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QUEST MEANS BUSINESS

Bruce Heyman, Former U.S. Ambassador to Canada Warns of Trade War Devastation; Trump Demands NATO Members Increase Defense Spending; Coffee Bean Futures Drop to 29-Month Low; Coffee Rival Bets on Starbucks Fatigue; Delta Profits Hit By Rising Fuel Prices; Singapore Airlines to Launch Longest Non-Stop Flight; England Defeats Colombia in World Cup Penalty Shoot-Out. Aired 4-5p ET

Aired July 3, 2018 - 16:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


BIANNA GOLODRYGA, CORRESPONDENT, CNN: The closing bell rang earlier on Wall Street as traders took a half day before Independence Day. It's

Tuesday, the 3rd of July. Tonight, Donald Trump resumes his row with Harley-Davidson, and economists worry about recession. Glencore shares

sink amid an international corruption probe, and in the case of Malaysia's missing millions, the former Prime Minister is under arrest. I'm Bianna

Golodryga and this is "Quest Means Business."

First tonight, a World Cup stunner is in progress. Colombia has just pulled even with England in the 94th minute of their match. It is now

locked at 1-1; extra time is about to begin. World Sport Don Riddell is at the CNN Center, Don, don't they know we have a show to put on? Two days in

a row now. It's come down to the 90th minute, these nail biters seem to be a recurring theme.

DON RIDDELL, HOST, WORLD SPORT: You know, this has been an absolutely brilliant World Cup. The games have been fantastic, so competitive, the

theme of the tournament has been the shocks, the upsets, and the late, late goals. The extraordinary drama here again with this game in Moscow,

England were inching towards the finish line thanks to a Harry Kane penalty, but deep into stoppage time in the 94th minute, Yerry Mina headed

in for Colombia sending this one into extra time.

This is the final game in the round of 16. It is the quarter finals after this, but we're going to have to wait at least half an hour to see who will

be playing Sweden in the quarter finals. I'm an England fan, so it's painful for me at the moment.

GOLODRYGA: It's not over yet, Don.

RIDDELL: It's not over yet, but that was a tough way to end that game.

GOLODRYGA: Yes, seeing the jubilation in Bogota right now. As we said, it is not over, Don. Hang in there. We'll be back with you ...

RIDDELL: All right.

GOLODRYGA: ... when the game finishes. Meanwhile, it's our business agenda tonight. Donald Trump is forging ahead in his spat with corporate

America as economists warn of severe damage from a trade war. This was the President's tweet, "US Harley customers are not happy with their move. The

US is where the action is." Now, remember Harley-Davidson decided to move some production overseas to avoid EU tariffs. The President says new trade

deals will only accelerate economic growth.

Meanwhile, Bank of America's top economist warns the world could fall into recession if trade skirmishes become a full blown trade war.

(START VIDEO CLIP)

ETHAN HARRIS, HEAD OF GLOBAL ECONOMICS, BANK OF AMERICA MERRILL LYNCH: What we're talking about here isn't just a trade war with China, but a

trade war between the US and most of its trading partners and if the US were to impose tariffs on all of its trading partners and they were to come

back with similar tariffs, you are very likely talking about a US and global recession.

Now, right now, we are a very long way from that kind of situation. Right now, it's a trade skirmish, not a trade war, but the end game here if the

two sides don't back down is pretty dire.

(END VIDEO CLIP)

GOLODRYGA: Joining me now is Rana Foroohar, she's the CNN's global economic analyst and business columnist at "The Financial Times." Rana,

great to have you on set.

RANA FOROOHAR, GLOBAL ECONOMIST, CNN: Thanks for having me.

GOLODRYGA: So, we heard trade skirmish, not a trade war, I heard somebody say this is t trade battle, not a trade war. At this point, what's the

difference?

FOROOHAR: Well, I don't know what the scientific difference is between skirmish and war, but it's a full on trade battle, I would say. You know,

this is tit for tat tariffs. This is exactly what economists were warning about when we started to see the first round of tariffs, China then later

with the EU, now we're seeing battles with the NAFTA partners, and the worry is that, trade becomes a spaghetti bowl, right, where it's back and

forth and there are all kinds of unintended consequences because of the really complex global supply chain.

GOLODRYGA: And yet, we don't really hear specifics as to a long term plan from the President except that it will all work out. He said in an

interview over the weekend that you don't know this, but I get calls from all of these global leaders saying, "Let's work out a deal." What does he

know that we don't about where this ends?

FOROOHAR: I don't think he has a plan. I don't think there's a 360 here. I think there's sort of two things in play. One, it has to be said that

Donald Trump is in some ways making real on threats that the US has been making for a long time now and on both sides of the aisle, right? You

know, Democrats under Obama had many of the same complaints that this administration does, but Donald Trump is just moving ahead unilaterally and

sort of getting out there with these tariff announcements almost before his staff - sometimes, before his staff knows.

I mean, you can hear just the differences between like a hawk like Peter Navarro for example, and some of the others like Treasury Secretary

Mnuchin. There's not even cohesiveness within this administration on what's going to happen next.

[00:05:00]

GOLODRYGA: Yes, Mnuchin seeming to calm the market's nerves or wanting to calm the market's nerves by saying we're not there yet, others suggesting

otherwise.

FOROOHAR: Right, and what's interesting to me, I've spoken to people on both sides of the aisle again that are even pro-trade moves, pro-tariffs in

some cases, but they say, "We've got to have a strategy." Nobody knows what victory looks like here. Our partners don't know - it's sort of

shooting from the hip.

GOLODRYGA: Let me get back to these tweets with Harley-Davidson because it has become personal. The President said after he came to Harley-Davidson's

defense early on, now said now that Harley-Davidson is moving part of its operation out of the US, my administration is working with other motorcycle

companies who want to move into the US. He started talking about how their sales are down 7% in 2017, the US is where the action is. Once again,

we're seeing a President target a specific company. What message does this send Harley, and what message does this send other companies?

FOROOHAR: You know, I think companies are in a real existential crisis right now because this President again is making good on threats to change

the global trading regime, to change sort of 40 years of the way business has been done, which is that companies can move jobs where it's cheapest,

where it's most expeditious to do so.

Harley is now doing that, but for the first time, they are facing this real governmental pushback which we have not seen yet. I think that you're

going to see more companies doing what Harley has done, but I also think there's going to be blow back for them in the domestic market and there's

going to be a political cost to all of this.

GOLODRYGA: And for a President who throughout the campaign and as long as we've really known him has followed the stock market on a daily basis, at

least when it was going up, talked about the economic growth that he's brought into the country since he's been President, it seems to be kind of

a walking contradiction to now say, "Don't worry about it, we may hurt in the short term."

FOROOHAR: Well, it's funny that you say that because there's never a good time for a trade war, but in some ways now is as good a time as any for

Trump because you do have annualized 5% growth right now. I mean, that's way up beyond what many people would have said it could be. Yet, that

could be an amazing thing for him in the run up to the midterms and instead, he's heading it off. He's sort of countering it with this other

force which is a trade war that's going to depress growth. So, this may end up being a net neutral rather than a positive.

GOLODRYGA: And again, all of this avoidable, this being the President's own decision. Where does this leave the Fed if in fact, we do see the

economy start to slow down?

FOROOHAR: Well, that's a great question. I don't think it's ever been a harder time to be a Fed chief right now. I have to say, I do not envy Mr.

Powell. I think that the big question is, are we going to see an inflation tick up and how quickly? Now, one thing that's very interesting to me, I

watch the bond markets very carefully because the smart money is usually in the bond markets, right? And you see the yield curve which is the

difference between short term and long term rates. You see that flattening.

So, the markets are actually saying, "Okay, we might see a little inflation in the short term, but you know what, longer term, we think this trade war

is going to take a toll on growth, and so we may go into recession. That puts the Fed in a very difficult position.

GOLODRYGA: Yes, the Fed and the Republican Party going into the midterm as well.

FOROOHAR: Indeed.

GOLODRYGA: Rana, great to have you on set. Thank you.

FOROOHAR: Thank you.

GOLODRYGA: Well, later in the hour, I'll be speaking to the former US Ambassador to Canada who says a trade war with Canada would be devastating.

Two international giants saw their share prices fall today now that they're facing new Federal investigations. Both Facebook and Glencore are facing

legal trouble in the United States. Glencore says it is being subpoenaed by the US Justice Department.

Shares in the world's biggest commodity trader plunged more than 10% before recovering slightly. American authorities are apparently probing

Glencore's compliance with money laundering and anticorruption laws in Africa and Venezuela.

Eleni Giokos is in Johannesburg with the latest. Eleni, so the company says that they are cooperating and investigating this as well. How

damaging are these allegations?

ELENI GIOKOS, CORRESPONDENT, CNNMONEY: Well, I mean, one just has to look at the amount of money that Glencore lost today on market cap and we're

talking about billions of dollars wiped off its share price in London and also in South Africa. The stock was down here around 9%. I mean, this is

a clear sign from investors. They don't like the news. They're expecting something bad to come out of this and remember Glencore has had quite a bad

year relating to these specific countries.

So, we're talking about the Democratic Republic of Congo, Nigeria, as well as Venezuela, and we're talking about fraud and money laundering,

corruption. These are the things that the Department of Justice wants to look into and they're asking for paperwork and documentation going back

over a decade, and remember this is a company that listed in 2011. So, it's interesting that the Department of Justice does want that historical

paperwork, and just looking at these jurisdictions. Firstly, the Democratic Republic of Congo accounts for around 25% of the company's net

value, around $6 billion worth of revenue comes from the cobalt and copper mines there.

And when you look deep into what's happening into the country, firstly, we know the DRC isn't exactly a bastion of transparency when it comes to the

corruption index, but more importantly, Glencore has been paying what many say is a DRC risk premium on its share price because of the troubles ...

[16:10:16]

GIOKOS: ... that it's experienced in that country. In Nigeria, the oil assets that Glencore is dealing with, we know that there's been a lot of

questionable issues that have arisen from working very closely with government officials, similar stories coming out of Venezuela, so I think a

lot of investors and analysts that I have been speaking to saying that they're not surprised that this has come to the full. It just depends how

deep the rot is, if there is going to be rot that is found and of course, the price tag if a fine then does emerge through any kind of findings down

the line, I think that's what people are awaiting for, and I think when you see the share price coming under so much pressure, it's indicative that

people are not exactly betting on good news.

GOLODRYGA: Yes, a huge blow for the company. What stands out is that these accusations of money laundering go back to 2007, as you mentioned

over a decade. It seems like it would be quite a time and quite a while for investigators to finally dig through all of these years.

GIOKOS: Yes. Exactly. I mean, it's going to take a very long time and the question is, how can Glencore actually put this paperwork together and

we don't know if the Department of Justice has actually given them a timeline. I am sure they have. They're going to have to get their

paperwork in order very quickly. And I just have to say that looking at the initial public offering documents, you know the paperwork that is kind

of distributed to investors during the road show is actually a clause in there saying that Glencore operates in many different jurisdictions, 90

commodities in 50 countries and it admits to saying that they do operate in countries that are known to be corrupt and with bribery is rife and they

cannot always dictate any kind of scrupulous transactions that might occur in these jurisdictions.

So, I think that warning had come out to investors from the onset and the question is, have they been implicated? Are they implicated? And what

would the findings be down the line.

GOLODRYGA: Huge implications not only for shareholders, but obviously, for the 146,000 employees of the company as well. Eleni Giokos, thank you for

joining us.

Well, Facebook shares fell more than 2% today after reports that the company is facing growing scrutiny from the US government over the

Cambridge Analytica scandal. Samuel Burke joins me from London. Samuel, this is at a time when the company has been saying repeatedly that they are

working on being fully transparent. New reports suggest otherwise, however.

SAMUEL BURKE, CORRESPONDENT, CNN: Here's the problem with that whole transparency line, Bianna is that, they only made people aware of this back

in March, but we knew that they were aware of this back in 2015. That is about three years. Let me just put up a list on the screen of all of the

agencies that we now know have open inquiries into Facebook. And it's a lot. When you think about the fact that the FBI, the Securities and

Exchange Commission, that's the group that's looking at the timeline, the Federal Trade Commission and the Department of Justice - here's the issue.

Okay, they didn't tell tech journalists like me until March, but did they have a fiduciary obligation to their investors to tell them back in 2015 or

at least in 2016 when it became obvious to the world that Cambridge Analytica was working with President Trump's campaign. Shouldn't that have

set off some type of alarm bell for them and that's the question that the SEC is going to be asking.

Also, when you look at the FTC, what they're looking at here is whether Facebook violated a previous agreement they had made with them in the early

2010 about consumer information. These are really serious questions and Facebook has been able to shrug off this whole scandal in terms of stock

price after Zuckerberg testified, really until today, that's a big chunk of money lost, at least in market value for Facebook.

GOLODRYGA: Yes, and there may be gray areas as far as what they should and shouldn't have done and what their duty is, fiduciary duties were as well,

but given what they have gone through, at least optically, I am not sure anybody would have advised them to not be fully transparent at this point.

BURKE: Especially with something as serious as something that would link them to the Presidential campaign, Donald Trump as we all know is the

divisive figure on many levels, so at least then, made that trigger something, but that's not the only thing that they're dealing with today.

I don't think it's really driving the stock price down, but I'm calling this the ex-lover's bug because basically, some folks, about 800,000 had

people that they had blocked on Facebook, Bianna that could all of a sudden see their messages and we all have ex-friends that we blocked on Facebook.

We all have some exes, some ex-lovers we've blocked on Facebook, those people were able to message folks.

Another headache for Facebook but certainly not as bad as having four different groups of the government in the United States looking into what

exactly happened with Cambridge Analytica.

[16:15:01]

GOLODRYGA: That is for sure, and Sam just between us, I would never block you on Facebook, just so you know.

BURKE: We're not exes.

GOLODRYGA: Yes, we're friends, strictly friends. Sam, thank you. With diamonds to Hollywood films, even a Picasso - investigators around the

world are still hunting down the funds they believe were diverted from Malaysia's sovereign wealth fund. Now, the arrest of the former Prime

Minister may shed new light on what really happened.

And if you are sick of your local Starbucks, this CEO thinks he has an answer for you. The boss of Coffee Bean and Tea Leaf joins me live.

Malaysia's former Prime Minister has been arrested in connection with a long running corruption scandal. Najib Razak will be charged Wednesday. He

has apologized to the Malaysian people for his weaknesses, but says that not all of the accusations are true.

Investigators in at least six countries are still trying to figure out what happened to billions of dollars that went missing fromm Malaysia's

sovereign wealth fund, known as 1MDB. The US Department of Justice alleges hundreds of millions in cash ended up in the bank account of a powerful

politician named only as Malaysia Office Official One. Other laundered money was spent on Picasso's, Van Gogh's and Monet's, a 300-foot luxury

yacht. The production "Wolf of Wall Street," a 22-carat pink diamond pendant and necklace for the wife of Malaysian Official One and it has been

widely reported that Najib Razak is that official. The current Prime Minister of Malaysia does not mince words about his predecessor.

(START VIDEO CLIP)

MAHATHIR BIN MOHAMAD, PRIME MINISTER, MALAYSIA: He was totally responsible for 1MDB, nothing can be done without his signature and we have his

signature on all the deals entered into by 1MDB, therefore, he is responsible. We have the text, we have the letters signed by him, so he

cannot say that, "I had nothing do with it."

(END VIDEO CLIP)

GOLODRYGA: And I am not joined by Wall Street journalist, Ken Brown, who launched the papers' exhaustive coverage of the 1MDB scandal. Thank you so

much for joining us.

KEN BROWN, JOURNALIST, WALL STREET JOURNAL: Thank you.

GOLODRYGA: What led up to this arrest?

BROWN: Well, so the big thing was the election, right? So, Najib lost to Mahatir in May and now as you have been able to stop all the investigations

for three years now and once he lost office, he couldn't stop them anymore.

GOLODRYGA: And talk about the brazenness of him. We went through some of the allegations, the millions of dollars that went missing and diverted,

but it really took US investigators getting involved as well because US banks were involved in the laundering, at least from the charges.

BROWN: Right, so the US government went after some of the assets that were stolen because they were laundered through US banks because they were in

dollars and so, that's what led to these asset seizures that happened last summer, the boat and diamonds and the film studio that made, "Wolf of Wall

Street." That studio was run by the stepson of Najib.

[16:20:09]

GOLODRYGA: And Najib comes from a family that's very well known politically in Malaysia. His father was a Prime Minister, I believe his

uncle was as well, talk about the significance this is for the family and its legacy in the country.

BROWN: Yes, that legacy is really tarnished. Even his brother has criticized him. I mean, Malaysia has always been sort of a low-level

corruption country, bribes and things like that, but he - the brazenness as you said, just got so huge that the establishment policies actually went

after Najib for this.

When we wrote our first story, which was three years ago today, ironically, that $681 million ended up in Najib's personal bank account that just

shocked the whole country.

GOLODRYGA: So, would this be considered the trial of the century in Malaysia if this goes to trial?

BROWN: Oh, yes. I mean, to bring down a sitting Prime Minister or a former Prime Minister of that family and that legacy, this party that he

controls have governed the country continuously since independence, so you can't understate how huge a deal it is, but the brazenness, the amount of

money they stole, I mean, it's $4.5 billion. It's mind boggling.

GOLODRYGA: Mind boggling and you look at it from the art work to the jewelry for his wife, and now he and his wife are not allowed to leave the

country. What does this mean for the current Prime Minister? His successor who as we just heard from now did not mince words in talking

about these accusations?

BROWN: Mahatir never minces words, right, he is a tough guy. Well, I mean, they need to get this behind him. He campaigned - Mahatir campaigned

on this corruption platform - an anticorruption platform. Mahatir was Prime Minister for years and years and he picked Najib as a Prime Minister.

He is a super powerful guy in Malaysia. He's 92 years old. He came back to fight this election out to get Najib out.

So, for him, this is very important politically. Also, it's going to help him now try to govern this country and get it sort of back on track.

GOLODRYGA: And what is the reaction amongst Malaysian people to this news? Are they surprised or maybe not as much?

BROWN: Well, so the press had been really suppressed in Malaysia for years, and so, we knew because people were reading our stories on Facebook

in particular, and so as we were exposing it, we were getting a lot of reaction. You know, Malaysia is a really interesting, well educated rising

country, very young population, and so they were frustrated because this old style corrupt government was really embarrassing to them, so the people

were very happy that this has happened. Najib has some supporters, but really, I think the country - it's a sense of a relief.

GOLODRYGA: Do you think Najib goes to jail?

BROWN: I think so. They say they have the evidence.

GOLODRYGA: Fascinating story. Fascinating reporting on your end as well. Thank you so much for sharing with us and coming in. We're going to move

to China now where fears about trade and growth rock stock markets in the yuan. On Tuesday, the Chinese currency hit its lowest level in 11 months

against the dollar. Now, later it stabilized. The traders say the Central Bank has to intervene.

State media calls the market's behavior irrational. CNN's John Defterios has more.

(START VIDEO TAPE)

JOHN DEFTERIOS, EMERGING MARKETS EDITOR, CNN: Bianna, clearly, investors are expressing real concern about two driving forces when it comes to the

Renminbi, slower Chinese export growth ahead, and a looming guillotine dropping on US trade sanctions. We now know China's Central Bank's

threshold for pain, 6.7 versus the dollar which have broke the reported intervention.

China's Central Bank Governor said at a forum, it will work to keep the Renminbi generally stable and at a reasonable and balanced level. The

worries over the currency reflected in the main Shanghai Index before Tuesday's recovery, it answered their market territory exactly a week ago

falling to its lowest level in nearly two years.

Overall, that ugly word contagion has reappeared in emerging markets, with currencies from India to South Africa under pressure. Turkey saw its

currency fall again as inflation spiked to over 15%. But one cannot downplay the impact planned tariffs by the US could have on China, $50

billion overall, $34 billion in the first wave. If they go through on Friday, the second wave pegged at $16 billion with the potential to be much

bigger if Beijing retaliates.

Another worry factor, China's corporate debt, a good share price in dollars hovers around $18 trillion or about 170% of GDP. If the Renminbi resumes

its fall, then Chinese debt will continue to rise. Bianna.

(END VIDEO TAPE)

GOLODRYGA: And you'll watching it. John Defterios, thank you. Yesterday, President Trump put the WTO on notice. Today, NATO. The President says

America's allies need to spend more on defense or else.

[15:25:00]

GOLODRYGA: Hello, I'm Bianna Golodryga. Coming up in the next half hour of "Quest Means Business" coffee bean prices are falling and some coffee

chains are expanding. I'll be speaking to the CEO of Coffee Bean and Tea Leaf. And while Delta warns about the rising cost of fuel, the head of

Singapore Airlines tells us why he is re-launching the world's longest flight.

First, these are the top news headlines we're following on CNN this hour. Thai Navy Seals have set up this command center inside the cave where a

youth football team is trapped, two kilometers from the entrance. Rescuers haven't decided whether they will try to get the boys out immediately which

could be risky or wait, perhaps months until the flood waters recede.

Two British divers discovered the team's location Monday, almost 10 days after they disappeared. A healthcare worker was arrested today on

suspicion of killing eight babies and trying to kill six others at a hospital in northwestern England. Police are looking at 17 deaths and 15

other nonfatal cases in all. They haven't said who the woman is or what job she held at the hospital.

President Trump says he has interviewed four prospective justices as he looks to decide on a Supreme Court nominee by Monday. The spokesman for

Senator Mike Lee says the Utah Republican also was interviewed by phone. White House aide say the President is hoping to play up the drama of the

selection process.

Extra time is almost over in the England game. The game between England and Colombia, the winner will play Sweden who beat Switzerland 1-0. Sweden

is trying to reach the finals for the first time since 1958.

The US car sales are (inaudible) despite recent talk of a trade war. New numbers for June show Ford and Fiat-Chrysler both saw sales increase year

on year. While GM no longer reports monthly numbers, it's done it for Q2 as a whole showed sales were up 5%. GM has already warned that auto

tariffs would hurt the company. Many of its car parts come from Canada. Bruce Heyman is a former US Ambassador to Canada and is joining us more on

this.

Bruce, first of all, let me get your reaction to this increased rhetoric that we're hearing at this point, not just from President Trump, but also

from our trading partners who he has been threatening.

BRUCE HEYMAN, FORMER US AMBASSADOR TO CANADA: You know, this is so disappointing, especially in the field that I know quite well, and the

relationship between US and Canada, that relationship has been the envy of the world. I mean, you think about these two countries. We share a 5,525-

mile border; 400,000 people cross on a daily basis. We have about $2 billion worth of trade that crosses the border almost every day and it's

balanced.

You know, the U.S. actually has a bit of a surplus. We worked together in NATO, we worked together in NORAD, protecting North America, we've been

allies for 150 years as all these candidates have been around, 151, and here we are now, you know when we've reached the depths, when the United

States president is taking shots at Canada.

You know we're at a very low point.

BIANNA GOLODRYGA, HOST, QUEST MEANS BUSINESS: And when it comes to NAFTA, the president said maybe we'll keep it, maybe NAFTA 2.0, it's sort of this

guessing --

HEYMAN: Right --

GOLODRYGA: Game. You've said though that you believe this is all a set up.

HEYMAN: It is a set up and I actually -- if you walk through the timeline, President Trump even before becoming president has been against trade

agreements with the United States his whole life. He thinks somehow everybody in the world is taking advantage of the United States of America.

Amazing how we've been able to grow our economy, become the number one economy in the world under all of these really bad agreements we have. But

with that in mind, he actually hit NAFTA pretty hard during the campaign and so all the things that they're doing in the administration leaves one

to believe that they do not believe that they want NAFTA 2.0, otherwise their behavior would have been much different.

GOLODRYGA: And so what's the end game here? How do you see all of this falling out? We've had an election with a surprise victor in Mexico, a far

left candidate has come in, what happens going forward between not only the U.S. and NAFTA negotiations, but the U.S. and Canada as well.

HEYMAN: So here's the path that we could go down. So I think there are three choices, and you know, everybody knows that Canada did its

retaliatory declaration of tariffs and they went into effect on the 1st of July.

So here we are, now the president can, one, let it go and just keep everything in stasis, that is a possibility and not respond. Number two,

we can actually back away and say, Canada, you deserve an exemption for stealing aluminum since the U.S. actually has a trade surplus in steel with

Canada and we actually make all of these things together including most of our military vehicles and equipment.

Oh, and number three, the president could follow through on his automobile tariff threat. And he's also threatened to tear up NAFTA. So if he goes

that route, I think that it's a very high risk move, it would be incredibly dangerous economically for Canada, Mexico and with Mary Barra's comments

just the other day, I think it would be harmful to the U.S. as well.

GOLODRYGA: And judging by the president's actions thus far, doesn't it seem as though option three is the most likely, the president rarely walks

back his own comments --

HEYMAN: Yes --

GOLODRYGA: Option two would suggest that he come out and walk them back, think he was wrong.

HEYMAN: Yes, and he rarely does that, actually, you're right, and it's quite unfortunate. So if he does move ahead with the threats he's made,

and he -- and all of your international audience knows he did that with Paris, he did it with TPP, he's done it with the Iran deal.

He's now threatening the same -- in the same type of language with NAFTA. So that is a more likely scenario. Now, everybody should know in NAFTA

that there's -- and that you have to give a six-month notice before you leave. And he may actually give the six-month notice as another squeeze in

terms of negotiation.

That doesn't mean we're out, but that if he gave that notice for example this week, that would put him over into January of 19th before any decision

would actually have to be made.

GOLODRYGA: Yes --

HEYMAN: But this is -- this is an increasing possibility, and I think, you know, NAFTA 2.0 is on life-support at this point.

GOLODRYGA: Yes, that would be after the mid-term elections, in the meantime leaving the global economy --

HEYMAN: Right --

GOLODRYGA: And the stock market in limbo, waiting to see what the president ultimately decides. We have to leave it there, thank you so

much, we appreciate your time.

HEYMAN: Pleasure to be here.

GOLODRYGA: Well, Washington's allies and NATO are defending themselves after a series of stern letters from President Trump. He warned Angela

Merkel of growing frustration and Germany's failure to meet defense spending target.

NATO members committed to spend 2 percent or more of GDP on defense. Most do not. Joining me now, John Kirby served as assistant U.S. Secretary of

State. John, great to have you on this show. So let's talk about the difference between this president and his two predecessors because they

also pressed NATO allies to spend more on defense.

[16:35:00] So how does a bit more bombast necessarily change the field?

JOHN KIRBY, FORMER ASSISTANT U.S. SECRETARY OF STATE: It's not just the bombast, it's the context within which that bombast is being delivered,

right? So you've got a much more aggressive Russia and Putin now and this is post-election meddling, he has done -- he has done similar activities in

European elections in just the last six, eight months.

So we have a much more hyper charged atmosphere on the continent, and not to mention a migration crisis caused by the civil war in Syria, that's the

worst since World War II. So the situation on the continent is different, it is highly more charged than dynamic.

And when he continues to complain in this very public vitriolic way, it has I think a more dramatic effect than it would have if it was President Obama

in his term or President Bush before him.

GOLODRYGA: Is it fair to say expectations amongst NATO members gearing up for this meeting which would be the second meeting that this president has

participated in. If expectations are low, given the news that we've been following, especially given the meeting that he has immediately after with

--

KIRBY: Yes --

GOLODRYGA: Vladimir Putin --

KIRBY: I think so, I think not only are the expectations low, but I think our European allies are actually worried about this summit, literally sort

of just falling apart and not being very successful at all because he seems to want to make it all about this one agenda item.

And look, he has a case to be made. The NATO allies do need to pitch in more, they all need to work harder to get to their 2 percent defense

spending minimum agreement that was made back in 2014, but he has to remember that there's other things the alliance is -- needs to be focused

on right now.

Cyber, counterterrorism, crisis in Ukraine and of course as we talked about Russian election interference. There's a lot on the plate for the alliance

and it would be a real shame if this one issue hijacked the summit and you're absolutely right, he's going to leave there, go to Helsinki, meet

with Putin.

Nothing would please Putin more than to be able to see Trump on the back- end of a NATO summit that really just kind of fell apart.

GOLODRYGA: And Putin has already said Crimea is non-negotiable, President Trump has sort of vouched for Vladimir Putin in saying he believes him when

he says they didn't interfere in the election. So what if anything can come out of this meeting other than a positive headline or two for Vladimir

Putin.

KIRBY: Not much, and you know, frankly, if you look at John Bolton's comments on the Sunday show just last weekend, that's pretty much what he

said, he didn't say it in those words, but basically he called this a meet and greet, and they're going to talk a lot and a lot of issues and they're

going to sort of air out some things.

But there's not really a specific agenda item that they're driving too in this Putin-Trump summit, they're not really a specific tangible outcome

that I think we can expect from it. Now look, I think it's always good for him to sit down with Putin, we do have a lot of differences.

And quite frankly, there's some areas for cooperation even with the relationship as tense as it is, but it's a -- it would be a real -- again,

I think to the detriment of the United States national security and our allies if he goes there after a NATO summit that really has just kind of

done nothing except give Trump another venue, another opportunity to complain about defense expenditures.

GOLODRYGA: Yes, it is incredible that he seems to be getting more and more distant between our U.S. allies and perhaps closer with Vladimir Putin, and

we will be covering this in the next few weeks, we appreciate you joining us, thank you.

KIRBY: My bet, thank you.

GOLODRYGA: Well, do you have Starbucks fatigue? The CEO of Coffee Bean and Tea Leaf is betting on it. He'll tell me how he plans to capitalize on

that, coming up next.

[16:40:00] (COMMERCIAL BREAK)

GOLODRYGA: Well, an update on the World Cup game between England and Colombia, it finished 1-1 and it's going to penalties. Well, guys, hold

your breath here, these are live pictures of fans watching in complete agony in London and Bogota and we'll be checking in on the shoot-out as it

gets underway so you won't miss anything here while this show continues.

Meantime, if you've got a cup of coffee in front of you, this is news for you, good news for coffee drinkers everywhere. Bean prices have fallen to

their lowest in nearly two and a half years. One pound of Arabica Coffee now costs $1.12, that's nearly 20 percent from the end of 2016.

But that means either lower coffee prices for you or higher profits for the world's biggest coffee chain. Starbucks is at the top of the list,

followed by Costa Coffee, Tim Hortons, Lavazza and McDonald's McCafe. But Starbucks has become the victim of its own success, resulting in something

that's being called Starbucks Fatigue.

It plans to close 150 underperforming stores next year. Its competitor the Coffee Bean and Tea Leaf is moving in, spending an aggressive expansion in

the United States. John Fuller is the CEO and he's joining us from Los Angeles. So John, great to have you on, you've got a pretty big base there

in California and presence.

You're hoping to expand that throughout the country and New York once again.

JOHN FULLER, CHIEF EXECUTIVE OFFICER, COFFEE BEAN & TEA LEAF: Yes, we are and thanks for having me on. We just a couple of weeks ago announced a 100

start about an agreement with new franchise partner in New York which will be over the next 10 years.

And that's our goal, it's to expand throughout the United States and have a greater presence. As you may know, we are in 30 countries already in over

1,200 units, but our goal is to have a bigger presence in the United States as well --

GOLODRYGA: Yes, three-quarters of your stores are in Asia today, you're hoping to --

FULLER: That's right --

GOLODRYGA: Expand, and I was intrigued by what you as -- Starbucks Fatigue could be your gain, explain.

FULLER: Yes, I mean, look, I mean, Starbucks has done an incredible job, but you know, they're -- you know, almost literally on every corner and as

a company gets that big, it's sometimes more difficult to deal with. So one of the feedback or the feedback we get a lot of attention, developers

and landlords is that we're a lot easier to work with and that they enjoy the relationships that we can develop with the -- you know, the developers,

the landlords and as opportunities come up, we're starting to get the calls a lot quicker and more often than we did before.

GOLODRYGA: And of course it's an industry where brand loyalty is key --

FULLER: Yes --

GOLODRYGA: What are you doing to try to get customers in the door for at least the first time?

FULLER: Well, we've got a great story, and I think getting our story out there about you know, yes, we're tough -- you know, I liked your article

about the beans thing, about the prices coming down because that obviously benefits all of us.

But we do get the top 1 percent of the beans around the world, we have great relationships with the farmers, and so it's really the quality of our

products and as we share that story and get people to come in and we share and let them know what we do different, it makes a difference that you'll

come back.

GOLODRYGA: Saying science maybe on your side as well, recent headlines suggesting that coffee drinkers could live longer and healthier, I'm sure

you liked that headline.

FULLER: Oh, absolutely, tell everyone that.

GOLODRYGA: So what can we expect to see as far as expansion here in New York over the next couple of years throughout the country as a whole?

FULLER: So I kind of -- right now, we're predominantly in southern California, but we have some franchises in Hawaii and Las Vegas and some in

Houston and -- oh, I'm sorry, Austin, Texas, and as we kind of want to go longer, ten corridor and the 95 and really start there.

And so we've had a lot of inbound interest in flick cities like Orlando, Florida, Georgia, up and down the East Coast and those are the

relationships we're pursuing right now.

GOLODRYGA: Well, best of luck to you and never turn down a cup --

FULLER: Thank you --

GOLODRYGA: Of coffee, so thank you so much for coming on.

FULLER: Appreciate that, thank you.

GOLODRYGA: OK, so folks, England and Colombia are going to penalties, we'll have an update for you right after the break. Unbelievable football.

[16:45:00] (COMMERCIAL BREAK)

GOLODRYGA: A turmoil in the oil market is now playing itself out in Delta's bottom line. And shares finished down more than 2 percent.

American and United also fell. It comes after Delta sent a warning to investors saying profit will be hurt for the second quarter because it paid

about 6 percent more for fuel.

The CEO of Singapore Airlines says the company is ready if these oil price trigger an aviation downturn. Singapore is getting ready to launch the

world's longest flight once again. Nineteen hours nonstop to and from New York.

The route was scrapped in 2014 when high fuel costs made it too expensive. Richard and the CEO Goh Choon Phong was talking about what changed.

(BEGIN VIDEO CLIP)

GOH CHOON PHONG, CHIEF EXECUTIVE OFFICER, SINGAPORE AIRLINES: What has changed is that we now have a new aircraft. Come in composite body, twin

engines that's capable of emissions in a very few efficient manner. On top of that, unlike the A345 we used to operate, this is now a fleet that is

part of a bigger fleet.

It's the A350 outer long range version, but with 67 A350s on order. So it's a bigger fleet, and it shares as fast, it shares also with the pilots

and is a lot more efficient to operate.

RICHARD QUEST, CNN: Right, the previous one, you only had a couple of them in the fleet --

PHONG: Only five --

QUEST: You only got five just to run these.

PHONG: Exactly.

QUEST: So it's much more of a bigger picture, and do you expect the numbers to be sort of eyebrow raising in terms of the lower fuel costs for

this one. Because fuels are a large percentage on such a long run.

PHONG: Yes, indeed and I think if you were to compare the A350 outer long range with the A345, we're talking about fuel efficiency in excess of 30

percent.

QUEST: And that will make the difference?

PHONG: Yes, it will make a big difference, and also on top of that is now as I said come in composite body, it's able to provide our customers even

with greater comfort with lower pressurization, so all these make it even more viable.

QUEST: I don't understand you don't want to lose money on all --

PHONG: Nobody wants to lose money --

QUEST: Yes, sure, but you'd run this almost break even as a core route, as a prestigious, the flagship route of the airline.

PHONG: Actually, not quite reject, we actually look at it and we look at it from a commercial perspective, and we believe that it is going to be

commercially viable, which means that it will make money. In fact, if you look at it, we had currently an outer long range operations to San

Francisco and it is doing very well.

QUEST: What the industry says is you take a Lufthansa, it's got the main line, it's got the low cost, it's got this -- it's got size and scale and

it's got large population. Same with the ING groups and the U.S. carriers obviously.

People always say with Singapore Airlines is that brilliant airline but where is its future?

PHONG: So that's the reason why we have taken efforts to make sure that we transform our business model. That's the reason why -- you know, simple

airlines has always been known to operate at a high premium level. Why would Singapore Airlines consider setting up an LCC subsidiary?

[16:50:00] Because we see that there's a growth in that particular business and we want to be there to participate in that growth. And when we set up

Scoot, of course there were skeptics who said, well -- probably it's not going to work. But as it turn out, you would agree that Scoot is probably

one of the most successful LCCs for medium to long haul wide body operations.

And I think it gives us an additional avenue for accessing a different market segment. The same reason -- you were right that Singapore Airlines

is based in Singapore, Singapore is very small market, it doesn't have a big base. And therefore we have to connect up with the rest of the world,

and that's the reason why we have been operating using new technology aircraft, secondary points, longer distance.

QUEST: As an industry, do you think fundamentally you've learned the lessons of the bad old days and the next cyclical downturn when it comes as

it surely will with higher oil prices you'll be better and able to cope with it. Or has the industry fooled itself into believing it's fit and

proper?

PHONG: I think I cannot commend for other airlines as you know, I always look at our own operations and want to ensure that we are prepared for

whatever changes there are in the industry. The fact that the industry has structurally changed actually was the reason why we have been making all of

these structural changes internally.

All this business model changes that were mentioned about. So we believe that we are prepared, I'm not sure whether I can speak for others, they

would have to decide whether or not they are prepared.

QUEST: And one thought does finally come here. First class, that lovely bit at the front of the plane --

PHONG: Yes --

QUEST: Many hours got rid of first class and truth be told, the new business class look very much like the old first classes and premium

economy, of course is a great way to new hope, get people to move forward and not backwards --

PHONG: Of course you are --

QUEST: You don't want to cannibalize it or --

PHONG: Sure --

QUEST: Yes, is there really a role for first class these days?

PHONG: We do, we do see first class demand, healthy first class demand. We do have to sort of right signs at our first class cabin, as you know,

our entry first class used to be 12 seats, it's now six seats. The 777 now used to eight seats, now four seats.

(END VIDEO CLIP)

GOLODRYGA: Well, Colombia and England are locked in penalty shoot-out thriller in Moscow as we speak. Don Riddell is at the Cnn center. Don,

everyone is on pins and needles, one last shoot-out kick right now from England. And that's it --

DON RIDDELL, CNN WORLD SPORTS: Oh --

GOLODRYGA: Congratulations, Don --

RIDDELL: Oh, my goodness, oh, my goodness. I apologize for showing the emotion. If you know anything about England and major tournaments --

GOLODRYGA: Yes, you have an excuse for not being objective right now --

RIDDELL: And the curse of the penalty shoot-out, it is absolutely awful. England's history, three times, England have gone out of World Cup, having

lost on penalty shoot-outs, three times they've lost in European championships on penalty shoot-outs.

They haven't won a shoot-out since 1996 and finally the curse is over, that was absolutely agonizing. But -- well, I can tell you, England have beaten

Colombia 4-3 on penalties and that was just extraordinary drama. And in another incredible night at this tournament, England were beaten, thanks to

a Harry Kane penalty.

They were just minutes away from winning the game in regular time, but Colombia equalized deep into stoppage time, forcing extra time, forcing a

penalty shoot-out. It's hard for any team to lose on penalties, I do feel sorry for Colombia, it is a terrible way for your tournament to end.

But England now advance to the quarter finals where they'll play Sweden on Saturday, and given the way the draw is opened up for England, they're in

the easy half of the draw, they will and quite optimistically thinking that they can get to the final this year.

GOLODRYGA: Though nothing does seem easy --

RIDDELL: Never --

GOLODRYGA: This World Cup, the games that were anticipated to go one way have turned out the other and you see the jubilation there on the streets

of London, many say that this World Cup should have been held there. London main and England was one of the bidders as well to host the 2018

World Cup.

So this is much needed excitement for them, we're not in Bogota right now, we had cameras in both cities, we are staying in London and we are staying

with you, Don. You talk about this game and the penalties and you just have to come down to those kicks from the Colombians that were not World

Cup quality penalty kicks.

RIDDELL: Well, I would say most of these penalties were pretty good to be fair, but England's Jordan Pickford made a crucial save towards the end, it

was a really terrific save, he was diving and he managed to get his left hand up to the ball to deny Uribe and yes, you know -- I'm kind of lost for

words to be honest.

[16:55:00] I really am. You know, England fans have been in this position so many times before, the players are different every time, but it's as if

just the weight of the previous failure is on shoulders of the players who come in the years subsequently.

Interestingly, the manager of this England team Gary Southgate himself missed a crucial penalty that year in '96, and I'm sure that he would have

been influential in preparing his players for his moment. He was giving them one last -- one last rallying call before the shoot-out.

And I can only imagine what he was saying to them, but essentially, you've got to keep all of that past failure out of the players' minds --

GOLODRYGA: Well --

RIDDELL: And England by and large took some great confident penalties and they're marching on to the quarter finals --

GOLODRYGA: Well, I saw you catch your breath, I think that was fantastic, television watching you in real time, react to this win. We'll let you

catch your breath --

RIDDELL: All right --

GOLODRYGA: We're going to go to the London fan zone where Mark Bolton is. Mark, you see jubilation in the streets there of London, revelers there

really taking in this victory. Can you hear me?

MARK BOLTON, CNN: Well, there's kind of pandemonium here in London, pandemonium, it's gone crazy, England would have won this World Cup. We

know England's history when it comes to penalties, there's no (INAUDIBLE) about that.

Have they finally got rid of that mood? The irony tonight, England not the better team marginally for large course of the game, usually they don't

dominate games, lose on penalties, tonight it's the opposite. They've gone through.

But despite the fact that this is where we'll party, after ask questions as to whether England really can go much further. These are the first real

questions asking England as a team. You can't count as Belgium was all the talk here because it was B team against B team.

They played 6 hours and 30 minutes of football now, they've scored nine goals --

GOLODRYGA: Well, you got the win, we've got to wrap up, Mark, we've got to wrap, we're going to let you go celebrate with those fans in London. Thank

you so much, congratulations again, and that's QUEST MEANS BUSINESS, I am Bianna Golodryga, the news continues here right on CNN.

(COMMERCIAL BREAK)

END