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QUEST MEANS BUSINESS
Eliminating Tariffs Entirely Would Completely Change The System In Place Today; Meme Creators Are Rejoicing After The European Parliament Rejects The Plans For A Controversial Copyright Law; Boeing Has Found A Tag Team Partner; President Trump Says Scandal-Plagued Pruitt has Resigned; Auto Shares Higher on Hopes of U.S.-E.U. Tariff Deal; E.U., U.S. Consider Eliminating Car Tariffs; European Parliament Rejects New Online Copyright Rules; Artists Upset as E.U. Rejects New Copyright Rules; Boeing, Embraer Team Up to Make Jets Together. Aired 4:38-5p ET
Aired July 5, 2018 - 16:38:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ZAIN ASHER, CNN INTERNATIONAL HOST: Hi, you've been watching the CNN coverage of the resignation of EPA administrator, Scott Pruitt. This is
QUEST MEANS BUSINESS. I'll be back right after this quick break, don't go away.
[16:36:00] (COMMERCIAL BREAK)
ASHER: Hi, good evening, everyone, I'm Zain Asher. We are hours away from a major escalation in the trade war between the U.S. and China in terms of
tariffs set to go into effect tomorrow, but it's the hope of a breakthrough between the U.S. and Europe that's moving stocks. In fact, Fiat, Daimler,
BMW and Volkswagen all moved higher, American and European officials are reportedly closing in on a deal that would reduce tariffs on cars and
potentially head off a full-blown trade war between the United States and Europe. President Trump wants the barriers to come all the way down.
(START VIDEO CLIP)
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: There are some cases where countries are subsidizing industries and that's not fair. So, you go
tariff free, you go barrier free, you go subsidy free, that's the way you learn at the Wharton School of Finance. I mean, that would be the ultimate
thing, now whether or not that works, but I did suggest that - and people were - I guess, they're going to go back to the drawing board and check it
(END VIDEO CLIP)
ASHER: President Donald Trump speaking there. Eliminating tariffs entirely would completely change the system in place today. The U.S.
charges tariffs of just 2.5 percent on cars coming into the United States compare that to Europe's 10 percent duty, but that flips around when we
look at like trucks. The E.U.'s tariffs stays the same, 10 percent, but the U.S. charges 25 percent and that dates back to the so-called chicken
war in the 1960s when the U.S. jacked up tariffs on European trucks in retaliation for E.U. levies on U.S. poultry.
ASHER: Joining me now is Arancha Gonzalez, the Executive Director of the International Trade Center. Arancha, thank you so much for being with us,
so just - let me get your take on this, what do you think of this idea that the E.U. is considering reportedly getting rid of car tariffs altogether.
Is this a worthwhile way of solving the trade dispute in your opinion?
ARANCHA GONZALEZ, EXECUTIVE DIRECTOR, INTERNATIONAL TRADE CENTER: Well, any solution that prevents countries for entering into tit for tat
retaliatory measures and countermeasures is in my view worth exploring. This would not be anything new. This has been tested before. It's been
tested for IT products and the question is building or bringing around the table the critical mass of exporters of cars to come to a deal to eliminate
tariffs on automobiles. This would be E.U.-U.S. of course. It would bring others, Japan, Mexico, Canada, China around the table in a dialogue to
resolve an issue that seems to be important to some trading partners.
ASHER: So, E.U. officials sort of looking at the situation, they are trying to examine whether or not it is feasible to sort of have a situation
with zero tariffs on either end, what sort of things are they looking at specifically to see whether this is going to actually be able to work?
GONZALEZ: Well, I think that the key is to bring people around the table. This is not just an E.U.-U.S. matter. If you have to solve tariffs on
automobiles, you have to bring the main exporters of automobiles around the table, and of course, this is where the discussion has to start. It's a
dialogue. You know, in a way this shows that the answers to the problems we are facing on international trade have to be beyond simply national
answers or unilateral answers.
It requires a dialogue. It requires an international setting where those that are affected have a say, but also make a commitment to fix the
ASHER: So in terms of just looking at Donald Trump's perspective, the E.U. currently - this is basically Donald Trump's perspective, the E.U.
currently imposes 10 percent tariffs on imported patented cars from Europe or from the U.S., and that compares to the U.S. imposing 2.5 percent duty
tariffs. Donald Trump says that that is hugely unfair. What do you make of his complaint?
GONZALEZ: Well, you see, when you negotiate a trade agreement, you don't exchange concessions for the same product in an identical manner. Because
sometimes you don't export the same products that your competitor does. You see, the U.S. has a tariff on 20 percent on trucks and the E.U. doesn't
have a 20 percent on trucks. They still trade on trucks.
The negotiations between the E.U. and the U.S. are made on global state of balance of concessions on both sides. The E.U. would be higher in some
products, the U.S. would be higher on some products, and vice versa. What matters at the end of the day is a balance where everybody finds offenses
and defenses that they want to in a way protect or advance that allows them to sign the deal, that's what trade agreements are about. They are not
about total victory or zero on any side mostly because none of them can do a total zero on their side.
ASHER: Yes, that is one - you have mentioned one argument that the E.U. had touched on and that is Donald Trump's complaint ignores other tariffs
that the U.S. has, so I spoke to the head of the WTO just yesterday, Robert Azevedo and he said to me that in the wake of these tariffs, these tit for
tat tariffs happening between the U.S. and China, if there is a global all out trade war that the consequences, the economic consequences of that
could be worse than the 2008 financial crisis. What do you make of those comments? Do you agree?
GONZALEZ: Well, what I am seeing already is the impact of this measures on the ground. I am already seeing the impact of the measures that have been
announced, not even take on workers in America. I have seen many companies saying, we will pull out of America, we will just simply lay off workers
because we can't sustain the pressure of tariffs.
I am seeing businesses not making capital investments in the U.S. as a result of the uncertainty that this measures have created, but more
importantly, tariffs are taxes, so what we are seeing is a massive - a potential for a massive tax increase that will be paid by consumers, will
make consumers poorer and will be to the detriment of the competitiveness of businesses and this is where American businesses in my view need to be
worried about this measure that are being imposed left, right and center because it will erode their competitiveness and the whole purpose of
reducing taxes on American business was precisely to render them more competitive. So we are going --
GONZALEZ: -- to see the opposite effect.
ASHER: As many people say, listen, there are no winners. No winners at all if there is a trade war. Okay, Ms. Gonzalez, thank you so much,
appreciate that. All right, meme creators are rejoicing after the European parliament reject the plans for a controversial copyright law. Online
activists were worried the E.U. directive would force Web sites to filter out copyright material uploaded by users including some of your favorite
memes. Internet activists say that would have been censorship. They are celebrating today.
The medium of memes of course - this is the Netherlands' official account, but the bill now goes to another vote in September, so it's not technically
over. Musicians including Paul McCartney had urged the E.U. to pass the laws to protect artists, there with the British Academy of Songwriters
said, they could help artists make a living.
(START VIDEO CLIP)
CRISPIN HUNT, BRITISH ACADEMY OF SONGWRITERS, COMPOSERS AND AUTHORS: It's not about the tech companies versus the major record labels or Hollywood
versus Silicon Valley, this is about real people like me, real small business creators who have to pay other people and we to try and make a
living out of our creativity.
(END VIDEO CLIP)
ASHER: Marietje Schaake is a member of the European Parliament who is backing the petition against the new rules. Marietje, thank you so much
for being with us. So, just your reaction to this proposal being rejected?
MARIETJE SCHAAKE, MEMBER, EUROPEAN PARLIAMENT: I think it's important that we have an opportunity to find a better compromise between the two very
opposing sides, so of course, it is fair that artists should be paid, but the proposals on the table now had a whole bunch of collateral damage for
freedom of expression and risk introducing sort of automated censorship upfront before people could upload information to the internet and that is
very, very undesirable.
ASHER: So, what would then be the solution? I mean, you've obviously had Paul McCartney come out and speak about this and obviously, you just had
someone from the recording artists association as well, what would be a solution that allows creative people to be happier?
SCHAAKE: Well, I don't think it lies in creating an additional protection for publishers because that's what was on the table, and so I don't quite
understand why some of these artists think that by creating intermediaries that also will make money that they will be better off, but that's for them
to decide. I think part of the solution will lie outside of copyright. I mean, just because we have a problem with the excessive economic power of
tech platforms doesn't mean that copyright is the best answer to deal with it.
So, I think part of the answer will lie in taxation, part of the answer will lie in these technology platforms acknowledging that the creation of
content is important, that they should sponsor it, which is what they are doing in some cases already, but there also has to be an acknowledgement
that there is a trade off that if you have information or a song or a movie, a news article you want to be found, and the journalist or the
artist that makes this content is also benefiting from traffic that is coming from the big technology platforms, and so, we have to look at what
is fair and reasonable and what does not go at the expense of fundamental rights of people in Europe, which is freedom of expression and access to
information and that balance has to be struck and that was not in the proposals that we voted down today.
ASHER: Yes, I mean, you certainly bring up several good points there, but TV stations obviously, we're on CNN right now, but TV stations across the
world obviously have to abide by very, very strict copyright rules. Some say, "Well, why shouldn't tech companies, why shouldn't social media
companies as well?"
SCHAAKE: I think that that's a fair point. And that was not what was at the table today though. So, I think it is fair that tech companies should
abide by the rules and by laws. I am a big proponent of respecting the rule of law also online and not having a disbalance between let's say
traditional media, such as television or the online world, but it doesn't mean that stricter copyright protection, protection of publisher's rights
as new rights that should be protected is the answer to those journalists and artists that are worried about their revenues.
And I also know a lot of artists especially smaller ones who don't want to depend on the big intermediaries, the big music houses and movie houses who
are happy to share what they produce, their songs, their creations to reach larger audiences. There are also those who would like to have that choice
and who don't want to be bound by the big publishers, the big music studios or the big movie houses that actually also take revenue. It's not like
they are only neutrally passing on the money between the tech platforms or others to the artists. They of course earn money, too. So, this is very
much a discussion about vested interests --
SCHAAKE: -- big players who can deal with any regulation because they have the lawyers, they have the money versus the smaller ones, the SMEs
that may not be able to and that it would be a problem for their competitive position, for the opportunity to innovate and that is something
that we were very concerned about, about the proposals today.
ASHER: All right, Marietje Schaake, live for us there, thank you so much for your perspective, appreciate that. Thank you. All right, we'll have
much more news here on "Quest Means Business" in just a moment. Don't go away.
High-flying moves and the occasional back elbow, sometimes, the fight between the world's big aircraft manufacturers feels a little bit like
professional wrestling. Now, Boeing has found a tag team partner. The U.S. plane maker is embarking on a joint venture to make commercial
aircraft with Embraer from Brazil. The new company is valued at $4.75 billion. Their opponents in the ring, a similar partnership formed last
year between Airbus and Canada's Bombardier. Let's get ready to rumble now. I'm joined now by - from San Francisco rather, by Ken Herbert,
Managing Director of Aerospace and Defense, Canaccord Genuity thank you so much, Ken, appreciate you being with us. So, this essentially would make
Boeing the market leader when it comes to small passenger jets. Just walk us through what this means for the likes of the C-series with Bombardier.
KEN HERBERT, MANAGING DIRECTOR OF AEROSPACE AND DEFENSE, CANACCORD GENUITY: Yes, so this effectively argue is a transaction that Embraer had to do
after Airbus invested in Bombardier in the C-series in particular and that recently closed, but obviously, Embraer is launching a new line of
aircraft, the E2 aircraft which is a follow on to its E-jets competing in a similar marketplace, and I think suddenly felt much more different market
dynamic from a competitive situation and so, they of course have been in public discussions or at least acknowledged discussions with Boeing for
several months, seven or eight months.
The companies will say they worked together in the past extensively, so I think it's just a natural step for Embraer and a must-do transaction and I
think Boeing gets access to a market now that's maybe not clearly going to be certainly as large as any of the other markets they are in on the
airspace side, but it gives them some optionality.
ASHER: So on the one hand, as we were just talking about, you've got Airbus and Bombardier. You've also got Boeing and Embraer, I mean, what
does that mean? What does this do really mean for new entrants say from the Chinese market and/or the Russian market.
HERBERT: So, it'll make it incrementally that much more difficult. I mean, you need to remember these sub 150-seat aircraft or regional jet
markets traditionally, we're not something that either Boeing or Airbus had actively participated in and really viewed as that attractive, so now,
maybe that's changed a little bit, but clearly, they've gone down into these markets under this Boeing since it is a one-stop shop for a 70 to
450-seat aircraft, so now that Boeing and Airbus are going to be investing more in these --
HERBERT: -- markets for the smaller aircraft, I think it will clearly make it more challenging for new entrants whether they be out of Russia or
of course the Comac aircraft out of China.
ASHER: But this still does require regulatory approval? I mean, what are the chances, what could block this?
HERBERT: Well, it's hard to quantify, but sure, you've got a relatively you could argue, volatile political situation in Brazil. I think part of
the reason that this had been in negotiations for so long was because the Brazilian government clearly wanted to ensure that - Embraer is a national
champion company down there and they are very much a pride of Brazil, so there's a lot at stake politically as part of this.
So, sure, they've - Embraer and Boeing had said, they don't expect this to finally close until the second half of 2019, so there's a lot that still
could happen, but I think fundamentally, the market dynamics are such that it will be difficult for Embraer to walk away at this point and the
valuation and the financial aspects are such that I see very little reason why Boeing would want to walk away, so certainly, still some risk
potentially volatility from a political standpoint, but I would argue, it looks like this deal will eventually happen.
ASHER: All right, Ken Herbert there for us. Thank you so much. Appreciate that.
HERBERT: Thank you very much.
ASHER: All right, let me take you to Wall Street quickly now, let's take a look pretty much all day in the green, the Dow ended this session and the
day up, up excuse me, very much up, 182 points. It took a dip ever so slightly, if you look closely around 2:00 p.m. in the afternoon local time
as the Fed released the minutes of its latest meeting, policymakers say they are worried about the effects of a trade war on a business investment.
All right, my friends, that was a very quick edition of QUEST MEANS BUSINESS. I'm Zain Asher, you're of course watching CNN.