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QUEST MEANS BUSINESS
Donald Trump Says China Is Not Ready For A Trade Deal, Not Yet; News From South Africa That Finance Minister, Nhlanhla Nene Was Stepping Down; Google Tries To Move Past The Data Disaster With A Brand New Smart Phone. Aired: 3-4p ET
Aired October 9, 2018 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
PAULA NEWTON, CORRESPONDENT, CNN: So it's looking a bit aimless really. Markets are still looking for some kind of a direction on what could be a
flat finish. These are the headlines on Tuesday, October the 9th. Donald Trump says China is not ready for a trade deal, not yet. Now, the IMF says
the rest of world could suffer. South Africa gives its revolving door of Finance Minister yet another spin, and Google tries to move past the data
disaster with a brand new smart phone. I'm Paula Newton and this is "Quest Means Business."
Good evening. I know you're ready for this. Tonight, China wants a deal. Donald Trump says they'll have to stew with his tariffs just a little while
longer. It's been just another ordinary day, an ordinary Tuesday really at the White House.
First, there was a warning from the International Monetary Fund. It says Mr. Trump's trade war will take a toll on the US economy, then political
intrigue took over in what was seen as a surprise move. It really surprised a lot of people. Nikki Haley said she is resigning as the US
Ambassador to the United Nations, and finally President Trump brought it full circle again, as he met with Haley in the White House, he said, he's
at the ready, prepared to slap yet more tariffs on China.
(BEGIN VIDEO CLIP)
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: We helped rebuild China. If we don't do that, China is not where they are right now. And that's fine
with me. But we're not doing it any longer.
UNIDENTIFIED MALE: ... more tariffs on China, they'll retaliate.
TRUMP: Oh, sure, absolutely.
UNIDENTIFIED MALE: Are you going to go forward with that?
TRUMP: A 100%. if they do that, if they retaliate - what does retaliate mean? They've already retaliated. They've taken out $500 billion. I
think that's the ultimate retaliation. Now, look, China wants to make a deal and I say they're not ready yet. l just say they're not ready yet,
and we've cancelled a couple of meetings because I just say they're not ready to make a deal.
(END VIDEO CLIP)
NEWTON: Okay, you get the picture there. Not ready yet. Our Jeremy Diamond is at the White House. Our Clare Sebastian is with us here in New
York. Jeremy, I go first to you. A surprise, yet another one from the White House, Nikki Haley saying that she's going to resign at the end of
the year, and yet, if you're her, if you put yourself in her position, this is a pretty shrewd political move at this point.
JEREMY DIAMOND, WHITE HOUSE REPORTER, CNN: It is interesting, the timing of this announcement has had a lot of head scratching frankly at the White
House. First of all, because a number of senior White House officials were not looped in until this morning, just an hour or so before Nikki Haley
stepped into the Oval Office with the President to deliver this announcement that she is resigning at the end of the year.
She did however come to the White House last week, last Wednesday. She is meeting with the President and that's when I'm told she told the President
of her intention to resign from her post and it was kept very, very closely held right up until today. A rare feat in this White House which is of
course, notorious for leaking as you well know, Paula.
But the question now is what will Nikki Haley do next? She signaled in her letter that she plans to return or not to return, but to head over to the
private sector and perhaps, make some money for her family. Sources have been telling us that that was perhaps a consideration in this move. But
the timing is notable also because last week of course, the President had this moment with Judge Kavanaugh, the day before Nikki Haley met in the
Oval Office with the President was when the President had mocked Dr. Christine Blasey Ford at that rally and our understanding was that, they
wanted to hold off on at least throughout last week, so that Justice Kavanaugh could get confirmed and not to overshadow that announcement.
But a lot of questions still remain as to why exactly now, a lot of the thinking inside the White House had been that if Nikki Haley was going to
resign, it would perhaps be after something on which she disagreed with the President, something on which the President stepped out and took a position
that she really could not support.
But here, we're seeing something very different. She insisted it was not for personal reasons, but nearly because she had put in nearly two years in
this administration and she felt it was time to leave.
NEWTON: Yes, and certainly, she was effusive in her praise there sitting next to the President. I mean, as Jeremy just explained, that was a
political intrigue, Clare. But what was top of mind for everyone during that meeting was the issue with China. The IMF weighing in saying, "Look,
this will hurt growth, not just in China, but in the US as well."
CLARE SEBASTIAN, CORRESPONDENT, CNN: Yes, the IMF made itself extremely clear today. This red - not just like a report on the numbers, Paula, but
essentially like a rallying cry. They're saying that global growth could be trimmed this year from the original forecast of 3.9%, it's 3.7% now.
Now, that's not a disaster, it's the same that we saw last year. It's the highest since 2011.
But this is a plateau essentially, this shows that it could meaningfully slow as a result of these trade tensions and that's because they say not
only are we going to see direct impact from the countries involved, but indirect impacts on supply chains around the world.
SEBASTIAN: And on confidence, on business sentiment, on financial market sentiment. All of those things play into it.
NEWTON: In terms of what the IMF his saying, they keep saying, it's like preaching to people who are no longer listening. They say the world will
be a much poorer and more dangerous place with this kind of protectionism. Did they feel as if, never mind the Trump administration, and that they're
speaking to the rest of the world here and just saying, don't take the bait, if we get into this, and it's a real trade war, we will be in trouble
on global growth.
SEBASTIAN: I think probably that that was part of the messaging as well. They actually took the unusual step of modeling what would happen if all of
the President's threats on tariffs, you know, another $267 billion of Chinese goods are tariffed. So all of those - and all of the retaliation
that comes with that and they said if all of that came into play, that could cut about a percentage point from global growth and that could extend
into the long term.
So, I think we've got a situation where emerging markets are struggling with problems in Europe. These countries kind of fall to have yet more
trouble in their economy, so I think that's part of what the IMF is saying.
NEWTON: Yes, and Jeremy, every time, when we're at the White House these days, when he's getting off of an airplane, on an airplane, he talks a lot
about this whole theme. In one of the speeches when he was announcing the new trade deal with Mexico and Canada last week, he said, look, stop being
babies about tariffs. Is there any doubt in your mind that the President will go through with these other tariffs on China?
DIAMOND: No, it certainly seems so and frankly, the deal that he was able to strike between the United States, Mexico and Canada - these NAFTA 2.0,
frankly, that has emboldened the President because you heard him immediately after that deal was signed, touting the fact that hi tariffs
were exactly what had led to the success of being able to broker that agreement and he lamented the babies who had complained.
Those babies of course, most of the Republican leadership in Congress who had complained about the President's tariffs saying that it was the wrong
way to proceed, but frankly, because the President was able to get that deal with Canada and Mexico using those brinksmanship tactics, I think it
makes it all the more likely that the President is going to continue to stay the course, to continue to up the ante with China because clearly, he
thinks those tactics will ultimately succeed.
The question though is, is China the same - is dealing with China the same as dealing with Canada and Mexico? Clearly, the stakes right now appear to
be much, much higher.
NEWTON: Yes, definitely. At least, that's what the IMF is saying. Our Jeremy Diamond there at the White House for us and our Clare Sebastian here
in New York. Good to see you.
Now, later in the program, I'll be talking about those IMF growth forecast with the new Nobel Laureate for economics, Paul Romer. You don't want to
Now, the resignations came thick and fast today. Within minutes of Nikki Haley saying she wanted out, this was making a lot of news in other
capitals. News from South Africa that Finance Minister, Nhlanhla Nene was stepping down.
Now, his departure had been widely rumored. We talked about it yesterday on the show, and he drew sharp criticism last week after admitting he met
members of the Gupta family. Now prominent South African businessmen at the center of a long running corruption scandal. You will remember, we've
talked about this many times.
Okay, the Finance Minister is out, the South African rand as you can imagine fell more than a percent on the news and it has already weakened a
lot against the dollar in the past six months. And his successor has now been named. It's Tito Mboweni. He will take over now as Finance Minister.
That job though seems to have become, what we like to call here the poison chalice of South African politics. Now, this portfolio has changed hands
six times in five years. Apparently, taking their indications from Italy on this one. The revolving door started spinning in 2014 when Pravin
Gordhan left the post. He was replaced by guess who? Nene. That was in fact his first turn at the helm.
Now, just a few months later, President Jacob Zuma gave the job to David van Rooyen, he was a total unknown at the time and his tenure was in fact
very short-lived. After four days, van Rooyen was forced out and Pravin Gordhan was back in place. Malusi Gigaba saw out the last few days,
though, of that Zuma administration.
Now, after Zuma's downfall, Nene came back to apparently - apparently, steady the ship. Eleni Giokos is in Johannesburg and has been following
every detail of this.
And I guess the point is where do we go now? I mean, if you - we were just talking about the risks and the vulnerabilities to emerging markets. You
got that rand that hasn't been doing good things lately, in the last few days and weeks and the fact of the matter is, South Africa needs foreign
investment. What is the government saying now about the confidence they have in this Finance Minister?
ELENI GIOKOS, AFRICA CORRESPONDENT, CNN BUSINESS: Absolutely. I mean, it needs the confidence. And just watching what you just played out there,
just how many changes we've seen within the Finance Ministry. Definitely, it does not create confidence in the Treasury and the Treasury of course is
the most important thing that's going to create stability within any economy.
We are currently in recession. Economic growth is coming at a significant pressure, we've got a volatile currency, and of course, as you said, the
emerging market scenario globally isn't exactly playing a very good role in terms of creating stability in South Africa, and then you've got the credit
rating agencies as well there also circling.
So when Nhlanhla Nene admitted to meeting the Guptas and it's not so much that he admitted to meeting them or meeting with, it's the fact that he
lied about it previously, and this is of course what created the big issue where he eventually had to apologize to the country last week and then
speaking to Cyril Ramaphosa in confidence earlier this week and this is when all the rumors started coming out.
And of course, the President has to ensure that he's got a clean government, a clean Cabinet and then of course, accepting that resignation
today. Now, what's interesting here, Paula, the man that is taking over, Tito Mboweni, I've got to ask you, how many Finance Minister do you know
have a song written about him?
NEWTON: Exactly, zero.
GIOKOS: Well, I mean, there is a song - there you go. Cassper Nyovest - a song named Tito Mboweni that came out last year and it hit number one
within 20 minutes of being released on iTunes. They are saying that he is of course, he prophesized this happening.
But Tito Mboweni is an interesting guy. I mean, he was the Reserve Bank Governor in South Africa for 10 years. He is a technocrat. He is known to
be prudent and relatively conservative. He also worked as Labor Minister under Nelson Mandela's administration as well. So, he's going to be the
guy that's going to take over and he is creating a sense of credibility in a Ministry that has been plagued, but with a lot of drama.
So this hope that of course, this is going to send the right message to markets.
NEWTON: So everything you just told me about this guy juxtapose against that video, it is giving people a lot of confidence, I mean, look at this
video. I mean, it's a marvel to look at and it must be good if it went to number one that quickly.
But honestly, getting that down to the bottom line here, it is incumbent upon the government no matter what this Finance Minister says or does now.
They're pretty much stuck with him.
GIOKOS: Exactly. I mean, look. He's got a big task ahead of him. What's interesting is that Tito Mboweni earlier this year actually said and he
tweeted and he tweets a lot and this is perhaps one of the Achilles heels and maybe one of the things that the market doesn't like that much. He
does tweet a lot and earlier this year, he said he doesn't want to become Finance Minister and that we shouldn't actually be rehashing people and
putting in similar people in similar positions in the country that we need fresh blood.
And here we have him now as Finance Minister and he is going to have this very tough job of trying to get in investments into the country, pushing
policy and it's not going to be easy because South Africa has basically - is in a situation where the country doesn't have enough money, it's got 27%
unemployment. There is worries about a budget deficit, and Paula, it's not looking good.
So he is going to have to pull on those purse strings very carefully, not like that video where you see literally dollars and you know they're
throwing around in the room. He is not going to have that ease of spending money. He is going to have to be pulling back, and he actually even said
in an interview a couple of weeks ago that he wants to cut back on public spending. Whether he is going to be able to implement that as Finance
Minister will be interesting to see.
NEWTON: All of it will be very interesting, although I'll be willing to bet that video does not impress the credit rating agencies. Eleni, thanks
so much, covering yet another ...
GIOKOS: Hey, you never know.
NEWTON: You never know, Eleni Giokos there covering another busy day in South Africa for us. Now, after the break, is Snap struggling to survive
and analyst report raises questions over the very future of SnapChat and a new hardware and new problems for Google. European lawmakers want to hear
how the company will protect its users privacy?
NEWTON: I was hoping when you came back, this would be a zero, and look - what? It's lagged pretty much close to flat as we are racing towards the
closing bell. It doesn't feel like that today though on the markets. It's the last hour of course of trading and after a topsy-turvy session, the
main US averages are pretty much as you can see right where they started.
Now, one stock though that we're watching very carefully is Snap. Shares as you can see there, down almost 6% now after an analyst said the company
is running out of money and perhaps time.
Our Paul La Monica joins me now. I mean, what is the issue there, Paul. This is a stock that it can't just be meme. Many people can't figure out.
It was so promising and why does it say that you could actually - they're almost acting as if this is an existential crisis for SnapChat.
PAUL LA MONICA, DIGITAL CORRESPONDENT, CNN: Yes, I think right now, Paula. Just a lot of analyst on Wall Street really don't get the sense that
management is able to turn around the decline that they are now experiencing in users, and once you start losing users a social network,
that is a very serious problem, couple the fact that they're not really doing anything that's all that innovative to be brutally honest.
I mean, they have new features that people tend to like, but any time SnapChat comes up with something that gets any traction, "Hey, there,"
Facebook and Instagram then just steal it and Instagram and Facebook obviously have a lot more marketing clout and user muscle behind it to get
more traction with anything that SnapChat may originate.
So it really doesn't matter who does something first in social media. It's who has the most users.
NEWTON: And it will be interesting there to see if someone does try and buy it, although no one has presented that possibility yet as it were.
LA MONICA: I would be very skeptical of anyone coming in to try and buy Snap at this point because you just - you're getting an asset that if you
were to buy it, you'd have to have faith that you can turn this thing around and Facebook isn't going away.
NEWTON: Okay, Paul La Monica, thank you. We'll continue to watch those markets up to the closing bell. Now, in the meantime, it's a huge day for
Google's parent company, Alphabet.
Here are the key letters of the day. We're going back to Sesame Street people. D is for defense. Google has pulled out of the running for a
controversial $10 billion Cloud computing contract with the Pentagon. Google says the program might be at odds with its principles around
artificial intelligence. R is for regulation. European politicians are calling for Google's CEO to come before the European Parliament and explain
the company's latest data breach and P is for pixel. Google has announced the Pixel 3 and Pixel 3 XL handsets to take on, yes, that iPhone. A tablet
to take on the Microsoft surface and home assistant with a screen to compete with Amazon's Echo. A lot going on there.
Rick Osterloh is Google's Senior Vice President for Hardware. He told CNN Business, Google is exploiting its software knowhow to make phones that
anticipate what users want.
(BEGIN VIDEO CLIP)
RICK OSTERLOH, SENIOR VICE PRESIDENT FOR HARDWARE, GOOGLE: What are trying to develop with Pixel 3 is the most helpful smart phone on the market. We
want to make it so that we really help users get things done that they want to get done and we can uniquely do that because of our assets in AI,
software and hardware.
So, an example would be our call screening technology, where someone who you might not want to talk to, say a spam call can call your phone and we
can answer it for you.
DIGITAL VOICE: Go ahead and say why you're calling.
UNIDENTIFIED FEMALE: You've been selected for a free holiday.
DIGITAL VOICE: They can't talk right now, but try calling them back later. Thanks and goodbye.
UNIDENTIFIED FEMALE: Do you have a favorite new sort of AI inspired camera future?
OSTERLOH: I'm definitely a big fan of the photo booths because it just takes the photo automatically for you and it makes it very easy to take a
UNIDENTIFIED FEMALE: We look amazing.
OSTERLOH: We do.
UNIDENTIFIED FEMALE: And what is it looking for? Is it just looking for smiles?
OSTERLOH: It's looking for smiles. It's looking for lighting and it's looking for where your eyes are focused.
(END VIDEO CLIP)
NEWTON: Okay now, Google as you can see there is investing in hardware. At the same time though, it is facing questions about how it handles
personal data. Mr. Osterloh, who you just saw there wouldn't answer CNN's questions regarding how it handles data. Here on "Quest Means Business,"
we have been asking Google to put up an executive, anybody to talk about this. No luck as of yet, but we'll keep you posted.
Seth Fiegerman is a senior tech writer here at CNN Business. We don't want to act like we don't want you here, Seth. You're good and you should
because you have a lot of knowhow about how Google is trying to face this now, and we've just had word as well, when we talk about regulation that
Google is in fact appealing a fine that it got in Europe of 4.3 billion euro.
And in terms of how it goes forward. You know, when it talked about that data breach, it was something that you reported that look, they didn't
report the data breach because they were afraid of the implications for regulation. What is the strategy here on Google's part?
SETH FIEGERMAN, SENIOR TECH WRITER, CNN BUSINESS: I think that breach, if we're going to call it that came to light to Google in March, which is the
same time of the Cambridge Analytica scandal came out. If there was ever a time for a company to be nervous about being in the wrong news headlines,
that was probably them.
It feels like Google is very sheepish about being cast in the same light as Facebook. They've tried to keep themselves separate from being ...
NEWTON: It's not working.
FIEGERMAN: It's not working. It feels like they are about to have a long awaited moment here and the irony is that the thing that might tip them
over the edge is a product that people have forgotten existed for years, people haven't been using for years and all of a sudden, it might be thing
that push them in the limelight.
NEWTON: Yes, it's so interesting because it was Google Plus which never had grand adoption and it really will end up being the Achilles heel. In
terms of Google's strategy, there is a lot of people talking about the fact that in a very insidious way, it is getting into every corner and crevice
of what we do online. Do you think that puts them at the sharp end of the stick when it comes to regulation?
FIEGERMAN: I do think so. I think Facebook has really kind of monopolized a lot of the bad headlines so far, but Google is at least as dominant at
taking people's data with the same privacy pitfalls to date. They haven't really stumbled but this could be their big stumbling moment.
NEWTON: In terms of what they're investing in, I mean, there are so many lines of business and I am sure some of them are secret. Where do you see
them? I mean, is this about the Cloud? Is this about the software piece? Is this about AI or is it about all of it?
FIEGERMAN: I think Google wants to be first and foremost your gateway into the internet and what that has meant has changed over the last 18 or 20
years that they've been around. Once upon a time, it meant just searching online, now it means they want to be in your home. They want to be your
phone. They want to be the Cloud service that provides you with all of your services. They need to be first and foremost that front player and
all companies are competing for this. Of course, them.
NEWTON: Their best asset is all the cash they have or also the software knowhow. I mean, look, there is a lot of competition for talents and
everything that the hardware engineer there just discussed, I am not sure about adoption rates at this level with that late entry into the market or
am I wrong?
FIEGERMAN: I think Google's best asset is that they dominate search and they dominate ads, hands down. No one competes with them on that front.
Cash, less so. And importantly, their brand. I think even today, Google still has a pretty strong brand that could be damaged under a tight
NEWTON: Yes, they don't have a good reputation with me so far. I'd like to hear from you Google. We'd like you come on the show. We can catch you
anywhere in the world. Seth, thanks so much for coming in and I do think that Google, as you said, will continue to be really at the center of the
news when it comes to regulation. Appreciate it.
Now, tech companies might be the buzziest, but a new study shows they are not the ones with the most staying power in terms of brands. Future Brand
ranks companies by perceived strength. These come out on top. You're looking at them right there.
Apple in fact, as you can see is the only FANG company in the top 10 and it fell down the list, along with Facebook, Alphabet, Amazon and Tencent. Jon
Tipple is the Chief Strategy Officer at FutureBrand and he joins me now.
In terms of putting together a survey like this, and in terms of how you put data together. I didn't see a huge correlation at times with let's say
success and profitability and these brands. Is that true or is the correlation there when you plot it on a longer term graph?
JON TIPPLE, CHIEF STRATEGY OFFICER, FUTUREBRAND: Yes, hi, Paula. Thank you for having me on. It's great to be here. There's so much in that
question, I'll just give it a little bit of context. While of course, there are many different ways to manage brands in this day and age, the
thing that great brands seem to have and shows a core characteristic is the ability to manage their purpose against their experience, and I think
that's something that's true of all brands.
TIPPLE: Not just necessarily the tech sector. When you drill into the tech sector, as we have done in our survey which you've mentioned, the
FutureBrand index, what you begin to see is that tech companies seem to have a little bit of a confidence crisis right now.
I mean, what we're beginning - sorry, what we're beginning to see is that technology has always been somewhat not set, it's always been changing
which in some way makes it incredibly exciting, but on the other hand, whilst our globally informed public that responded to our survey said that
they definitely saw brands like Google, like Amazon, like Facebook being a part of their long term future, some of the things that are causing them
concerns in the short term are affecting their confidence around technology brands, which could in turn have an effect on profitability and usage.
For example, people are concerned as to whether technology brands are genuinely changing people lives for the better. If you look at how they
write for example healthcare companies, which is seen as incredibly positive, there is a concern around technology companies being generally
having strong principles, is that a question that they are beginning to ask genuinely being around to make our lives better.
And I think that on the one hand, that creates a degree of uncertainty, but it also creates a huge opportunity for new brands to come into the space.
If you notice, Invidia is a brand that's new into the sector and new into the study this year. As is Adobe, and I'd also mention brands like Verizon
which typically have come from a telco background rather, but are now beginning to bring something new and potentially quite interesting into
NEWTON: And I want to get to some of the brands though that are falling behind because they are household names. I mean we have Walmart, L'oreal,
HSBC, which you say are falling behind, why?
TIPPLE: Sure. There is a fundamentally - the brands that grow well are doing a fantastic job of balancing what they stand for, their purpose
against the experiences they bring people every day. In the examples you used there, there's usually an issue typically with one or either or both
So if for example, you were to talk about Walmart, Walmart is one of those companies that across almost every measure, I think with the exception of
indispensability, is seen as no longer exciting people, no longer animating people and the experiences it offers people are increasingly perceived to
be somewhat banal.
We are dealing with employees and consumers and generally, our world these days where our people can be incredibly discerning about where they spend
their time and their money and if brands aren't able to give them experiences that are generally meaningful to their lives, that give them a
sense of direction, sense of purpose, and allow them to meaningfully interact, then I think brands like the ones you just featured tend to slip
down the list.
There are of course also some particularly structural issues that will be affecting individual cast degrees. We look at luxury. In some ways, it's
harsh on Louis Vuitton because Louis Vuitton - LV Malletier is really the only traditional luxury brand that's managed to be in the PWC top 100
global brands, global companies which is our start point, and in some ways they are suffering some of the challenges that traditional luxury brands
But at the same time, there is a change in consumer behavior these days. They used to be very simple to sell to new consumers and sell luxury to
consumers, but these days, they are looking for much more meaningful independent experiences and we need to adapt to those. It's something
that's a real challenge.
NEWTON: It does seem to be something to really - that's become more and more difficult to put your finger on in terms of how these brands fair
individually, year to year. Jon, thanks so much.
TIPPLE: But it's usually not ...
NEWTON: Sorry, I've got to leave it there, but Jon, thank you. We will continue to follow along with these surveys. Appreciate it.
TIPPLE: No problem.
NEWTON: Now, the IMF says there's something putting the brake on global economic growth. Coming up, one of the world's foremost experts on how to
get it going again. Fresh off his Nobel Prize win, Paul Romer joins me next.
[15:30:00] PAULA NEWTON, HOST, QUEST MEANS BUSINESS: Hello, I'm Paula Newton, coming up on the next half hour of QUEST MEANS BUSINESS, I'll be
speaking with the 2018 Nobel Laureates for Economics Paul Romer, fresh from his award on Monday. And all they want for Christmas is you.
The head of Manpower tells us why employers need holiday workers more than ever. Before that though, this is Cnn, and here, the facts always come
first. Nikki Haley says she doesn't know what her next move will be, but says it's important for government officials to understand when it's time
to step aside.
The U.S. Ambassador to the UN announced her job resignation today alongside President Donald Trump. He praised her for doing a quote "fantastic job".
Turkey says Saudi Arabia is allowing it to search its consulate in Istanbul as authorities continue to investigate the disappearance of journalists
critical of the Saudi royal family.
This is the last time Jamal Khashoggi has been seen entering the consulate a week ago. You can see the picture right there, the UN has voiced serious
concerns over his disappearance. The wife of Interpol's former chief says she fears for her life after her husband was detained by officials in
In an exclusive one-on-one broadcast interview with Cnn's Melissa Bell in Lyon, France, Grace Meng tearfully kept her face hidden as she talked about
Meng Hongwei's disappearance. Beijing announced recently that Meng is being held on suspicion of corruption.
And returning to our top story tonight, the IMF warns that global growth is in jeopardy because of that trade war between the U.S. and China. Now, my
next guest is perfectly placed to make sense of this economic picture. Paul Romer is a former chief economist at the World Bank, and yesterday, he
was awarded the Nobel Prize in Economics for his work, trying to understand how economies can sustainably.
Sir, thank you so much, and obviously, first off, congratulations from everyone here, and I have a request that you really shed the humility at
this point in time and tell us why you think the committee in fact recognize your work. They say that you have significantly broaden the
scope of economic analysis.
And I'm going to say that you likely agree with them.
PAUL ROMER, NOBEL PRIZE WINNER IN ECONOMICS LAUREATES FOR 2018: Well, let me try and -- let me try and give you like a simple version, and then if
you want, I'll give you the really boring, you know, professorial one. But the simple version, there's a lot of economics is about trade-offs, it's
what people -- some people call that trade-off thing where you get a little more of this but a little bit of that.
A little -- you get more of this, you get less of that. The perspective of growth theory that both I and my co-recipient Bill Nordhaus, work done was
a perspective about discovery, which means, you know, we can have more of everything.
[15:35:00] Even more using less natural resources, and the way we can do that is because we discover new ways to get value to get satisfaction out
of the same raw materials, the same resources to work with. So it's the accumulation of understanding and knowledge and the discovery of new ways
of doing things that ultimately sustains progress and standards of living.
NEWTON: And we'll get to more of the --
ROMER: Now, you want the boring, now the boring --
NEWTON: And we'll get to that, thank you and we will get to that in a second. But in the meantime, just going back to the IMF report, and you,
you know, held a position, chief economist at the World Bank, it is something that economies grapple with, what has been a temptation of many
governments, not just the U.S. administration at the moment is to see things as a zero-sum game.
So I'm going to get the climate, but first, let's get to trade. Why and how can you convince governments, so look, it's not a zero some-game that
we are going to go exponentially if you get away from -- let's name one thing, protectionist tendencies.
ROMER: Yes, well, there's a real connection between these two things. And it's one that I think it's not well understood. If you ask, what are the
real benefits of taking -- say exposure to closed economy with a billion people. Why is it better to extend it so it's an economy with 10 billion,
the whole global economy?
Why isn't a billion enough? If you're just thinking about that trade-off thing with physical objects, it's hard to see why you get some gains from
going to even bigger scale. But if it's -- if you think about the realm of ideas where everybody anywhere in the world can contribute a new idea, and
then once it's discovered, it can used everywhere else in the world.
The big advantages to having everybody in communication with everybody because what we -- what comes out of it is this global innovation machine,
this discovery machine that cumulatively generates the progress that we all enjoy. And the historical course of more globalization, more people
working on these ideas is the reason why we've seen growth speeding up over time. So --
NEWTON: And that -- just going to stop you here for a second because sometimes that can be a controversial topic. You have a situation now in
the United States --
ROMER: Yes --
NEWTON: Where the government is deregulating at a fast-pace, pretty proud of it as well including tax reform which basically just leads to tax cuts.
I want you to listen to an exclusive interview we did earlier today with Hillary Clinton and what she says the role of government should be for
Democrats going forward. Take a listen.
(BEGIN VIDEO CLIP)
HILLARY CLINTON, FORMER SECRETARY OF STATE, UNITED STATES: We do believe in making government work. We're not interested in disabling it, cutting
taxes so dramatically that it gives you an excuse to raise Social Security, Medicare and Medicaid. We try to have empathy for the situations people
find themselves in, that's why we support universal healthcare.
Why we wouldn't deprive people with pre-existing conditions from getting access to healthcare, and the list goes on.
(END VIDEO CLIP)
NEWTON: And when we say the list goes on, the list goes on because there's a lot for government to get involved and they'll do. I don't have to tell
you that your indigenous growth model right now is controversial and why? Because it basically puts the premise in front of people that improvements
and productivity can be tied as you were saying earlier to factor innovation.
But here's the catch. The government has a role to play there. If we want to extrapolate that to the environment, why does it seem that so few
governments these days -- at least the ones that matter are convinced that government has productive role to play in that sphere?
ROMER: Sure, but what -- let me -- let me just be clear about what someone like me can contribute. What we do in science broadly speaking and then
the economics in particular is trying to provide the answers to questions what if? You know, what are the facts about what if?
Then that information can be taken by someone on the Democratic Party like Hillary Clinton or somebody like Donald Trump in the Republican Party, and
they can bring their values, their preferences to the choice about, well, what should we do?
But it's very important to understand that all we can provide an expert opinion on is the 'what if' question. Just what are the facts that then
heed the rest of the debate. And the facts about trade and globalization is that they can speed up discoveries, speed up sharing of knowledge, speed
But you know, there's a lot of other issues that people are thinking about including if somebody isn't playing by the rules, you know, how do we
respond? Same thing on climate. There's a bunch of issues about timing, strategy, how you approach something.
But we can still focus on the facts.
NEWTON: And in terms of focusing on those facts, you have said people think protecting the environment will be so costly and so hard that they
want to ignore the problem. It does seem easier right now, and governments are almost betting that they're betting against you, Dr. Romer, saying
look, if we just let it go at this point politically, that's more plausible and it's not going to do that much harm for our economies or our
[15:40:00] ROMER: You know, one of the hard things to convey to people is the facts as we know them are uncertain. You know, we try to give
confidence intervals or uncertainty ranges when we describe things. So I can't tell you with absolute certainty what it would cost to decarbonize,
you know, the whole energy system.
But what I can tell you is that if you look back at previous episodes where people try to forecast, oh, God, it's going to be really terrible to --
it's going to be really costly to get rid of the chlorofluorocarbons that are, you know, killing the ozone layer. When you look at what the actual
cost was, it's always smaller than people expected.
And often a lot smaller. So I think we're kind of paralyzed by fear about what it would cost to try and reduce the greenhouse gas emissions, and once
we commit to that, it won't be that costly, precisely because we'll discover new ways to do things. We aren't just going to scale up the
things we know now.
NEWTON: Yes, and the government has other role to play there. Dr. Romer, we have to leave it there, but we thank you for coming in and invite you
back any time you want to, OK? Appreciate that, and again, congratulations --
ROMER: OK! I'll give you the boring version any time you want --
NEWTON: OK, we will be surprised, we'll invite you back, thanks so much, appreciate it. Now, when we return, a monster hurricane is honing in on
the U.S. coast in Florida and it's only getting stronger. We'll have the very dangerous forecast coming up.
NEWTON: Affect "Quando's(ph)" net, but it has been a rough year for toy stores, but FAO Schwarz -- where this famous scene was from the movie "Big"
is planning a major international expansion and it's moving into Canada, China, Europe and Australia and there will be a new flagship store right
here in New York which will open just in time for the holiday season.
Now with U.S. unemployment, the lowest its been for decades, retailers are fighting hard to hire the extra staff they need for that all important
holiday period. Now, in fact, the reason why they call it the given season and Richard was feeling any good mood.
(BEGIN VIDEO CLIP)
[15:45:00] RICHARD QUEST, CNN: It's beginning to look a lot like Christmas and certainly when you think of unemployment, the current rate in
the U.S. have 3.7 percent and you just look at the bonanza that is about to come to seasonal workers as companies fight over getting workers to help
with the Christmas rush.
For instance, let's look at Macy's over here, now Macy's want an extra 80,000 workers over the festive season. So it's offering a competitive
hourly income and a discount on Macy's merchandize. And then you've got Target; a vast company, Target wants 120,000 seasonal workers.
To help them attract them against the opposition, it's offering a 10 percent self-discount and further discount on wellness products. As of
course for Amazon, they're not saying how many staff are needed, but if you just take last year as an example, 120,000 hires.
And bearing in mind, Amazon is now offering a $15 an hour minimum wage, which makes it extremely attractive. Now, someone has to deliver all of
this around the country. FedEx is worried it won't have enough pilots. According to "Reuters", if you're a pilot for FedEx and you're near
retirement, now FedEx is so desperate it's apparently offering bonuses of up to 110,000 if you stick around for Christmas.
Wherever you look, the demand is for workers, more employees. And so, if you look at the tracker by Challenger Gray and Christmas, estimates nearly
600,000 jobs, holiday jobs have been advertised so far this year, and this doesn't include Amazon. Extraordinary large numbers.
Jonas Prising is the chief executive of Manpower, joins me now. The numbers have shown with an unemployment rate of 3.7 percent. It's really
very simple, who is going to do all the work?
JONAS PRISING, CHIEF EXECUTIVE OFFICER, MANPOWER: Well, as you've so eloquently laid out, it's an extremely tied labor market here in the U.S.
Now, one thing to remember though is that for the seasonal work that is occurring within retail as well as within logistics, there are talent pools
that employers can access that are interested in seasonal work around Christmas.
But they may be students, they may be retirees, they may be returning seasonal workers that are doing this work and maybe are not working in --
during the rest of the year or in a part-time basis. So I think it's somewhat -- although, it is a very difficult hiring market, no doubt.
You're seeing companies take action, offering that are benefits, that are discounts, higher wages and tapping into talent pools that may be are not
at such full employment as the general part of the workforce.
QUEST: Under what point does that become inflationary? At what point does, you know, the lack of workers or available workforce require companies to
put up wages even more to attract?
PRISING: Well, you've seen some signs where companies are doing what they need to do to attract the talent that they need and most likely Amazon.
But of course, some of the companies you mentioned earlier, Target, FedEx and others have all been adjusting their wages to make sure that they
attract and retain the workers that they -- that they have.
You know, you've also seen in this latest jobs report that the wage inflation actually came down a little bit. So the wage inflation here in
the U.S. as well as in many other countries across the world has been relatively muted. So they're offsetting this with productivity and
benefits other than just wages.
QUEST: If we look at the bigger picture, not just seasonal, and you see this unemployment rate of 30 -- of 3.7 percent. In the longer -- in the
medium to longer term, the ability of the U.S. to provide and to come forward with a qualified workforce capable of going into those jobs is
getting harder and harder as the economy is at full employment.
And with immigration and migration being restricted, I guess the simple question is what happens next?
PRISING: What we see many employers investing in is to invest in training for their employees. If I compare the service we made three years ago to
the service we made just recently, from 12 percent of employers are saving, investing in training, that number is now 50 percent.
So what employers are doing, they are investing in training so their employees becomes more skilled and --
QUEST: Right --
PRISING: And more productive. And that is where they can create some space. There's also still some space within the U.S. labor market because
the labor participation rate are not at the level they were before the recession. So some people are still on the sidelines for various reasons,
and that can be another source of workforce as we continue in this economic expansion.
[15:50:00] QUEST: Allow me to go from the seasonal to the medium term to the very long term. The revolution that is taking place, the fourth
industrial revolution AI Quantum and the like. At what point are we going to start to see the job losses in large numbers that some have warned
PRISING: And that is a great question. Because the industry forward of zero requires people forward of zero level skills. And what we've seen so
far is despite all of the rhetoric around the impact of automation, it crosses all industries. The industries that have really had a major impact
have been manufacturing, where most developed countries have lost about a third to 35 percent of the workforce over the last 10 years.
We as yet have not seen a similar impact across other industries, but what we have seen a significant impact on is the requirement for a more skilled
workforce to take advantage of the technologies so that people can become more productive. And as we look at our surveys, we see many companies
estimating the job losses outright to automation to be relatively low.
But the requirement for a more skilled workforce much higher than what the current pipelines are allowing for. So that's why we think a skilled
revolution, a shift from this concern around the job elimination to a much greater focus on being able to upscale at scale the workforce. That's
where productivity is going to come from, and when that happens, then we get broad-based wage growth across all scale segments.
(END VIDEO CLIP)
NEWTON: And we will be back with more in just a moment.
NEWTON: People living on the U.S. Gulf Coast are bracing for what could be the most dangerous storm to come ashore in decades. Hurricane Michael is
gathering pace off the West Coast of Cuba. The government of Florida says it's a monstrous storm that could bring total devastation to some places.
Allison Chinchar has been following this from Cnn Weather Center.
And Alison, you're so used to having a good look at these storms, getting some insight into them. What is it with this storm? Is it fast-moving? Is
it the winds? Is it the water?
[15:55:00] ALLISON CHINCHAR, METEOROLOGIST: Right, so the wind is really going to be the big concern with this. With Florence, the last storm to
really impact the U.S., and main concern was rain and the flooding. This one is really going to be more of a wind factor and also tornadoes.
Systems that typically move through the Gulf have a much higher chance of spitting out a lot of tornadoes than the ones that stay hid along that
northern Atlantic coastline. So that's going to be another concern with this storm. Right now, winds are 175 kilometers per hour, but we do expect
those to go up before it makes landfall.
As of this moment in time, landfall is expected likely between late Wednesday afternoon to early Wednesday evening local time in Florida. It's
likely expected to make landfall along the Florida panhandle, then pushing in-land for safe-flight, Georgia in North and South Carolina as well as
Storm surge going to be a big concern with this storm. Right here, you can see for places like Apalachicola, down the Cedar Key, about two and a half
to three and a half meters. Places like Panama City, about one and a half to two and a half meters. And even a large city that seems to be quite far
away like Tampa, still expected to say see some storm surge upwards of around one and a half meters total.
Rainfall also going to be a concern. Not quite the amount that we saw in Florence. If you recall, you have some areas around a 1,000 millimeters of
rain. This will not be that high. Most widespread areas around a 100 meters, but you will have some areas that get slightly higher amounts.
However, Paula, with that said, North and South Carolina do expect to get some additional rainfall from Hurricane Michael. Keep in mind, we still
have several river gauges there that have not come back down to normal levels from Florence, and now we're adding the additional rain on top of
NEWTON: Yes, it took days and days for those levels to actually crest, and as you said, they're just getting over, and now we will keep our fingers
crossed. Allison, thanks for following that, appreciate it. And we are approaching the final moments of trade on Wall Street, we'll take you to
the closing bell next.
NEWTON: So of course, we are in the final moments of trading on Wall Street. The Dow had gone between gains and losses all day, Caterpillar
shares are down more than 2 percent with investors still worried about the trade war with China and those rising interest rates.
In that meantime, this is interesting, those shares fell to a record low after one analyst warned that the company was actually running out of
money. You see it there, down now better than 6 percent. Tesla shares meantime are up nearly 5 percent. Researchers at Macquarie say Tesla is on
track to hit those all important key production targets and be profitable by the end of this year.
And that is QUEST MEANS BUSINESS, I am Paula Newton, "THE LEAD" with Jake Tapper is up next.