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First Move with Julia Chatterley
U.K.'s Cobra Committee Meeting After Promising To Respond To Iran's Seizure Of An Oil Tanker; Shanghai's new tech exchange star market soaring in its first day of trade; "Top Gun 2" Hit Some Diplomatic Turbulence Over Maverick's Bomber Jacket. Aired 9-10a ET
Aired July 22, 2019 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR, FIRST MOVE: Live from the New York Stock Exchange, I'm Julia Chatterley. This is FIRST MOVE and here's
your need to know. A robust response. The U.K.'s Cobra committee meeting after promising to respond to Iran's seizure of an oil tanker. A shooting
star: Shanghai's new tech exchange star market soaring in its first day of trade and the need for speed, "Top Gun 2" hit some diplomatic turbulence
over Maverick's bomber jacket. It's Monday. Let's make a move.
Welcome to FIRST MOVE once again. I hope you all had a great weekend. I can tell you, we were sweltering here in New York, in that temperatures
above 100 degrees Fahrenheit. The question of course, the markets this week has given all the data. We're going to get the earnings as well. Do
we add fuel to the market rally here and some fire or do we pour cold water on that market rally?
Right now, I can tell you futures are higher. We're less than three quarters of a percent away from those record highs. So, many earnings
though to digest this week, 25 percent in fact of the S&P 500 reporting including the likes of Alphabet, Amazon, Facebook and McDonald's. We're
going to further gauge of course the power of the pocketbook for U.S. consumers.
The bank earnings last week and I'll keep talking about these, they were a good sign showing consumer loan demand is solid, retail sales data, of
course was robust, key ahead of Q2 U.S. growth numbers on Friday this week. That said of course, as we stress last week, trade still matters and
forecast for many of these corporates will remain front and center.
Cue, a tweet then from the editor-in-chief of "The Global Times" over in China. It's a handle now that market watches pay very close attention to.
The tweet suggesting that Chinese importers are gearing up to buy us agricultural products. Why do we care? Well, this is one of the promises
that China made as part of the trade truce, anything that will help restart formal U.S.-China trade negotiations. I think it's going to be seen in a
positive light right now particularly as investors watch what's going on and the further ratcheting up of tensions in the Middle East. Lots of
watch points to watch.
Let's get to that because that's what we're going to start the drivers. Oil rallying over global tensions with Iran. The U.K. government promising
a robust action response if Tehran does not release that seized tanker. Matthew Chance is in the UAE for us on this story.
Matthew, great to have you on the show. The U.K. Cobra emergency committee meeting this morning as well to kind of formulate a response here at the
same time, the Iranians saying that they've seized 17 individuals they believe have connections to the C.I.A. So, all sorts of news flow from the
region this morning.
MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT: There are lots of different issues that are ratcheting up tensions even further here in this
whole Persian Gulf region. The first one that you mentioned that issue of the captured or the seized a British flag oil tanker, which is still being
held just a few miles from where I'm standing now in the southern Iranian port city of Bandar Abbas, an Iranian flag is flying over that British flag
vessel right now.
We've just had within the past few hours, the first images from inside the vessel showing the crew members. Now, there's 23 crew members on board
from countries like India and Latvia and the Philippines and Russia, in fact, and there's been a lot of concern expressed by their families about
their welfare. They're shown on Iranian state television to be in pretty good spirits, and then you know, going about their normal business on board
that ship.
But their future, Julia depends on the outcome of the next few hours on what Britain decides to do to try and get that tanker released from Iranian
custody.
You mentioned high-level meetings under way in London right now. They've promised robust action, but exactly what they're going to do, we're not
quite sure, possibly sanctions, possibly discussing with allies, how they can protect the British shipping in the area and other shipping of course
in the area by providing escorts or convoy patrols to escort those oil tankers and cargo ships out of the Persian Gulf.
But what the British say -- and this should provide some reassurance to the markets, what the British say is that they want a diplomatic solution, so
there's not a military one. At the same time, you know, set it against the ratcheting up of tensions between the United States and Iran and the whole
thing looks increasingly dangerous -- Julia.
CHATTERLEY: I couldn't agree more and you make the perfect point here, I think, is what kind of response can the U.K. do here when they've promised
a robust response without further damaging diplomatic efforts, particularly if they want to go with a peaceful route here?
[09:05:11] CHATTERLEY: I mean, I mentioned the reports this morning, the Iranians saying now that they've found or seized 17 individuals with
connections to the C.I.A. I mean, Mike Pompeo, Secretary of State was asked about this in the United States this morning, and he was very
cautious about what to say. But he suggested that the Iranians can lie and that's the problem here.
We've got all sorts of avenues where the tensions are ratcheting up, everybody has to be very careful here not to precipitate violence, I think,
of a military response.
CHANCE: Yes, absolutely. And this incident that was -- that came to light earlier today, with Iran announcing that it had broken up a C.I.A. spy
ring, essentially and had detained 17 Iranian nationals that it said it individually had been recruited by the C.I.A. in exchange for financial
rewards and promises of Us residency and jobs and healthcare, and things like that, I think was an attempt to first of all, show the Iranian people
and to show the world that Iranians can still, you know, kind of, you know still have got a handle on the intelligence issues in their country.
Also, it paints the United States domestically in Iran, as a country that is provocative, that probably has resonance amongst many Iranians as well.
But you know, here's one of the big ironies of this whole latest incident involving the British ship. Britain has been one of the countries that has
been arguing strongly for sanctions to be lifted against Iran. It was very much opposed to the U.S. decision last year to pull out of that
multinational Iranian Nuclear Agreement. It's been working hard to try and keep that agreement alive.
When you've got this situation emerging, and you've got a new British Prime Minister about to take office, you could well be more sympathetic to the
American point of view when it comes to Iran and its maligned activity in the region, then you could see a sea change in British policy towards the
Islamic Republic.
CHATTERLEY: Critical point. Matthew Chance, thank you so much for that. All right. Let's move on to our next driver. A stellar debut for China's
NASDAQ style Star Market, the 25 companies listed surging an average of 140 percent, won in fact, as much as 520 percent. Sherisse Pham joins me now.
Wow, I mean, these kinds of market moves for an individual stock would normally be suppressed, they would be kept in China. So, there's plenty of
unique differences about this index. Talk us through it, Sherisse.
SHERISSE PHAM, CNN BUSINESS REPORTER: A couple of unique differences. Absolutely, Julia. And really, analysts were forecasting to expect crazy
days on the first day of trading and crazy is what we got.
We had one massive company moving 520 percent and then eventually gave back some of those gains. It was the best performer today, which was a company
that makes semiconductor products. They ended the day up quadruple their stock price. They were up 400%. That was Anji Microelectronics
Technology, and the lowest performer today, still clocked in an impressive 84 percent gain.
But there are a few key differences between the Star Market and existing Chinese boards. If we can take a look at a few of them, we've got the fact
that companies that are not profitable are allowed to list, companies with dual class shares.
So, dual voting rights are also allowed to list and we've got no limits, no caps on stock prices for the first five days. That is massive on other
tech boards. If you IPO, you cap out at 44 percent, and we've got the last one that's really a key one here is that it gives issuers control over
price and timing.
So, this is really a board that is meant to attract China's homegrown tech companies to seek money in China because you know, the past tech giants
that we've seen Alibaba and Tencent, they have chosen not to list in China, they went elsewhere. They went to New York and Hong Kong to list -- Julia.
CHATTERLEY: Yes, I mean, this is really flying the flag and saying, guys, we've got an equivalent index of something like the NASDAQ, something that
you can go abroad for. We've got it here right now.
I mean, it's interesting to allow the kind of volatility, the sharp moves, unlike other markets. But you know, a couple of investors I spoke to said,
but there's always this perception in China that the government backs these. This is such a huge project of flying the flag for China and the
Chinese markets that the government will support it anyway. So, it's kind of a win-win. What do we think of that?
PHAM: Yes, it is a win-win, especially because this was not only a government backed project. This was a project that President Xi Jinping
himself announced, I think barely a year ago. So, it's backed by the absolute top dog in the Chinese government.
So, you are going to see a little bit of a different playout. We have seen other NASDAQ style boards try to launch in China and fail spectacularly.
[09:10:10] PHAM: But like this time, the Star Market is looking to the United States. It is copying some of the U.S. techniques that we have seen
work so well and that have attracted Chinese companies to those boards.
So, including the dual class listing shares, for example, and also tinkering with the more streamlined process for IPOs to come to market that
includes giving issuers and companies more control over the size and the timing of IPOs.
These are all things that will attract hopefully, tech companies to list in their homegrown markets, but we still have to wait and see. And I know
that is really a bit of a cliche in TV Land, but it is true because today, we saw 25 companies list on this exchange, none of them are household
names.
And at the moment we are hearing speculation that Alibaba is pursuing a secondary listing. It's not going to be in Mainland China, but they are at
the moment looking to Hong Kong. So, we will see if the current future Big Tech darlings like ByteDance, if that chooses to list on the Star Market,
then we will really be in business -- Julia.
CHATTERLEY: Yes, interesting. We shall see. It's got a long way to go before it manages to perhaps challenge the likes of Hong Kong and the
NASDAQ, but it doesn't mean, they won't try. Sherisse Pham, thank you so much for that. All right.
PHAM: Thank you.
CHATTERLEY: Let me bring you up to speed now with some of the other stories that are making headlines around the world. The British Foreign
Office Minister has resigned ahead of Boris Johnson's expected victory in the race to become the next Prime Minister.
Over the weekend, the Finance Minister Philip Hammond and Justice Secretary David Gauke confirmed they would quit if Boris Johnson wins. The result is
due to be announced on Tuesday morning.
And India has liftoff. The country has launched an unmanned rocket to the moon after delaying it last week due to technical difficulties. It is
aiming to become the fourth country to make a soft landing on the moon's surface. Nikhil Kumar is in New Delhi for us. A landmark moment, Nikhil,
great to have you with us, as India becomes or tries to become a space superpower here and the fourth nation of course, to achieve a soft landing
on the moon, talk us through it.
NIKHIL KUMAR, CNN NEW DELHI BUREAU CHIEF: That's right, Julia, this -- excuse me -- as you mentioned, this was meant to happen last week, but
there was a technical snag, which meant that this launch was delayed by a week. Now that the rocket has gone up, the aim is to land a Rover on the
moon sometime in early September.
And as you say that will make India only the fourth nation in the world to do this. This, of course comes after many other headlines that we've seen
over the years about India making forays into space.
You had that Mars mission several years ago that grabbed everybody's attention, partly because it was extremely low cost. So, India has a lot
of ambitions here. They've outlined other plans in coming years. By 2022, they'd like to put Indian astronauts into space. They've even hinted at
plans for an Indian Space Station.
So, a lot of ambition here and a lot of this, Julia, is signaling -- signaling that look, India is a power that is here to be counted.
Although, some analysts that we've been speaking to recently have said to us that look, whilst there are lots of hopes and ambitions is still the
question that in many cases, the budget, for example, just isn't there.
Although, the budgetary allocations have been rising for space in India, the money still isn't there to achieve all the goals, but nonetheless, this
is a signal that the country is making strides in the final frontier.
CHATTERLEY: Yes, it's going to be fascinating to see two months of course until that landing, so, a bit of a time to wait and watch. Nikhil Kumar,
great to have you with us. Thank you for that.
Something else we're watching as well. Thousands of protesters could take to the streets in Puerto Rico today calling for the resignation of Governor
Rossello over the leak of offensive chat messages.
Leyla Santiago joins us now from there. Leyla, thousands of people expected to take to the streets. I believe the organizers say we could see
as many as one million. I mean, that's a third of the population. What are we expecting to see today?
LEYLA SANTIAGO, CNN CORRESPONDENT: Well, a key moment just in the last five minutes. I want to show you what's behind me. These are the truckers
that have arrived to close off a major artery here, a major expressway in which north and south traffic will be blocked.
They came in honking their horns. People were, you know, flying their flags, cheering because this is where it starts today for many people as
they call for the resignation. People have been bussed in from all parts of the island. They are gathered here in unity, all calling for the
resignation of the Governor saying that his announcement yesterday was not enough.
That is what I'm getting from the people we have talked to, but let me let you talk to them yourself. Why are you guys here today?
[09:15:02] UNIDENTIFIED FEMALE: We're here because we're demanding the Governor of Puerto Rico, Ricardo Rossello to resign because he has
disrespected Puerto Ricans and we're here fighting for what's just for our country.
SANTIAGO: So, what will it take to end all of this?
UNIDENTIFIED FEMALE: His resignation, nothing else.
SANTIAGO: This will not stop. Protesters will not stop until --
UNIDENTIFIED FEMALE: He resigns.
UNIDENTIFIED FEMALE: Yes.
SANTIAGO: Okay. On a personal level, what does it feel like to be here today? This is a historic moment here on this island. What's running
through your mind? How are you feeling?
UNIDENTIFIED FEMALE: I feel that the sensation of Puerto Rican youth out here is strong and sturdy until he resigns and we're not backing down no
matter what.
SANTIAGO: What do you feel people out off the island need to understand about what's happening right here in Puerto Rico?
UNIDENTIFIED FEMALE: I think that they need to understand that one, we're not giving up to start with, and then that what they do outside of the
island also helps us creating awareness. So, all the Puerto Ricans who are not on the island, give us support so we can keep going and keep fighting.
UNIDENTIFIED FEMALE: And it doesn't end with his resignation. There's so much more that we have to do and we just need to end corruption on a whole.
It's a history that has lasted for so many years and people get away with corruption --
SANTIAGO: Ladies, thank you so much for your time. I really appreciate that. Again, this is -- you have one gentleman back here saying that
people have power.
You certainly can feel a sense of pride and patriotism as we've been here, but also a sense of resiliency and determination to not back down.
CHATTERLEY: Yes, the critical time of course in the recovery after Hurricane Maria. Leyla Santiago, thank you so much for that. Pretty clear
there, as you saw nothing short of resignation from the Governor will be enough. We will continue to keep you posted on those developments there
for the protests in Puerto Rico.
For now, let's move on. Hong Kong's Chief Executive, Carrie Lam condemns shocking scenes of mob violence that took place on Sunday night at a train
station north of the city center. Forty five people have been hospitalized, one man is in a critical condition. Five women in serious
condition.
All right, we're going to take a quick break here on FIRST MOVE, but still to come, one of the largest hacks in U.S. history will cost Equifax a
record of nearly $700 million. And as trade wars and tensions rise across the globe, we will look back on times of international cooperation and the
legacy of Bretton Woods, the 75th Anniversary. Stay with us. You're watching FIRST MOVE.
(COMMERCIAL BREAK)
[09:20:36] CHATTERLEY: Welcome back to FIRST MOVE live from the floor at the New York Stock Exchange this Monday morning where we are looking at a
positive open for U.S. markets. The tech stocks looking set to outperform after a losing week last week though, so a bit of consolidation.
The S&P and the NASDAQ falling some one percent. The Dow around half. It was the worst week actually for the NASDAQ since May, so interesting to
watch the techs this week, particularly in light of earnings.
We've also got the first read on the second quarter GDP numbers, the growth numbers from the United States. This is the last big economic reading
before the Fed's policy meeting, of course. The Atlanta Fed is putting Q2 growth numbers at 1.6 percent, which is interesting, weaker than Q1's 3.1
percent growth. But we've got some interesting context coming.
Joining me now, Ellen Zentner. She is Chief U.S. Economist from Morgan Stanley. Ellen, good morning and great to have you with us.
ELLEN ZENTNER, CHIEF U.S. ECONOMIST, MORGAN STANLEY: Thank you.
CHATTERLEY: You are significantly different on Q2 growth readings. You think two and a half percent growth in the second quarter following retail
sales?
ZENTNER: Yes, we think it could come in that strong. That's a very strong quarter. The way the Fed is looking at it, though, is that that's a little
bit of old news.
CHATTERLEY: Yes.
ZENTNER: And what we're worried about is what happens after this.
CHATTERLEY: So, what are you thinking as we go throughout the year then? Because that's what -- as you say, the Fed is focusing on right now as
strong as perhaps Q2 looks on a relative basis, the future is more important.
ZENTNER: Yes. So, 14 of the 17 FOMC participants see downside risk in the outlook. And it's all about global growth and trade. It's not about how
healthy the domestic economy is. As you mentioned, retail sale is strong. We know the domestic economy is strong, we want to keep it that way.
We think that growth could be as sluggish as 1.5 to 1.6 percent in the back half of the year, and that's why the Fed needs to cut rates, we think by 50
basis points at this upcoming meeting, in order to add a bit more back to growth to keep it closer to the economy's potential.
CHATTERLEY: I mean, the market is fully priced for one cut, kind of stubbornly sort of undecided between whether they do one or whether they do
two.
I mean, I spoke to Jim Bullard last week, of course, the St. Louis Fed President. He said he thought that 50 basis points or half a percentage
point will be sort of a bit too aggressive.
ZENTNER: A bit done. Yes. And so there's going to be some disagreement here. In fact, this is one of the first Fed meetings I've witnessed where
we're going into it, and they have not already made up their mind. It's clear, they're going to have a hot debate, but even if I were Bullard, I
see cumulative cuts that could be 50 basis points or more in my rates path.
Am I really going to fight that hard against delivering more of it up front? Which their own studies have suggested you want to go aggressive
when you start cutting in order to guard against hitting the zero lower bound again.
CHATTERLEY: So, actually if you're thinking you're going to do two cuts in 2019? Why not have more bang for the buck and do it early?
ZENTNER: The research suggests you'd front load that.
CHATTERLEY: Interesting. What's the risk of alarming perhaps, investors, the market, consumers, whatever it is by doing that half a percentage point
because you're kind of sending a message that perhaps you see something that we don't.
ZENTNER: Yes, so the Fed talks about this. We read transcripts in past cycles, and they talked about informational risk. What message are we
sending the markets by doing a 50 basis point cut? Is it, "Oh, my gosh, the Fed know something we don't." I think in that context of -- couching
at the context of insurance cuts, helping to keep the economy strong. We've got strong data that's been incoming on the domestic economy.
And so you're catching it that way, and it's more of like -- this is careful and preemptive, and you get the message right. But I don't think
you run that informational risk. But that's something they will be talking about.
CHATTERLEY: I mean, we've got two things here. As you point out, we've got the U.S. economy and what we're seeing now and then we've got
everywhere else and what? Seventy percent now of nations around the world are slowing to some degree. We've also got Central Banks looking at
stimulating. Do you think U.S. recession can be avoided here by cutting rates quickly?
ZENTNER: Yes. So, I think that's exactly what the Fed is trying here. Now, you could say every Fed has tried to avert recessions. And they have
been successful in the past, in the mid-90s, in the late 90s. We got insurance cuts, then the Fed held steady, waited for the economy to turn.
It did. And we took off again.
As President Evans had said, in the 1990s, we cut 75 basis points in order to hike 175 basis points later on. So, they can be successful and their
hope is that going preemptively as they are that that will be what's needed.
And by the way, it's not just the Fed; and as you mentioned, global growth is slowing just about everywhere. At our last count, our global teams has
19 Central Banks that are ready to act. So, this is like a global effort in order to support growth and keep the expansion going.
[09:25:07] CHATTERLEY: So back in 2014, you had a call, Vision 2020. You predicted that actually, this would be the longest expansion in history?
ZENTNER: Yes.
CHATTERLEY: You well and truly called it.
ZENTNER: Normally, economists wouldn't make predictions that far out.
CHATTERLEY: A lot of danger.
ZENTNER: But what we were looking at then, still very much holds today. Household balance sheets, they are so protected in a rising interest rate
environment. So, we said even as the Fed starts to raise interest rates in this cycle, it would not hamper households' ability to spend that much
because most of their balance sheet is locked in it fixed rates.
CHATTERLEY: Right.
ZENTNER: This is unique. It is very unique to this cycle and that household dynamic means that 70 percent of your economy, which is U.S.
households, is extremely healthy, even this late into the cycle.
And that's one reason why even though recession risk is out there, it still remains relatively low for the U.S. Again, because the Fed is going to act
as well.
CHATTERLEY: It kind of takes us back to what I've already asked you. But if you had to make a similar kind of judgment call today, sort of
predicting out that far, what would you say?
ZENTNER: I would --
CHATTERLEY: I won't hold you to it.
ZENTNER: I would say that when I sat there in 2014, I was much more sanguine on how much longer the expansion could last than I am today.
Because then we were in the beginning of a cycle.
CHATTERLEY: It's according to Beige --
ZENTNER: Here -- right. We're a little bit older now. And we've got the global economy slowing and other factors out there. Trade negotiations
that create exogenous risks that we cannot predict.
CHATTERLEY: Yes, it is tough. Ellen, thank you so much for that.
ZENTNER: Thanks so much.
CHATTERLEY: Thank you for trying to answer. Ellen Zentner there, the Chief U.S. Economist at Morgan Stanley. All right, we've got the market
open coming up. After the break, we're going to be talking more about Iran. What does a diplomatic solution here look like and can we ratchet
down the tensions? All that and the market open. Stay with us.
(COMMERCIAL BREAK)
[09:30:00] CHATTERLEY: Welcome back to FIRST MOVE live from the New York Stock Exchange. That is the opening bell as you can see more happy smiling
faces and so they should be, U.S. stocks are rising for the first session of the week, taking back some of the losses that I mentioned that we saw in
last week's trading session.
Earnings season, of course, well underway this week, a quarter of S&P 500 companies reporting the likes of Amazon, Alphabet, Facebook, Tesla, of
course, too on Wednesday, after the closing bell.
Also keeping an eye on what's going on in the energy markets, too. You can see, we're seeing rises for Brent and WTI, a rise of a three quarters of 1
percent right now amid broader Middle East tensions. Continuing to watch what's happening. We are off though session highs.
The U.K. government has promised robust action, as we discussed earlier on in the show if Tehran does not release a seized tanker.
All right, let's talk this through. Paul Wolfowitz is a former U.S. Deputy Defense Secretary. He's also former President of the World Bank and now a
visiting scholar at the American Enterprise Institute. Paul, fantastic to have you on the show. Thank you so much for joining us.
I just want to start by talking about what we're seeing in the Middle East and draw on your experience there. What do you make of what's happening
with Iran right now? And what is the appropriate response here?
PAUL WOLFOWITZ, VISITING SCHOLAR, AMERICAN ENTERPRISE INSTITUTE: Well, it seems to me that what's happening now makes it pretty obvious that the
sanctions are really hurting. They wouldn't be behaving the way they are, if it wasn't squeezing them.
And I think the purpose of squeezing them is to try to come away with some kind of overall deal that deals with some of the defects of that so-called
Joint Cooperative Plan of Action, I think they called it, the JCPOA that was supposed to end their nuclear ambitions and certainly didn't.
CHATTERLEY: What we are seeing though is a tit-for-tat. We've seen the U.K. seize Iranian vessel thinking that it was contravening a Syrian
sanction. We now see the Iranians seizing a U.K. flagship, just to mention one country that's now engaged with Iran alone, never mind what's going on
with the United States.
Should military -- a military response of any form be avoided at all cost, whether it's the United States or it's the U.K. hereto?
WOLFOWITZ: You know, when you say avoid it at all costs, that really means taking it off the table entirely. And I don't think -- I think the
Iranians should be made to worry about what's going to happen if they take this thing too far.
On the other hand, I think we shouldn't exaggerate. Put it the other way around, we should be well aware of the fact that we have the strong hand,
they have the weak one. They don't have sanctions they can apply to us. They don't have a military that's comparable to ours.
And importantly, what they're doing, for example, with the U.K. is bringing allies to our side and I'm sure the British will be very, very helpful in
anything that needs to be done in keeping this free flow of oil out of the Persian Gulf.
CHATTERLEY: Why do you think they are doing that? Why do you think the Iranians are doing this? I mean, the U.K. is a country that has fought to
try and hold on to the nuclear agreement here and to push the United States to reduce the sanctions at this stage. Why is Iran taking on an ally just
for political gain or to establish the appearance of being in control here?
WOLFOWITZ: Look, what you're really asking me is why did Iran insist on sending oil to Syria and violating the sanctions on Syria when they're
trying to deal with sanctions themselves? That's what started this whole business with the U.K.
And I think the general behavior of Iran appears to fit the model of people who are -- despot is too strong a word -- but who are very concerned about
the situation that the sanctions that put them in are trying to force their way out of it by threatening people and taking -- supposedly taking
hostages.
And I don't -- if I had to choose between Secretary Pompeo and the Ayatollah as to whether these 17 people they arrested were really American
spies, I'll go with Pompeo.
I think what they're doing is demonstrating that they can coerce the Iranian people, but it's much harder, to coerce the United States or even
the U.K.
CHATTERLEY: Does this end up in a negotiated solution, Paul, do you think? As you point out, this looks like desperate behavior from the Iranians
under the pressure of U.S. sanctions? Is the White House getting this right and in the end, does it bring Iran to the table for an improved
nuclear agreement? Because that takes time.
[09:35:01] WOLFOWITZ: That will take time and certainly that's what they specifically appointed a special negotiator to do. But the Iranians have
really so far really refused to engage as far as I understand, and that's going to be the first requirement.
And I'm afraid when they come to the table, they're going to feel like they've submitted themselves, but that's not -- I don't care about them
saving face or not, what I do care about is getting to a better outcome for the whole region and for the United States.
CHATTERLEY: This is only one foreign policy challenge that the current government here in the United States is facing. China is the other one and
a battle over technology over trade, all sorts of things here.
Do you believe that the White House is handling China appropriately given everything that you know, with your experience at the World Bank and the
challenges of tackling China at this stage? Is this being handled appropriately?
WOLFOWITZ: Let me start by saying compared to previous administrations, of which I was part, and I think I was part of the hopeful idea that China was
on a course toward a better China and a better world. And for a long time, it looked that way and I had no trouble saying despite all the human rights
violations in China, at least, the Chinese people were much better off under Deng Xiaoping than they had been under Mao Zedong. But I think, your
listeners know which dictators I'm referring to.
But then, in the last five or 10 years, they've steered a different course, a course of external aggressive behavior in the South China Sea, building
whole new islands, which they then claim are Chinese territory, and I would say worst of all, is the way they're treating their own subjects.
I hesitate to say their own people, because I don't think the Chinese people are particularly fond of this way of living. But putting, for
example, non-Chinese speaking more Muslim subjects in the western province of Xinjian into what really can only be called concentration camps.
They're not extermination camps, admittedly, like the Nazis created, but they are very close -- they are certainly much worse than anything that was
done, for example, and we're ashamed of it to Japanese-Americans here during World War II.
CHATTERLEY: Paul, do you think that in light of everything that you've said that President Trump should not trust Xi Jinping? And therefore, it's
tough to do a deal here because as you pointed out, China is not changing for the better, it's changing for the worse. Can President Trump trust Xi
Jinping?
WOLFOWITZ: I don't think -- I think that line from President Reagan is exactly the right one, "Trust, but verify." Certainly don't expect that
because they've signed something they're going to stand by it.
We've already seen in Hong Kong, where they signed a commitment for 50 years that Hong Kong could have all the freedoms that it had under the
British. It's ironic they had more freedoms as a British colony than they have now under as a part of Communist China.
And in the latest move, this law that was protested by a million people in Hong Kong, an incredible number of people that turned out in a relatively
small, not even city, but a small province to protest this law, basically, the Chinese or -- excuse me -- that Beijing was getting ready to take away
all of the rights that have been promised in that agreement with the U.K. back in 1987.
So I would say trust, but verify and be sure if you affirm, if you discover that they're not keeping agreements, you need to go after that in some
strong way.
And I may not approve every tactic that President Trump has used. But I certainly think that taking on China in a peaceful, but nonetheless,
aggressive fashion was necessary and long overdue.
CHATTERLEY: At least, it fits with the conversation that we're going to have very shortly. We're going to take a quick break here. But Paul,
please stay with us because we're going to continue. Paul Wolfowitz is going to be back with us when we mark the 75 years since the Bretton Woods
Agreement, and as a former World Bank President, we will get his take on the agreement's legacy and what lessons can be learned for 2019.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE. This month marks 75 years since the Bretton Woods Agreement. It was a global monetary system devised
during the final stages of the Second World War. Its aim was to see the rise of protectionism and the competitive devaluation of currencies.
Issues that sound familiar anyone?
In a moment, we will discuss its legacy. But first. Clare Sebastian looks back at how the Bretton Woods agreement was born.
(BEGIN VIDEOTAPE)
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT (voice over): It was the summer of 1944. In Europe, Allied forces were advancing into Nazi occupied
France.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Forty-four allied and associate countries arrived for the opening of the United Nations Monetary and Financial Conference.
(END VIDEO CLIP)
SEBASTIAN (voice over): And in the mountains of New Hampshire, Allied finance chiefs were crafting a new post war world order.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: He discussed our plans for the stabilization of world currency.
(END VIDEO CLIP)
SEBASTIAN (voice over): The task at Bretton Woods was not just to rebuild countries ravaged by World War II, it was to avoid a repeat of the 1920s
and 30s, a period of economic depression, widespread protectionism and ultimately the rise of totalitarianism.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: These meetings are designed to promote trade in the post war world and to create a foundation for lasting peace.
(END VIDEO CLIP)
SEBASTIAN (voice over): That foundation came in the form of two institutions -- the International Monetary Fund, which established a system
of fixed exchange rates centered on the U.S. dollar, which was pegged to gold and the International Bank for Reconstruction and Development, now
part of the World Bank.
Led by British economist John Maynard Keynes, this new financial system championed open markets and international coordination.
(BEGIN VIDEO CLIP)
RICHARD NIXON, FORMER PRESIDENT OF THE UNITED STATES: We must protect the dollar from the attacks of international money speculators.
(END VIDEO CLIP)
SEBASTIAN (voice over): While the fixed exchange rate system ended in the 1970s, the Bretton Woods Institutions have survived to face new challenges
-- the rising influence of China.
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: We are finally putting America first.
(END VIDEO CLIP)
SEBASTIAN (voice over): And the emergence of leaders who advance nationalism over that spirit of global cooperation that underpins those
summer days of 1944.
Clare Sebastian, CNN, New York.
(END VIDEOTAPE)
CHATTERLEY: As Clare explained there, one of Bretton Woods' surviving legacies was the World Bank. And we're now joined once again by former
President, Paul Wolfowitz. Paul, fantastic to have you back with us and thank you for being patient there.
As Clare was describing there, the spirit of the organization of this agreement was to prevent all the things that we're seeing today -- rising
nationalism, rising protectionism -- do you think those institutions can be used to help reverse? Can what we're seeing today be reversed? And if so,
how?
[09:45:02] WOLFOWITZ: I think you have to add a third institution which is not commonly discussed, it was then called a General Agreement on Tariffs
and Trade or the GATT and it was kind of replaced by something called the World Trade Organization, which I still believe is an effective
organization.
And one of our issues, which is to try to bring China into compliance with the commitments it made when it joined the WTO. And I think if that could
happen, then we'd be making progress.
I do think with respect to at least the World Bank, and -- or let's call it what it was called, originally, the International Bank for Reconstruction
and Development, that it should think about its 75th birthday, not in the way that people who are 75 can kind of pat themselves on the back and say,
"Well, I made it to 75. And now it's time for a comfortable retirement."
I think when an organization reaches that old age, it's time to really rethink its mission. And to be honest, in the private sector, corporations
have usually done that multiple times by that age and in the public sector, it's very hard for organizations to really rethink their mission.
CHATTERLEY: They need to think more like businesses, perhaps that to your point. What you said, as well there about tariffs not being necessarily
the right answer here. If it is a way to bring China to the table and to allow to facilitate China making changes that are to the betterment of
their own country in the end and reform, opening up business sectors, will we look back and say actually tariffs were the right response here because
they enacted change, or do you think that's a pipe dream?
WOLFOWITZ: I think you have to get their attention. I think in order to have a serious negotiation with them and the negotiation should be about
bringing them into compliance with the rules that they agreed to back, I guess, in the Clinton administration to join in the WTO back then. And yet
they've violated with impunity, and they've outrageously been stealing intellectual property in the United States. I think that's one of the
biggest concerns.
And here we are, we've been building up -- no, we haven't been building up, but we have been assisting Beijing to build up the economy of Communist
China, while they are engaged in expanding territory in the South China Sea, actually creating territory with concrete around islands, using
concrete to put their subjects in what they like to call reeducation camps.
I'd find a worse word for them. They're really giant prisons that contains something like a million of China's Muslims. And I think how they're using
the resources that they have to the benefit of participating in the international trading system is something that ought to be looked at as
well.
CHATTERLEY: Yes. Some huge questions still to be asked. Sir, thank you so much for joining us. Paul Wolfowitz there joining us on the show.
WOLFOWITZ: A pleasure, thank you.
CHATTERLEY: Thank you. All right, you're watching FIRST MOVE. We'll be right back.
(COMMERCIAL BREAK)
[09:50:08] CHATTERLEY: Welcome back to FIRST MOVE. Japan is one of Washington's two strongest allies in Asia. And right now, it's in a trade
war with the other one, South Korea. And as our Paula Hancocks explains, to fully understand the current conflict between Tokyo and Seoul, you have
to understand their war time past. Listen in.
(BEGIN VIDEOTAPE)
PAULA HANCOCKS, CNN INTERNATIONAL CORRESPONDENT (voice over): Making a point with kimchi, a protester dressed as Japanese Prime Minister Shinzo
Abe takes fermented cabbage beating by fellow South Korean protesters, others pour out Japanese beer and sports drinks, part of a growing boycott
against Japan after the country imposed export restrictions on three chemicals used to make high tech materials such as display screens and
memory chips.
Materials which are vital to South Korea and companies, including the world's biggest smartphone maker, Samsung. The consequences could be
global.
(BEGIN VIDEO CLIP)
ROB KOEPP, DIRECTOR, THE ECONOMIST CORPORATE NETWORK : South Korea doesn't have a lot of inventory of these chemicals. So, unless something is done,
we could start seeing very rapidly a disruption in the supply chain.
(END VIDEO CLIP)
HANCOCKS (voice over): Samsung says they are assessing the current situation to minimize the impact. Earlier this month, Japan announced the
restrictions citing national security concerns, a claim South Korea rejected and said it is gathering evidence for a complaint to the World
Trade Organization. Seoul sees the restrictions as retaliation for a series of disputes dating back to the early 20th Century when Japan
occupied Korea.
HANCOCKS (on camera): Late last year, South Korea's Supreme Court ruled that Japanese companies have to pay compensation to Korean victims of
forced labor during the Second World War. Japan challenged that ruling saying that all wartime disputes had been settled under a 1965 Treaty which
established diplomatic ties between the countries. Japan denies that this has anything to do with its current export restrictions.
(BEGIN VIDEO CLIP)
HIROSHIGE SEKO, JAPANESE MINISTER OF ECONOMY, TRADE AND INDUSTRY (through translator): We have made it clear that our move to carry out export
controls appropriately is for national security purposes. It's not a countermeasure.
(END VIDEO CLIP)
HANCOCKS (voice over): Tokyo has also proposed removing Seoul from a whitelist of trusted trade partners.
(BEGIN VIDEO CLIP)
MOON JAE-IN, SOUTH KOREAN PRESIDENT (through translator): The vicious cycle of actions and counter actions is not desirable at all for either
country.
(END VIDEO CLIP)
HANCOCKS (voice over): The potential for escalation and global repercussions has the attention of a key ally for both countries, the
United States.
(BEGIN VIDEO CLIP)
KOEPP: Number one, you have the U.S.'s two most critical allies in Asia, who are also side by side neighbors to each other and China. Add to that
the North Korea issue where South Korea and Japan also play a very important part. So, there's a lot of interest for the U.S. in seeing this
matter resolved.
(END VIDEO CLIP)
HANCOCKS (voice over): Japan and South Korea have struggled to come to terms with their past for decades, but this dispute could reverberate
around the world. Paul Hancocks, CNN, Seoul.
(END VIDEOTAPE)
CHATTERLEY: Yes, it's going to be tough to untangle. Controversy now is flying around Paramount Pictures sequel to "Top Gun" even before the movie
has taken off. The new trailer for "Top Gun: Maverick." Here's two patches originally showing the Japanese and Taiwan flags and now missing
from Tom Cruise's jacket.
Clare Sebastian is here with more. Wow, Clare. I mean, I saw this a blow up on social media. Is this the price you pay for making sure you get your
movie played in China and draw in those box office receipts there because it's a huge draw?
SEBASTIAN: Absolutely, Julia that is the speculation we should say neither Paramount nor its financing and marketing partner Tencent Pictures have
commented on this.
But the presence of Tencent Pictures in this movie is one of the reasons why speculation is so rife. This is one of China's biggest companies, part
of Tencent. The other reason is, of course, the geopolitical backdrop here. Chinese relations with Japan have been somewhat strained over their
territorial dispute in the East China Sea.
We know that for years, China has been pressuring foreign companies to not refer to Taiwan as a separate country, despite the fact that it has been
self-governed for about 70 years. All of that would align with this if this was part of that picture.
And of course, China is a critical market. It is the second biggest global box office, et cetera, according to some estimates, overtake the U.S. in
the coming years.
I think if this is the case, it does again, highlight the power of this market. The fact that these movie companies in Hollywood simply can't
afford to upset the Chinese authorities who of course have the power to ban any movie they like.
CHATTERLEY: Absolutely. And I guess this wasn't a worry back in whenever it was, 1986, when the first movie came out, but a far greater problem now.
Speaking of the power of the Chinese consumer here as well, this has been critically important, too for the rise of "Avengers: End Game" of course,
which has now surpassed, I believe "Avatar" as the highest grossing film of all time. Is that right?
[09:55:06] SEBASTIAN: That's right, Julia. This made me feel really old. I had realized it had been 10 years since "Avatar" released. It has held
the top spot of the highest grossing movie now for 10 years only to be supplanted this weekend by "Avengers: End Game" now in its 13th weekend.
It's now my $2.789 billion worldwide and you're right, a lot of that is because of China.
It made $600 million in China. It has become the first foreign title to do that. It smashed a lot of other box office records. And of course,, not
only does this show the power of China, this shows the power of Disney through its acquisitions as it now owns not only "Avatar" which is now the
second top grossing movie of all time, but of course, the "Avengers" franchise as well.
CHATTERLEY: Yes, I've not seen the "End Game" but I'll tell you what, I'm going to be in the queue for "Top Gun 2." Sorry, I love "Top Gun." Clare
Sebastian, thank you so much for that.
All right, that just about wraps up the show. A quick look at markets. We are in positive territory ever approaching. We are some half a percent
still now away from record highs. We will continue the thread on "The Express," but for now, you've been watching FIRST MOVE. Time to go make
yours.
(COMMERCIAL BREAK)
[10:00:00]
END
