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Quest Means Business
US, EU Trade Talks; Cutting the Red Tape; European Horsemeat Scandal Keeps Widening; Dollar Up; UK Report Card; London, Paris Markets Up; Growth Versus Inflation
Aired February 13, 2013 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
NINA DOS SANTOS, HOST: A game-changing deal. The US and the EU get to work on an historic new trade agreement..
The horsemeat trail in Europe gets even longer. Now, two British meat factories are also under suspicion.
And getting to know Lew. The US treasury secretary nominee gets a Capitol Hill grilling.
Hello, I'm Nina Dos Santos, and this is QUEST MEANS BUSINESS.
Good evening. The United States and the European Union are planning to break down trade barriers to boost growth on both sides of the Atlantic. They want a new trans-Atlantic deal to smooth over the kinds of differences which have caused disputes in the past.
Both the US and the EU are facing growing competition in particular coming from China, and both of these blocs are finding it difficult to reenergize their economies since the recession. President Barack Obama says that deepening ties with the EU on the movement of goods and services would help to boost growth and also unemployment.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: And tonight I'm announcing that we will launch talks on a comprehensive trans-Atlantic trade and investment partnership with the European Union, because trade that is fair and free across the Atlantic supports millions of good-paying American jobs.
(END VIDEO CLIP)
DOS SANTOS: So, hopefully this deal would help to boost jobs and bring down the unemployment rate. In a joint statement, American and European leaders said that bilateral trade amounts to nearly $1 trillion every single year.
European Commission president Jose Manuel Barroso says that with trans-Atlantic business already being quite so large, a deal would bring major rewards to Europe as well.
(BEGIN VIDEO CLIP)
JOSE MANUEL BARROSO, PRESIDENT, EUROPEAN COMMISSION: The future deal between the world's two most important economic powers will be a game- changer. Together, we will form the largest free-trade zone in the world.
It is estimated that when this agreement is up and running the European economy will get a stimulus of half percent of our GDP, which translates into tens of billions or euros every year, and tens of thousands of new jobs.
(END VIDEO CLIP)
DOS SANTOS: Karel de Gucht is the EU trade commissioner, and earlier today, he told me that these talks actually had their roots in the Trans- Atlantic Economic Council, which was founded back in 2007.
(BEGIN VIDEOTAPE)
KAREL DE GUCHT, EUROPEAN TRADE COMMISSIONER: As we worked in that Trans-Atlantic Economic Council and we got results, we got confidence that we should go further and engage in a real free trade negotiation, a comprehensive negotiation between the two major economic blocs in the world, the United States and Europe. So, it's out of confidence of the ongoing process that we finally decided to do it.
DOS SANTOS: But the practicalities here are going to be extremely difficult. They've also got to get through various houses of parliaments and governmental systems. Everything could come to an end if it can't get through Congress in the United States.
DE GUCHT: There's no reason that it would be easy with the United States, the more so that we already have a very sustained trade relationship, which accounts to about 2 billion euros a day, which is massive.
So, the so-called low-hanging fruit isn't there anymore. It's really about the difficult topics of behind the border barriers, technical barriers to trade. It's about opening investment and services markets.
It's about procurement, it's about standard-setting, it's about regulatory approximation, all very difficult topics. But we have the confidence that we can get out something by negotiating a comprehensive deal.
DOS SANTOS: If we look at the specifics, what are you going to be tackling first?
DE GUCHT: We should try to resolve a number of existing problems, and there, for example, we have been asking industrial sectors to come forward with their wish list, wish list that is common for the European and for the United States business. That's, I think, a good in-road that you start on the basis of what industry itself is asking you to do.
And the second part, it's about the future. How are we going to avoid that kind of problems for the future? How are we going to set standards together? How are we going to approximate our regulations? How are we going to establish global rules whereby we can influence what is happening on the global scene?
DOS SANTOS: There's been a lot of talk about a currency war out there and the value of the euro being so strong it could be stifling exports to places like the United States. On the other side of the equation, the dollar is comparatively weak. How is that going to play into this kind of talk?
DE GUCHT: Yes, it would be better if it was a little bit lower, but we see no reason to influence it.
DOS SANTOS: Final question: do you have any kind of evidence that this is eventually going to give Europe and the United States the kind of growth in jobs that these two regions so badly need?
DE GUCHT: Oh, I'm pretty sure if we were in a position to reach an -- ambitious outcome, it would, for example, make away with the major part of red tape.
Look at the price of a product. It is estimated at between 10 or 20 percent of a product is about red tape, about all kinds of procedures and losing time and all that kind of thing. If we can make away with that, that will be a tremendous boost for both our economies, and it will certainly help us out of the crisis.
(END VIDEOTAPE)
DOS SANTOS: Karel de Gucht, there, the EU Trade Commissioner. Well, that kind of red tape is something that our very own Jim Boulden has been busy unraveling today, and he joins us now, live. Take it away, Jim.
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Well, that's right, Nina. It is all about red tape, red tape that stops the flow of goods and services, or at least makes it expensive between Europe and the European Union.
Why? Number one, harmonization. This is when you have two sets of procedures or regulations that could apply to the same product. For example, the approval of pharmaceuticals or patents.
You might have exactly the same drug, the same idea, the same good, but in order to get it approved or protected, you have to have it examined on both sides of the Atlantic. Of course, that can be costly and time- consuming. So, can they harmonize rules and regulations? That's one big step.
The next, of course, protectionism. We know why protectionism exists. It's of course another red tape mess. It's where you look to protect your own domestic interests and make it harder for international competition.
For example, interesting, the Buy America Act from 2009, it was meant to give the US an economic boost after the financial crisis. It included a controversial buy American provision. Listen to this. "Any public building or public works project funded by the new stimulus package must only use iron, steel, and other manufactured products produced in the United States." That's protectionism.
Number three, duty and tariffs. Well, a duty, of course, is what you and I pay to bring in a valuable good at the airport or to ship a purchase across overseas, and duty can be up to 85 percent, depending on the product. I don't think I've had to pay that much.
But look at tariffs. Well, tariff is what a country charges for imports from another country. Things like raw materials, steel or wood, or goods, like automobiles or agriculture products. These tariffs are lower between the EU and the US than other parts of the world, but bringing that down, experts say, will actually boost both areas' economies.
DOS SANTOS: Well, that's what they say, Jim, but it's going to take an awful long time. Do we have any idea about how they can bring this into place within the next four, five years?
BOULDEN: Well, we're talking about a free-trade agreement, but it's never a free-trade agreement. Not all of this will go. Protectionism won't all go. Even the EU says all we want is some Buy America -- sort of getting some of the exceptions to the rule, as it were. So, they doubt Congress would get rid of this, but maybe just some waivers for Europe.
Also, US states have to agree to this as well. Some US states have different rules. So, you're not just talking about 27 countries in the EU, not just with the US government, but with 50 US states as well.
DOS SANTOS: Backdrop to all of this is also that the UK's threatening to withdraw from the European Union and, of course, they're a major portal for American goods and services into the European Union.
BOULDEN: But interestingly, maybe this is what helps the United Kingdom look better in the eyes of the rest of Europe. Because if they can help this deal get through between the US -- we're talking about a deal that may start in a couple of months, may take a couple of years.
It's been decades the two sides have talked about maybe a free-trade agreement. They've done it with other countries. They haven't been able to do it with each other. Maybe the UK can help that.
DOS SANTOS: This could be huge, but we'll have to see whether it'll deliver the kind of promises that they put on the table. Jim Boulden, thanks so much for that. Have to say, though, your red tape looks suspiciously like red ribbon. Perhaps that's a prop to keep for tomorrow, which is, of course, Valentine's Day.
Coming up after the break here on QUEST MEANS BUSINESS, raids in the UK, crisis meetings in Brussels, and anger right across Europe. We'll have the latest on that ongoing horsemeat scandal and, of course, Europe's broken-down food chain.
(COMMERCIAL BREAK)
DOS SANTOS: Hello and welcome back. EU ministers are proposing a coordinated control plan lasting one month as they try and contain the widening crisis surrounding mislabeled horsemeat in some supposedly beef products.
Well, some German supermarkets actually withdrew beef lasagne products today over the back of those kinds of concerns that may or may not be what they appear to be.
So, the scandal now encompasses all sorts of countries, including Switzerland, Sweden, the United Kingdom, Ireland, France, Romania, and the Netherlands, as well. But let's take a look at the links in this rogue food chain and as, I say, how exactly some of these products were labeled what it turned out they weren't.
Now, starting out with things like this: in January, as you can see here, food safety authorities in Ireland reported that some supermarket products actually labeled "minced beef" -- what those products -- excuse me. The products that were labeled as minced beef actually contained horse.
Nine out of ten of those burgers that they tested contained some form of horsemeat, it seems, and samples of lasagne subsequently -- we're talking about lasagne that was made by a Swedish company called Findus -- contained between 60 and 100 percent horsemeat.
Irish officials actually blamed ingredients coming from Poland, and what we saw was Findus, the maker of that kind of lasagne, which was supplied by this company, Comigel, over there in northeastern France. This is a firm that makes similar products for food suppliers and retailers right across 16 countries.
The products in particular that contained horsemeat, as I was saying, were made by Comigel, but not actually in France. They were made, actually, in Luxemburg. Findus is also blaming a Romanian company here, a supplier there, and it says it's taking legal action against that business for allowing horsemeat to get into the food chain in the first place.
But if we go back to Comigel, this frozen food plant in particular, it says that the meat actually came from a delivery that it took from a trader in Cypress, which it actually subcontracted the order over to the Netherlands, and now the investigation seems to be coming back towards the United Kingdom, because the UK's investigating its own suppliers.
British authorities actually recently just raided and closed two operations, and the EU's health commissioner, Tonio Borg, says that the European Commission is working with all its governments involved to get to the bottom of this kind of scandal. Take a listen.
(BEGIN VIDEO CLIP)
TONIO BORG, EU HEALTH COMMISSIONER: If anyone distributes and circulates meat product as beef when it is not beef, then that is in violation of legislation.
DAVID CAMERON, PRIME MINISTER OF BRITAIN: Retailers, I think, do bear a real responsibility here. At the end of the day, it is they who are putting products on their shelves and have got to say that they're really clear about where that meat came from, what it was, and who it was supplied by. It's up to them to test that.
(END VIDEO CLIP)
DOS SANTOS: I'm joined now by our senior international correspondent, Nic Robertson, who's been following the latest on this. So, the last thing we've heard in the last half hour or so, Nic, is that obviously Brussels is taking some pretty severe action of its own. It's not just the UK.
NIC ROBERTSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: No, they're talking about a series of tests, two types of tests, to be conducted over the next 30 days, and then probably to be extended over a period of three months.
The tests to be DNA tests. One of them is to be a DNA test that will test for the DNA of horsemeat, but he's saying -- the health commissioner for the European Union is saying 25 -- 2,500 tests across all the European states in that first 30-day period, and also 4,000 tests testing for phenylbutazone, which is a chemical that is to treat fever in horses, which is not something that can be used in humans. So, these are the principle tests.
DOS SANTOS: Yes, it causes severe anemia, doesn't it, in humans? And other worrying side effects. But I suppose this is the issue: it's not -- is it a food safety issue, is it a labeling issue, is it a mislabeling of the horsemeat, or just the fact that all sorts of things are getting into supposedly beef products anyway?
ROBERTSON: You know, what's really interesting today is before they got going with this meeting in Brussels today, the health commissioner said categorically, this is not a health issue. However, when we listen to him after the meeting, these are health tests that he's making.
He said that it's a labeling issue, that there are -- there's legislation in Europe to prevent this type of thing happening, but clearly, he said, either fraudulently or negligently, these laws are being broken. It's up to individual nations, member nations, to press charges and to enforce those laws.
But that's where he laid the blame -- the problem: labeling, not health. But clearly, now, we see these are health tests.
DOS SANTOS: Yes, they certainly are. And the other issue we should mention is that, from a religious point of view, we're now finding out that some -- some products that Waitrose has been selling are found to have contained not horsemeat, but actually pork.
ROBERTSON: And we're seeing how it's affecting these companies. Waitrose is talking about now exclusively using a facility that it's already had in England to produce all its meat products exclusively, sort of closing down the trust, if you will, to one facility, one company.
Yes, it's shocking consumerism, that's why we're seeing people like Waitrose move quickly to rebuild that confidence, because trust, as we know, easily lost, but hard to rebuild.
DOS SANTOS: It certainly is. When it comes to who is going to pay for all of this, so, eventually, if governments across the European Union decide that these companies should routinely test the content of beef -- all sorts of meat products and test further down the supply chain, somebody's going to have to foot the bill. We're getting awfully used to cheap food around the EU.
ROBERTSON: It's going to be the taxpayers, isn't it? What we've heard from the commissioner -- what we heard from the health commissioner today say about the tests that European Union -- he is the health commissioner -- is proposing and that are being discussed, 15 percent of the cost of the tests, he said, would be paid by the European Union.
The cut for each test, he said, cost about 400 euros, 15 percent is a small slice of that, 25 -- 2,500 tests, perhaps multiplied longer over months, the 4,000 other tests, this number builds up. There's going to be a cost, and without doubt, it will end up somehow in the consumer's pocket, tax member states.
DOS SANTOS: Better in their pocket than in their stomach, perhaps, some might say. Nic Robertson, thanks ever so much for that here in our London studio.
Now, time to bring you a Currency Conundrum out there. Venezuela's currency, the bolivar, has been devalued -- finally, some might say. How many times has it actually been devalued over the course of the past decade, though? Was it A, just this once? Could it have been B, three times? Or C, five times? We'll have the answer to that Currency Conundrum later on in the program.
Well, speaking of currencies, the US dollar is actually up against the pound and the Japanese yen. It's flat, though, against the euro, probably on the back of that trade deal that could be in the offing.
(COMMERCIAL BREAK)
DOS SANTOS: The Bank of England says that a recovery is in sight, but it won't be easy. In its quarterly inflation report, what we saw what the Bank of England governor, Mervyn King, saying that while there was some cause for optimism here, it will take the UK economy another two years to grow back to the size that it was before the financial crisis.
(BEGIN VIDEO CLIP)
MERVYN KING, GOVERNOR, BANK OF ENGLAND: The weakness in overall output in large part reflects sharp falls in construction that are unlikely to be repeated in 2013. The UK economy is, therefore, set for a recovery. That isn't to say that the road ahead will be smooth. This hasn't been a normal recession, and it won't be a normal recovery.
(END VIDEO CLIP)
DOS SANTOS: Well, the governor also warned that inflation will remain high for quite some time to come and longer than expected, staying above the central bank's 2 percent target for at least another two and a half years.
From here on, Mervyn King said that this could be tolerated as part of the attempt to try and boost the economy and the recovery. The governor's comments came as official figures showed low wages and high inflation have been hitting households and their incomes particularly hard.
The real value of average earnings has actually fallen back to -- all the way back in 2003 levels. And despite the economic gloom, Britain's FTSE 100, though, I might point out, actually managed to break through January's peak to set a fresh five-year high, as you can see, put on around about a third of one percent on the day.
In Paris, the CAC 40 also closed up around about a third of one percent for its part, and we saw gains, though, being limited by the sharp fall in Societe Generale. This is an important French bank, which reported a deep loss in its fourth quarter. That was the reason why that helped to temper some of the gains, otherwise, in Paris.
Bronwyn Curtis is the senior advisor at HSBC's investment arm here in London, investment banking arm, and she joins us now, live from our London studio. Great to have you.
Now, this is obviously Mervyn King's penultimate press conference, and it is the 20th year in a row that we've seen these inflation -- quarterly inflation reports come out, and it seems to send some mixed messages. Also, perhaps, a departure from form, would you say?
BRONWYN CURTIS, SENIOR ADVISOR, HSBC INVESTMENT BANKING: Well, things are changing in the world, as we've seen. I think the -- well, not surprise, we knew they'd probably have to revise up their inflation forecast.
But even in two years' time, as you say, if you look at the numbers and draw the line, it looks like it'll be around 2.3 percent in two years' time. Now, that is above the inflation target, and it's really because growth is so low that they're letting that happen.
DOS SANTOS: So, he's more or less saying, despite the fact that a lot of people there on the MPC are being rather hawkish, some might say up until the many rounds of quantitative easing that the UK's had over the last two years. We're going to more or less sacrifice inflation for the benefit of growth.
CURTIS: I think they're looking -- what they call looking through inflation. Now, inflation has been very sticky in the UK, on the upside, and the Bank of England has had quite a poor record in forecasting inflation and have usually been too low.
But this time, they increased their inflation forecast, which is unusual, but actually, their growth forecasts were lower. And so, now, everyone -- it's not just the UK, but other countries who are looking to stimulate their economies.
DOS SANTOS: That's right. So, the UK is under pressure to try and inflate its way out of its own debt bubble, if you like, as well, and to try and stimulate to boost growth. So, they can't be caught short.
But we obviously have somebody else taking up the reins at the Bank of England, and he seems to be rather keen on perhaps temporarily abandoning that 2 percent inflation forecast. Would that be something that you'd agree with, Bronwyn?
CURTIS: Well, I don't think abandoning is probably what he said.
DOS SANTOS: Shelving it.
CURTIS: He certainly listed some different ways, whether we do what he calls "nominal GDP" and all sorts of other things. But I think he's not really looking to self the 2 percent.
But I think what every policymaker now is looking at is for flexibility so that they can get the economies growing. Now, a huge amount of money being pumped in by the Bank of England into the economy in the form of quantitative easing, so buying bonds, pumping money in.
They're not doing any more of that at the moment, and the reason for that is because inflation's still high. Other countries are still pumping money in.
DOS SANTOS: Well, obviously, inflation and quantitative easing mean completely different things to you, depending on where you are in the investment and saving cycle, where you are in the work cycle, as well.
With so much inflation out there, do we have any evidence that the quantitative easing is actually going to work, given the fact that inflation will bite certain people who've saved up hard for some time to come?
CURTIS: Well, I think you have to be careful here. In the UK, inflation is sticky on the upside, so that's something that's structural in the UK economy. But the bankers also have put in place this funding for lending scheme, which we hope will help get the cost of money down. And that does seem to be working. So, that will help.
But their hands are a bit tied at the moment, and it'll be interesting to see what the new governor, Mark Carney, will do about that, because they can't really pump more money in because of the level of inflation, so they might do what perhaps the US has done and go for something like guidance, which will look at --
DOS SANTOS: And he's floated that idea, hasn't he? Perhaps looking at the unemployment figures, as the Fed does. There's a lot of debate about whether guidance to a certain economic statistic is actually worthwhile in the long run, isn't there?
CURTIS: Well, I think one of the problems is that the whole of the Western world has very low growth. We've had a lot of policies, quantitative easing being the most obvious one, which are just -- new. No one's really used them before.
And there are always unintended consequences of that, and it is possible -- it's possible -- that that could mean higher inflation everywhere in the Western World going forward. But we don't know yet.
DOS SANTOS: Bronwyn Curtis, always a pleasure to have you on the show. Thanks ever so much for joining us. That's Bronwyn Curtis, there, senior advisor at HSBC's investment banking arm.
Coming up next on QUEST MEANS BUSINESS, the president's choice to run the US treasury, Jack Lew, gets a Senate grilling. We'll have the verdict on his performance in just a moment's time.
(COMMERCIAL BREAK)
DOS SANTOS: Hello and welcome back. I'm Nina Dos Santos. These are the headlines here on CNN this half hour.
At least four people have been killed in a plane crash in Ukraine, according to Russian state media. The news agency RIA Novosti says that 45 people who were onboard the plane, which had to make an emergency landing in Donetsk in the east of the country, it says the fate of two passengers is still unknown at present.
European officials are in crisis mode this evening over the growing horsemeat scandal. They're calling for a coordinated control plan to restore consumer confidence after meals labeled as beef were found to contain horsemeat. The EU commissioner says that the labeling was fraudulent and also that it broke the law.
Syria's deputy foreign minister has told CNN that he believes Syria is winning the civil war. He also says that the military will hold out, quote, "as long as it has to" to shut down the rebellion. Opposition activists say that at least 150 people have been killed across the country today, many of them in Aleppo and also in the suburbs of the capital, Damascus.
Pope Benedict XVI has told the faithful gathered for the Ash Wednesday mass his decision to retire was for the good of the church. The mass was moved to St. Peter's Basilica to accommodate the large crowds gathered for what's likely to be his last public mass as head of the Catholic Church.
A cruise ship that's been disabled for days in the Gulf of Mexico is finally expected to reach land in a little over 24 hours from now. Thousands of passengers and crew have been living in unsanitary conditions since Sunday. That was when a fire knocked out much of the ship's power and also plumbing.
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DOS SANTOS: The man lined up to be the next U.S. Treasury secretary has been in the hot seat on Capitol Hill today. Longstanding Democrat Jack Lew will be replacing Tim Geithner, but before he could get his name on the door, he had to go something of a confirmation hearing, which could be pretty painful, as we all know, sometimes.
Well, Maggie Lake is in New York and she is listening in. So my first question to you, Maggie, is how painful was it and how did it go?
MAGGIE LAKE, CNN CORRESPONDENT: It went as well as you can expect these things to go, Nina. Listen, Jack Lew is no stranger to confirmation hearings. I think this is the sixth one he's been through. And remember, this is a man who has spent most of his working life in Washington at the very top of policy circles. He was just recently Obama's chief of staff; he's been White House director twice. So he knows his way around these type of things.
You know, they talked a lot about budget issues, about financial regulation, the things that I guess you'd expect to come up at a Treasury secretary hearing -- confirmation hearing. One of the most -- the most contentious points lawmakers asked Lew some pointed questions about, two things, one his time as executive at Citigroup and the severance he took when he left to go back into public life.
I mean, it was right before the bank received government bailout money, TARP money. He was asked about that. And he was also asked about an investment he made in the Cayman Islands. Have a listen to that.
(BEGIN VIDEO CLIP)
JACK LEW, TREASURY SECRETARY NOMINEE: I took a loss when I sold the investment. I always reported all income. I always paid any taxes that were due.
SEN. MAX BAUCUS (D), MONT., FINANCE COMMITTEE CHAIRMAN: Why is the investment in the Cayman Islands?
LEW: Senator, I actually don't know why it was organized. I was not involved in setting up the fund.
BAUCUS: Did you know at the time (inaudible)?
LEW: You know, at the time I invested, I was aware that it was an international fund investing in emerging markets and I knew that much of the personnel for the fund was based in London. I actually didn't know at the time what the address of the -- of the partnership was.
(END VIDEO CLIP)
LAKE: And of course part of the reason, Nina, this came up -- and a lot of the questions about that coming from Republicans, as you may remember, during the presidential campaign, President Obama taking shots at then-candidate Mitt Romney for some of his offshore investments. But, really, that's about as tough as it got.
It is not expected to in any way derail his confirmation hearing. This was, by all accounts, pretty boring. It was about things like tax reform. And as you see from that very large pile of paper, it was about as interesting as reading through all of that. And that's exactly what the White House wanted.
They wanted a quick confirmation hearing and someone they can get in the post in order to deal with those very big budget issues and budget fight that is looming with Congress.
DOS SANTOS: Oh, now that begs the question, what's he likely to be in this new role? Obviously Tim Geithner was well respected. Some people criticized some of his decisions.
LAKE: Yes, you know, it's going to be interesting to see Jack Lew very different kind of person, Tim Geithner was very much a banker, had very close ties with Wall Street, with the financial community, was at the New York Fed for years.
But this is a very different environment, isn't it, Nina? Tim Geithner was Treasury secretary at the height of crisis. There was so much stress in the system, stress in Washington, finger pointing, blames about the remedies that were put in place.
Interestingly, in this confirmation hearing, Europe didn't even come up or financial markets didn't even come up until really far into it and then only briefly. So that gives you an idea what a vastly different landscape it is now.
And, again, that is sort of why Lew was chosen as well. His expertise really is in the sort of balance sheet, the budget, the sort of granular part of fiscal policy. That's where the crisis now lies in the U.S.
And that's hopefully what he is going to help steer the administration and the country through, whether he does that well or not, we're going to have to see. But it looks like he is on his way to getting confirmed.
DOS SANTOS: Good luck for him, then. Maggie Lake, thanks ever so much for bringing us all of that from CNN New York.
And let's have a look at how all this obviously with the news of a potential E.U.-U.S. trade on the horizon, very distant horizon, might add, has been affecting the markets because it's been something of a mixed day on Wall Street.
Investors have been digesting more earnings reports yet again, also some retail sales figures as well. Remember that the consumer accounts for two-thirds of the world's largest economies. So that's pretty important, too, as you can see. Alison Kosik is live from the New York Stock Exchange.
Run us through the main action so far. So rough the off the highs.
ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Exactly. Yes, you are seeing stocks off their highs of the session. You notice that those retail sales numbers, they are -- they are pretty much weighing on the Dow today. You see the Dow moving farther away from that all-time record high of 14,164.
Retail sales numbers came in just at 0.1 percent in January. We saw that spending slowed because of higher taxes, higher gas prices. And expiration of the payroll tax holiday, that has something to do with it as well, taking a bit of a bite out of Americans' paycheck. Workers here in the U.S. earning an average of $41,000 are taking home $65 less per months.
But interestingly enough, that payroll tax holiday, Nina, it really was meant to be temporary. You know, the economy and the jobs market relatively speaking have recovered enough, where workers can try to absorb that tax increase.
Looking at spending numbers, compared to a year ago, that gives you an idea that you see some big gains and some non-necessity items, like sporting goods, books and music stores are up 7 percent from last January.
Restaurants and bars are seeing sales up 6.5 percent. But as for the 4th quarter earnings seasons winds down, it is pretty quiet here today at the New York Stock Exchange. Volume is light but we do have our eye on Deere. Deere shares right now are down more than 3 percent. The world's biggest farm equipment maker raising its forecast.
But investors look like they wanted an even more optimistic view. They're worried about weakness in Europe. Lower corn prices here in the U.S. and those lower corn prices mean less cash for farmers, which means less money to spend on new equipment. After the bell today, (inaudible) report once again 4th quarter earnings season winding down, Nina.
DOS SANTOS: Bit of a rest for you, then.
Thanks so much for that, Alison Kosik there, bringing us all of the news and action from the New York Stock Exchange.
Well, a holiday nightmare for passengers and operator alike as the Carnival Triumph is towed home. The company that runs it is warning that profits -- guess what -- well, they might suffer. We'll have a full rundown after the break.
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DOS SANTOS: Carnival says the disruption and repairs to its stricken Triumph cruise ship are likely to hit its half-year earnings. The ship was left drifting off the coast of Mexico on Sunday after a fire knocked out the engine's power.
The Triumph (inaudible) more than 3,000 guests currently aboard and are being towed to Mobile, Alabama, which is where our very own David Mattingly is for us this hour with all the latest.
So these people must have had a really, really rough time. Run us through what the conditions are like on board, David.
DAVID MATTINGLY, CNN CORRESPONDENT: Well, once the engine went out and they weren't able to restore any power there, they didn't have any air conditioning, the plumbing caused all sorts of problems. They had the toilets backing up, sewage backing up into showers, into rooms. They also had problems unable to serve people any food, any hot food.
So they had to have food delivered on board from other ships, people complained about long lines to get that food. They also complained about the unbearable conditions inside the ship because of the smell from the sewage and just the high temperatures that were inside the ship because of the lack of air conditioning.
By the time they get here to this port here behind me, this port built specifically for cruise ships, by the time they get here, those passengers will have endured those conditions for almost a full five days. They are going to be so ready to get here, to get to dry land.
The cruise ship company has arranged for rooms for people who need them, to go there to get a hot shower, to get a rest in a warm, dry bed, to get some hot food. They are also arranging for transportation flights out of this area to take them back to Texas where their cruise was supposed to end originally.
So that -- those arrangements have been made. That's what's waiting for them when they get here as well as some very anxious family members who didn't want to wait for them to get home, who actually came here to Mobile to greet them as they get off the boat.
DOS SANTOS: David, this may sound like an obvious question, but it's something that's come up time and time again when I've talked about this stricken cruise ship with people here in the U.K. They say why can't they just get the people off the boat first? Why do they have to suffer such appalling conditions?
MATTINGLY: Well, this is a very, very large ship. And it's a very complicated procedure to transfer someone from one large vessel to another vessel out in the open sea. It's much safer to keep them on board that vessel that they're on, such as it is, than to bring that vessel into port and then allow them to disembark.
And that's what they're going to do here in Mobile. This entire facility's set up waiting for them. That's going to happen sometime tomorrow.
DOS SANTOS: Gosh, that's an interesting point, actually, one that, if you're not familiar with cruising, it is an important consideration.
I hadn't taken into consideration, David, we've also got to talk about what this means for the cruise business in general, because anybody watching news shows and hearing about the plight of these people would not necessarily be tempted to take a Carnival cruise these days.
MATTINGLY: Well, cruises are the thing to do for so many families here in the United States. People are saying they've had great experiences on them. Something like this happens, of course, it's going to have a chilling effect on the industry.
In fact, Carnival announcing that this particular ship, the Triumph, they are canceling the next 12 cruises that were scheduled for that ship while they try to repair it and get it back into service. That's means there won't be any customers coming aboard that particular ship at least until sometime in April.
So, again, people may be thinking twice about plans they've booked. But this, again, this is similar to a situation that happened in 2010 with a Carnival cruise ship in the Pacific Ocean, a fire happened there in the engine room.
The ship had to be towed into port for -- under the same conditions.
So here, when it does arrive, there will be federal officials from the U.S. government, from the U.S. Coast Guard, the National Transportation Safety Board, they are going to launch a probe, an investigation into why this happened to find out if there some sort of systemic problem with the way these ships are built, or to get to the bottom of why the fire here happened here, to make sure that doesn't happen again.
DOS SANTOS: OK, David Mattingly in Mobile, Alabama, thanks so much for bringing us all we know on that cruise ship for the moment.
And speaking of which, obviously as that cruise ship does approach land, we'll continue to follow its progress and bring you live pictures when the ship does dock. That'll happen, it's likely, sometime on Thursday afternoon.
Well, the resort city of Acapulco in Mexico is heavily focused on rebuilding its reputation. Earlier this month, six Spanish tourists were raped while on holiday there. Nick Parker reports from Acapulco on how the city is going on the PR offensive to rebuild its name.
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NICK PARKER, CNN CORRESPONDENT (voice-over): It's one of Acapulco's most celebrated spectacles, nighttime cliff diving still attracts tourists, but the city's security problems have taken a toll.
ANGEL DAVID, CLIFF DIVER: Couple of years ago, we received like maybe 25-30 boats here in Acapulco. So now we have none.
ANA MARIA LOPEZ, ARGENTINIAN TOURIST: When I came, I really -- I was scared. But the people say there is no word about -- worries about it. So we are all right now.
PARKER (voice-over): In its heyday, the city lent glamour to Hollywood blockbusters. Memories of famous visitors are preserved at this hotel. The hotel says its occupancy has actually come back from the depths of 2011, when drug cartel violence was at its worst. The high-profile presence of security forces in tourist areas has helped.
SALOMON GROMAN, MANAGER, MIRADOR HOTEL: I think you can see and you can judge by the number of tourists coming back to Acapulco that things in that Acapulco area are getting safer and better.
PARKER (voice-over): The resort city remains heavily dependent on tourism, which officials say last year brought in more than $2 billion, now mostly from Mexican tourists.
PARKER: Acapulco was blessed with great natural beauty. Its iconic bay is surrounded by mountains. It has a wide, sandy beach and it's sunny nearly all year 'round.
PARKER (voice-over): It's a glossy image being marketed by "Gossip Girl Acapulco," a Spanish language version of the U.S. TV show. The international production may help improve the city's violent reputation. We visited the set, which was just along the coast in the downtown area in so-called New Acapulco. Roberto Palazuelos is one of the stars and his family are powerful business figures in Acapulco.
It's not really that bad, you know. We're filming here and nothing has happened. I see all the people walking on the beach. But you know, in this business, in the tourist business, if you get a bad publicity then you don't get the people.
PARKER (voice-over): It is a pivotal time for Acapulco. Tourism numbers had improved in recent months and the overall impact of the latest violence remains an open question -- Nick Parker, CNN, Acapulco, Mexico.
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DOS SANTOS: Speaking of business traveler out there, bet you're wondering how the weather is doing and if you're on any cruise ships, you'd also be wondering how the weather is doing for that stricken ship, the Carnival Triumph, which is making its way towards the Alabama coastline now.
Jenny Harrison is at the CNN International Weather Center with all of that.
How's it looking, Jenny?
JENNY HARRISON, CNN METEOROLOGIST: Well, you know, it's been a mixed few days weather wise, actually, Nina, for all those (inaudible) across, as we know, there have been taking their matters outside to actually get some fresh air away from certainly below decks.
But what they decided, of course, is to actually bring the ship up into the northern sections of the Gulf of Mexico, because of the current. So that was going to help with the (inaudible) steering in of this massive ship without any power. And you can see that actually the timeline has been put back a couple of hours.
So now it's expected that it'll be sometime Thursday afternoon, probably later in the day than literally was thought just a few hours ago. So it is quite a long way still to come and, of course, moving at such a very slow pace. And it's got to get right the way through the lagoon and obviously actually into dock.
Now the weather has been very unsettled, very mixed. And certainly throughout the rest of this day for those passengers, as they head closer to shore, we have got the threat of some afternoon and early evening showers. It should clear later on, in fact, bitterly quite cold in the overnight hours as well, the winds coming in from the north.
And then for Thursday, the day they've all been waiting for for so many days now, it will be clear. It will be dry. But it will be a little bit chilly. But at least it will be a bright, sunny day that awaits them.
And just in case you're wondering or any interest, this is actually one of the actual tugs, just a picture of it, to tell you a little bit about it. It's actually pulling that big ship in -- there's a couple of these. And they're not very big, as you can see, 63 meters long, so two main engines, two propellers. And you can see obviously the size of the engine. So that is why it's taking as long as it is.
Now meanwhile, in Europe, very wintry picture. At least they haven't got that to contend with. The central Mediterranean, though, has been seeing a lot of rain and some snow. But the U.K. as well in the last few hours, very widespread, but it's not really sticking. It's closely followed by the rain, right now it's very cold, Birmingham -5. It's -7 in Stuttgart.
And the snow tends to peter off. Doesn't really make it across to mainland Europe. But you can see the accumulations, we will see quite a bit certainly into Frankfurt in the next 48 hours. Maybe that 5 centimeters just over 3 in Munich, so that could slow you down a little bit at the major airports.
And then the southeast, again, we're seeing quite a bit added onto yesterday's accumulations. But again, just like the northwestern U.K., it's not really sticking particularly. It's actually quite mild by day. So that's that system in the southeast.
Here's the one coming across the northwest. It will turn to snow but fairly light across northern sections through Scandinavia and again across into Germany. And then it actually goes milder out across the west in the wake of that system. So turning mostly to rain and settled across those central regions.
And as I said, the airports, just be prepared for that snow in Frankfurt. And then fairly breezy conditions elsewhere and also Sofia some snow in the overnight hours for you and a bit of a -- bit of a mix in Geneva, Nina.
DOS SANTOS: OK, Jenny Harrison there at the CNN World Weather Center, thanks for bringing us the update there on the weather.
Well, straight ahead here on QUEST MEANS BUSINESS, packing a punch at New York Fashion Week (inaudible) Betsey Johnson, proving that age is (inaudible).
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DOS SANTOS (voice-over): (Inaudible) the answer to tonight's "Currency Conundrum," earlier in the show, you may remember I asked you how many time Venezuela's currency, the bolivar, has been devalued over the course of the last decade.
And the answer is actually the fifth time in 10 years, so C. Venezuela devalued its currency (inaudible) high inflation in the exchange rates is 6.3 bolivars to the U.S. dollar these days.
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New York Fashion Week is wrapping up after bringing glamour and style to a wintry Manhattan as well as showcasing fresh talent, the events (inaudible) some pretty familiar faces.
The off-the-wall designer Betsey Johnson has influenced five decades' worth of fashion in the United States and elsewhere. And now at the age of 70, well, she's back on the catwalk, complete with her trademark moves. CNN's Felicia Taylor got an exclusive peek into Betsey's world.
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FELICIA TAYLOR, CNN CORRESPONDENT (voice-over): Betsey Johnson just turned 70 and has the same energy and passion for fashion that she had four decades ago when she first began as a designer in Manhattan's Lower East Side. Johnson filed for bankruptcy last year, but now she's back and reinvented herself with high hopes for her colorful and distinctive label.
BETSEY JOHNSON, FASHION DESIGNER: I had choices either quitting or staying and I know Stevie (inaudible) -- Stevie Wonder -- I've known Stevie for a long time, like this just -- I've enjoyed Sam. He's enjoyed me. And I said, you know, I'll -- I'm going to stay on. I can't retire. I love my work.
Six, seven, eight champagne with the nozzle up.
TAYLOR (voice-over): She says filing for bankruptcy was a tough decision with store sales on the decline after recession, the company defaulted on a $48 million loan.
But Steve Madden came to the rescue last year and took over the ownership and license of Betsey Johnson. Staying current is important. Last year, she launched a new dress line and is back at Fashion Week, unveiling a high-end sports clothing line, all --
JOHNSON: Well, I always wanted to expand the brand. And it's, you know, been a busy turnover; I jumped in as creative director.
Oh, my God.
TAYLOR (voice-over): Betsey is in every detail from catered cupcakes to Twizzlers.
And the models hit the runway in colorful outfits and with a surprise. As the girls hit the floor along with Betsey Johnson herself, as she takes the stage with her signature cartwheel and split, a sign that Betsey Johnson is still in business -- Felicia Taylor, CNN, New York.
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DOS SANTOS: Well, staying with the fashion theme and onto a more serious side of the industry, though, here on CNN we're following an American charity which is selling donated bras to Africa to give victims a sustainable income. It's part of CNN's Freedom Project, fighting a war against modern-day slavery. That's "Mozambique or Bust."
You can see it here on CNN this Friday at 4:30 pm London time. We'll have plenty more QUEST MEANS BUSINESS after this break.
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DOS SANTOS: The friends of the honest financier and the respectable broker is finally celebrating its 125th year of print. In 1888, when the "Financial Times" began publishing it vowed to print without fear as without favor.
The first paper was just four pages long here. Commodities dominated the front page here. And this is the front page from October the 30th. And at 1929, that was the day after Black Tuesday, the lead reads, "The London Stock Exchange has abandoned any attempt whatsoever to read what is likely to happen in New York," it goes onto say, "the harvest of figs has turned to thistles."
And during the last crisis, in 2008, the "FT" pulled no punches, either, screaming headlines like "Fight for survival on Wall Street," "Banks in crisis," "Wall Street in turmoil." Well, this very evening, the "FT" had caught us on the Thames (inaudible) in pink. This is, of course, its signature color.
And let's just finish on a little anecdote supplied to us by the front pages of the paper itself. The Chinese ambassador in Africa was once asked why he was carrying a copy of the paper, affectionately known as the "Pink 'Un" in London. And he said, "We always read the 'FT' in the embassy because capitalists never lie."
There you have it. That's it for this edition of QUEST MEANS BUSINESS. Thanks so much for joining me. I'm Nina dos Santos. I'll have a full check on headlines next.
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DOS SANTOS (voice-over): The headlines on CNN this hour: at least four people have been killed in a plane crash in Ukraine according to Russian state media. News agency RIA Novosti says that 45 people were on board the plane, which is making an emergency landing in Donetsk in the east of the country. It says the fate of two passengers is still unknown.
(Inaudible) officials are in crisis mode this evening over the (inaudible) horsemeat scandal. They're calling for a coordinated control plan to (inaudible) consumer confidence after meals labeled beef in Sweden, the U.K. and France were instead found to contain horsemeat. The commissioner says that the labeling was fraudulent and broke the law.
Pope Benedict XVI has told the faithful gathered for the Ash Wednesday mass his decision to retire was for the good of the church. The mass was moved to St. Peter's Basilica to accommodate the large crowds gathered for what's likely to be his last public mass as head of the Catholic Church.
A cruise ship that's been disabled for days in the Gulf of Mexico is finally expected to reach land in a little over 24 hours from now. Thousands of passengers and crew have been living in unsanitary conditions since Sunday. That was when a fire knocked out much of the ship's power and also plumbing.
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DOS SANTOS: That's a look at the main stories we're watching for you here on CNN. "AMANPOUR" is next.
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