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Quest Means Business
Donald Trump Is Accused Of Letting China Take Them To The Cleaners On ZTE; Mark Zuckerberg, Again, Says Sorry This Time To A Different Set Of Law Makers; Never Mind The Brexit, British Stocks - It's Another All Time High; U.S. Lawmakers Are About To Vote On Whether To Throw Out The Banking Rules Put In Place; A Woman Has Been Named President Of The NYSE; Trump Casts Doubts On Summit With North Korea; Trade Unions On Strike Across France; Royal Newlyweds Celebrate With Prince Charles; Trump Not Happy With Trade Talks, Stocks Sink; China To Cut Tariffs On Imported Autos; Senators Warn Against Relaxed Penalties For ZTE; Trump Proposes Five Management Changes For ZTE; FTSE 100 Closes At Another Record High; Lava From Hawaii Volcano Nears Geothermal Power Plant; Carnival Cruise Announces Hawaii Itinerary in May, Unveils Newest Cruise Ship. Aired: 4-5p ET
Aired May 22, 2018 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN HOST: Closing bells ringing on Wall Street. The market turned turtle in the afternoon when shop is out, I'll show you the numbers
in a moment. A lot of nearly 200 points having been ducked - one, two, three, thank you very much. The market is now closed. The day is over,
probably for the best, it is Tuesday, it is May the 23rd.
Tonight, Donald Trump is accused of letting China take them to the cleaners on ZTE.
Mark Zuckerberg, again, says sorry this time to a different set of law makers. Tonight, they tell us they are not satisfied.
And never mind the Brexit, British stocks - it's another all time high.
I am Richard Quest, live in London, where of course, I mean business.
Good evening. We have two stories that dominate the agenda tonight. Donald Trump under fire on Capitol Hill over his trade deal with China.
The deal we have very few details about. And in Europe, in Brussels, Mark Zuckerberg apologizes to European law makers over Facebook's data policies
and breaches.
And yet, Zuckerberg insists he is ready to make tough changes.
(START VIDEO CLIP)
MARK ZUCKERBERG, CEO, FACEBOOK: I expect that this increased investments in security will significantly impact our profitability, but I want to be
clear, keeping people safe will always be more important than maximizing our profits.
(END VIDEO CLIP)
QUEST: Now, you're going to hear a lot more from that hearing in just a moment. However, we begin tonight with ZTE.
They are three small letters, and they are now at the center of tensions in the hall of power. It's no longer just a source of trouble brewing between
Beijing and Washington, now ZTE is pitting Republican versus Republican in the United States.
Remember, Donald Trump wants to save the Chinese company from going under. It's a massive U-turn for the Washington administration. They were the
ones that sent it under in the first place when they refused it access to U.S. technology, but this is now angering his own party.
And Donald Trump is bullish about the deal with China.
(START VIDEO CLIP)
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: When you're losing $500 billion a year, you can't lose in terms of a negotiation, it's really easy
to win, but I want this to be a great deal for the United States and I want it to be a very good deal for China, too, if that's possible.
(END VIDEO CLIP)
QUEST: The President built himself as the ultimate deal maker. Some members of Congress from his own Party using that image to make that point.
Marco Rubio, there's no love lost really between the two men, a Republican senator, he says, China is out negotiating the U.S.. Rubio's claims this
is not winning. On the Democrats side, the Minority Leader, Chuck Schumer says the administration proposals to punish ZTE do not go far enough.
(START VIDEO CLIP)
CHUCK SCHUMER, SENATOR MINORITY LEADER, DEMOCRAT: The penalties that are proposed by Secretary Mnuchin are penalties in name only. They are a
diversion from the fact that it seems President Xi has outmaneuvered President Trump and Secretary Mnuchin. The art of the deal, it should be
President Xi who writes the book because he has taken us to the cleaners on ZTE.
(END VIDEO CLIP)
QUEST: Here is why this issue is complex and contentious. ZTE is known for its smart phones. Its technology powers cell networks around the
world. The U.S. says it illegally shipped ZTE - illegally shipped equipment through Iran and North Korea, which is in breach of sanctions,
and those regimes could use American technology against U.S. interest and their own people.
ZTE lied about whether it had punished employees involved, and on top of that, American intelligence says ZTE devices pose a security threat to
their users.
So, that is why the American government cares or at least part of the American government. It has leverage because Chinese technology is powered
by American components, more than a quarter of the device, some estimates.
What are we talking about? Well, let's just now look at this. You've got processes from Qualcomm, storage from SanDisk, glass from Corning, and the
android operating system from Google.
American jobs will be affected if ZTE goes under, and the President says he is trying to balance everyone's interests.
(START VIDEO CLIP)
TRUMP: As far as ZTE is concerned, the President asked me to look into it and I am doing that, and don't forget for the ones that say, "Oh, gee,
maybe Trump is getting a little bit easy." ZTE, we closed it. It wasn't another administration. It was this administration that closed it. It's a
phone company for those that don't know, a very large phone company. But it's also a phone company that buys a large portion of its parts...
[16:05:16]
TRUMP: ... that make up these phones and are sold all over the world from American companies. So, when you do that, you're really hurting American
companies also. So, I am looking at it, but we were the ones that closed it. It wasn't done by previous administration. It was done by us.
(END VIDEO CLIP)
QUEST: CNN's Congressional Correspondent, Phil Mattingly is with me. And that's the problem. The President says, "We were the ones that closed it."
But it begs the question, why, if you're only going to reopen it again?
PHIL MATTINGLY, CNN CONGRESSIONAL CORRESPONDENT: Right, and I think the biggest issue right now, Richard, that you're hearing on Capitol Hill,
you're hearing frankly from intelligence officials as well is that the President kind of how he views. The prism through which he views this, and
that is as a trade negotiation. Obviously, talking about U.S. jobs, talking about how President Xi has repeatedly come to him and personally
asked him to address this issue.
That is not the prism by which people in Capitol Hill and people in the intelligence committee view this issue. They view it as a national
security issue and those are two things that they should believe, trade and national security should be separated.
Richard, just three or four minutes ago, a group of 25 senators including big names like you mentioned, Chuck Schumer, but also Republican leaders
like John Cornyn, Marco Rubio, Tom Cotton - these are hawkish Republicans, a lot of them close allies of the President just sending a letter to the
administration saying, "Export control and sanctions laws should not be negotiable because fidelity to the rule of law is a key part of what
distinguishes the U.S. from a country like China."
Richard, this is escalating on Capitol Hill, and as you know, one of the big issues here is it's being escalated by some of the President's closest
allies who were in sharp disagreement with the strategy here.
QUEST: Right, but ZTE has been around a long time. Is there concern on Capitol Hill, the sanctions busting enforcement for Iran and elsewhere, on
North Korea or is it about the devices where it's claimed there is a national security threat by having just so many Chinese devices.
MATTINGLY: Yes, it's much more the latter than the former. I think every Republican Senator, even Democrats that I have talked to are talking about
the intelligence concerns more so than the sanctions. They view the sanctions as a pathway to address the intelligence concerns, which is why
they are very supportive of what the actions of the commerce department took earlier this year, but they don't believe that that's the biggest
issue.
They believe it's the intel concerns, and Richard, you could see it hearing after hearing after hearing when you have national security officials up
here being questioned by these senators, they ask every single one of them, would you personally use a ZTE phone? Would you allow anybody in your
institution or in government to use it? Every single time, that national security official says, no, these senators are trying to make the case that
this is an intel issue far more than a sanctions issue.
QUEST: Phil Mattingly, thank you, sir. Thank you for putting it in perspective. Mark Zuckerberg was already persona non grata amongst
Europe's political elite. His testimony on Tuesday in Brussels apparently did not help his case.
The Facebook Chief Executive apologized to members to the European Parliament for Facebook's recent scandals, then he drew their anger by
giving general answers to specific questions and ended the hearing before responding to all of their questions.
(START VIDEO CLIP)
ZUCKERBERG: I'll make sure that we follow up with each of you afterwards to make sure that your specific questions get addressed and we are going to
have someone come to do a full hearing soon to answer more of the technical questions as well, so thank you again, for inviting me and for having me.
UNIDENTIFIED MALE: Mr. Zuckerberg, I think there was one question raised by Gifa Huset (ph) and that linked to my question and that's the separation
of different services and I think it's a very important question in this round, the market power of Facebook and the question if you cross use for
example data between Facebook and WhatsApp, so it would be good if you say at least one word to that?
UNIDENTIFIED MALE: Would you allow users to escape targeted advertising? I mean, I asked you six yes and no questions, I got not a single answer,
and of course, when you asked for this format, well, for a reason.
ZUCKERBERG: Okay, I will make sure we follow up and get you answers to those.
(END VIDEO CLIP)
QUEST: When Zuckerberg appeared in front of the U.S. Congress last month, some American lawmakers asked confusing questions and didn't grasp the
basics at hand. Europeans made it clear, they were coming prepared.
(START VIDEO CLIP)
UNIDENTIFIED MALE: We are here in terms of regulation and the United States is here. You've come here not to Congress, but to the European
Union and we'd have expectations.
UNIDENTIFIED FEMALE: How many data categories do you store? Does Facebook store on the categories that you collect?
ZUCKERBERG: Senator, I am not actually sure what that is referring to.
UNIDENTIFIED FEMALE: And what do you do with the non-Facebook data? Do you commercialize it and getting you to do that, is it morally acceptable,
do you think in your opinion to collect non-Facebook user's data without them knowing what you do with it?
[16:10:16]
UNIDENTIFIED MALE: Could somebody call you up and say, I want to see John Kennedy's file?
ZUCKERBERG: Absolutely not.
UNIDENTIFIED MALE: Could you not - would you do it? Could you do it?
ZUCKERBERG: In theory - and we do not sell data to advertisers.
UNIDENTIFIED MALE: You clearly rent it.
UNIDENTIFIED MALE: You have to ask yourself what - how you will be remembered as one of the three big internet giants together with Steve
Jobs, I should say and Bill Gates who have enriched our world and our society, or the other hand, the fact that a genius will create a digital
monster.
(END VIDEO CLIP)
QUEST: Can you top that with a telling and very deep question to Mark Zuckerberg. Samuel Burke is with me in Brussels. I know you were to
talking to Guy afterwards, and that failure to answer all the questions in a format where they were all put together and he wasn't really forensically
challenged. Did he do himself more harm than good?
SAMUEL BURKE, CNN CORRESPONDENT: A major missed opportunity on the European Parliament's part, and I don't think they could have foreseen the
frustration that they would have with this format and therefore, Mr. Zuckerberg - though we have to clarify, Richard, this is the traditional
format that is used in this type of hearing, in this institution. Now, the questions were very poignant, what really caught my attention is how they
were tag-teaming with their U.S. counterparts, following up on questions from U.S. senators that Mark Zuckerberg was able to evade with his famous,
"I'll follow up with you. My team will follow up with you later."
The questions were - but this format of doing all of the questions first and then having Zuckerberg answer later was really just a futile experience
in its totality, but I did get a chance to follow up with the former Prime Minister of Belgium, Guy Verhofstadt, who is the current MUP and asked
about the frustrations not just with this format, but with Mr. Zuckerberg's response.
(START VIDEO CLIP)
GUY VERHOFSTADT, FORMER PRIME MINISTER OF BELGIUM: On the very precise questions, he didn't give an accurate answer. For example, on GDPR, so the
new European privacy rules. There is already proof of the fact that he doesn't apply it since the outbreak of Cambridge Analytica that EU data of
non-EU citizens has been moved outside Europe, away from the Europeans that this is against European rules
BURKE: But do you really think that you're going to get those answers followed up in writing the way that you could have gone back and forth the
way you and I are doing right now.
VERHOFSTADT: Exactly what I did at the end, but the question is the following - if they don't respond to the questions in a written form, it is
clear what we are going to do as European Parliament and we are competent for that.
BURKE: What are you going to do?
VERHOFSTADT: First, strengthen the rules on the privacy...
BURKE: Stronger than GDPR.
VERHOFSTADT: Stronger than GDPR because it's clear that some of these rules need to be strengthened. For example, compensation, if there is an
abuse of use of data, of Facebook users, they have a right on compensation...
BURKE: For the users, not just a fine because right now, you guys can fine Facebook $1.5 billion...
VERHOFSTADT: Exactly, but I think it's more important for the users that they have a compensation and not only...
BURKE: What do you do?
VERHOFSTADT: And secondly, it is to activate the European antitrust authorities because, in my opinion, it is clear that Facebook is a
monopoly, a monopoly organizing all of social context on the internet, certainly after the takeover of Instagram.
So, there is no competition at all, and what scares me more is the fact that the explained and that was interesting, that is the only point that
was interesting in this hearing. He explained how they scrutinized with several tens of thousands scrutinies, everything what you or I am boasting
and deciding we are going to take it away, this is fake news. This is not fake news. This is hate speech. This is not hate speech.
In my opinion, that has to be done under the control of a public authority. We cannot outsource the protection of our citizens, their privacy, the rule
of law, the fight against criminality, we cannot outsource it to a private company that has monopoly.
BURKE: But with all due respect, given how passionate you are about this issue, should this format be changed in the future if you have other social
media executives in front of you?
VERHOFSTADT: Exactly. And that's the reason why we sent now these questions in a written procedure because that's the only way to have
accurate answers on this. I have done a lot of hearings and any (inaudible) what they put on paper, that will count.
(END VIDEO CLIP)
BURKE: Now, Richard, we know that Mark Zuckerberg's team at Facebook does follow up with the members of Parliament because we saw that happen with
the U.S. Congress, but hard to see how they are going to get meatier answers than they could have in the back and forth.
You and I were live on air, and I could feel your frustration with the format, Richard...
[16:15:16]
BURKE: ... and we're feeling that frustration from the politicians already, so if you are watching this, you may have thought, well, it's
going to be Mark Zuckerberg - easy for Mark Zuckerberg to pick and choose which questions he wants to answer, which is what he did. He answered a
few tough ones, but in recycled bullet points.
But now, this frustration is spilling over to the UK where you are, where the member of Parliament, Damien Collins who has been very aggressive about
Facebook is saying, "This wasn't enough." He wants to have a try and I think before this, you could have said, "Well, Mark Zuckerberg is coming to
the European Parliament, you get all the European Parliament in one when you do this, but because there were so many questions left unanswered,
maybe Damien Collins will get his opportunity in the UK Parliament.
QUEST: All right, Samuel Burke, stay with me for one second while we talk about one of the bigger issues at the moment.
As Facebook is grilled on privacy, European Union's sweeping data law, GDPR comes into effect on Friday. Now, GDPR as it's called, comes all sorts of
personal information from bank details to social media posts, to medical information online.
Here is how it works. Anybody who is a European citizen, in fact, all companies now who do business with European citizens are sending e-mails to
everybody saying that they now have to opt in. There will be no longer - it's a sort of a double opt-in process now involves ticking a box to accept
marketing e-mails and to confirm.
You, me, we've all been swamped with e-mails at the moment asking us to opt-in. No more pre-ticked boxes. So opt-in is the first big thing. The
second one is, there is now a right to be forgotten. If you ask your personal data must be erased and search engines like Google must be told as
well so they can delete their records, too.
And finally, the burden, the burden is on the firms to prove they're handing data correctly and that might mean appointing a data protection
officer and if a data breach does occur, and rules are broken, it must be reported within 72 hours. Fine us of up to 4% of global annual sales could
be involved.
Pull all of these together and you see GDPR is the biggest change to hit data, not just in Europe, but in the world in the last 10 years. Samuel,
is this workable?
BURKE: It's definitely workable and Mark Zuckerberg even said that they will already be in compliance by the time this goes into effect on Friday.
What's incredible for me, Richard, is the fact that this was not done in response to the Cambridge Analytica scandal. Looking at it, you might
guess that, but this was done two years ago, so it shows the foresight that the Europeans have and it shows really how Europe is setting the agenda
here because even though as you just said, this is required for any company regardless of their base, if they have clients in the European Union, this
is a standard that most of the tech companies, the big tech companies are going to adopt for people worldwide.
QUEST: Samuel Burke in Brussels, thank you. As we continue tonight on "Quest Means Business" regulation rolls back. U.S. lawmakers are about to
vote on whether to throw out the banking rules put in place, the Dodd-Frank rules after the global financial crisis.
[16:20:00]
QUEST: In a few minutes, Congress is expected to vote on whether to roll back some of the banking rules known as the Dodd-Frank. CNN's Clare
Sebastian reports on the rules and how we got to this position.
(START VIDEO TAPE)
BARACK OBAMA, FORMER PRESIDENT OF THE UNITED STATES: It is an indisputable fact that one of the most significant contributors to our economic downturn
was an unraveling of major financial institutions and the lack of adequate regulatory structures.
CLARE SEBASTIAN, CNN CORRESPONDENT: In the turmoil that followed the 2008 financial crisis, the Obama administration set about rewriting the rules of
Wall Street.
OBAMA: Today, my administration is proposing a sweeping overhaul of the financial regulatory system. A transformation on a scale not seen since
the reforms that followed the Great Depression.
SEBASTIAN: In 2010, that transformation became law, the Dodd-Frank Act. Dodd-Frank was comprehensive. It required big banks to keep more capsule
in reserve and it stopped them from trading using their own money.
It also set up the Consumer Financial Protection Bureau designed to protect consumers from risky lending practices, and above all, it tried to end the
whole idea that some banks were too big to fail.
RANA FOROOHAR, CNN GLOBAL ECONOMICS ANALYST: If you look at what causes financial crisis, it is always a fast run up in debt. It's always more
leverage on the part of these large institutions, and Dodd-Frank did help them curb that.
SEBASTIAN: Dodd-Frank was complicated though with 2,300 pages of regulations, and it was divisive and it passed Congress with almost no
Republican support and that didn't change.
RICHARD SHELBY, U.S. SENATOR, ALABAMA, REPUBLICAN: Dodd-Frank legislation undermines the effectiveness of our regulators by asking them to do too
much.
MITT ROMNEY, U.S. PRESIDENTIAL CANDIDATE: The banks that had become bigger under Dodd-Frank are the big banks.
TRUMP: These regulations enshrine too big to fail and encourage risky behavior.
SEBASTIAN: And its efforts to rein in the big banks, some argue Dodd-Frank hurts small community banks.
PAUL MERSKI, EXECUTIVE VICE PRESIDENT, INDEPENDENT COMMUNITY BANKERS OF AMERICA: Because of the over regulation, many banks have been merged up,
consolidated and you have fewer and fewer choices for consumers and even greater concentration of assets in just a handful of banks.
SEBASTIAN: America's biggest banks are bigger now than before Dodd-Frank but they are also more stable.
Last year, for the first time, all of them passed the Federal Reserve's stress test.
MERSKI: It's really a smart time to look at what works, what doesn't work, what could be done better.
FOROOHAR: We're in a recovery. We're in the late stages of recovery. This is a time when we should be actually preparing for a rainy day, rather
than trying to put more kerosene on the economy.
SEBASTIAN: Clare Sebastian, CNNMoney, New York.
(END VIDEO TAPE)
QUEST: Now, in that report, you saw Congressman Gregory Meeks standing beside President Obama when he signed Dodd-Frank into law. The Congressman
joined me a short time ago, and he is concerned about what he calls the poison pills in the banking bill that could bring back discriminatory
lending.
(BEGIN VIDEOTAPE)
REP. GREGORY MEEKS (D), NEW YORK: I would hope and we need to make sure that we put in place something strong and be able to watch with the
regulators et cetera that we don't have redlining in the United States again that is very harmful and dangerous.
I grew up in a time where I saw a redlining, I saw what took place in 2008. I don't want that to happen again, but I want to banks to be able to - the
community banks, the credit unions et cetera to be able to serve the communities in which they work in.
QUEST: If we look at the China trade deal that is now being put forth, admittedly, we have very few details about that. We have almost none
whatsoever, but this linking to ZTE where even Senator Schumer has said ZTE is a national risk or a security risk. Do you have concerns?
MEEKS: Yes, I do. And I am you know, shocked that this President, I mean, I shouldn't say I am shocking this President because he flip flops all over
the place. He, at one time had another position with regards to China, he was doing these dreadful tariffs. That is not the way to go with China.
And now, it seems as though he is trying to get something from China or China, so therefore, he has equivocated his position. In my estimation,
the best way to deal with China is to have a rules based system that China and everyone else has to follow, and so by the President pulling out of TPP
- the Transpacific Partnership, that is the best way to deal with China and to deal with trade in a collective basis in my estimation.
QUEST: So, what do you think is behind the ZTE --
[16:25:16]
QUEST: -- business? First commerce said it's going to go for enforcement, then President Xi steps in, then Donald Trump says, no, let's keep the
thing going. Then you have a trade agreement or at least, the start. What's going on in your view, Congressman?
MEEKS: Well, let me tell you something, I've got a problem with our President of the United States. In fact, it wasn't me who said it. If you
look at Mitt Romney and/or Ted Cruz and/or Marco Rubio, they all call him a con man, and so it is difficult to understand what the con is because it's
wait and see and look, and trying to make sure you don't fall apart, but that's what it seems like to me.
He's juggling all up and to me, there is something nefarious that's going on behind the scenes whether it benefits his business or not, I don't know,
but clearly, in my estimation, it's not helpful for the United States of America or any of our allies.
(END VIDEOTAPE)
QUEST: In its 226-year history, never has the New York Stock Exchange had a day quite like today. A woman has been named President of the NYSE.
Stacey Cunningham was on the balcony for today's, Tuesday's, opening bell. She was formerly the Stock Exchange's Chief Operating Officer. She is also
a familiar face on Quest Express. She joined us for example during Spotify's IPO last month, and she started as an intern and a market trader
at this exchange.
Her ability to break that financial ceiling was paved by the women who came before that, such as Muriel Siebert. She was the first woman to hold a
seat at the New York Stock Exchange. Maggie Lakes spoke to Stacey about Siebert's influence last year.
(START VIDEO CLIP)
STACEY CUNNINGHAM, PRESIDENT OF THE NEW YORK STOCK EXCHANGE: If you look at the New York Stock Exchange, in itself can be a little larger than life
sometimes, and so for Muriel Siebert to walk into an entirely male trading floor and say, I have the right to be here, and you're going to welcome me
with open arms, and then have them turn around and do it, I think is such an accomplishment, not just for Muriel but for women throughout the world.
For me, personally and I started my career on the trading floor and I didn't give a single thought to whether or not I should be allowed to be
there, and I didn't give that thought because we already did it.
(END VIDEO CLIP)
QUEST: Stacey Cunningham's appointment comes at a time when corporate culture towards women is in a transformation. She won't be alone in the
exchange, she will soon be joined by the famous, fearless girl statue.
As we continue, U.S. lawmakers say, President Trump isn't getting enough from China in trade negotiations. American and European automakers are
finding plenty to like, in a moment.
(COMMERCIAL BREAK)
[16:30:00] QUEST: Hello, I am Richard Quest, there is more QUEST MEANS BUSINESS in just a moment. British stocks are knocking over record after
record at an all time high for the FTSE, Sir Peter Westmacott will be with me in just a moment.
And I'll ask chief executive of Carnival Cruise, what it's like to sail toward an exploding volcano or maybe not the case maybe. As we continue,
this is CNN, and on this network, the facts always come first.
During talks with South Korea's president, Donald Trump said the summit with North Korea's leader may not happen in June or indeed at all. They're
scheduled for three weeks from today. Donald Trump's remarks are the strongest indication yet that the meetings at risk after the North
threatened to pull out last week.
Thousands of rail workers, teachers, hospital staff and air traffic controllers are on strike across France, some clash with police's trade
unions and more than a 100 cities protested against President Macron's economic reforms.
The Duke and Duchess of Sussex have made their first official royal appearance as husband and wife on Tuesday. It was the 70th birthday party
for Prince Charles. The newlyweds helped celebrate his charity work in the gardens of Buckingham Palace.
President Trump says he's not satisfied with trade talks, and investors weren't satisfied with that. Look at the numbers, the Dow gained vanished,
it closed up -- I mean, it was from 2:30 in the afternoon, the market just went steadily lower and it closed off 179 points and now well back in the
25,000.
Car makers in the U.S. and Europe were however satisfied, shares of Ford, G.M., Chrysler, they were all high, not huge, but they were higher,
particularly Ford, Chrysler. China says it will cut tariffs on imported cars from 25 percent to 15 percent.
Michael Hirson served as the U.S. Treasury's chief representative to Beijing. He's now the Asia director at the Eurasia Group. The issue with
these tariffs, these car tariffs is China is sort of being intending to do something along these lines.
Anyway, we can't necessarily say this is as a result of these trade talks or can we?
MICHAEL HIRSON, ASIA DIRECTOR, EURASIA GROUP: Well, I think that's a very good point, and the agreement that the Chinese worked out with the Trump
administration really is significant because it goes in the direction that China was largely already trying to go.
What China managed to do is put the hard issues and particularly those related to technology and industrial policy to the side for now.
QUEST: Right, but if we assume the president is not a fool and he's a deal maker that he says he is, he will be aware that if he -- if China is just
stringing him along, not giving him a decent deal.
HIRSON: Well, that's right. It's not necessarily that the president didn't get anything from this agreement or really, it's just steps towards
an agreement. It's a matter of priorities. The president sided with his camp in particular led by Secretary Mnuchin, the pragmatic camp that is
looking to sell a deal based on China importing more from the U.S.
The camp that lost out led by U.S. trade representative Robert Lighthizer was pushing China to make deep changes to its economy, in particular, the
set of concerns and policies related to technology and intellectual property.
QUEST: Right.
HIRSON: That's the side that lost out from the framework of an agreement that was agreed recently.
QUEST: Sir, you're the former Treasury expert on China. Is it your view that -- and I'm trying not to take you into just a sort of a political
decision or you know, was the president led, was the president not, who won, who lost?
But is it your view that really China -- this is a missed opportunity, it is not the deal that everybody thinks it is.
HIRSON: I think yes, without making a political judgment, it is fair to say that because we can measure it against the objectives that the Trump
administration has set for itself. And again, the objective was not just to have China commit to buy more from the U.S., but to make changes to
really deep structural policies on market access, on the trade deficits and on industrial policies --
QUEST: Right --
HIRSON: With technology. And by that measure, this agreement and it's not a full agreement yet, we should just say, it's a framework of an agreement.
It is really now going to enter into serious discussions. But based on what we know so far, it is fallen short of the benchmark that the
administration had set.
[16:35:00] QUEST: Do you believe there was a quid pro quo over ZTA?
HIRSON: Well, I think quid pro quo is maybe ascribing nefarious purposes to some extent. The way that I would frame it is, President Trump clearly
understood from Beijing that putting out of business, China's second largest telecom firm was going to be very difficult for the relationship.
He needs President Xi for a number of reasons, but in particular, to have the North Korea summit go well. And he made the judgment that the
enforcement action that the Commerce Department had dialed up was too harsh in the grand scheme of things.
So was there a quid pro quo? In some sense, yes, it was to preserve the relationship, and clearly at the beginning stages of this discussion, there
were some specific trade measures that China had agreed to.
But I think that the difficult part of the arrangement is that it puts in play the notion that a law enforcement action --
QUEST: Right --
HIRSON: It is subject to trade negotiations, and that's a difficult precedent to set.
QUEST: Michael Hirson, thank you for joining us, appreciate it. I'm told we're about to go on to get more details of this particular deal. As we
continue tonight on QUEST MEANS BUSINESS live tonight from London, the FTSE here in Britain is at a record high, I wonder because we're in London, it's
possible.
They like to deal with it whatsoever, the FTSE is at a record high, but we do need to understand why, particularly if the British economy is in such
post-Brexit trouble.
(COMMERCIAL BREAK)
QUEST: Back-to-back records on the London FTSE, the ninth record so far this year, that's definitely worth about -- if I was in New York by the
way, we would be having the trading posts open it out and we will be notching them up for the FTSE.
It's closed up 1 percent higher and it's flirting with 8,000. Look at the way it all goes so far, market records in 2018, the NASDAQ is the number
one, the FTSE easily handily beats out Germany's Dax which only had one, it's all probably thanks to the weaker dollar.
Investors are enjoying a trade war, and now ignoring the recent big dip has been on a tear, largely ignoring exactly the elephant in the room which is
Brexit, which uniquely brings me to Sir Peter Westmacott, former U.K. ambassador to the U.S., Turkey and France. That's a nice collection, U.S.,
Turkey and France.
The FTSE, you're not a market economist as such, but the FTSE is doing very well when people like me tell me that the economy potentially could be in
terrible trouble in the future and that the whole Brexit thing is an almighty mess. Square the circle for me.
PETER WESTMACOTT, FORMER U.K. AMBASSADOR TO THE U.S., TURKEY & FRANCE: I would say a couple of things expertly. One, of course, the currency going
right down which we did of the referendum means that the British exports are more competitive than it would be otherwise.
So we've had a fillip to our external trade. Secondly, there's very high levels of employment which just surprise people, but we're doing pretty
well.
[16:40:00] Thirdly, I think the markets are beginning to say the risks are a really hard Brexit on a bus stop later this year are receding.
And the chances are probably that we spend a bit more time in a transitional arrangement which has calmed the markets down. And fourthly,
this is what's happening in America, the risk of a trade war with China looks much more serious -- much less serious and much less even than we did
before.
He still -- self together and he begins to reassure the markets for the time being.
QUEST: You had to -- you qualify it for the time being because you probably don't think it's going to last on this. We need to talk about
Iran.
WESTMACOTT: Yes --
QUEST: We need to talk about Iran and the way in which the U.S. is promising -- Mike Pompeo just a day again, threatening to ratchet up the
heaviest harsher sanctions ever.
WESTMACOTT: Yes --
QUEST: The secondary sanctions on European companies could be devastating.
WESTMACOTT: I think so too. It's a bit bizarre because there he is threatening Armageddon strike on Iran, at the same time as he wants to do a
deal on denuclearization of the Korean Peninsula, you know, the sort of mismatch there.
QUEST: Why is that a mismatch?
WESTMACOTT: It's mismatch in view because on the one hand America hasn't reached the deal which is now torn off and says we want a better deal which
isn't about that.
And on the other hand, he's saying to the Koreans, why don't you do a deal and trust us to mend it, and here's the evidence that America doesn't stick
to its word if it does do a nuclear deal.
So it seems to me that on the one hand he wants diplomacy, on the other hand he's ripped up and the president is ripped up a bit of -- the one bit
of successful diplomacy we've had on dealing with Iran's nuclear program in recent years.
QUEST: The president says -- on this argument, the president says though that the U.S. president -- no, that's not the case, we will do a deal with
North Korea that he will be able to rely on.
WESTMACOTT: Yes, well, he says that. Let's see, I noticed the president today is not too sure whether the meeting is going to take place. Because
quite rightly, they're going to have to make sure that this is going to be a substantive meeting which makes progress rather than pointless meeting.
(CROSSTALK)
Over the years, he's played a lot of games with the United States.
QUEST: But I -- because you're an expert on all of these. You've been to more summits than there are probably honest or decent. And but does it
matter if you have a meeting that doesn't have a fruition.
Can you not say we got together and we built a relationship, it's the first step on a road to a greater thing. Are you not -- are you not putting too
much pressure on this meeting?
WESTMACOTT: I don't think I am or we are. I think the point is, what is the level of expectation that is raised by that meeting. If you say
there's going to be a big, beautiful, huge deal, and that's going to be the end of nuclearization of the Korean Peninsula and then you achieve nothing
at all, then I think that is a disappointment.
If you know the expectation, you say, we're just going to get to know each other, and that's fine and we'll see where that takes us.
QUEST: It's not exactly what Donald Trump has cleverly done. He said a couple of weeks ago standing with Angela Merkel, we will have a meeting, if
it works, that's good, that's fine, and if it doesn't, that's fine too.
So he is managing expectations.
WESTMACOTT: I think there's a little element of realism here.
QUEST: Really?
WESTMACOTT: Because he's also saying we're going to have a nice meeting if we reach an agreement, North Korea is going to be fantastic, it's going to
be rich, prosperous, great, successful country.
North Korea is never going to rich, prosperous, successful country, not in our life time as we should. So I think there's an element here of I may
say it's a make belief, I'd be delighted if it works, but I think we have to be a little realistic.
And back to your point about Iran where diplomacy which was the key point of the Obama administration's approach to Iran and did produce a deal which
Donald Trump doesn't like at all, you asked about the sanctions effect, you asked me about where that takes us all, and the answer is, it's extremely
serious because although the European elements and the Russians and the Chinese would (INAUDIBLE) which is that deal do not want to go along with
destroying that deal.
And do not want to go along with additional sanctions, there's going to be a big impact because of the importance of the all powerful dollar on global
business that seeks to do what business with Iran.
So this is a big deal, you put a finger on something very important.
QUEST: OK, but if we don't look at anybody doing business with Donald Trump globally --
WESTMACOTT: Yes --
QUEST: Always has to bear in mind that the man is a maverick and he might actually do what he says he's going to do.
WESTMACOTT: Yes --
QUEST: That has brought North Korea to the table. It has perhaps destroyed the Americans ability to be an honest broker in the Middle East.
It brought South Korea to do a trade deal. It brought China to do a mercantilist trade deal.
Humor me if you will, Peter, is it not just possible that his strategy is bearing fruit?
WESTMACOTT: I think it is certainly possible, but by making a lot of noise, something on the table, using unconventional language and so on, you
get the attention of the other side, you threaten them with Armageddon and they fight back and they say we're not going to do that.
And he says OK, let's sit down and see what we can do together. I think this unconventional approach does seem to be making some progress on some
issues. I would add one, on China, yes, they reduced the automobile tariffs, but they were probably going to do that in any case.
They have not addressed the other issues like stealing the intellectual property at every single foreign investor in that country or the industrial
policy issues which we all find offensive.
[16:45:00] But there's a movement and there's a mess of a risk of a big trade war, that is true.
And on the Korean Peninsula, let's see, I'm not saying it's a complete farce, it's absolutely not, and if it works, I shall be, you know, a
cheerleader like everybody else, and delighted to wait.
The point I'm trying to make is that on the one hand with Iran, we've decided diplomacy doesn't work, and on the other hand in North Korea, we're
saying let's give diplomacy a chance, there's a bit of a mismatch there.
QUEST: Delighted that you came and to help us understand it all. Thank you very much indeed --
WESTMACOTT: Thank you --
QUEST: Good to see you, Peter. As we continue tonight, meter by meter alluvial(ph), the scale of devastation slowly grows. The lava from the
volcano in Hawaii is close to claiming a power plant, and the extraordinary thing about this is there's nothing anybody can do about it.
(COMMERCIAL BREAK)
QUEST: It is hypnotic, you cannot take your eyes off it. I could watch this for hours and hours. Slowly, but surely, the lava is coming out of
the Kilauea volcano on Hawaii. And it's now approaching a geothermal power plant.
Stephanie Elam is in Niihau (ph) joins me now. I can only imagine what the power of this thing must feel like as you get there -- what is it? What is
it actually like when you get close to this lava, this noise, this fire and fury coming from the ground?
STEPHANIE ELAM, CNN CORRESPONDENT: I love all of your excitement, Richard, because you're right. It is mesmerizing and when you're here, all you want
to do is get closer to it, even though those gases are toxic and they burn your eyes and your throat, you've got to wear gas masks to get anywhere
near it.
But there's nothing like it. The orange of the magma coming out of the earth is such an intense orange, it almost looks like it's been digitally
revived, even though you're looking at it with your own eyes.
There's that aspect of it, the gas is, there's a fact that it is now reached the ocean and it is now sending up a massive plume because when
lava mixes with ocean water, it creates hydrochloric acid and there's even little particles of glass that are in there in that steam in that cloud
that is consistently been lifting up.
But it's rivers of lava, and we were out here overnight, and you can see in the darkness that river of lava is making its way down the hill side. All
of it like you said is mesmerizing, but it is --
QUEST: Stephanie?
ELAM: Also deadly in its beauty, and that's a huge part of it, what people here are concerned about.
QUEST: Stephanie, is there a feeling of helplessness in the sense that, you know, I mean, if there's a flood, you can build barriers, if there's a
fire, you can try and put it out. But this is mother nature, this is doing what it wants to do and it seems as if there's nothing that we can do about
it.
ELAM: It's pretty much true, there's no way to stop 2,000 degree lava that is rolling down a hill, there's nothing you can put in front of it, it was
raining on and off pretty heavily yesterday, lava does not care.
[16:50:00] And so you talk to the people who have been displaced by this emergency and one woman -- she actually said -- a young woman, she just
move here from California literally three months ago --
QUEST: Right --
ELAM: Right before this happened, and she said, you know, it's like an ongoing drama and you can't just move on with your life. If you have a
hurricane, a storm comes through, you clean up. With lava like this, you don't know how long it's going to go on, how long is eruptions going to
happen, and for them, that is a very hard situation --
QUEST: Right --
ELAM: And reality to live in.
QUEST: Stephanie Elam, thank you. Stephanie Elam joining us from there. And when I next see you, I need to have all the stories of what it was
actually like to be there. This is one extraordinary.
Now, earlier this month, the Carnival Cruise has announced a cruise itinerary crossing the Pacific to Asia. It was going to go via Hawaii, and
the Chief Executive Arnold Donald joins me from New York.
First of all, my apologies sir, I was meant to be with you, of course, live in the studio but the royal wedding got in the way and I'm still here in
London, so my apologies that I'm not actually face-to-face with you.
But listen -- and you've had to reschedule or how are you handling the question of the Cruise and the Volcano?
ARNOLD DONALD, CHIEF EXECUTIVE OFFICER, CARNIVAL CRUISE: Yes, first of all, greetings to you, Richard, I enjoyed some coverage that I saw of you
on the royal wedding --
QUEST: Thank you --
DONALD: So thank you for that, you did a great job. You know, for us, we have very limited itineraries going there, so luckily there have been no
injuries or anything like that --
QUEST: Right --
DONALD: Period, which is great. It is a captivating natural thing to see of course some people have been displaced from their homes which is always
kind of disturbing --
QUEST: Sure --
DONALD: But it is a wonderful, natural event -- nature event. And so at any event, I think on the Hilo side of the island, I think -- I get them
confused to saying Hilo and Koloa, but one side is --
QUEST: Good point --
DONALD: Still receiving, the other side is not. So mobile, weak, move around and so it hasn't been an issue for us.
QUEST: Let's talk about the Carnival Horizon which arrives in New York, and it does so at the same time as you've got five years under your belt as
chief executive which congratulations because most CEOs are gone in the company's average tenure.
The average tenure as you know is about two to three years, so you do it better than most. But listen, what do you see as your greatest
achievement? Sounds a bit pompous but you know what I mean.
What are you most proud of what you've done to try and put Carnival back onto -- into its profitable forecasts?
DONALD: Well, I think I've been fortunate to lead a great team of 120,000- plus employees with some great travel partners in terms of travel professionals. And basically, you know, we're in the golden age of
cruising. Cruising has expanded, our business has done very well all those five years, we mould and doubled our share price more than doubled our
earnings, more than doubled our return on investor capital, all while exceeding guests expectations.
Like with the Carnival Horizon which we're going to name here in New York - -
QUEST: Right --
DONALD: As you mentioned, tomorrow, Queen Latifah will be the godmother, she's going to do a lip sync battle with the Philadelphia Eagles' Super
Bowl --
QUEST: Movie --
DONALD: Kicker, and so that would be fun. But the ship has lots of features --
QUEST: Right --
DONALD: But most importantly, it's engineered to exhibit the spirit of Carnival and to elevate the human spirit --
QUEST: So --
DONALD: It's all about people connecting.
QUEST: So what's your priority? I mean, I look at what you're doing at the moment, whether it's China, obviously you have to be there and you have to
be there in larger numbers and larger ships. Dubai, you've got the deal over there --
DONALD: Right --
QUEST: Caribbean continues, you're just cruising. I mean, you've got lots of ships, you've got lots of potential and investment. What is your
priority?
DONALD: My priority is exceeding our guests expectations. But in the last two weeks, I've been in Barcelona for the new terminal we opened there, I
was in Dubai, spent a few minutes with the ruler of Dubai over the terminal work we're doing there.
Obviously, we were in Venice and I'm here in New York for the naming of the Carnival Horizon. I was in Malta for the naming of the Seabourn Ovation,
as you know, we have nine, well, in cruise line brands and Seabourns are ultra luxury brand.
So I'm busy, and I move around a lot, but the number one priority is exceeding our guests expectations --
QUEST: Yes --
DONALD: If we do that, everything else works.
QUEST: Finally, five years down, how many -- all right, come on, everybody asked you this, what you've got in five years, five years down, how many to
go?
DONALD: Well, we'll see how long, the shadows want to keep me around the board, but what I can tell you is I'm in the vacation business, and so it's
fun to be in the vacation business and it's certainly to be at Carnival Corporation.
So we're enjoying it and we hope we're making a difference.
QUEST: Good to see you, sir --
DONALD: Good to see you --
QUEST: Thank you for joining us, sir --
DONALD: Thank you --
QUEST: Always lovely to have you on QUEST MEANS BUSINESS, thank you very much.
DONALD: Thank you, Richard.
QUEST: Let me just remind you the way the markets are looking at the moment and the way they're closed in New York as we hang the book over to
Asia. The Dow Jones Industrials -- I mean, it's worth looking at because for no obvious reason, it felt quite sharply.
[16:55:00] And as you can see the reason, it's Boeing, Caterpillar, the big numbers of the Dow, even Home Depot, 3M, they were all sharply lower, and
it is on the back of trade concerns about China.
This deal that the U.S. has done or that Donald Trump has done, the framework agreement that now has to be flashed out, the market is basically
saying it is not -- it is skeptical about the ability to do so.
And with that, we'll have our profitable moment after the break -- now, where's the ship? Where is the ship?
(COMMERCIAL BREAK)
QUEST: Profitable moment, really could just look at that, absolutely as the volcano in Hawaii continuing to spew out tons and tons of molten lava
for hours and hours. Why are we telling you and talking about this tonight, because in a world where everything is certain, we need to know
the results of the economy.
What will GDP growth be next year, next quarter, what will the companies' forecast be? How many jobs will be created? What will be the result of
Brexit? The U.S.-China trade talks, how will they be resolved? And yet, you have this going on at the moment.
And thank God there has been no serious loss of lives as a result, on only one or two injuries as such. But this lava, there's nothing we can do
about it. You've got that? Nothing. The earth is going to throw this up and yes, people will lose homes and there will be some people who will be
injured and businesses will fail as a result.
That can be dealt with in some shape for form, at least economic damage. But this is all inspiring because this means we have no control. It's a
reminder we ain't in charge. And that's QUEST MEANS BUSINESS for tonight, I am Richard Quest in London.
Whatever you're up to in the hours ahead, I hope it's profitable, I will see you tomorrow.
END
