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Quest Means Business
Equities Are Sinking In The Battle Of Stocks Versus Bonds; Salesforce Chief Executive Tells Us, It's Time For Governments To Regulate; Russia And China Are Now Accused Of Sweeping Cyber Attacks And That Has Also Dragged Down Technology Stocks; U.S. Senators Review FBI Report on Brett Kavanaugh; Indonesia Officials: 70,000 People Homeless After Indonesia Quake and Tsunami; Ronaldo Left Off Portugal's National Team; Polish Prime Minister In New York To Promote Trade; Toyota, SoftBank Launch Autonomous Vehicle Venture; Tesla's Model 3 Is Now the Bestselling Luxury Car In The U.S.; U.S. Stocks Fall As Bond Yields Hit Seven-Year Highs; Snap Inc. Shares Hit All-Time Low. Aired 3-4p ET
Aired October 04, 2018 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL HOST: We are in the last hour of trade on Wall Street and what a dismal, grim sort of day it has been. The sea of
red from the moment right away through to almost the close. We are off the lows of the day. There's one number to show you that's been the reason in
the course.
US interest rates going up, the 10-year bond that is the number, that is the detail because when you factor that in and you look at the numbers,
this is what's driving the day. Equities, they are sinking in the battle of stocks versus bonds. Within that, you've got tech, which is tanking,
and the Salesforce Chief Executive tells us, it's time for governments to regulate. If that weren't enough, Russia and China are now accused of
sweeping cyber attacks and that has also dragged down technology stocks.
Live from the world's financial capital, New York city, on Thursday, the 4th of October, I'm Richard Quest. I mean business.
Good evening, it is the final hour of trading and the numbers have been pretty grim, dismal throughout the course of the day. If you look at the
Dow in the last hour, you'll see although we are off the lows of the day, we're not - look at that last point, it was down over - just over 315 or
317 points. This was down just around 2:00 and then similarly, at 1:30.
Now, we are in that part of that day where you watch very closely as market makers and investors decide how they want to go into the overnight. Do
they want to remain long? Are they shorting out? And that's what you're going to see over the next hour.
So we could expect to see volatility because the nature of the day has been extremely volatile. Coming up slightly down 246. NASDAQ is the worst of
the US markets at the moment. The tech and communication index falling very sharply. This the global scenario at the moment. And if you see the
way the day has moved, obviously we saw it in Asia and we have some heavy losses in Hong Kong with the Hang Seng. You then have Europe which has the
FTSE off one and a fifth percent and also Paris down one and a half, and then you end up in New York, and you see the NASDAQ down the best part of
2%.
And the reason, well, if you factor down this to its raw potential, it's the selloff starts perversely, ironically, all of this starts with positive
economic news in the United States. Specifically private payrolls, jobless claims and new jobs in the service sector. That is the job expectations
leading into tomorrow morning's jobs report. That the jobs picture in the United States is pretty good at the moment.
Now, that leads the Fed Chairman, Jerome Powell to make various comments. Comments suggesting that rates will continue to go up at the short end and
that leads to rate rises. As the rates - the official rates rise, so the market rates rise and there's an expectation of increased rates across the
board.
So you get the US 10-year hitting the highest level. The bond yields - official rates rise, bond yields follow, we have now bond deals at the
highest rate since 2011. All in all, it raises borrowing costs, because what happens is, as bond yields go up, stocks usually go down and you end
up in a tussle for yield.
Take a look at that, that's what's going on. That is exactly what is happening at the moment in the market and that is what is leading to a Dow
and the US market down some one or two percent.
Jay Bryson is with me -- Wells Fargo interim chief economist. Good to see you, sir. Thank you very much indeed.
JAY BRYSON, INTERIM CHIEF ECONOMIST, WELLS FARGO: Thanks.
QUEST: I mean, ignoring the fact that the rate rises is perversely because of good economic news, the markets are finding it now somewhat difficult to
take in at stride.
BRYSON: Well, yes, markets are always kind of forward looking, you know, especially the kind of a stock market here. And so, as you kind of just
described, what's happening is, you're getting this very positive economic news out of the United States and that leads investors to think, "Oh,
there's going to be more Fed tightening coming down the line."
And so as the stock market starts to digest that and watch bond yields start to back up, they're looking into the future and they're saying, "OK,
so if the Fed is really kind of tightening here, maybe that's because this growth is slow as we kind of go forward.
[15:05:02]
BRYSON: So the point here is, things right now are very, very strong but the market is always kind of forward looking and is trying to discount how
much potential slowing we're going to have further out.
QUEST: Is this rotation or is this downward draft on the market, because of expectation of lower corporate profits in the future on the back of a
slowing economy or are we seeing it just a straightforward rotation for better yield, better return?
BRYSON: Well, Richard, I think we're probably - like a lot of many things, probably a little bit of both, in the sense that as bond yields go up,
everything else equal, they become a little bit more attractive relative to stocks, which are a little bit more riskier.
So you do have that going on. That kind of that rotation unto something that's going to be higher yielding. On the other hand though, if things do
slow down enough because the Fed is getting a little bit more aggressive in terms of tightening, that could also weigh on profitability. So again,
it's a little bit of both, I think.
QUEST: Have a listen to Jim O'Neill - Lord O'Neill, former Goldman Sachs asset management and chief economist. Have a list to what he said about
the dollar. I want to get your thoughts.
(BEGIN VIDEO CLIP)
JIM O'NEILL, FORMER GOLDMAN SACHS ASSET MANAGEMENT AND CHIEF ECONOMIST: What I think is strategically wrong is that the role of the dollar now is
still the same as it probably was 30 years ago, despite the fact the US economy is nowhere near as important for the world as it was.
And so, what happens because of the integration of the financial system, the Fed starts tightening, bond yields start rising and here we go, yet
again, with this sort of interplay with many so-called emerging markets around the world.
(END VIDEO CLIP)
QUEST: Do you accept that that is the scenario we are in, particularly emerging markets being hit on the back of what is an excellent economic
position and a very strong dollar.
BRYSON: Well, yes, I mean so what we are seeing is, obviously, yield in the United States are going up. These bond markets are very highly
correlated, so you're seeing yields in Europe going up as well and even they are picking up a little bit in Japan.
And so you have what's a relatively safe asset, a 10-year treasury bond, the yield is going up. The attractiveness that's going up, and then you
have this higher yield and the higher riskier sort of places like the emerging world.
So when you do see sell-offs in the bond market, we see higher yields here in the United States, everything else equal, that does cause people to try
to flee some of those riskier sort of assets. Markets will eventually calm down but as long as bond yields here are rising and rising sharply, you're
probably going to continue to see emerging markets sell-off as well.
QUEST: And finally, these elevated levels of 2,600, the numbers look quite horrific. Dow off 200 or 300 points. It looks quite a large number, but
we are at much higher levels, what do you think it takes to calm things down to have a period of stability, if such that there could be?
BRYSON: Well, I think it's what's it going to take is just continued science that the US economy is not overheating here. I think that it
really takes is if you look going forward, we see inflation numbers continuing to come in at moderate sort of levels that inflation is not
really kicking up, that the Fed doesn't have to over tighten. At that point, I mean, it's almost like a Goldilocks sort of thing. You have
strong growth, but you have low inflation, that's a great scenario.
And so, I think as we go forward, we really need to look - and see what's happening to the wage numbers and see what's happening to the CPI numbers
as well.
QUEST: Good to see you, sir. Thank you. Great to have you on the program. We look forward to talking to you in the future. Joining us from
Wells Fargo's Securities.
The newly agreed trade deal between the US, Canada and Mexico, the USMCA has helped drive markets higher for much of the week. Now, despite the
breakthrough in Washington, it remains frozen out of the upcoming meetings on international trade hosted by Canada. Ottawa is claiming only like-
minded nations have been invited. The US embassy has also sparked controversy over how it's going to restrict Canada's ability to make trade
deals with non-market economies. That's what it says, in other words, those like China.
Joining me, former Prime Minister. Good see you, Kim Campbell is with me.
KIM CAMPBELL, FORMER PRIME MINISTER OF CANADA: Hi. Thank you.
QUEST: And former Prime Minister of Canada, but also one of the parties who was there during NAFTA itself.
CAMPBELL: Indeed, and my signature is on the environmental and labor side agreements, so and in fact, the Canada and US free trade agreement was the
issue that brought me international politics and the '88 election in Canada was really a referendum on that deal. So, these trades are really
important part of my history.
QUEST: And when you now look at this new agreement, with all its deficiencies, do you feel Canada was somehow bludgeoned into it?
CAMPBELL: Well, I think the timing of the negotiation was something that we hadn't necessarily expected, except when President Trump was elected
since getting rid of NAFTA was his campaign promises. We expected something would happen.
But I think other than that, I think that we've had time to do what we needed to do in the negotiations, so I don't feel that we were bludgeoned.
I think - we hoped that we'd have a happier and more enthusiastically supportive American administration.
[15:10:12]
QUEST: From what you've seen in the agreement, Canada benefits?
CAMPBELL: I think so, I think so.
QUEST: And if you look at this strange clause at the back end of the agreement about no party being allowed to do a deal with no market
economies, and if they do, then they could be terminated in bilaterals. What do you make of that? What's behind it?
CAMPBELL: Well, first of all, I don't think that Canada - I mean, we've talked about trade agreements with China, but I think even given this
latest scandal with the chips and all that kind of stuff, I think creating binding trade agreements with non-market economies who do not have the kind
of legal structure behind them that - goes with the market economies that we work with. I think it's a bit worrisome. So I don't think in the short
run that's a problem for Canada at all.
QUEST: But what's behind it? Why bother putting it in?
CAMPBELL: Well, I think this is part of the American desire to put pressure on China and say, look, we aren't alone. We've got all of these
because don't forget how big the North American trading market it. We've got this big - huge market and we are going to put pressure on you to play
by the rules.
QUEST: How much bitterness is there in Canada over the way the Prime Minister was treated by Donald Trump? Now, they can paint over and say
it's all politics and so and so and so, but the reality is, first of all, to claim national security as a reason for tariffs and then to call him
dishonest and weak.
CAMPBELL: I think people consider the source because the President says terrible things about somebody, now he is in love with Kim Jong-un now, but
what actually terrible Mr. Rocket Man, so I think we don't take it all that seriously. I think the national security thing was offensive, but
remember, national security is the get out of jail free card in most trade pacts. It's the one ground on which you can put tariffs on your otherwise
non-tariffable partner.
QUEST: You were the first woman Prime Minister, first female Prime Minister of Canada and the only one so far ...
CAMPBELL: So far. I'm waiting.
QUEST: ... and you take the lead on general related issues. What do you make of the way Dr. Fox is being treated under Kavanaugh hearings, now it
looks like it's coming to a vote.
CAMPBELL: I think the issues are so much more complicated than even gender, although, I think sexual assault and all of those issues are real
hot buttons. I think - I mean I could criticize that process much more broadly in terms of the failure to provide documents and things. It's a
small piece of it, but sure, it's part of an ongoing history, of an ongoing story.
QUEST: Yes, but you say that but the reality is that these issues only become live when they rise up the agenda and this one has because of Dr.
Blasey and the way in which she - and then President Trump's comments in his speech the other day, and now seemingly a rejection of it all with the
acceptance of the FBI and a vote. Where does it leave women?
CAMPBELL: Well, I think it leaves some women much more motivated to press for better recognition of their rights, to press for a more honest
assessment of what it means to be seen as a body who is the perk of power, is really what it was done to that that many men seem to think that women's
bodies are their perks when they get powerful positions, and how incredibly destructive that is that we see this. You see this even with men.
I mean, sexual assault is one of those things whether it's men or women and you see these men who are victims of Catholic priests have for the rest of
their lives. They deal with shame. It's the sense of powerlessness, I think when you feel that somebody is taking liberties with your body.
So, I think these scandals and issues raise the profile and perhaps, motivate people to push for a better recognition of it, change in social
morays, maybe change of policy.
QUEST: Happy to have you with us. Thank you very much, indeed.
CAMPBELL: My pleasure.
QUEST: Thank you. As we continue tonight, western allies are pointing the finger at Russia or accusing the country of worldwide state-sponsored
espionage and the Chief Executive of Salesforce is calling Facebook the new cigarette and we'll ask you, so please get your mobile device ready.
cnn.com/join, what would cause you to get rid of Facebook?
[15:15:00]
QUEST: Facebook has suffered largely today. They are down some 2%. If you take a look at where they have moved over the last - 164 now down at
158. This does really tells the story of the last few weeks, but if you think about how Facebook has risen so dramatically, except for those
occasions where of course, it has been hit by hacking scandals or indeed, having to pay damages or compensation.
Now, the company is under a formal investigation in Ireland with a hack that affected some 50 million users. So, the stock itself is down 6% over
the last five sessions and considerably more if you take it over the past - year to date. It's lagging far behind the tech sector and it raises the
question what is the final straw if you decide to give up Facebook, so get out the phones, tablets and computers.
On this occasion, please, do not go to Facebook.com, oh no; instead go to cnn.com/join and prepare yourself to vote. So what would cause you to
delete Facebook? What would cause you to leave it behind? Will it be a privacy breach? Would it be a lack of usefulness and it's simply wasting
too much time? A toxic environment? The whole concept of toxic environment or big things like fake news, being used, being abused, and you
wouldn't delete it come what may.
These two seem to be the big ones - privacy breach, lack of usefulness and it is cnn.com/join. Those are the three and these are the results so far.
We'll have more for you. In fact, we'll show you the final numbers on the other side of this.
The Chief Executive of Salesforce is calling Facebook the new cigarette, an addictive service being pushed on us by unknown force. Mark Benioff has
been speaking to CNN's Laurie Segall who said it's time for the government to step in.
(BEGIN VIDEOTAPE)
MARK BENIOFF, CHIEF EXECUTIVE, SALESFORCE: When will every company say our highest value is the trust that we have with you, our customers, our
consumers. Out governments have to say the same thing, our citizens that is there is nothing more important in this revolution that we have than the
trust we have with each other and for companies and CEOs that aren't able to say that, then let me tell what is going to happen to them. Their
employees are going to walk out and they are. Their executives are going to walk out and they are. Their customers are going to walk out and they
are. If they don't trust them.
So if your highest value is something other than trust, like let's say it's power and you all care about is the monetization of your company or your
social network or whatever it is, it's not really about the trust and integrity that you have, but even your core employees or your top
executives that you work with every day, you've got a serious problem and every CEO is going to have to address that.
This is the new world.
LAURIE SEGALL, CNN CORRESPONDENT: I get the sense that you were kind of referencing Facebook there. Was that Facebook with all the ...
BENIOFF: I am really talking about - I am really talking to them, well not even just the technology industry, I am talking about every industry
because technology is every industry now.
SEGALL: Do you trust this industry to self-regulate? Someone just the other night said to me, we as a technology have to self-regulate. I've got
to tell you, I'm looking at the last couple of years and I don't ...
[15:20:06]
BENIOFF: I don't trust the industry to self-regulate. I already said, Facebook is the new cigarettes. It's not good for you. It's addictive.
You don't know who is trying to convince you to use it or misuse it. The government has to step in and regulate it. And Facebook has proven that to
us over and over and over again that they need to be regulated because they are not self-regulating, and that's sure of a lot of technology companies.
I don't think there's anything wrong - look, we have those examples in every industry. Why is technology going to be the only industry that the
government isn't going to step in to make sure that there is fair practice and truth and trust with consumers or businesses? You have to get there
and when the technology is getting so powerful, they are going to have to step in and do that.
SEGALL: But I also watched the senators grill Mark Zuckerberg and thought, "Oh, dear Lord, do they actually have an understanding of technology." So,
I feel complicated about it.
BENIOFF: Well, maybe not these senators, but the millennial senators that are coming, too. Maybe these are not digital natives, these senators and
these Congress people, but I am confident that there are senators and Congress people and Presidents and everyone else who is coming into the
future who are digital natives and who will understand this.
So you either change now or you will change later, but you will change.
SEGALL: The critics of Facebook say fundamentally, the business model of Facebook is broken. You can't make money and also achieve Facebook's
mission. What do you think?
BENIOFF: I don't know the detail intricacies of their engine room, all I can say is at a meta level, we have to operate with values and every
company and every CEO needs to be able to articulate what is really important to you and are you congruent as a CEO, as a board of directors,
as a management team with your values.
(END VIDEO TAPE)
QUEST: They are remarkably strong questions and you will want to hear more from what Mark Benioff said, and you can now find that because today is a
landmark day in our coverage of business and technology. CNNMoney is no more. They rather like the idea "Quest Means Business" so much so today,
we are proud to introduce to you, CNN Business. CNN means business. And with that comes a new site as you can see below and all of the stories on
the innovation changing our world.
It is a very straightforward way to get to it. It's through the main door, cnn.com/business whether online, on television, digitally or otherwise, we
mean business.
Russia stands accused of weighting business of its own, a rather nasty business, a complex worldwide campaign of cyber espionage and the western
allies are now taking unprecedented action to counter Moscow's attempts to interfere and undermine democracies.
So the United States for example, today, announced indictments against seven Russians it says engaged in hacking. British and Dutch officials
pointed to a series of malicious cyber attacks across the world including the US Democratic Party which we are aware about and indeed, they announced
their own arrests.
The accusation details sprawling, targeting cyber attacks. Victims came from Ukraine, from Turkey, from Bulgaria, from Japan, South Korea, Canada,
and the United States. And the British Defense Secretary said it's a situation that cannot continue.
(BEGIN VIDEO CLIP)
GAVIN WILLIAMSON, BRITISH DEFENSE SECRETARY: What we are doing, by acting with our allies, by actually isolating Russia exposing the fact that these
are actions of the state that is acting in a reckless and indiscriminate manner. This is not the actions of a great power. This is the actions of
the pariah state and we will continue working with allies to isolate them, make them understand they cannot continue to conduct themselves in such a
way.
(END VIDEO CLIP)
QUEST: So that's Russia and the allegations against Russia and despite all of these allegations, the Trump administration says, Chinese interference
is even worse. So let's forget Russia and let's concentrate on China. The US Vice President Mike Pence has accused Beijing of attempting to influence
American public opinion in the midterms coming up, and a Bloomberg report which everybody is talking about and congratulations to them on this report
suggest Chinese spies successfully hacked almost 30 US companies including Silicon Valley giants like Amazon and Apple. Both these companies have
denied the attack.
Vice President Pence said the US won't be intimidated.
(BEGIN VIDEO CLIP)
MIKE PENCE, VICE PRESIDENT OF THE UNITED STATES: As a senior career member of our intelligence community told me just this week, what the Russians are
doing pales in comparison to what China is doing across this country and the American people deserve to know it.
(END VIDEO CLIP)
[15:25:07]
QUEST: Matthew Chance joins me from Moscow. The VP says that China pales - Russia pales in significance compared to China. Now, that's supposed to
be a serious matter because Russia is up to - and it's up to their eyeballs. Matthew?
MATTHEW CHANCE, CNN CORRESPONDENT: It is, I mean, look, within the past two hours, we've had the United States and we have had the Dutch coupled by
the British and various others as well basically outlining a catalogue, a series of cyber plots that they believe the Russian GRU military
intelligence agency has been embroiled in to hack into the OPCW, the chemical weapons watchdog in the Hague to hack into WADA, the World Anti-
Doping Agency in Lucerne in Switzerland, attempt to access information into the investigation of MH-17, the downing of that Malaysian Airliner over
Eastern Ukraine, and a host of other issues as well, not to mention meddling in the US presidential election in 2016.
And so there have been an absolutely enormous catalogue of maligned activities, it is often characterized now on the part of Russia and general
and the GRU military intelligence agency, in particular. And so, yes, it's quite astonishing that the Vice President believes that China is doing even
more than the Russians are.
QUEST: But how - Russia denies it and no amount of evidence put before the world public opinion seems to shift that denial to ordinary people in
Russia even know about the extent of the allegations against the Russian government.
CHANCE: They do. I mean, because those allegations are covered, but I mean, they are covered to the prism of Russian state media and you're
absolutely right, the Russians go to great lengths to categorically deny every single allegations that's made against them, whether it's hacking the
Presidential election, downing MH-17, carrying out a chemical weapons attack on the British streets. I mean, all of these is basically cast as
anti-Russian propaganda.
Within the past few minutes, the Russian Foreign Ministry has issued a statement saying that the latest allegations of hacking the chemical
weapons watchdog are yet another propaganda campaign against their country and so they are speaking to their domestic audience.
I mean, in fairness, the Dutch and to some extent, as well as the British when they put out their evidence in the Skripal poisoning have gone to
extraordinary lengths to put out a lot of detail. The Dutch had photographs of the equipment that had been seized, the photographs of the
suspects they had expelled. One of them even had a taxi receipt that they found in his pocket which was from a street near to the GRU headquarters in
Moscow to the airport where he took a plane to the Netherlands. And so, a lot of detail in order to counter these incessant Russian denials.
QUEST: Matthew Chance, thank you for staying up late in Moscow tonight, joining us from there. Poland's Prime Minister says his country is a can-
do nation. He wants to investors to know it. When we come back after the break, the Prime Minister of Poland is with us. Good to see you, Prime
Minister.
MATEUSZ MORAWIECKI, PRIME MINISTER OF POLAND: Good to see you there, Richard.
QUEST: We are going to talk trade and a barrage of issues including Poland and the European Union. Come and join me.
MORAWIECKI: Thank you.
(COMMERCIAL BREAK)
[15:30:00] QUEST: Hi, I'm Richard Quest, we've got a lot more QUEST MEANS BUSINESS in just a moment when I'll be joined in the C-suite by Poland's
Prime Minister as he pushes for closer business ties with the United States.
But also of course, as many serious problems with -- back home in the European Union. One of the world's most powerful field men, Richard
Edelman will also be in the C-suite. Today, I want to visit C-suite as being -- as we continue tonight, this is Cnn, and on this network, the
facts always come first.
U.S. senators are reviewing an FBI report that will help determine whether Donald Trump's Supreme Court nominee is confirmed. It details findings of
a brief investigation into sexual assault allegations against Brett Kavanaugh. Five undecided senators hold the key to his fate, one says
she'll vote no, while two others have praised the reporters thorough.
Indonesian officials say at least 70,000 people are homeless because of the earthquake in tsunami that hit almost a week ago. On Wednesday, Red Cross
officials went looking for a village that was home for 500 people, they found the village was gone.
Football superstar Cristiano Ronaldo has been left off Portugal's national team for the next few days. Portugal's football federation didn't say why?
Ronaldo is facing accusations of rape, an accusation which he denies. Federation says he'll be back on the squad next year, and the federation
president says he believes Ronaldo's denials.
It's really very simple. Poland is going for an America first term's of seeking investment. The Prime Minister is in New York to promote trade.
Ahead of the trip, Warsaw said he wants to build economic bridges with the United States, so it can sell products they don't find, technology is not
available in Poland.
U.S. President Donald Trump is a fan, he's been vocal in his support for the Polish government which is in stark contrast to serious deepening
tensions with the European Union. It's really pretty basic. Critics say the populist-ruling party Law is undermining Poland's democracy.
These are accusations that are not new to the Polish Prime Minister Mateusz Morawiecki who joins me. Good to see you, sir.
MATEUSZ MORAWIECKI, PRIME MINISTER, POLAND: Good to see you --
QUEST: Prime Minister, we'll start with your visit to the United States. Have you found a new authoritarian friend in President Trump that you can
do business with?
MORAWIECKI: You must be -- you must be kidding, Richard, we are here with lots of our CEOs and we meet many Americans CEOs, some of them I know, some
of them are new friends. For instance, Dion; head of Hewlett Packard; CEO of Hewlett Packard who has huge operations in the city where I come from in
Rzeszow; southwestern part of Poland and many others are invited to Poland as well --
QUEST: But do you feel a certain affinity with a populist government in Washington when your own government can arguably have ridden the same horse
--
[15:35:00] MORAWIECKI: What I -- what I really feel is that Poland has to actually bring closer the European Union and the United States again
because we are very pro-American and at the same time we are very pro- European. Not too many countries like this, and I believe that we can be a kind of, you know, integrated in the Trans-Atlantic community.
QUEST: You certainly can integrate from the U.S. because obviously there're -- nothing, I missed it really. I mean, your Poland is in the
deepest of trouble with the European Union on the most fundamental of issues, the rule of law.
MORAWIECKI: This is what some people believe, but actually what I say --
QUEST: No, it's not belief --
MORAWIECKI: No --
QUEST: That's not a belief, that is a fact --
MORAWIECKI: Yes --
QUEST: The fact is that your article 7 --
MORAWIECKI: The fact is that many countries from western Europe which did not come through the communist times and post-communist times, they do not
understand the idiosyncrasies and the different things which are happening in central part of Europe, into Czech Republic, in Hungary and Poland, in
Romania, Bulgaria, Lithuania, Latvia and some other countries.
And this is what we try to explain, Poland is very much pro-European, but a little bit Brussels-skeptic.
QUEST: OK, you're Brussels-skeptic and rightly so, in the sense that, I mean, the EU Commissioner Frans Timmermans says Poland government -- your
government is systematically, politically interfering with composition powers in the administration and the functioning of the judiciary --
MORAWIECKI: Actually, exactly, this gentleman and as well as with Jean- Claude Juncker. I'm actually talking almost every month, many dialogues, many conversations from -- since the beginning of this year, and actually
we've changed a lot in our judiciary system, several changes are actually going in a very right direction and they are -- they are praising those
changes big time.
Like for instance, random allocations of cases which was not the case before and which led to lots of --
QUEST: No, with respect --
MORAWIECKI: Wrong behavior --
QUEST: Well, it doesn't really -- it doesn't really matter though if you have random allocations of judges if you --
MORAWIECKI: No, random allocations of cases --
QUEST: Yes, of cases --
MORAWIECKI: Not judges --
QUEST: Right, but that doesn't really matter if you've already --
MORAWIECKI: It matters a lot --
QUEST: Yes, not if you've already --
MORAWIECKI: Five years ago, I was -- five years ago, our predecessors, actually, there was no random allocation and the case in one of the biggest
Ponzi schemes in Poland was supposed to be allocated to a special judge. So we -- in our situation, it would not be possible anymore.
QUEST: I don't want to get too much into the nitty-gritty because obviously, you'll have a much better grasp of the detail in that sense.
You are the Prime Minister after all. And -- but only over-arching picture, there's a feeling that Poland is going in the wrong direction on
the question of the rule of law, to military and for example media.
Why is everybody else wrong --
MORAWIECKI: Let me --
QUEST: And you're right.
MORAWIECKI: Let me reply this to a very special example. FTC Rzeszow(ph) has re-qualified for that Trump emerging market to develop market
economies. Would you believe that -- do you believe that this would be possible without checking all the institutions. Not only the stock
exchange and regulatory environment, but also institutional stability and legal environment, it wouldn't.
So the proof is in the eating. We have been a week ago -- we have been classified as a developed country with stable market, not only regulatory
environment, but rule of law as well.
QUEST: Yes, so how do you explain the decision of the commission to go for article 7 against Poland, for being in breach of article --
MORAWIECKI: OK, that's it --
QUEST: Against the being in breach of article 2, one of your colleagues suggests it's all to do with the fact that maybe it's the fact that to
punish Poland or having an independent policy and for the fact that it has stopped being the neat, obedient country. Is that what you think? Do you
think you're being punished because you found your own voice?
MORAWIECKI: It's much more than only one reason. We have really changed a lot. We have actually attacked the 18 mafias and fraudulent taxation
system which was until 2016. And this is one of the reasons, many people don't like it. So we have closed our VAT gap by the highest pace in the
European Union. This is one of the reasons.
Another one is that many people don't like that we have very independent policy that we do not accept migration for instance because yes, this was -
- this was a very -- this was a bone of contention with the European Commission Angela Merkel; Chancellor of Germany.
She actually said this is -- the comments could do, let's calm everybody from North Africa, Middle East, you can come to Europe. We said no, we
want to preserve our culture, we want to preserve --
QUEST: But it's so --
MORAWIECKI: Our country.
QUEST: But it's interesting, for security reasons -- but it's interesting that your closest friend in the union seems to be Viktor Orban in Hungary
who has his own problems on exactly the same issues of media, judiciary and --
[15:40:00] MORAWIECKI: We don't have problems with media, we have problems in explaining our judiciary reform, but I can give you an example.
Our National Judiciary Council consists of 25 people and huge majority of them are appointed by judiciary. This is exactly opposite to the German
case where most of this National Judiciary Council and also a composition of their Supreme Court is appointed by politicians and it supposedly works
well.
QUEST: As we come towards the end here, I want you to come back to this, why you're here and the relationships between the U.S. and the EU. It's
pretty difficult to see how there can be a good relationship.
MORAWIECKI: I still believe it can be --
QUEST: Well, President Trump offended Angela Merkel, was rude to Theresa May on his last visit, has been downright unpleasant in terms of President
Juncker on his last visit. Where is the common ground with this administration?
MORAWIECKI: I don't want -- I don't want to be actually a defender of everything President Trump is doing, but I will emphasize the two things.
This is the forum and here is the substance. The forum you said about before, and the substance is free and fair trade. In balances, in current
account, in balances, in trade are contribution of different NATO nations to the joint batch or to the joint commitments, I should have said.
Because every country is supposed to spend 2 or more percentage points on GDP -- of GDP on military expenses. And only Poland and several other
countries including of course the United States are doing. So who are the other countries who are not doing this? They are free-riders, sir.
So this is why President Trump is right in many instances, but in terms of -- as far as forum is concerned, maybe, you know, it's not for me to judge.
QUEST: Things were to be diplomatic. Prime Minister, thank you very much. I tell you --
MORAWIECKI: Thank you so much.
QUEST: If we bring QUEST MEANS BUSINESS to Warsaw, you'll join us there?
MORAWIECKI: Absolutely --
QUEST: There you are, we'll come, I promise that, good to see you, Prime Minister --
MORAWIECKI: Good to see you --
QUEST: As we continue tonight, wheels on fire, some good news for Tesla after a rough week, the good, the bad and its founder and the power of
brands. Chief Executive Edelman will help us rush up on our brands. In a moment.
(COMMERCIAL BREAK)
[15:45:00] QUEST: Two Japanese giants are joining forces. SoftBank and Toyota said they'll develop the driver's car services. The joint venture
is called MONET or MONET or no Mobility Network. But actually it's short form, it has nothing to do with the French painter which -- MONET plans to
roll out self-driving hospital shuttles with exams and on board and mobile offices and amongst other things.
MONET -- meanwhile, Tesla's Model 3 is now the bestselling luxury car in the United States. The Model 3 success comes despite Elon Musk's recent
controversies. Only days ago, he agreed to step down as chairman and he paid the $20 million fine after U.S. regulators said he had misled
investors claiming he had funding to take Tesla products.
Edelman is the marketing consultant, he joins me now, Richard Edelman; the CEO, one of the greatest --
RICHARD EDELMAN, CHIEF EXECUTIVE, EDELMAN: Hello --
QUEST: Thinkers in the business on this subject. Elon Musk and his tweeting clearly has damaged the brand when the brand itself is robust
because the product is loved.
EDELMAN: Elon hurt his company by having that tweet. But the bigger message for CEOs is, you're expected to stand up and leave now. Two-thirds
of people tell us that don't wait for government, get out there and talk. And talk because your employees expect you to do so.
It's really important for CEOs to absorb this message. That they are actually the change-agents instead of government at this time.
QUEST: Hang on. But this -- we saw that with trans-gender bathrooms, we saw it with the immigration, then we've seen it -- you've got many examples
where CEOs have led the way or the brand has been used.
Colin Kaepernick and Nike at the moment with the advert for them. But it's a risky business.
EDELMAN: Actually, companies are smart if they play in this game in their extreme length. They have got to do it -- two-thirds of people again say
I'm only going to buy a brand if the brand stands up and speaks on my behalf. This is a fundamental change, it's the rise of brand democracy.
And what you see is, somebody says I can best affect the world by what my purchases are.
QUEST: So when do you know when it's time to put the brand behind? A good example will be same-sex marriage or it's called marriage equality. Now
marriage equality 20 years ago or 15 years or 10 years ago, the balance of views was very different than the views today.
You can arguably say when a company gets on board on one of those things, it's just riding a winning wave.
EDELMAN: But example, the dove campaign for real beauty which is a real winner for that company increasing sales every year, now they have the Dove
beauty studios all staffed by women and it's an incredible advantage for them.
QUEST: So how -- assuming I was paying your reasonable fees and we're able to get your advice, how would a company handle Me Too, not in a case of a
claim, but putting forward a view of a quality, transparency and fairness? Or would you run for the Hill if you were the CEO, frightened of what might
come your way?
EDELMAN: I think that there's a distinction between corporate reputation and brand marketing. So on the corporate values, you've got to stand up
and speak up on behalf of your female employees. On the other side on brand marketing, if you're a brand like a Dove, where it's female oriented,
you need to have position.
QUEST: Why was Nike brave and right to do what they did with Colin Kaepernick and not brave but failing in doing it.
EDELMAN: The recognize that their market segment was urban, young, millennial and socially conscious. And they caught a moment in time where
they could lead. And they were seen as taking up risk, but it was a smart risk. And you've seen that their sales have gone up.
And there were other companies that are coming into this same area. So in a different way a company like HP with the all-American family campaign for
what they're doing with trainers, you know, showing diversity in America.
That's a constructive use of marketing.
QUEST: Does it work? I mean, at the end of the day, don't the public see artificially constructed families to appear in rainbow colors in a Northern
Rockwell redux(ph) environment as being somewhat manufactured.
EDELMAN: It's a big change in the ecosystem. You see now that there's an equal response to product advantages and brands taking the stands --
QUEST: So what do you tell your clients?
[15:50:00] EDELMAN: We are saying, you've got to take a stand. You need to find areas in which there's a need in society and you can fill it and be
brave, go for it because the customer will respond, will buy the product on that basis.
QUEST: Stay here, don't go anywhere, I want to remind the question we're asking this hour, what would it cause -- what would it cause you to delete
Facebook? You've seen the various things, it's the privacy issue, of course, it's useful, lack of usefulness, the toxic environment or you
wouldn't delete it at all.
Fifty three percent of you at cnn.com-slash-join have answered 53 percent. But this privacy breach is a good example for you every time you want to
talk about because this shows a brand which was exceptionally strong, now starting to have chinks and holes punched into it.
EDELMAN: Well, in fact, trust in social platforms has collapsed. We're now down at 20 percent in the U.K., U.S., France and Germany as a result of
these violations of these people's privacy and data and also a sense of fake news.
So this need to build back has got to be premised on specific actions by these social platforms --
QUEST: Do you think they get it yet? Do you think Twitter, Snap, Facebook --
EDELMAN: I do think they get it, but this is going to take a while for there to be prove of change.
QUEST: Finally, how would you vote on that? What would it cause you to delete Facebook? Privacy breach issues, lack of usefulness, toxic
environment, you wouldn't delete it?
EDELMAN: I wouldn't delete it because it's a necessity. Fifty percent of Americans do not watch mainstream media anymore. This is an urgent channel
and it's got to improve, we've got to make sure that it has quality material on it.
QUEST: That's paid for, not free.
EDELMAN: That's both, because you know, you actually ultimately have to have consumer-generated content being important.
QUEST: I'll show you what the results are, the results are in and most of you say it would be privacy for you to delete Facebook. Fifty three
percent of you voted it's lack of usefulness. Very -- you're not a leader of the -- very few of you say you wouldn't delete it under any
circumstances. Richard, very good to have you with us --
EDELMAN: As well, thanks --
QUEST: To talk, thank you very much indeed. Trade man -- trade is coming to an end on an abysmal day, we will have a check of the numbers for you in
just a moment.
(COMMERCIAL BREAK)
QUEST: We have just about five minutes before the end of the day or no records and in fact all the days of gains have just evaporated and there's
been -- the worst losses in nearly three months.
[15:55:00] Now, the Dow which will close shortly well off the lows of the day, the lows were down at half past one and half past two. But then --
and they were off over 330 points there. Tech stocks was hit very hard, Snap was down 6 percent to an all-time low.
And by the way, for those of you that want to know, my Snap investment is now down 72 percent from where I bought it. One thing to note, Verizon,
you don't see this every day. Verizon, which is one of the Dogs of the Dow at the moment, the best performer, it's at a gain of 1.25 percent. Why?
Because of an investment of a third party investment which is boosted.
Nike though is the biggest and sharpest loser on the market. Otherwise, your senior market that simply had no capacity to rise, it never wanted to,
it never tried to. I mean, at a point you can arguably say this is a bit of buying opportunities, but frankly, it's just unwinding, the worst of the
day.
That's the market, it closes very shortly in four minutes and we'll have our profitable moment after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment, on this program this evening, you heard the Polish Prime Minister give a spirited defense of his country's
policies in the face of opposition from the European Union. Remember, Poland is about to be a subject to an article 7 process because of its
policies against the rule of law.
Anyway, the Polish Prime Minister fundamentally told us that the other western European countries didn't really understand what was going on in
the central European countries and they didn't really understand the policies and how they were being presented.
It's an interesting argument, but it's not one that would be welcomed in Brussels. Poland is being perceived to be anti-Democratic at the moment
with anti-media and anti-judicial policies. That will not change until the European Union probably takes some form of enforcement action, which is
where things are and things stand at the moment.
But it was good to have the Polish Prime Minister on the program and he did answer all the questions. And that is QUEST MEANS BUSINESS for tonight, I
am Richard Quest in New York. Whatever you're up to in the hours ahead, I hope it's profitable.
(BELL RINGING)
The Dow -- the bell is ringing, the day is over, the Dow is down.
END
