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Quest Means Business

U.K. Prime Minister Boris Johnson Visits Angela Merkel Over New Brexit Deal; Demonstrators in Hong Kong Face Off with Riot Police at Metro Station; Brazil's Amazon Rainforest Burns at a Record Rate. Aired 3-4p ET

Aired August 21, 2019 - 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, QUEST MEANS BUSINESS: Strong day on the markets, as you can see, the Dow is roaring up, being a bull session,

giving back a bit in the late afternoon. But all three major indices are up by roughly one percent. Well, those are the markets and these are the

reasons why.

The backstop roadblock. Angela Merkel has a solution, may be possible within 30 days. No set course for rate cuts. The Fed says headwinds

abound. And Americans are still shopping. Target says the outlook is strong.

We're live in the world's financial capital, New York City on Wednesday. It's August the 21st. I'm Richard quest, I mean business.

Good evening, the British Prime Minister Boris Johnson says a breakthrough with the E.U. is possible. The Prime Minister is making a case for a new

Brexit agreement whilst he is in Germany. It's his first trip abroad as PM. And Mr. Johnson says his number one priority is to remove the Northern

Ireland backstop, a controversial mechanism aimed at preventing a hard border between Northern Ireland and the Republic once the U.K. leaves.

Speaking of that border, Boris Johnson has promised Britain will not implement security checks, in his words, under any circumstances. There

are two months left before Brexit and the British Prime Minister is optimistic a deal can be done.

(BEGIN VIDEO CLIP)

BORIS JOHNSON, BRITISH PRIME MINISTER: We, in the U.K. want a deal. We seek a deal. And I believe that we can get one, we can do it. 'Wir

schaffen das' I think is the phrase. I think, clearly -- clearly, we cannot -- we cannot accept the current withdrawal agreement.

(END VIDEO CLIP)

QUEST: Now, Nina dos Santos is in London for us tonight. I'm not sure what word it was that Boris -- my German is a little rusty. What word it

was -- what was it?

NINA DOS SANTOS, CNN EUROPE EDITOR: Richard, we can get it done.

QUEST: We can get it done.

DOS SANTOS: 'Wir schaffen das.'

QUEST: I knew you'd know the answer. But Angela Merkel also suggests that a deal can be done or that something can happen in the next 30 days. But

she has already ruled out reopening the withdrawal agreement.

DOS SANTOS: Yes, that's right. She is essentially saying 'Wir schaffen das' 'vielleicht' - perhaps by September the 21st. That's the 30-day

deadline that she has given Boris Johnson to come up with any kind of credible alternative to the Irish backstop that he says just has to be

taken out of that withdrawal agreement because when Parliament starts sitting again in a couple of weeks' time on the third of September, it

could be a fourth time that they could reject it, if indeed he'd even deign to put that withdrawal agreement to the House, which is very unlikely. He

has already said that it's dead in the water.

Now, for Merkel, it might have been a little bit more acquiescent or at least polite to Boris Johnson, humoring him remember that Germany has more

to lose than France because obviously, Germany is a big automotive exporter and the U.K. is its largest export market, taking one in seven German cars.

But you know, she's also got to consider weighing up the value of the U.K. as a big export market against the value of keeping the single market

integral, if you like, and the E.U. as we all know only does things in unanimous agreement at the head of state level. And that's where Emmanuel

Macron's meeting is crucial for Boris Johnson tomorrow.

QUEST: There's no dispute about the area. Everybody knows that we're talking about this backstop. Boris Johnson continually talks about

transition arrangements, the technology at the factory gate, but these technologies have been not shown to work on a large scale and they are

nascent at best.

DOS SANTOS: They are and indeed he referred, I think during that press conference to a report that Greg Hands who is on the board of one of the

Commissions looking into the so-called Alternative Arrangements put out over the course of the summer during which he and other pro-Brexit former

members of government, like Suella Braverman have been saying they think that this type of new technology, new initiatives like trusted trader

statuses whereby the customs officials will know exactly which vehicles are coming and going because they're already part of a database beforehand.

[15:05:14] DOS SANTOS: They believe that all of that can avoid any kind of stoppage of vehicles at the border. But you know, whether that's enough at

this stage for the Europeans, and particularly the Irish, they are obviously at the front line of all of this to go for that seems very much

premature.

And remember, there's only 70 days to go until Brexit actually happens. So how we can make headway in the short period of time that Angela Merkel has

given him before September the 21st. Well, it requires something of a leap of faith, Brexitly, speaking -- Richard.

QUEST: Nina is in London, thank you. Now well, Boris Johnson insists a new deal can be struck. He is stepping up the preparations for a no deal

eventuality.

Michael Gove is the Minister tasked with those preparations. And he says despite reports warning of shortages of food, medicine and fuel, the U.K.

will be ready.

(BEGIN VIDEO CLIP)

MICHAEL GOVE, BRITISH MINISTER IN CHARGE OF NO-DEAL BREXIT PREPARATIONS: What we are going to do is to make sure that businesses have access, as we

see here at the moment to the facilities that they need to be able to export and also that consumers have and will continue to have a flow of

goods into this country, which gives them a great range of choices to make every day.

(END VIDEO CLIP)

QUEST: Britain is on course for a no-deal Brexit on October 31st; and France has already said that seems to be the default option. There's

several potential roadblocks though to this. First of all, the U.K. Parliament has rejected no-deal before and might try to block it again. It

would require taking control of the parliamentary timetable. It's a tricky process and they've managed to pass new legislation.

They did it back in the spring, you'll remember, but it was torturous at best. And if that fails, MPs might try to take the government down and

install one that's anti no deal. The government has a majority -- a working majority of only one, any no confidence will be a serious

challenge.

And of course, the nuclear option, Royal intervention. Her Majesty has always been politically neutral, involving her would cause a constitutional

crisis the likes of which U.K. has never seen, or at least not for a couple of centuries.

John Peet is the Political and Brexit Editor at "The Economist." He joins us from London. Just how much has moved since May, both Theresa and the

date in terms of actually shifting the positions. Bearing in mind the arguments haven't changed?

JOHN PEET, POLITICAL AND BREXIT EDITOR, THE ECONOMIST: Well, I think we know our Prime Minister, who is making very clear that he is willing to

take Britain out of the European Union without a deal. And I think Theresa May blinked several times and was not willing to do that, because she saw

the consequences is very bad for the British economy, very bad for the union with Scotland, Northern Ireland and Wales, and very damaging for

Europe.

Boris Johnson seems to want to use the fact that he says he is willing to go and to leave with no deal as a bargaining tool to try and extract

concessions from the European Union that they've been unwilling to make so far. I'm very skeptical it is going to work.

QUEST: Okay. But from your reading of the European position, at the end of the day, for this to work, the Europeans have to give ground on the

backstop. And if what we see is true from a Macron -- Emmanuel Macron of France, basically he says that's not going to happen. Angela Merkel was

being polite today. What's your understanding?

PEET: Now, I think they're going to be polite. I think even Macron will be polite although, perhaps not as nice as Merkel tried to be to Boris

Johnson today, but it is -- you know, we've been arguing about this for three years now. To set 30 days to come up with something that the

European Union believes is credible, I don't think it's going to work. The Irish --

QUEST: Just hang on, I just wanted to interrupt you there because -- forgive me, but does Parliament have the ability -- well, it has the

ability, but does it have the wherewithal to actually stop a no-deal Brexit? Bearing in mind, the way it voted back in the spring, it both

voted for against the no deal, but also against the withdrawal agreement.

PEET: Well, that's right. I mean, Parliament has shown itself capable of voting against things, but it's not been very good at voting for anything.

I think the one thing you can say about the current Parliament, which has not changed since the arrival of Boris Johnson, is that the majority of

Members of Parliament are against leaving with no deal.

Now the question then becomes, procedurally, how can that majority make itself felt? And a determined Boris Johnson government could try its

hardest to stop Parliament from getting in the way and that's what they say they're going to do.

I think the first two weeks of September are going to be critically important for this because a number of Conservative MPs I've spoken to are

pretty determined to try every procedural trick they that they can find to prevent Boris Johnson taking Britain out of the European Union on the 31st

of October with no deal.

[15:10:10] PEET: They may succeed. Although I have to say, there are doubts about whether they can succeed and there are thoughts about whether

if it came to a real crunch, the nuclear option of throwing the government out of office altogether would work.

But as you said, Boris Johnson has a majority of one seat, that's pretty tiny. So he's not -- he is certainly not comfortable in his government.

QUEST: If you had to answer this question, and you complete the fifth, as they say, over here, do you think the U.K. will leave on October 31st?

PEET: No, I don't think it will leave on October 31st. I'm not quite sure what will happen. But I think that a combination of trying to find some

solution over the Irish border, parliamentary games to try and stop no deal, and sheer -- the sheer problem of how much preparation and

legislation is required to prepare Britain for life outside the European Union, almost none of that legislation has been passed.

I think if you put all those things together, at the end of the day, even if Boris Johnson complains about it, he will say he was forced to seek more

time. Now, I'm not sure the trouble is what more time will do, but it could lead to a general election, conceivably even another referendum while

I think that's pretty unlikely at the moment, but there certainly could be a general election.

QUEST: Good to see you, John. Thank you. Much appreciate it. Thank you, sir.

PEET: Thanks.

QUEST: Now to Europeans stocks, it closed higher. They rebounded from Tuesday's serious losses. The FTSE and the DAX posted solid gains on that

meeting between Johnson and Merkel in Berlin.

In Italy, investors welcomed signals that a new government coalition, maybe in the works after Prime Minister Conte resigned. The MIB jumped 1.7

percent. I have to say, it is only really clawing back what it had given up in the previous session.

Top Fed officials are expressing concerns about global economic slowdown. Minutes from the Federal Open Markets Committee that were just published a

short while ago, it suggests more aggressive interest rate cuts are not guaranteed.

In the last hour, these minutes showed there was no set course for interest rates. A recent 25 percent basis point cut was part of its risk management

strategy it says, mitigating the effects of slowing growth globally and trade headwinds.

The market reactions to the Fed Minutes has been muted. The Dow is continuing to hold on to solid gains. But if you look at two o'clock down

there, you'll see there was no great rally or fall off in the course of the session. So we are in the last hour of trade on Wall Street, all the major

indices, the S&P, the NASDAQ are better than expected. And indeed retail earnings from Target has certainly boosted. We'll talk about that in a

moment.

President Trump though is again targeting his own Federal Reserve. He took a swipe at the Fed Chief Jerome Powell ahead of the Fed Chair's speech in

Jackson Hole saying Powell was like a golfer who can't putt. Donald Trump is demanding the Fed cut rates by at least a full percentage point.

Now, investors also have their eyes on the green. The question is which club will the Fed swing as it goes out? My trusty caddy for the club or

two. Thank you, sir.

Now, most of you who watch this program know my view on golf, it ruins a good walk fiddling with sticks. Donald Trump wants a driver to hit a full

one percent basis cut, something along the lines of -- he is not going to get it. Instead, investors are betting far more likely, on a nice chip,

and they're going to use a wedge and aim for a cut of 50 to 75 basis points by the end of the year with a bit of luck and a following wind. Oh so

close.

There is a chance however, that despite presidential criticism, Chair Powell will use his putting skills with a nice short 25 percent basis

points. A couple of those wouldn't go amiss. There we go there, one, two, three. You get the idea.

Well done, sir. Well done. Not with my bad back. Good to see you, Cristina Alesci is with me.

CRISTINA ALESCI, CNN BUSINESS POLITICS AND BUSINESS CORRESPONDENT: You are really a terrible golfer.

QUEST: I'm sorry?

ALESCI: You're really a terrible golfer.

QUEST: Do you swing a club or two?

ALESCI: No, I do not. I'm of your school of thought.

QUEST: Ruins a good walk.

ALESCI: It ruins a good walk.

QUEST: Fiddling with sticks. All right, so besides the obvious insult to Chair Powell that he can't putt, Donald Trump yesterday wants a hundred

basis points. The market is looking at 50 to 75 overall. The Fed Minutes suggests what?

[15:15:07] ALESCI: The Minutes suggest that it is consistent. It is not going to signal future rate cuts. And Donald Trump, as you point out,

wants the Fed not only to cut by a hundred points, but to signal that to the market so that we can boost economic growth, according to Donald Trump,

that would help him win reelection.

The Fed is not going to do that. Because the reality is, is that economic data in the U.S. is still strong. We're still growing at 2.1 percent,

which brings us to the contradiction that we're dealing with, which is Donald Trump calling for these swift and drastic rate cuts in the face of a

growing economy. What is wrong with the economy that we need a hundred basis point cut?

QUEST: Right, but, well, participants generally noted that incoming data over the intimating period had been largely positive. And the economy had

been resilient in the face of ongoing global development. So this 25 points that they did last time really was just an insurance policy.

ALESCI: Well, you can definitely see it like that. They see perhaps, a slowdown down the line, so they want to be proactive, if you will. But

essentially, what investors are telling me is that what Donald Trump wants the Fed to do is, quote, unquote, these are not my words, "crazy," because

if you signal a hundred basis, point cut, what it will do is it will spook the market into thinking the Fed is seeing some trouble ahead. So it

actually might backfire on Donald Trump.

What essentially he is doing, I believe, is he is looking for a scapegoat if we can't get to the two percent growth, or the 2.5 percent growth, or if

we do head into a possible recession. He is looking to blame it on somebody and that somebody is the Fed and Chairman Powell.

QUEST: But he seems to -- I mean, yesterday, at is long Oval Office Q&A with the Romanian President, he had said, basically to people that look,

the trade war was necessary. I think today, he has almost used a biblical phrase, he says, "I am the chosen one" to actually have this, others should

have had it.

If that's the case, he is saying, "Don't blame me for the trade war. I had to do this."

ALESCI: I don't think anyone, any reasonable economist or investor that you and I speak to will disagree that we need to hold China accountable for

some of its practices. The problem that many people have is the way that Trump is going about holding China accountable.

And he is also not acknowledging, by the way in that press conference, and in today's comments, that there is pain in pockets of the economy. And by

the way, some of that pain is borne by his base -- farmers manufacturing -- okay, manufacturing is only 10 percent of the U.S. economy, but it's still

a bellwether, and it's still important, and it is seeing a slowdown because of the trade war, in part.

QUEST: Well, and that could be translating, as you see here, public perception of the U.S. economy has taken its first significant hit.

According to a CNN poll, 65 percent of Americans believe economic conditions are good. It's still a majority, but it is --

ALESCI: It's still pretty good.

QUEST: It still is -- yes, it is good, but it's down five percent.

ALESCI: It's down give percent, but today, we saw retailer earnings in the U.S.

QUEST: Yes, extraordinary.

ALESCI: They were extraordinary. So the consumer is still feeling pretty good. The problem is that the consumer tends to be a lagging indicator,

and business investment seems to be the forward indicator and business investment right now is sending a signal that it is not -- that is not

positive for the economy, because business investment is pulling back.

Now investors don't think that businesses are going to cut to the bone. They're not going to pull back so much right now. But further disruptions

on the trade war. No progress on the trade war. That's going to be problematic.

QUEST: Good to see you.

ALESCI: Thank you.

QUEST: See you on the links where we can --

ALESCI: Yes, where we can throw balls, maybe.

QUEST: It would be better. Okay, thank you very much. It is back for retailers -- Cristina was just talking about that. Who missed the target?

And who hit the bullseye? Target. Oh, that was well written.

And a merger between Renault and Fiat-Chrysler was once thought to be dead on arrival. Now, the deal could be back on the table. It is QUEST MEANS

BUSINESS. We are live in New York.

(COMMERCIAL BREAK)

[15:21:51] QUEST: Better than expected retail earnings are once again show that the U.S. consumer is in good shape. The numbers came from Lowe's and

Target and they both beat estimates and their shares soared, particularly Target, up 20 percent.

The company is raising its full-year earnings outlook. Now, 20 percent is a hefty move for a mature retailer like Target. The big picture for retail

earnings is once again very mixed. This shows how shares reacted in the 24 hours after earnings. Macy's was down. Walmart was up just a tad. Home

Depot had a bit, it goes down. So Clare is here to explain what's the underlying -- why should some of those be down and Target be up? What did

target say that Walmart didn't?

CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Well, so I mean, Target beat on all metrics, which is something that Walmart didn't, but I think what

you're seeing with those numbers there is more of what we saw in 2017, really, the bifurcation of the big books from the department stores.

Again, I wish I could tell you that it was something new but the department stores are really --

QUEST: What do you mean by that?

SEBASTIAN: So the department store really struggling in this area. Just before I came on, I made a note of the year-to-date performances, some of

them -- Macy's is down 48 percent, Nordstrom, which was seen as one of the -- the kind of the big adapters, down 44 percent. And yet we have Target

most of which happened today, but up 54 percent on the year. Walmart is up 20 percent.

I mean, I think --

QUEST: To the viewer who is not as familiar, and myself included, what is the difference between a department store and a big box store since

essentially they sell the same things?

SEBASTIAN: Well, so department stores are usually attached to malls. That is part of that problem and they will have lots of different floors, lots

of different brands and all kinds of different products and the big box stores tend to have lower prices. They tend to include grocery, which the

department stores don't and that is part of their strength.

But I think, Target, it's not just about what they are. It's about how they've executed over the past two years. They spent $7 billion or they

pledged it in 2017 to revamp their digital, to revamp their stores. And it's really starting to bear fruit. They saw digital sales up 34 percent.

That's almost as good as Walmart, which is now starting to be seen as one of the leaders there.

They saw the same day shipping options really contributed significant amount of their same store sales. They've got pick up, drive up, they

bought a company called Shipt in 2017 that does one-day shipping. So they're really starting to execute.

And one thing that is interesting is they have already factored into the guidance that they raised this year, the potential impacts from tariffs.

So they don't really expect that to be much of a problem this year.

But then in other words, Richard, they said this could be a 2020 problem. And I think that's what we're looking at with retail when it comes to the

tariffs.

QUEST: Thank you. Excellent. Thank you. For months, it seemed the wheels have come off a plan merger between Fiat and Renault. The two

companies said it was not going to happen; now, the deal could be back on.

The prospect is sending European auto shares higher. Fiat-Chrysler and Renault are rallying on the report. You see them. They're not huge, it's

a bit of a move up. It first surfaced in the Italian media.

The talks began before the summer and they were shelved in June. John Davis is the host of "MotorWeek" who joins me from Owings Mills in

Maryland. Why would these talks be back on? What's the motivation? Who moved?

[15:25:02] JOHN DAVIS, HOST, MOTORWEEK: It looks like the French government probably moved a little. They were an opposition of the

original merger back in May and June. And probably also Nissan that was standing in the way.

They want the amount of their shares owned by Renault reduced because after all, Renault saved them from bankruptcy and I don't think they've ever --

they thought that was a loss of face. They'd like to get out from under some of that. Some of that must have moved around a bit for this report to

come out and the fact it hasn't been denied means there's probably something to it.

QUEST: Does it make sense? Does this deal make any more sense now than whether it did earlier this year?

DAVIS: It made great sense earlier this year. You've got Chrysler, you've got Renault and you've got Fiat basically companies that are relatively

moderate in size, then you throw in what's happening in the world, the China situation with the market slowing, all the new investment they saved

for electric cars and so forth.

And you really do need these companies to get together. They would end up being the third largest auto maker behind Volkswagen and Toyota, and then

you throw Nissan into the mix, which would still have some kind of involvement and I think it would speak very well for all of these companies

going forward.

It is a good thing for shareholders --

QUEST: But hang on.

DAVIS; It means that basically, they will be able to share engineering. For instance, Fiat and Renault make a lot of overlapping products. Why are

they all developing all news cars and all classes themselves when they can share a lot of engineering?

It may not be so good for some of the factory workers and I think that's what the French government was worried about.

QUEST: But hang on. Let's just talk culture if we may.

DAVIS: Okay.

QUEST: You know, we both remember Daimler-Chrysler and the horrible cultural relationships that existed between those two companies across the

Atlantic. Can you put together the French, the Italians, the Americans and strategic partnerships with Nissan and others -- Mitsubishi and the like --

and the Japanese?

DAVIS: That's the $64.00 question. Obviously, Fiat and the Americans are getting together, have been working pretty well together. Fiat-Chrysler is

a good well-oiled machine. They are selling trucks like crazy. They've made Jeep a global brand, but now, you have basically Renault coming in to

the mix.

They were working pretty well with Nissan, but there was more friction there than they would let on. So, I think that that's $64.00 question

whether they can pull this off. It may look great on paper, it may look great to me, but culturally, it may be much more difficult.

QUEST: Good to see you, sir. Appreciate you coming on tonight. Thank you.

DAVIS: Thank you, sir. Thanks, Richard.

QUEST: President Trump is adding insult to injury. He abruptly ditched his plans for a State Visit to Denmark, and now he is accusing the Danish

Prime Minister of being nasty because she said his plan over Greenland was absurd. Next.

(COMMERCIAL BREAK)

[15:30:00] QUEST: Hello, I'm Richard Quest, there's more QUEST MEANS BUSINESS in just a moment. President Trump is firing back after Denmark

rejected his offer to buy Greenland, and it's rather nasty and grubby. And blood and gold, CNN gets exclusive look at mine keeping in Venezuela,

Nicolas Maduro in power.

Before you and I continue, this is CNN, and here, the facts always come first. The British Prime Minister Boris Johnson is in Germany where he's

pushing for a new Brexit deal and with one that would not include the Irish backstop. He expressed optimism it can be done before the U.K. leaves the

EU at the end of October. Mr. Johnson though next goes to France on Thursday.

In Hong Kong, hundreds of pro-democracy demonstrators gathered at a subway station on Wednesday for a sit-in to mark one month since mob's peaceful

demonstrators. Riot guard police gathered as protesters began overturning trash cans and then barricading themselves in. The incident ended without

outright clashes.

Big sections of the Amazon rainforest in Brazil are alight. Tens of thousands of fires are raging in the Amazon this year, 80 percent more than

last. It's so bad smoke reached Sao Paulo in a 3,000 kilometers away.

This was the announcement put out by the royal household in Denmark. "The president of the United States to visit Denmark." If you look at the

bottom, it goes on to say, "it's at the invitation of her majesty, the queen." So, this wasn't an official visit, it wasn't a working visit, it

wasn't let's get to know you, come along and have a nice cup of tea, this was a fully-fledged state visit that is now off after the country's Prime

Minister rejected Donald Trump's offer to buy Greenland.

Mr. Trump says it was nasty of her to call his bid "absurd". He said he should have just said no, thank you, no thank you. But they did several

times last week again and again and again, they said no. Anyway, Ambassador Nicholas Burns joins me now to talk about it. Well, ambassador,

your initial thought when you realize that the president of the United States had cancelled a royal state visit on the back of a tweet?

NICHOLAS BURNS, FORMER U.S. UNDER SECRETARY FOR POLITICAL AFFAIRS: My initial thought, Richard, he's an embarrassment to our country. He is --

it's shameful behavior by the president of the United States. I mean, imagine the Danish Prime Minister having the temerity to suggest that she

doesn't want to talk about selling off part of her country.

I mean, one can understand why the Danes are so exorcised about this. The president has a history of going after NATO leaders, trying to embarrass

them publicly, I'm sure he'll do it again at the G-7 Summit this weekend, unfortunately. And he has a history of going against women publicly.

Female leaders, Theresa May, Angela Merkel and now the Danish Prime Minister.

He's an embarrassing spectacle, our presidents have never acted this way -- we've had plenty of disagreements in the past, but you're civil to your

best friends.

QUEST: Now, but here is the real rub, ambassador. Does it make a difference at the end of the day who has the biggest toys, who has the

biggest playground, whose economy is the strongest and the place where everybody wants to be? Does it -- long-term, ambassador, long-term, does it

make a difference?

[15:35:00] BURNS: It don't make a difference as long as Donald Trump is president, and until someone more sensible and rational comes back to the

White House -- but I'll tell you this, Richard, I mean, the United States has not been able to get a single European ally to commit to the anti-

piracy coalition in the gulf. Why is that? It's because the president has not been nice to them and the president has actually taken policies,

climate change agreement, the Iran nuclear agreement, they're against the interests of the European government.

So, I think there is a dramatic difference here, and there's an impact when the president of the United States is so uncivil, so contemptuous of our

best allies in the world. I would just remind you that the Danes have committed in 17 years more than 10,000 of their troops on rotations into

Afghanistan and of course, they've lost dead soldiers and they've had soldiers wounded. So, we owe them a lot and we certainly owe them common

courtesies.

QUEST: And I think it's a percentage of troops, it's higher than just those, unfortunately, lost by other countries as well. So, the -- but you

see, I keep coming back to this idea that, what I'm also wondering is, are we getting to a state where other world leaders realize there's no value in

trying to be nice here?

You know, I see tonight, Macron -- let's talk about Russia, for example. Donald Trump wants Russia to be re-admitted to the G7, the G8, which of

course, he was kicked out from in 2015-'16 after Ukraine and Crimea. But Macron tonight basically saying, no, that would be rewarding the actions.

Do you think world leaders are basically saying, we lose if we say yes, we lose if we say no, let's do what we think is right?

BURNS: I think the majority of world leaders, the great majority know exactly who Donald Trump is, they know that if they can't depend upon him -

- this idea of President Trump that you'd bring Russia back into the G7 to make it the G8 again, after Putin has done nothing to deserve it.

I mean, what would the message be to the thugs and dictators around the world if we did that? So, I'm not surprised if President Macron and I

wouldn't be surprised if Chancellor Merkel said no to the president, I don't think they'll agree to that at the G7 Summit this weekend, and they

shouldn't because that would just be rewarding aggression and we've learned from the past not to do that.

QUEST: Is it possible that with Brexit, being so febrile at the moment, so uncertain that Donald Trump would deliberately do a trade deal just to

annoy everybody else so that he gives Boris Johnson something -- this kicking sand in the eyes of the EU.

BURNS: Well, the President Trump has said he's going to do exactly that. He wants to push a U.S.-U.K. free trade agreement after a hard Brexit.

That's a poke in the eye to the European Union. The president says that the European Union is a competitor. He's the first American president to

say that.

But I will say this, Richard, the Democratic leader of the Senate, Chuck Schumer and the Speaker of the House, Nancy Pelosi have warned the

president that if a no-deal Brexit leads to a hard border as it will on the island of Ireland, and if it diminishes the Good Friday Agreement, the

Democrats will block the free trade agreement because we have too much at stake in our relationship with the Republic of Ireland and we don't want to

see a return to the troubles in Northern Ireland.

So, that's a real warning from the Democrats against President Trump. He may not be able to help Prime Minister Boris Yeltsin -- Boris Johnson,

excuse me, with a free trade agreement.

QUEST: Good to see you, sir, thank you, as always, much appreciate your decades of diplomatic experience being brought to bear, thank you. Now, as

you and I continue tonight, blood, sweat and gold. We get an exclusive look at the mines that are keeping Nicolas Maduro in power, and the system

of corruption and control that lie just beneath the surface.

[15:40:00] (COMMERCIAL BREAK)

QUEST: Venezuela's president says his administration has been in contact with U.S. officials for months despite severing diplomatic ties back in

January. As the country faces major economic and political crisis, Nicholas Maduro is relying on one commodity to stay afloat, and it is gold.

In this CNN exclusive, Isa Soares found out it's precious enough to kill for.

(BEGIN VIDEOTAPE)

ISA SOARES, CNN CORRESPONDENT (voice-over): On the fringes of the Amazon rainforest, a state's sponsored network of violent gangs and corrupt

Venezuela military hide amongst a vast land, rich minerals and seeping gold.

(on camera): All this has made this area Maduro's El Dorado and it's this that's giving him financial life-like --

(voice-over): We've come deep into Venezuela's mining arc to find out how Nicholas Maduro is holding on to power, and able to resist American

pressure. He's given himself direct control over this land, and he's bleeding it dry, enriching himself and buying the allegiance of the

military and it all starts with the local miners.

Few with mouths to feed at home, risk it all operating this lawless region. We venture in 50 meters deep, it is a precarious operation. Inside the

mine, they guide us through the various levels and galleries, past evidence of a colonial thirst for gold.

Along the way, I meet Darwin Rohas(ph) who has been mining here for three years now.

UNIDENTIFIED MALE: (SPEAKING IN FOREIGN LANGUAGE)

SOARES: Back-breaking work in intense humidity. Everywhere you look, speckles shimmer from above.

(on camera): This mine has been so productive for them because they have got 250 kilos of gold out of this mine, just to give you a sense really of

why it's called the Millionaire's Mine.

(voice-over): If 250 kilos or just over 550 pounds is accurate, that's well over $10 million at global market prices, all from one single dug

hole. There are dozens around -- there's thousands within Venezuela's mining arc. But not all that shimmers is gold, and these miners know it.

These rocks need to be crushed, processed, scraped and melted before you actually see the gold.

This nugget here, $315, but it comes at a cost to the health of the miners as well as the environment, with mercury and other chemicals used to

separate gold from grit, poisoning everything you see around us. But this is business, and these mills don't do it for free. And then there's an

additional cost, even if the miners are scared to admit it.

(SPEAKING IN FOREIGN LANGUAGE)

[15:45:00] SOARES (on camera): It's clear from what he's saying, there are other forces involved, there are other people they have to pay to be --

able to continuing to work in these mines, but clearly, they're not prepared to tell us who they are.

(voice-over): They have every reason to be afraid, these mines are run by a network of hooded militias called Pranas(ph), who according to a senior

military source and to mines to extort steel in silence. They do so together with complicit members of the military who they bribe to operate

freely.

(SPEAKING IN FOREIGN LANGUAGE)

SOARES: A local miner too scared to speak out about the gangs close to the mines opens up once his identity is hidden.

UNIDENTIFIED MALE (through translator): They mutilate people, they cut them, torture them, and the ones that speak are also tortured and

mutilated. They kill them and throw them down those holes.

SOARES: One active senior military source confirms what we've heard in El Callao, telling me the same groups use death squads to command obedience,

battling each other and the military for control over this mining area. It's a pressure tactic of blood and bullets. I asked the miner if he

blames Maduro.

(SPEAKING IN FOREIGN LANGUAGE)

UNIDENTIFIED MALE (through translator): I think the government has the capacity to put a name to the planners if they want to do it, but they're

not going to do it because they benefit from it.

SOARES: This is echoed from the top. General Manuel Figuera was the former spy chief for the Venezuelan president until April the 30th when he

defected.

MANUEL FIGUERA, MADURO'S FORMER SPY CHIEF (through translator): Maduro has knowledge of all of this, and has done very little, if anything.

SOARES: For years, he was part of Maduro's inner circle with the U.S. Treasury sanctioning him of accusations he oversaw mass torture, mass human

rights violations and mass persecution. Now with sanctions dropped, he is speaking out about corruption at the very top, battling the U.S. assessment

that Maduro's family also profiting.

FIGUERA: There are companies linked to Maduro's family circle who buy the gold and negotiate the extraction of the gold in the south of the country.

They sell one part of it to the central bank and the other part, they take out of the country without any kind of control.

SOARES: In Caracas, we find this network expands beyond Venezuela. In 2018, Maduro traded Venezuelan gold to Turkey, some in exchange for food,

which the government then used in their subsidized food boxes, but it didn't stop there.

(on camera): According to a source at the Venezuelan Central Bank, 26 tons of gold were taken out of the bank to the end of April. They were put into

private airplanes and a destination, Middle East and Africa.

(voice-over): That's $1.6 billion, much of it skirting U.S. sanctions. According to the source, several other shipments left Caracas this year to

United Arab Emirates directly and also via Uganda on a Russian plane in exchange for euros.

FIGUERA: Maduro is at the helm of a criminal enterprise, he has hijacked all the state's institutions to work in his service. This has allowed him

to corrupt public servants and military officials and all the power structure in order to perpetuate his rule.

SOARES: This much is what we hear on the streets of El Callao, here, where gold is a standard currency. Many like this gold seller are just a cog in

the system which is controlled all the way from the top. But with the river of gold running deep and the economy shrinking by half in the span of

five years, there's little sign Maduro and his men will turn their back on this blood gold.

Here, human misery goes hand-in-hand with environmental devastation, it's a free for all, a gold rush where the main winner is Maduro. Isa Soares,

CNN, El Callao, Bolivar State, Venezuela.

(END VIDEOTAPE)

QUEST: CNN contacted both the Venezuelan government and the Central Bank, we retained no response. The Venezuelan government has dismissed U.S.

sanctions in the past, saying they are an unjustified attack on the country and an attempt to get hold of its resources. We reached out to the Turkish

government, again, we received no response.

And an Emirate official did tell us they take these matters very seriously, and that the UAE government is in compliance with international law. They

wouldn't comment on legal proceedings in another country.

[15:50:00] When we continue, Alibaba is backing out in new reports, says the unrest in Hong Kong is giving the Chinese e-commerce giant pause for

thought, it's delaying its planned IPO.

(COMMERCIAL BREAK)

QUEST: Hundreds of Hong Kong protesters staged a sit-in at a metro station in the far north-west of the city. They were marking one month since the

suspected organized crime group violently attacked protesters there. Some demonstrators suddenly began barricading exits while others threw fire

extinguishers at the police.

And the crowd is angry no one has been prosecuted for the violence against demonstrators. There was some argy-bargy, but no serious damage or

injuries. Sources say the protests have prompted China's e-commerce giant Alibaba to delay its $15 billion listing in Hong Kong. Matt Egan is with

me, delay or they're being pressured by the Chinese government not to go to Hong Kong?

MATT EGAN, CNN BUSINESS SENIOR WRITER: It's safe to say that Alibaba does not want to anger Beijing right now. They've had 11 straight weekends of

these pro democracy protests in Hong Kong. It would be a pretty awkward time to have China's largest e-commerce company, really one of the crown

jewels of all the companies in China list with $15 billion listing in Hong Kong of all places. So, I think it makes some sense why that is part of

the rationale here.

QUEST: But they don't have to listen, Hong Kong, do they? I mean, they've got the U.S. listing, they've got multiple listings anyway.

EGAN: Exactly, this is not something that they have to do -- this is not really a blow to Alibaba per se because one, they've already listed their

listing in New York, but they did want to add some diversity, they wanted to raise some more money by raising $15 billion, they could have used that

money to, you know, fund future growth.

But this is the delay, "Reuters" are saying that they could still do a listing as early as October.

QUEST: When Cathay Pacific's CEO Rupert Hogg, excellent man in the industry resigned, and then you had that advert in the newspaper and the

response by the four big consulting companies. The global corporations are now betwixt and between, they don't know what to do.

EGAN: No, they want to -- they have no idea because they're in such an awkward position, right? They don't want to give up on Hong Kong, they

believe -- I would think that a lot of them privately, probably -- they agree with some of the pro-democracy protests.

But they also do not want to anger China's rulers, and so, they're kind of caught in between, and we're seeing Alibaba right now play it safe, and

they're deciding to --

[15:55:00] QUEST: They have no choice, they are a Chinese company based in China. But if you are any other conglomerate, if you're a GM, if you're

another -- we saw the U.S. airlines fall back over the description of Taiwan on a map with Delta Airlines if you remember.

EGAN: Right, this is -- this is probably not as much of a decision by Alibaba because as you said, I mean, they may not really have much of a

choice here, but you've got to wonder maybe some more western companies --

QUEST: Right --

EGAN: Are going to actually, you know, come out and take a different approach.

QUEST: Good to see you, sir. As I go and walk over in that direction towards the market, what should I be looking at?

EGAN: You know what? I think that we need to say, this has been a strong day for the market, the stocks are not ending --

QUEST: Right --

EGAN: Quite at session highs though.

QUEST: Not on Nasdaq because I -- let's take a look and see exactly what we do have. Now, we've heard from Matt Egan, that -- we've been up

throughout the course of the day, the Dow is holding its gains, but as Matt points out, not off the -- we're all well off the session highs which was

just before lunch.

All major indices are up, but again, they've all just knocked back from their 1.1 percent core. We do notice over 26,000 on the Dow, no 3,000 on

the S&P, that's the market, we'll have our profitable moment after the break.

(COMMERCIAL BREAK)

QUEST: Tonight's profitable moment, we're trying to avoid here of commenting too much on what Donald Trump may have said about this or the

other, but tonight I can't avoid it. The U.S. President has canceled a state visit to a close ally because the Prime Minister of that country

called his policy or his proposal absurd.

Think about this for a second. The U.S. president cancelling a royal state visit because of such an insult, bearing in mind this is the same president

that called Emmanuel Macron of France very insulting, Theresa May of the U.K. foolish, Justin Trudeau of Canada very dishonest and weak, and Angela

Merkel, he described her country as being controlled by Russia.

But he is offended on behalf of the United States because another Prime Minister said, no, you can't buy parts of my country. Which part of this

do I not understand? I'll leave you to figure that out for yourself.

And that's 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.

Good day on the Dow! The day is done.

(BELL RINGING)

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