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Quest Means Business
Tropical Storm Dorian to Hit U.S. as Category 4 Hurricane; A U.S. Justice Department Report Cites Former FBI Director James Comey Broke Rules By Leaking Trump Memos; South Korea's Supreme Court Orders Retrial for Samsung's Heir; Calls For Calm From China Have Soothed Investors On Wall Street; Peter Navarro Talks About Donald Trump's Economic Policies; Aired 3-4p ET
Aired August 29, 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: Stock is up, two maybe three in a row, very strong day in the markets. The Does is up
one and a third percent, gain of 330 odd points, best -- almost -- of the day. Thereabout that's not quibble over a few points, and more
importantly, all the other indices are up.
The markets are strong on, and these are the reasons why. Calls for calm from China have soothed investors on Wall Street, all the major indices
reacting up one percent or more. Donald Trump's top trade adviser calls on the Fed and the ECB and the Germans and the British --basically everyone to
step up their game. Peter Navarro, yes, he is with me live from the White House in just moment. And Marriott makes a pledge to ban mini plastic
bottles. The Marriott Chief Executive live tonight on this program as well.
We are live in London on a Thursday, August the 29th. I'm Richard Quest, and yes, in London, I mean business.
Good evening. Tonight a real burst of optimism about the trade war is washing over the markets. The Trump administration says the future of the
economy depends on factors outside its control. The Dow is having its best day in two weeks, as China says it wants to negotiate with a calm attitude.
The government though is hinting it won't escalate the trade war for the time being and as you can see there, you have the Dow up 320 odd points.
Back in the U.S., growth in the second quarter was revised down slightly. It's down at two percent way off the 3.1. But better than the end of last
year.
You're seeing an interesting band, but it is falling off growth. That's the important thing. Consumer spending stayed strong, which is also
important and business investment is falling off. Speaking to me earlier on "The Express." The former Treasury Secretary, Larry Summers said the
market is pricing in a steeper downturn.
(BEGIN AUDIO CLIP)
LARRY SUMMERS, FORMER U.S. TREASURY SECRETARY (via phone): People would not be pricing in 100 basis points of Fed rate cut over the next 12 months
if they weren't significantly alarmed about the economic prospects.
(END AUDIO CLIP)
QUEST: The man behind the trade war, the top White House trade adviser says the economy is good, thanks to President Trump. Peter Navarro says
making the economy great will depend on these factors that the White House doesn't control.
So he is talking about the U.S. Congress with tax policy, the Fed in which there's a repeated call here that echoes his bosses call for the Fed to
lower rates by perhaps up to a hundred basis points.
The ECB here acknowledges, is lowering rates and so he talks about the competitive environment between Central Banks. They do not act in
isolation.
Brexit with the U.K. Government and the need for certainty. Germany and Japan stimulus and stimulus from China. He is looking forward to that.
Now, these are countries that are grappling with the global economy and how to boost growth. Peter Navarro joins me now from the White House. It is
good to see you, sir. Your article has certainly raised some questions and interest by people. Before we get to your article, which we will in a
second.
PETER NAVARRO, DIRECTOR, WHITE HOUSE OFFICE OF TRADE: Mr. Quest, good to be here with you, sir.
QUEST: It is always good to see you, whatever the economic weather, Peter. Now, the article you wrote. And before we get to it, what do you make of
Bill Dudley's article that he wrote, in which he basically says it may be up to the Fed to stymie President Trump in his reelection campaign.
NAVARRO: I would say in one word, atrocious. That was just really beyond the pale for somebody who served this country and talks about the
independence of the Fed to so blatantly try to politicize it. But that's the way Mr. Dudley is, I guess.
I think for me, Richard, what I try to do is, is look at the chessboard as a macro guy and what I see through 2020 and we start with the Trump four
pillars of economic growth are which are the tax cuts, deregulation, cheap energy and a level playing field on trade.
And we think that gets us to at least a solid two percent rate of growth and the good news then is all the other things you mentioned, which have
some reasonable high degree of probability to advances further, let's just walk through that list again.
[15:05:18] NAVARRO: Congress has to do its job by passing the U.S.-Mexico- Canada Agreement, the virtue of that agreement from Make America Great Again perspective is that it has provisions in there which will restore the
supply chain and manufacturing to this hemisphere. We think that it gets us a 1.2 percent GDP growth, over 100,000 jobs, many of them manufacturing.
So that's number one.
In terms of the Federal Reserve itself, I think we generally understand that it raised too far too fast. The idea of them lowering rates is not
the Larry Summers apocalyptic scenario of recession, but simply to make a strong economy stronger.
We think if they lower their rates, that will help two ways. One, it basically will stimulate investment directly; and two, stimulate exports
indirectly.
As you know, Richard day, the dollar went up by about 10 percent after Powell started raising rates.
QUEST: Right, but Peter, on that Fed point, ignoring Dudley's last paragraph, the gravamen of his article said, "If the Feds accommodation
encourages the President to escalate the trade war, further increasing the risk of a recession." Are we entering a sort of a cycle where the
President does tariffs, the Fed has to react. Therefore, the President knows if he does more tariffs, the Federal push rates down.
NAVARRO: I think that's a series of hypotheticals built on a castle of sand. If you want to talk about the tariffs, the purpose of the tariffs
simply is to address China's seven acts of economic aggression. And you know what they are, Richard, it's the cyber intrusions in the U.S. business
networks, forced technology transfer, intellectual property theft, dumping products into our markets, the massively subsidized state owned
enterprises, the currency manipulation, and killing Americans with their deadly fentanyl.
So those are the issues that we are and will negotiate with. And that's good news. I think bringing that whole argument as Mr. Dudley had done,
it's just silly. I mean, I think what we need to focus on here, and I'm sure what the Federal Reserve will do, as Board of Governors is make sure
that this economy reaches its full potential without creating an inflation.
The problem with the Fed, Richard, is that it is basically trying to minimize the unemployment rate rather than maximize growth. And the
problem is, you can have a 3.6 percent unemployment rate at two percent growth, or you can increase the labor force participation rate by a million
people and have 3.6 percent unemployment and three percent growth. That's what President Trump wants.
He wants three percent growth and more. And I'm giving you like, five different reasons how to get there if we can go through them at some point.
QUEST: Right. But Peter, the fact is, you're not going get a disagreement from me that the U.S. economy is in excellent shape at the moment, and
truly motoring along better than any other major economy in the world. You're not going to get an argument from me or not.
But all you in danger of shooting yourself in the foot? Listen to what Senator Pat Toomey says. "There's no question trade uncertainty is
contributing to the slowdown." The Fed Chairman says, "Trade policy uncertainty seems to be playing a role in the global slowdown." Now, that
trade policy uncertainty is coming from your policy.
NAVARRO: So just to be clear, Richard, we do not accept that premise at all. It's a false premise. That's a false narrative. The big headwind
we're facing right now, it's two headwinds. One, it is Federal Reserve policy raising rates too far too fast, which is hurting us directly through
investment and indirectly through a currency effect. So that's a big headwind.
The second headwind, of course, is Europe. And let's talk about my other bullish scenarios. Because we are with certainty, we are going to get
reduction in rates by the ECB and some quantitative easing. Now, if that strengthens Europe, that will certainly boost our export demand and growth,
but only and this is the chess match of Central Banks, only if the Fed matches those cuts. Otherwise, any benefit we might get would be offset by
further currency effects.
So I see the ECB in some sense, putting more pressure on the Federal Reserve to lower rates. So that's bullish as far as I'm concerned.
[15:10:10] NAVARRO: Now, look, the biggest thing is, since you're over on the other side of the pond there is the German issue, you know, the term
black zero. It's Germany's policy of fiscal austerity. I think there's a growing momentum both within Germany and across Europe, for Germany, to
engage in a significant fiscal stimulus.
QUEST: Right.
NAVARRO: And that would help enormously the global economy as well as the U.S. growth rate, and then, of course, Brexit. What's interesting about
Brexit is it's basically frozen some investment, people don't know where things are going to be. So they're waiting to see how that ends.
Once that resolves itself by October 30th, that will unleash investment, but it'll also allow us the opportunity of a free trade agreement with
Great Britain, that's all good.
I am giving you all sorts of great bullish reasons why the stock market is going to hit over 30,000 and we're going to hit three percent growth. And
that's how we see this.
QUEST: Give me a date for either of those.
NAVARRO: So if we get the USMCA passed in September, or early October, and if we get a hundred basis point rate reduction by the end of the year, we
will go over 30,000 and the Dow would ease. And then if all these other elements fall into place, ECB rate cuts, German fiscal stimulus, Brexit
stimulus, China fiscal stimulus, perhaps even Japan, a fiscal stimulus, I think we will see a global economy that has had a temporary slowdown, which
will quickly rev back up, and we'll have another virtuous cycle going on.
QUEST: Are you at all worried that Central Bankers, they've got a bit of ammunition left? I mean, you know, the Fed has got a hundred basis points.
But you know as well as I do, Peter, that compared to traditional recessions or traditional slowdown, one percent is not that much if you
really need to boost an economy?
NAVARRO: Well, I think that's why the fiscal stimulus is for places like Germany, and China are going to be an important part of the mix. I mean,
we've had over 30 interest rate -- we've had over 30 nations reduce their interest rate since the start of the year. You can't do this all with
monetary easy, and that's why I think some of these fiscal elements are good.
And of course, Richard, I think, look, you and I would certainly agree on this. At some point, Europe has got to come to that moment where they were
realize that this welfare state over regulation, over taxation policies is holding back a highly skilled workforce and a great group of nations. But
you know, that's a conversation for another day.
QUEST: I think we'll put that to one side. The issue overall becomes one of strategy in all of this. Everybody has pretty much the same goal. I
want you to listen to what your boss, President Trump said, at the G7, when asked about this uncertainty, this strategy of seeming to -- negotiating
strategy, going from one side to the other and back again. Have a listen, sir.
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: Sorry, it's the way I negotiate.
QUESTION: So my question is, is that a strategy? Is it a strategy to call President Xi an enemy one day and then say that the relationship is very
good the next day, and then -- you know, I mean, it is going back --
TRUMP: The way I negotiate, it's done very well for me over the years, and it's doing even better for the country.
(END VIDEO CLIP)
QUEST: All right now, Peter, I'm not going to ask you to comment on that strategy. He is after all your boss, but you will agree, it is different
to any strategy you've worked for from a public policy official before.
NAVARRO: Certainly the tariffs are central to the strategy of this administration, and they work in different ways depending on the situation.
For steel and aluminum, we had to put tariffs on simply to defend our domestic industries against what was a flood and glut of international
imports into this country.
In the case of Mexico, for example, when we threatened tariffs, we literally got more done in two weeks on our immigration policy than any
previous President done in the last 20 years.
And I think, Richard, you might agree with me on this. Absent the tariffs that have been put in place on China, China would never have come to the
bargaining table and advanced this far in those negotiations, and as a fourth element of the strategy, we are seeing on a daily basis, new
investment come in from Japan, from Germany, other places in Europe, particularly in our auto industry, simply because of the concern of these
countries over the possibility of auto tariffs.
[15:15:25] NAVARRO: So President Trump is using the tariff strategy, I think brilliantly. It's a great defense of this country. It has a long
history as part of this country in terms of previous Presidents, and yes, he is doing it different than any modern President, but certainly not
within the context of the broad sweep of American history.
QUEST: Peter, it is always good, and we're always grateful that you give us the time that you do.
NAVARRO: It is a pleasure to see you.
QUEST: Thank you, Peter. We'll see you again before Christmas. Good to see you, sir. Thank you.
NAVARRO: Thank you.
QUEST: Now, as we continue tonight, and there's plenty there to digest from what we heard from Peter Navarro, we will be going through it and just
bringing some more back to you, as we go through the program today, particularly that call, down 30,000. He gave us a date or at least a set
of circumstances, when he says the Dow goes to 30, and the growth goes to three percent, which is actually, of course lower than the four percent of
the President Trump had called for.
But I think, we would all take three percent at the moment in the current situation. We need to continue a call for calm from China, boosting the
stock market. Why Beijing said it won't retaliate for now.
And stock up while you can. The world's largest hotel chain is going green and getting rid of tiny plastic toiletries. Ali Sorenson, CEO of Marriott
is with me later in the program. This is QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
QUEST: Welcome back. Call it "talk" was a hint -- a hint -- that China wouldn't escalate the trade war and the Dow was off like a rocket. Now
we're off the highs of the day, but even so through 329 points, up more than one and a quarter percent.
With the industrials, the techs, the financials shares leading the gain, we will show you the Dow 30 in a second or two to show you exactly who is
leading and lagging amongst the 30 stocks.
Matt Egan is in New York. There's the Dow 30 and the usual suspects, although the financials are doing really well. Cat is the best of the day.
And so it's really fascinating the way two days in a row strong gains.
[15:20:01] MATT EGAN, CNN BUSINESS LEAD WRITER: I think that's right, Richard, but I would say that the real justification for this rally is
pretty thin. I mean, just a few months ago, everyone thought there would be a trade agreement. Now we've seen the stock market take off, not on a
trade agreement, not even on signs of an agreement, but on low level talks between the United States and China about possibly having negotiations, the
bar has really been set low.
And meantime, those tariffs are still going up on China on Sunday, and we continue to have all of this evidence of the real world impact from the
trade war, including some disappointing earnings reports from retailers.
I mean, Best Buy lowered its sales guidance. They talked about tariffs, the word tariffs came up 35 times during the earnings call this morning.
And Abercrombie & Fitch has warned that its already really thin bottom line is going to be hurt by the trade war. So there is a little bit of a
disconnect here.
And also, I would just point out the bond market. I mean, the bond market is still flashing red, Richard, we saw the 30-year Treasury yield go down
to an all-time low.
Clearly the stock market and the bond market are not on the same page, and soon enough, we'll find out who is right.
QUEST: Well, that's absolutely. Stay with us. Don't go too far. We're going to squeeze the asset, as we say in the market. Because we've got
more for you to talk about on the question of the independence of the Fed. There's more juice to come from Egan.
Republican Senator Thom Tillis is calling for a hearing on U.S. independence of the Fed after the controversial editorial that the former
New York Fed President Bill Dudley was talking about. Remember what I said earlier when I was talking to Peter Navarro.
Dudley says the Fed can no longer remain apolitical. It shouldn't bail out an administration whose trade war is hurting growth. And he says, "If the
goal of monetary policy is to achieve the best long economic outcome, then Fed officials should consider how their decisions will affect the political
outcome in 2020."
In other words, policies that would ensure Donald Trump does not get reelected, my words not Dudley's. Join the conversation, row your phones
at cnn.com/join. Should the Fed try to block Donald Trump's trade war? Remember what we were saying? The Fed -- Donald Trump goes to war on
trade. The Fed has to decide if it's going to respond. If it doesn't respond, then the economy will go down the tubes. If it does respond,
arguably, it emboldens the President to do more. cnn.com/join. Vote and we'll see how that goes.
Larry Summers is calling Bill Dudley's op-ed the least responsible statement by a former financial official in decades. He was talking to me
on "The Express." The former U.S. Treasury Secretary said Dudley has it backwards when it comes to the independence of the Fed.
(BEGIN AUDIO CLIP)
SUMMERS (via phone): I think it is Trump derangement syndrome. The idea that the unelected appointed Federal Reserve should seek to use its
authorities to damage the economy, so as to influence the election against a sitting President is an appalling concept.
To offer it, when one is seen as someone who is a recent former part of the institution, and close to the institution, is to give aid and comfort to
all the Fed's most severe critics and to raise a question about the legitimacy of the Fed's decision making. Even Mr. Dudley previous close
connections with the Fed, and the idea smacks of dystopian fiction, like "Seven Days in May."
QUEST: Which I watched again recently is, yes, but what do you do in a situation where as Dudley says, "The Fed's accommodation encourages the
President to escalate the trade further increasing the risk of a recession." Many of us said when the last tariffs were announced, this was
purely designed to pressure the Fed to lower rates to tee up the economy. What should the Fed do in this situation?
SUMMERS: The Fed should stay out of any concept of political negotiation. And the Fed should judge what this is that is best going to serve its
mandate of full employment and/or maximum employment and stable prices.
And given the policies that are produced by the rest of the government, it should optimize those policies and possibly in very rare circumstances, the
Fed Chair should speak out if he sees any issue that is very important for monetary policy and the economy, but it's not his place to try to lever the
President of the United States' choices.
(END VIDEO CLIP)
[15:25:26] QUEST: Matt is with me again. Matt, what was Dudley thinking? I mean, his argument was really strong throughout his article, you know,
what should the Fed if it is put in the position of doing the President's work for him, and then write the last paragraph, "Trump's reelection
arguably presents a threat to the U.S. and global economy." I mean, he is entitled to say it, but --
EGAN: But, I mean, listen, he had a very legitimate message, and then he stepped on it completely. He is right. The Federal Reserve may be
enabling Trump's trade war, which is hurting the economy no matter what Peter Navarro says, but no one will remember that he said that because of
that last paragraph.
To suggest that the unelected Federal Reserve should somehow tip the scales of an election in a democracy is a reckless thing to say, and I'm not at
all surprised that now we're hearing calls for a hearing into this matter. And I really think it just -- it adds ammo for President Trump as he tries
to hold up the Fed as the reason why the economy is slowing.
And it adds ammo to all of the conspiracy theorists out there who are already very skeptical of the Federal Reserve. It's a really surprising
thing to hear from a former official from, Richard, what you know, is a very guarded, very careful, very deliberate institution.
QUEST: From a man who guarded his words carefully when he was in office, maybe it's the shackles that have been removed. Matt, good to see you,
sir. Thank you. Appreciate it.
EGAN: Thank you.
QUEST: Let's look at the market just to remind ourselves where we stand on this because the day is extraordinary in the sense that for no obvious or
apparent reason, we are at 308 points, which does suggest some buying and does suggest enthusiasm.
The British Prime Minister's move to suspend Parliament is causing some of his allies to resign. Its consequences and the likely next steps in the
uncharted Brexit territory of prorogation. I can't even spell it.
(COMMERCIAL BREAK)
[15:30:10]
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: There's more QUEST MEANS BUSINESS in just a moment. Top Tories are heading for the exits after
Boris Johnson suspends the British parliament. And Marriott is saying good-bye to travel-sized toiletries. The Chief Executive Arne Sorenson
will be joining me on this program.
As you and I continue our evening chat, and this is CNN, and here on this network, the facts always come first. Forecasters now think Hurricane
Dorian will strengthen to a category four storm by the time it reaches the U.S. East Coast by Monday. It means sustained winds of at least 200
kilometers an hour. A state of emergency has been declared in Florida, the storm's likely target.
The U.S. Justice Department report says that the former FBI Director James Comey violated agency policies when he leaked secret memos about his
meetings with President Trump. Now, the department's Inspector General says there's no evidence Comey released any classified information, so
prosecutors declined to charge him.
The top White House trade adviser says the U.S. economy can expect to hit 3 percent growth in a matter of months. Speaking to me on QUEST MEANS
BUSINESS, Peter Navarro says the Dow will surpass 30,000 under these conditions.
(BEGIN VIDEO CLIP)
PETER NAVARRO, DIRECTOR, WHITE HOUSE OFFICE OF TRADE: If we get the USMCA passed in September or early October, and if we get a 100 basis point rate
reduction by the end of the year, we will go over 30,000 and the Dow will ease.
(END VIDEO CLIP)
QUEST: A powerful South Korean industrialist could face a return to prison. South Korea's Supreme Court says a lower court made a mistake when
it suspended a bribery sentence handed down to the Samsung heir Jay Lee. The case is part of a huge influence peddling scandal that has brought the
country's former president Park Geun-hye.
Spanish football giant Barcelona have been drawn in the so-called group of death in this year's Champion's League; the biggest tournament in club
football. Barcelona will face Inter Milan and Germany's Borussia Dortmund in the toughest first round brute. The defending champions Liverpool are
in a group with Napoli and Salzburg.
There's anger just about everywhere over the decision by the British Prime Minister to suspend parliament and its spreading to his own ranks. The
leader of the conservatives in Scotland Ruth Davidson has resigned citing a desire to spend more time with her family and a conflict over Brexit.
Any minute before, another conservative George Young resigned being the leader in the house of lords, a very senior role in the government. The
opposition Labor Party says it will take first steps to stop a no-deal Brexit on Tuesday when parliament returns. Brussels is unmoved. Michel
Barnier the negotiator says "the EU will continue to protect the interests of all its citizens in all circumstances."
The former British Ambassador to France and Washington and Turkey and all other places -- Peter Westmacott is with me. A veritable Thomas Cook --
PETER WESTMACOTT, FORMER BRITISH AMBASSADOR TO FRANCE: Thank you --
QUEST: Of the ambassadorial ranks. But let's -- seriously, I mean, today, we get the reaction. But what can anybody do?
WESTMACOTT: Well, the reaction yesterday, when it was clear that what the Prime Minister was going to do was to ask the queen to prorogue, to suspend
parliament was, this is a very political move and it's not right to involve her majesty in this, but actually there's nothing that we can do to stop it
because the queen is fundamentally obliged to follow the advice she's given by her Prime Minister.
So, yesterday, nobody could do anything, it has gone ahead. Now, what's happening is that people like Phillip Hammond; the former chancellor of the
Exchequer and other former ministers who want to stop Boris Johnson going ahead with the possibility of no-deal Brexit have got much less time in
parliament to try to do that --
QUEST: Right, but can they do it? I mean, as I've been looking at the timetable, so Jeremy Corbyn says he will introduce on Tuesday, legislation,
or at least it has to go, it has to have a debate to decide to lift the rules, and now they have to get into a debate -- I mean, the speaker is
going to go along with this. But is there enough time to do it between now proroguing?
[15:35:00] WESTMACOTT: Between now and proroguing, very little. But of course, there was a bit of time that you would have after the queen's
speech before the 31st of October.
QUEST: Right, but you'll be hard pushed under parliamentary rules to carry over any preliminary work --
WESTMACOTT: You will --
QUEST: Done because you're going to lose it all when the parliament prorogues.
WESTMACOTT: That is right, which is why the talk of some fancy complicated bit of legislation is probably a bit far-fetched. Therefore, the other
options which include a vote of no confidence, which can be done very quickly, and if Boris Johnson loses a vote of no-confidence, then he's
either got to win one, a fortnight later or somebody else has got to take over as Prime Minister or he's going to have to call on a general election.
That's one possibility or parliament could go in a different election. It could for example instruct him to go and ask for an extension of the famous
Article 50.
QUEST: That's what they did the last time. But they did that by applying for a law. The problem of doing that is will Europe give it?
WESTMACOTT: Well, that is a very good question.
QUEST: Remember, France was very difficult at the last meeting in Brussels --
WESTMACOTT: Yes, I think it's by no means to give it, and even if they did give an extension because if they said, we need a bit more time to hold an
election, please, which is not a bad reason, there's no guarantee at all that Boris Johnson would accept, let's say, the conditions that the
commission might attach to giving that extension.
And then there's another possibility which is a bit of a nuclear option, which is that parliament could say, you know what? We're going to vote
against the continuation of the Article 50 process. Let's simply rescind the Article 50 application --
QUEST: There won't be the votes? There won't be -- look, I don't know -- I haven't sat down and methodically gone through all 650, but bearing in mind
what we saw in the Spring where they couldn't get a majority for anything. I question whether they'll be able to.
WESTMACOTT: I think it's very unlikely, but you ask me what can they do, it is one of the options. I think that is a long shot, but we should not
underestimate the sense of outrage that there is. It is not just confected anger as Jacob Rees-Mogg called it. There's a lot of people including some
Brexiteers who think that the Prime Minister is playing fast and loose with parliament and with constitutional procedure.
QUEST: I'm asking everybody, really, what do you think the chances are now of a no-deal Brexit? Now, one of our guests last night said 85 percent.
WESTMACOTT: Yes --
QUEST: There is a shift in perspective to where a no-deal Brexit is being seen as being the default now.
WESTMACOTT: I know. Well, it's been the default legally for a long time - -
QUEST: Right --
WESTMACOTT: As soon as Boris Johnson became Prime Minister, I was hearing senior Tories saying to me privately, we're up at 90 percent, no deal. I
wasn't at the 90 percent, but I think it is becoming more likely. However, I think that he's talking it up very deliberately in order to perhaps try
and scare the European side to give him something.
But here's the problem. Even if there was a move on the famous Irish backstop, that is not going to be enough to get the hard-line Brexit party
and Nigel farage and the Rees-Mogg's of this world to support a policy which is not no-deal. So, I think the chances of no deal are rising.
QUEST: Right, but get rid of the backstop and the Withdrawal Agreement passes parliament.
WESTMACOTT: Get rid of the backstop, but as people like Ian Duncan Smith, former Tory leader and others have said --
QUEST: You will attract enough of your own party.
WESTMACOTT: Get rid of the backstop, and that still not enough because we hate the deal is what a lot of them are saying. Get rid of the backstop if
you really do, but I don't think you can. But you know, if you did, that might allow you to get through the party with a momentum of a new Prime
Minister who's brought, you know, a whole new approach to it. That is possible.
But there's a lot of people in the conservative party who don't want that to happen.
QUEST: I'm not being flippant here when I ask this, how much of a mess is this?
WESTMACOTT: I think it's a very serious mess, right now, we're all excited about the constitutional bit of it which is improper and of course a great
deal of anger. Personally, I think it's a mess if we have no deal Brexit, because I think there's a huge amount of damage that will be done to the
U.K. and our economy.
It's not yet for sure, it is -- this is a Prime Minister who could, with the right vote then decide at the last minute, you know what? I've got a
deal, I've got a concession, I've got a version of Irish backstop, I've decided that for the good of the country, we're going to have a deal and
this is the deal it's going to be.
And because it's Boris Johnson and because he's been able to stand on his head in the past, it just might go through. But if it does become no deal
and I agree with you that the chances of that are rising fast, I don't think it's 85 percent, 90 percent, but I think it's above 50. That will be
a real mess for the U.K. and it's bad for Europe too.
QUEST: Always good to see you, sir --
WESTMACOTT: Thank you, Richard --
QUEST: Appreciate it, thank you. In Europe, stocks had a strong rally across the board, and that was on the back of trade hopes, Italian shares
were up almost 2 percent, that's obviously moved there, Giuseppe Conte agreed to a mandate to leave the parliament of diametrically opposed
parties. Let's see how well that works out.
A staple of much -- a stable of pretty much every hotel room is going away at Marriott. The chain is getting rid of travel-sized toiletries. Arne
Sorenson; Marriott CEO explains why?
[15:40:00] (COMMERCIAL BREAK)
QUEST: Our next guest has a million bedrooms, probably more by now, she'll put me right in a moment. The world's largest hotel chain taking a stand
against plastic waste. Marriott announced it's getting rid of these. You're all familiar with them, they are the ubiquitous travel-sized tubes
of shampoo conditioner and bath gel or bath gel conditioner and shampoo.
I'm never sure which order, I always manage to get the wrong ones and on many occasions have actually put hand lotion all over my hair. Instead,
they're going to be replaced with larger bottles. The chain affects roughly half a million rooms and 7,000 hotels around -- at the end of next
year.
Marriott says it will reduce plastic disposal by nearly a third. That's more than 900 tons annually. IHQ which owns Holiday Inn announced a
similar move last month. We're very pleased to have Marriott CEO Arne Sorenson who joins me from Washington. Arne, good to see you, sir. You
don't make these decisions lightly. Why did you decide to do it?
ARNE SORENSON, CHIEF EXECUTIVE OFFICER, MARRIOTT INTERNATIONAL: Well, it's obvious obviously in many respects. It's about a half a billion little
bottles every year that we're using today and sadly disposing them in the landfills. And so we've been looking at this for the last couple of years,
we've obviously got it already rolled out in about a thousand, what we would say a select service or mid-market hotels in the United States.
But we've been -- we've been wrestling the last few months with, how do we get this rolled out to all 7,000 hotels? It's about 1.4 million rooms. So,
you told me --
QUEST: Yes --
SORENSON: I correct you on this, I better correct you on it. But in 130 countries and around the world, we rather make sure we get the supply chain
right, we've got to make sure we get the branding right so that in luxury brands, it is a luxury experience.
And we've got to make sure that we get the tamper proof and other bits of this right so that it can be reliable, safe and so that we can recycle
these larger bottles that we use in the future, and we're really excited we own that --
QUEST: Right, I mean, you know, congratulations on doing it. How are you going to stop people stealing the larger bottles?
SORENSON: It's an interesting one. The -- I think in many brands, they'll be affixed to the brackets or to the wall, and so it will be a little bit
harder to walk out. You know, funny story, when we moved my mother about a decade ago from her town house into a sort of an independent living
arrangement, I found in a very large drawer in her bathroom, a full drawer of unopened hotel soap.
[15:45:00] Now, it won't surprise you to know that they were mostly Marriott-branded bars of soap, but here, you know, in this depression era,
a woman had collected soap from every place she stayed at and basically never used them, and we know lots of people take the toiletries from
hotels.
I don't think really, it's that big a deal to them, I think most of them will look at this and say this is much more sustainable, it makes more
sense -- and by the way, I can get more shampoo --
(CROSSTALK)
QUEST: I'm guilty --
SORENSON: Along here --
QUEST: Guilty --
SORENSON: Guilty --
QUEST: If you -- if you -- if you use -- if you come and stay at my apartment and use the spare bathroom, I think you'll feel quite at home --
SORENSON: Yes --
QUEST: With the condiments and shampoos. Arne, look, the issue -- the wider issue of sustainability, the airline industry is being clobbered.
The perception that they're not doing enough. Hotels are doing a lot, but I suspect you're next in the firing line for, are you doing enough?
SORENSON: Well, there's always that, and by the way, we will always be able to do better. This is -- this is a journey which does not have a
final destination in the sense that every year, we're looking at new opportunities.
I'll remember a decade or so ago, we talked to our paint suppliers and said if we agreed to buy only low volatile organic compound paint, can you
supply it to us on cost-effective terms? And they quickly said if you guarantee the volume, we'll deliver it at economic terms.
And we've been doing that with various things in our supply chain for the last decade or so, probably longer than that. We've had goals set up --
one of our goals by 2025, particularly germane to this is to reduce the amount of stuff we send to the landfill by 45 percent, nearly half.
We're obviously doing things around energy efficiency, water usage efficiency --
QUEST: What?
SORENSON: But we've got to do that and also make sure that we're not clobbering our guests over the head with choices that they don't want us to
make on their behalf.
QUEST: And that's really -- that is always the problem at the luxury end, isn't it? The -- you know, the -- you and I discussed this at various
symposium where, you know, you're going to have to at some point say, even to the five-star hotel guests, we're not changing your sheets every day.
It doesn't make environmental sense to do it or what I've always believed is you walk in to have your sheets changed, not rather than the other way
around.
SORENSON: Right, and that's essentially where we already are with all of our brands including the luxury brands. I'm yet to meet somebody who says,
I wash my sheets every night at home, every night at home. And I think people understand if I'm staying at some place for a couple of nights,
that's fine as long as the bed is made and tidied up --
QUEST: Yes --
SORENSON: That's perfectly OK, that's a change that's already been made. And, you know, I think there's things that we can do that are invisible to
the guests in terms of where we source energy, how reliant we are on --
QUEST: Right --
SORENSON: Green energy, but energy will be used in hotels where we can't deliver the kind of experience our guests want by having new energy there.
QUEST: Let me ask you, the business itself, there're so many economic head winds wherever we look, the trade dispute with China. Now, you, of course
are very big in China and aiming to get much bigger. You've got Brexit which must be giving your U.K. division conditions. What are you most
worried about on the geopolitical front at the moment?
SORENSON: Well, it all comes back to trade and obviously you can put -- you can put trade as a description around Brexit, you can put trade as a
description around the U.S.-China relationships or China's relationships with the rest of the world today, but trade is obviously something which
drives hotel demand and uncertainty causes anxiety in major participants in the economy which can in turn cause the economy to slow.
What we've seen so far has actually been fairly encouraging. Even look at London in the midst of all this --
QUEST: Yes --
SORENSON: Brexit conversation. London has been performing spectacularly well this year, why?
QUEST: Right --
SORENSON: Partly because the pound is cheap and Americans are there on vacation, and Chinese are traveling to Europe in record numbers. You look
at the United States and while year-over-year, performance is not very exciting in absolute terms, the economy is strong and hotels --
QUEST: Right --
SORENSON: Are performing well. But there's plenty of anxiety when you look at the horizon.
QUEST: Quick final question, I've got to ask you, how are you feeling? I know you're going through some pretty dramatic medical issues at the
moment, but you're looking -- you're looking well.
SORENSON: Well, thank you, Richard, very much. I feel great, actually, which makes this cancer battle a little bit surreal to me. We're about
four months into it, we've got another four or five or six months before we can turn around and say, did we accomplish what we needed to accomplish?
But our doctors are optimistic, I'm optimistic. I feel good and I'm just glad to be engaged in the battle and optimistic about the outcome.
QUEST: And we're with you too, thank you, sir, appreciate you coming in and I'll save the little bottles for you.
SORENSON: Thanks, Richard --
[15:50:00] QUEST: Good to see you, thank you. As we continue, the city of Hong Kong is on edge, fears of a possible crackdown are growing and
China says its latest military moves are routine. As the unrest continues to weigh on the people and the city's economy.
(COMMERCIAL BREAK)
QUEST: To send thousands of new troops into its Hong Kong garrison, and that's sparking concern. Beijing said it's just routine. But the move
comes ahead of a big march planned for this weekend, and the city is on edge worrying that the military might be deployed into Hong Kong's streets.
Meanwhile, heading towards the 13th weekend of unrest, businesses are feeling the economic fallout. In Hong Kong is CNN's Paula Hancocks.
(BEGIN VIDEOTAPE)
PAULA HANCOCKS, CNN CORRESPONDENT (voice-over): The food is just as good and the opening hours just as long. But business is bad at Man Kee; award-
winning noodle restaurant. The owner says people are afraid to eat out since police use tear gas on the streets of his neighborhood, Sham Shui Po.
SIMON WONG, OWNER, MAN KEE RESTAURANTS (through translator): In fact, the revenue of our business has recently dropped by 20 percent due to the
protests.
HANCOCKS: Empty tables are becoming more common around Hong Kong and at least 700 people lost their jobs after more than 15 restaurants shut down
in the last two months, according to an industry union. A recent survey by a restaurant workers union found 99 percent of those polled said their
business has been affected by the protests.
KWOK WANG HING, EATING ESTABLISHMENT EMPLOYEES GENERAL UNION (through translator): Many people dare not go out to dine due to the series of
protests, particularly foreign tourists and mainland Chinese tourists.
HANCOCKS: Thirty two countries have issued travel warnings of varying degrees for Hong Kong. Tourists are choosing to stay away, and that's
hurting the hotel business. A five-star hotel worker spoke to us on condition of anonymity.
UNIDENTIFIED MALE: Last year, 2018, July and August, the normal occupancy rate around 70 percent to 80 percent, right now, it's 50 percent occupancy
rate.
HANCOCKS: The hotel workers union says around 10,000 people have been affected, cost-cutting measures include asking workers to use up their
annual leave or take lower pay. That makes a big difference to hotel workers who typically earn the equivalent of less than $2,000 a month.
(on camera): Protests like this want to becoming almost a daily occurrence here in Hong Kong these days. There is no sign of them letting up, and
it's just adding to a sense of instability in the city.
[15:55:00] Some workers from hotels, airlines and restaurants are willing to stand with the protesters even though they know that there is a chance
it could affect their livelihoods.
(voice-over): At the Man Kee Noodle Restaurant, there's a sign apologizing for the inconvenience of the protests and asking patrons to avoid talking
politics, but sometimes it can't be avoided.
WONG: Lots of people ran to our restaurant to escape tear gas fired by the police. We were forced to shut down immediately.
HANCOCKS: Lost revenue or worse is fast becoming a reality for some businesses in Hong Kong, even those trying to stay out of the unrest.
Paula Hancocks, CNN, Hong Kong.
(END VIDEOTAPE)
QUEST: That's all, it's about trade, and for the second day in a row, we have a solid wall of green, although yes, and they did have losses at the
open, but none of that today, one little dip just in the mid-morning, but nothing to worry about, the Dow saw strong gains, China has indicated it's
in no rush to respond to President Trump's latest round of tariffs.
The Dow is up, everything is up, obviously, CAT is showing good gains, as indeed Boeing. Boeing has got its own problems -- those are the markets,
we'll have a profitable moment after the break.
(COMMERCIAL BREAK)
QUEST: Tonight's profitable moment. I have no idea why I take them. I've got bucket-loads of them at home. Shampoos, conditioners, I've got more
shoe horns than I know what to do with, and as for hand lotions, well, you can imagine. But I still do, and the news and the announcement that hotels
Marriott joining others like IHG to get rid of the little bottles and go for large bottles instead is entirely welcome.
There's a lot of cynicism about when hotels make some sustainable environmental announcements and I understand that there is truly part of
the benefit too -- lower costs of cleaning, electricity and all of that. But they also understand that they are part of a larger requirement to
reduce the traveler's footprint.
I've not met a CEO that cynically says I'm only doing it to save money. They are part of the problem and they know they're part of the solution.
And like you and I, they have families that also take part. So, congratulations to Marriott -- now, I'll just have to use the ones I've
got. 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. Great day on the Dow, the Dow is up, the day is done. Hit it! Hit it!
(BELL RINGING)
END
