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QUEST MEANS BUSINESS
The Nomination Of Brett Kavanaugh To The U.S. Supreme Court May Be Unraveling As New Allegations Emerge Against Donald Trump's Pick To Be The Next Supreme Court Justice; Investors Are Digesting The Fed's Rate Rise And Its Bullish Economic Forecast In A Decision With Implications For Lenders, Borrowers; Donald Trump Warns More Sanctions Are On The Way For Iran And That Is What Is Going To Be Affecting Those Oil Prices; China Says It Will Not Accept What It Calls Donald Trump's Unwarranted Accusations; Trump Holds Meeting With British Prime Minister; EU Commissioner: Brexit Needs Cool Blood; Daimler Names First Non-German CEO; U.S. And Japan To Discuss Bilateral Trade Deal; Peso Slides as Argentina Efforts New IMF Deal. Aired: 3-4p ET
Aired September 26, 2018 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
PAULA NEWTON, CNN INTERNATIONAL CORRESPONDENT: OK, you know how I like to short hand these things. I am going to call this market slack, but
technically, the Dow is on course to have its first gain of the week. This is what is driving the day so far, the Fed makes its move as Jerome Powell
says things look good, but not perfect. Oil prices meantime, still near record, Donald Trump warns of more sanctions on the run. And time to make
a deal, Britain's Prime Minister meets the U.S. President this hour. It's Wednesday, September the 25th, I'm Paula Newton and this is "Quest Means
Business."
Good evening. As always, we will have the day's business news for you in just a moment, but first tonight, the nomination of Brett Kavanaugh to the
U.S. Supreme Court may be unraveling as new allegations emerge against Donald Trump's pick to be the next Supreme Court Justice. Now, another
woman has now come forward accusing Kavanaugh of inappropriate behavior while she was in high school, while he and she were in high school. She
says she attended well over 10 parties where Kavanaugh was present and saw him quote, "engage in abusive and physically aggressive behavior towards
girls."
Kavanaugh will deny any wrongdoing in his testimony to the Senate tomorrow and President Trump is also calling the new claims ridiculous. Top
Republicans meantime insist, Thursday's hearing in Washington will still go ahead as scheduled. Following all of this for us is Kaitlan Collins. She
joins me now from Washington where I believe the President has had - if he hasn't already arrived from New York.
What is he making of these newest allegations? Of course, the lawyer, Michael Avenatti who is also the lawyer for Stormy Daniels had said that he
had these kinds of accusations that he would present.
KAITLAN COLLINS, CNN WHITE HOUSE CORRESPONDENT: He did. He warned and he warned that it would come out in the next 36 hours and of course, we see
President Trump now attacking Michael Avenatti directly for the first time since Michael Avenatti has been in the public eye representing that woman
who says she had an affair with President Trump and now that he has come out representing a woman who is accusing his Supreme Court nominee of
sexual misconduct.
President Trump is more than happy to go on the defense and go after Michael Avenatti, which we saw him do in New York at the United Nations
General Assembly while seated next to the Prime Minister of Japan saying that he was a third rate lawyer, saying he did not believe the latest round
of accusations made against Brett Kavanaugh, and that this is all part of a Democratic scheme to upend his nomination to the Supreme Court.
So that is what we are witnessing. President Trump is taking Brett Kavanaugh's defense into his own hands and that comes after we had sources
telling us that they didn't - that President Trump didn't believe Brett Kavanaugh was being forceful enough in his defense. He watched that
interview that Brett Kavanaugh did seated next to his wife on Monday night and he didn't think he was aggressive enough in defending himself.
So, now we have seen President Trump really take the reins into his own hands, going after several of the women who have accused Brett Kavanaugh.
The first woman saying, Christine Blasey Ford would have reported these actions to the authorities if they were as bad as she says they were saying
the second woman, Debra Ramirez she was intoxicated at the time of the alleged incident and now with the third woman, he is going after the lawyer
who is representing her.
So it is an all-out full frontal defense from the White House at this point to keep their nominee. What we are hearing from people who are with
President Trump in New York is that he is going to stand by him. Right now, he is still standing by his nomination. There is no intention to
withdraw it, and the thing is, we will likely hear more from President Trump even more than we've already heard today when he holds that press
conference here in New York in a few hours.
That is something that President Trump decided to do because he wanted to continue to be able to defend his nominee against what he says are just the
Democrats attempting to go after the President, not necessarily Brett Kavanaugh, but go after the President and try to upend his agenda here by
derailing this nomination.
NEWTON: Yes, and Kaitlan, I was - I was kind of mistaken there, he is still here in New York as you said, a lot going on this hour. He is
meeting with Theresa May in just a few minutes from now and then we'll have that all important press conference at 5:00. What's interesting here
though is that the President in the day had said that perhaps, Brett Kavanaugh wasn't aggressive enough; perhaps, he wasn't categorical enough.
If you take it away from the Oval Office and to those all important Republicans in Congress right now, in terms of those people that will have
to give that seal of approval to his nomination, what are they thinking about yet another woman coming up with these kinds of allegations?
COLLINS: Well, it really depends on who you ask. If you will consider Lindsey Graham, an ally of the President who is on the Senate Judiciary
Committee and will be there present for that testimony tomorrow, he is growing angrier and angrier the more that these allegations are emerging,
the more that they are increasing.
We heard from him saying that people are trying to portray Brett Kavanaugh as a serial rapist, and is a phrase he used multiple times saying that he
does not believe the claims and that if they allow the claims from someone like Michael Avenatti to derail this nominee, that Republicans deserve
their fate.
[15:05:11]
COLLINS: Now, on the other side of the aisle with someone who is undecided about their vote for Judge Kavanaugh, Senator Susan Collins, she is
offering no comment on this, but we did see her conferring with another senator, Senator Jeff Flake who is also undecided after this third
allegation and this third woman emerged to come forward with her story.
So the question is how they are going to feel? It is really a very small handful of senators, what is going to happen to Brett Kavanaugh. A lot of
them are already decided. The Democrats have decided they are going to vote against him, a lot of Republicans have decided they are going to vote
for him, but there is a small group that is undecided right now and it really depends according to them on what Christine Blasey Ford says
tomorrow.
It brings for us a whole new round of questions about whether or not this second accuser - the second and third accuser also deserve a chance to be
heard at this hearing and if it's even fair to Judge Kavanaugh, if he does have a chance at an open setting in front of Congress to rebut those
accusations as well.
So a lot of drama unfolding here in Washington, but for right now, the White House is sticking by their Supreme Court nominee.
NEWTON: Sticking by and trying to get him through, obviously, before those all-important midterm elections. Again, it remains to be seen as to
whether or not those Republicans will again start to side with the Democrats who are asking of course for that FBI investigation now into
three allegations yet unproven. Our Kaitlan Collins there with that update in Washington. Appreciate it.
We are going to turn back to what is that incredibly busy day of business news as well and it has a healthy side of politics to it. It is the final
hour of trade. Investors are digesting the Fed's rate rise and its bullish economic forecast in a decision with implications for lenders, borrowers -
yes, your mortgage - the global economy and President Trump who has bashed the Fed for raising rates.
Now, moments ago, the Fed Chair said he is doing what is best for all Americans and trying to ignore the political pressure.
(BEGIN VIDEO CLIP)
JEROME POWELL, CHAIR, FEDERAL RESERVE: We have just points of view which we debate extensively and come to a perspective and try to set monetary
policy to achieve maximum employment in the context of price stability. That is what we do. We don't consider political factors or things like
that and so, that's who we are, that's what we do and that's just the way it's always going to be for us.
(END VIDEO CLIP)
NEWTON: That was a fairly strong push back because you could hardly expect anything else from Jay Powell at this point. They are supposed to be
impartial. Let's get back to today's rate. That rise was the third this year. The Fed believes it won't be the last and that's significant. Rates
are expected to be about 2.4% by the end of this year with further increases both in 2019 and 2020.
Remember that December rate rise, perhaps maybe January is already baked in. Now rate rises prevent the economy from overheating. There is
supposed to be that stop gap measure against inflation. But they also make the United States a much more expensive place to invest. Remember, even
though the Fed makes its decisions independently, President Trump has appointed many of those decision makers. It's his job. That's the
Chairman, Jay Powell seen here, maybe perhaps in happier times.
President Trump criticized Powell's predecessor, Janet Yellen for keeping rates low. Then there's the Fed Board. There are - get this and this is
significant - still three vacancies and President Trump has nominated three people to fill those slots. They will join Jay Powell and two other Trump
nominees who have already been confirmed. There is just one other person on the Board, Obama-nominee, Lael Brainard.
Now, joining me is Joseph Gagnon, he served as Associate Director on the Fed Board. He is now a senior fellow at the Peterson Institute for
International Economics. We want to turn first to the politics. It's not something that we're used to seeing even it's a mouthful in terms of the
Federal decision. Could you expect Jay Powell to say anything else other than the fact that look, we try not to engage in politics even though
perhaps the President would like him to be more dovish.
JOSEPH GAGNON, SENIOR FELLOW, PETERSON INSTITUTE FOR INTERNATIONAL ECONOMICS: He couldn't say anything else, and in fact, I've sat through
those meetings, and they don't ever discuss political considerations. Of course, they are in the back of their minds obviously, but they don't
discuss them so they don't enter in the formal discussion.
NEWTON: I know that you have experience in this, obviously, in your former roles with the Fed, but you know what we're all thinking, you're not
talking about it around the table, but everyone's actions come under suspicion especially with that amount of pressure from the President.
GAGNON: Well, the interesting thing I think is that President Trump has named nominees for the committees, some have gotten through, some are still
waiting. But they are all people that are seen as reasonably independent, incredible officials. So, I think it's going to be hard for him because
once they are appointed, they can't be removed. They have a fix term.
So given the people he's appointed, I think it will be hard - I actually believe them when they say they will not let political consideration sway
them.
[15:10:05]
NEWTON: And likely why Jay Powell can speak with such confidence to that. I want to talk about the actual Fed rate itself. They have removed that
language saying they are accommodative. But why is that significant and what does it mean for basically this soft landing on interest rates that
everybody is hoping for?
GAGNON: Well, it means that they are getting within a margin of error, to where they think the neutral rate for the economy is, so they've decided to
remove that term because they couldn't be sure. They are still at the low end of what that range is, but they couldn't be sure, so they thought,
let's take that term out.
NEWTON: And a lot of people pointed to that though and just saying, "Why do that now?" Why do you think they decided to do that now? They didn't
need to.
GAGNON: They didn't need to and I wouldn't have been surprised if they waited one more time, so I think this maybe a slightly dovish message in
the sense that they are saying that there may not be that much farther to go, although interestingly, the actual path of interest rates are
projecting - if it's anything that's slightly bit higher than before, but not much.
NEWTON: And I want to get to that. You wrote in June that you thought that perhaps the projections on inflation were perhaps in your words, that
inflation will rise more than the FOMC projects in 2019 and 2020. You're speaking to the choir here. I still think they do not have a good read on
inflation, but what do you - what does your educated opinion tell you about inflation and how quickly it can really rise?
GAGNON: Well, I think I agree with you that inflation is going up more than they are projecting and there were some tough questions at the press
conference just now about that. Chairman Powell's answer was that he thinks that the effect of this excess overheating economy which is not that
strong, slightly overheating, he thinks that effect is very small and slow, that's his answer.
I think it is going to be a bit faster than they think and I think maybe - but, not overwhelming. I mean, I think even a year from now, I don't think
inflation will be at three, but it will be above two.
NEWTON: It will be interesting just to see how all of that flushes out as well as some people start to see those indicators. A lot to talk about
there. Thanks so much, we will get on with it here on QUEST MEANS BUSINESS but we hope to have you back. Appreciate it.
Now, we will turn to that reaction on Wall Street. The Dow spiked at 2:00 p.m. as the Fed announced its decision, but it's now settled back down to
reality. Our Alison Kosik is at the New York Stock Exchange. Now, Alison, in terms of the market reaction, this was quite tepid. It basically had
zero reaction. It was as quiet it seemed a few minutes after the Fed decision as it was a few hours ago when I was there. This is pretty much
what most had expected, right?
ALISON KOSIK, CNN GENERAL ASSIGNMENT CORRESPONDENT: This is really exactly what everybody expected. Now, we did see the Dow reach its highs of
session. We saw the Dow up around 113 points higher than where it was before the Fed announced. So we are seeing those gains certainly fizzle
out. But you're seeing the Fed decision really bake into the trade especially the trade today and the trade really throughout the past several
months.
Now, the expectations are the same as before the Fed came out with this announcement. There is going to be one more rate hike this year that could
happen in December and then three more next year. So really, no deviation from those expectations.
I did see a little bit of focus on that word "accommodative." There was some talk about what exactly did Fed Chair Powell really mean by that, but
it looks like everybody is kind of settling in, thinking that the word "accommodative" was something that was used during the financial crisis and
now that word has been picked out of the Fed statement, and now we're seeing that gradual increase of interest rates and the way many
interpreting are that - there's a lot of confidence in the strength of the U.S. economy that inflation is relatively stable at this point,
unemployment is low and we are seeing economic growth strong in the U.S..
So overall, you're seeing a positive reaction to the Fed decision, no surprises here. Paula?
NEWTON: And before I let you go, Alison, a good environment for IPOs right now and SurveyMonkey that went public certainly believes that it's a good
environment.
KOSIK: Yes, so this is a software company that uses digital survey and analytic services. It was priced at $12.00; it's right now trading at
around $18.00, over 50% of that IPO price. Interestingly enough, this is a company that is yet to turn a profit, but the interest in this IPO was
super strong and once again, you can see it in the way it's trading right now, 50% above its IPO price.
I talked with the CEO of SurveyMonkey, Zander Lurie, earlier today and talked about the company. I also talked about its all-star board. One of
the people sitting on the board, Serena Williams. Listen to this.
(BEGIN VIDEO CLIP)
ZANDER LURIE, CEO, SURVEYMONKEY: First off, she is a winner. This is a person who took on an industry 20 years ago and has been dominating it. I
think the embodies grit. I think grit is an attribute that Silicon Valley can benefit from. We're all on a journey in life and when you get knocked
down, nobody stands up and fights harder than Serena Williams.
[15:15:12]
LURIE: And that's why she is one of the winningest athletes of all time. Second, she's an incredible operator. She is savvy. She starts
businesses. She is an incredible marketer, and thirdly, she has a voice. She has been talking about issues that we care about deeply starting with
equal pay for equal work. She has used SurveyMonkey data to help highlight the importance of some of these issues that are dear to us.
So I am thrilled by Serena Williams' contribution. She has been an adviser and a friend to me and we are in great step with her on our Board of
Directors.
(END VIDEO CLIP)
NEWTON: And I'm sure, it will be really interesting to see what she has to say about that company going forward. Alison Kosik from the market, thanks
so much. Appreciate that and now, meantime, oil prices are still above $80.00 a barrel. Donald Trump warns more sanctions are on the way for Iran
and that is what is going to be affecting those oil prices.
At the U.N. Security Council, the U.S. President says countries will not be allowed to try and skirt those sanctions.
(BEGIN VIDEO CLIP)
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: All U.S. nuclear related sanctions will be in full force by early November. They will be in full
force. After that, the United States will pursue additional sanctions, tougher than ever before, to counter the entire range of Iran's maligned
conduct. Any individual or entity who fails to comply with these sanctions will face severe consequences.
(END VIDEO CLIP)
NEWTON: CNN's Michelle Kosinski joins me now. Interesting day here in New York as always. Still to come, we're expecting him to meet with Theresa
May and for him to have the press conference at 5:00. Before any of that happen, he spoke about Iran and these additional sanctions. It seemed to
catch many people by surprise especially those in Europe who were already trying to basically plot a way to work around the sanctions.
MICHELLE KOSINSKI, CORRESPONDENT, CNN: Well, yes, I mean, okay, so we have these sanctions that are going to kick in that the U.S. has already
announced in November and that will be on the oil sector, also banking. So these are the higher level sanctions that everybody has been expecting, but
they seem to be saying that there could be even more after that.
So it's consistent with what the U.S. has been saying that the pressure is only going to increase until they finally strangle Iran into changing its
behavior and coming to the table and forging some new deal with the U.S., while Iran is simultaneously trying to salvage with the U.S.'s closest
allies, what is left of the original Iran nuclear deal.
So yes, U.S. allies are worried. Iran is trying to say, "Well, we are going to find ways around this," but we're going to see the first round of
what the President is foreshadowing here in November and we all know that that is going to be severe, not only on Iran but on those allies that are
going to be sanctioned as a result of still doing business with Iran.
NEWTON: He has been quite struggling about this, basically saying, look, one way or the other, I am going to win on Iran. Has there been any light
between him and Secretary of State Pompeo on this. There doesn't seem to be at all, but in terms of the way they are working behind the scenes.
KOSINSKI: I think the way they presented - and Pompeo always wants to be closely, closely aligned with the President. Even if he says things and
sometimes in a more diplomatic way, well, he is America's top diplomat where he says things in a less harsh way. We know that he is working
towards that same goal.
So behind the scenes, we know there was this talk of the U.S. wanting to sit down with Iran and each side sort of says that the impetus was coming
from the other, but that is just not happening here. There is not going to be really any movement on this now, but we see Iran sitting down with U.S.
allies and trying to find ways around U.S. sanctions and the U.S. mode right now.
NEWTON: Those U.S. allies include France, the President with Emmanuel Macron and from what you're reporting, things didn't go very well.
KOSINSKI: Yes, I mean, there two were supposed to have a good rapport and they see eye to eye on things. At least they could have this good working
relationship where we know the President enjoyed that trip to Paris where he saw the big military parade, gave him some ideas back home and there was
talk of this bromance which a lot of people think is just overblown anyway to describe them.
But then they have this bilateral meeting on Monday night, so this is before the big speeches, the fiery speeches yesterday before the General
Assembly where apparently, according to our source, Trump just like he's done with the other U.S. allies, just ranted and vented about trade and how
the EU in his mind is worse than China on trade and we're told of the way Macron handled this as he pushes back some and then he moves the
conversation along, so it's gotten to the point where U.S. allies expect this kind of behavior and this kind of behavior and this kind of attitude
from President Trump even when they are meeting face to face.
But President Trump seems to have these talking points and these rifts that he goes on, even when it's a close ally. He just wants to hammer them
again on the trade issue. It's uncomfortable and unpleasant, but at this point, not unexpected.
NEWTON: And hanging in the balance. There are still a lot of tariffs involved between the United States and the European Union. Michelle,
thanks so much ...
[15:20:14]
NEWTON: ... so we are going to continue.
KOSINKSI: Thank you.
NEWTON: Still quite a few hours here following Donald Trump and later in the week with our other allies. Appreciate it. Now, Chinese propaganda in
a regional U.S. newspaper, the latest complaint from Donald Trump as the U.S. President launches a fresh tirade against the Chinese government.
China says it will not accept what it calls Donald Trump's unwarranted accusations. The U.S. President told the U.N. Security Council that China
is trying to interfere in November's midterm elections because he is beating them on trade.
(BEGIN VIDEO CLIP)
TRUMP: They do not want me or us to win because I am the first President ever to challenge China on trade and we are winning on trade. We are
winning at every level. We don't want them to meddle or interfere in our upcoming election.
(END VIDEO CLIP)
NEWTON: Winning on trade. The founder of New York steel producer, FJM Ferro says tariffs are unnecessary evil to deal with threats from China.
Joe Casucci is also the CEO of the company and he joins me now live from New York Stock Exchange. Thanks a lot for joining us.
I'd imagine everything that Donald Trump said today was music to your ears and you think that perhaps, it was a challenging industry before Donald
Trump put in the steel and aluminum tariffs has now become a heck of a lot easier.
JOE CASUCCI, CEO, FJM FERRO: Yes, hi, hey, it actually has been very interesting as of late. In my world, the contracts have been rolling in.
It has been a wonderful time as far as the way everything is coming in our direction, more is coming across, new jobs - it's been really an
interesting blessing, and also like a double-edged sword if you will because it's great that these sanctions and tariffs are involved in our
world, but there's also that creativity that we have to as a fabricator, as an installer her in New York that deals with the northeast region. We have
to be very careful in how we take care of these materials and buy them.
NEWTON: You know, right now, at the table, there's a lot of pressure from allies in Europe, in Mexico, in Canada to get rid of those - and Japan to
get rid of those steel and aluminum tariffs. What would you say to the President if you had a chance to speak to him because at this point, they
are trying to keep the two issues separate, but a lot of the people that are coming to the table who do these trade deals, they are saying, look,
steel has to be included.
[15:25:09]
CASUCCI: I agree. What I would say to the President Trump is, I understand your methodology, you want to keep everything inside the U.S.,
keep American jobs. However, we have to have free trade and we need to get some other competition coming out of the United States bringing imports in.
We do need that eventually.
Right now, I understand the tactic, but there is a little bit of a short term pain with a long-term gain aspect that he is doing here and we don't
know when that will end, so it becomes a little bit troublesome on our side to say, okay, these materials keep going up. We have to be creative.
Where is the ceiling and if that ceiling is met through imports starting to come in because we've exceeded that ceiling because of the way the mill's
pricing has increased and it may make a particular increase, we don't know as of yet.
NEWTON: And that is an interesting point and again, it's numbers that you deal with everyday. I want to get your opinion on this in terms of how
long do you think this should go on. I mean, right now, many people think that President Trump's strategy is good. That it is a good negotiating and
bargaining strategy, and yet, what would you say a year from now, two years from now?
CASUCCI: Well, I am experiencing - we're experiencing something interesting right now as well. So it's more now and then we'll see how it
is in about a year or so. Interestingly enough, I deal with fabricated materials which I service to our building owners here in New York and other
parts of the country, but we have tariffs that are placed to Canada, Mexico and other countries, but interestingly enough, we are not - fabricated
materials coming outside of the country into the U.S. are not tariffed.
So there is like an interesting catch. So a year or two from now, is this still going to be the case if these tariffs are still in play? That gives
us a sort of a disadvantage at the same time. So, outside companies from outside of the U.S. are able to compete with U.S. companies right now in
order to bring in fabricated materials. That means cut up drilled materials into the U.S. with no tariff implication. So it's sort of a
quandary for us like when is this - what's going on here?
NEWTON: I don't have a lot of time, but the point is you're saying you're for free trade, but it almost sounds as if you do want more tariffs put in
to those fabricated materials, steel materials coming into the country?
CASUCCI: Well, there are tariffs imposed on the raw material, so now, there are no tariffs on raw material that are fabricated coming into this
country. So it sort of puts a little bit of a question for us how do we handle that? I love the tariffs idea. I love keeping everything American,
but there are now outside forces coming in bringing in competitive materials. But on a different scale.
NEWTON: Yes, an incredibly complicated picture that we will continue to be affected obviously by the general economy. Thanks so much for coming in.
We really appreciate it. Now, moments from now, as we have been saying, President Trump is set to meet British Prime Minister on the side lines of
that United Nations General Assembly meeting. We will bring you live pictures in a moment.
[15:30:00] THERESA MAY, PRIME MINISTER, UNITED KINGDOM: Variety of topics, the relationship between the U.K. and the U.S. is a really special
one.
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Yes --
MAY: Even and during -- but there's much for us to talk about, specifically forward together. Particularly, obviously, the ambitious of
wide-ranging trade deal that we want --
TRUMP: Yes --
MAY: That we want to do between the U.K. and the U.S., but also security partnership and business partnership and those many challenges that we are
facing around the world and how we can together cooperate.
TRUMP: We'll talk about it and we'll come up with solutions and answers. Thank you very much everybody.
UNIDENTIFIED FEMALE: Thank you everyone, thank you guys, bye-bye.
UNIDENTIFIED FEMALE: Mr. President, are you going to watch tomorrow's testimony?
(CROSSTALK)
TRUMP: We'll see you at the press conference at 5 O'clock, thank you.
UNIDENTIFIED MALE: Thank you guys, thank you.
UNIDENTIFIED FEMALE: Thank you --
UNIDENTIFIED MALE: Thank you press.
NEWTON: Indeed, we will see the president's much anticipated press conference at 5:00 p.m. in New York. In the meantime, he begins his
bilateral meeting with Theresa May, one thing on the agenda is the fact that the U.K. would like a significant trading relationship in place with
the United States just after Brexit becomes reality.
More on Brexit. Now, to the European Economic Commissioner who says his job is trying to remain in his words cool-blooded during these Brexit talks
that have become incredibly complicated. And he says he's trying not to use in his words "fantastic words" early and what motivated all this was
that the French Finance Minister said it would be in his words "suicidal" to grant the U.K. a deal that seems better than EU membership.
I asked the commissioner, Commissioner Pierre Moscovici if the European Union will make an example of Britain to ward off the possibility of more
members thinking they can leave.
(BEGIN VIDEO CLIP)
PIERRE MOSCOVICI, FORMER FRENCH MINISTER OF THE ECONOMY, FINANCE & INDUSTRY: We are in a situation which we didn't choose. We respect the
vote of the British people, we regret it, for us. We could be much better off if the U.K. would stay inside the EU.
But the fact that the exit must not change the nature of the EU for those countries which will have the EU as their global identity, that's precisely
where we are. So, no, we are not trying to make any example, we're just negotiating in our best interest as Madam May is also negotiating in the
interest of the British people.
We've made progress, we still believe that an agreement is doable, but we need to intensify the talks and to find the right way to be there.
NEWTON: And in Europe and in what is the most difficult problem to solve right now.
MOSCOVICI: Probably the question of the Irish border is complicated, I can understand it's complicated as well for us because we want Ireland to be
fully respected, we want the Customs Union to function smoothly. We know that there's no appetite for any kind of physical border we can -- between
the two parts of Ireland.
And on the other hand, the British government obviously, doesn't want a part of the U.K. to be inside the Customs Union, that there might be some
technological solution. We are looking at it, but they need to be really safe, they need also to be a safe legally. And so, that's a complicated
issue.
But well, again, let's concentrate on solutions and then let's not raise too many problems or use too spectacular words.
NEWTON: Yes, but what you mentioned there is a problem that is obviously wholly significant and has been for many months, there are still no
solution. Have you seen anything creative on the table that would solve the Irish-border question right now.
MOSCOVICI: We're not yet there.
NEWTON: And is perhaps on the last point that the EU is having the most difficulty. I was struck by your comments in the French press recently,
you said "for the first time, I'm scared." And what you were talking about was national, was more -- used to talking about the political risk in
nationalism.
But why are you scared and what do you think is the economic risk in nationalism?
MOSCOVICI: Well, I'm scared as a politician, I am scared as a citizen because when I see that there are governments or parties in Europe which
are raising and which attack our liberal democracies which are illegal democracies in the sense that they're elected -- Mr. Orban is elected.
[15:35:00] But they are trying to destroy the rule of law, and they're trying to destroy freedom of the press, they're trying to destroy
independence of justice. This is not Europe as we've built it, not only since World War II but for centuries.
And I think that we are moving backwards in our history through some tragic times and we don't want to reap it that. This is why we've got European
elections next year in 2019, we need to fight nationalism. But for that, I mean, first to again show that we have a political, a social model which is
efficient, which is also made by values.
We need also to deliberate better, we talked about migration, we talked about Brexit and we talk also about inequalities which I said to meet the
root causes of -- there was troubles as well with migration and anger. And so we must be in the fighting mode.
You were asking about the economic consequences, that's another point to me, that first is politics and it's about the way Europe has been designed
and what Europe can bring to its citizens, and again it's open society, open economy and a very practical social model and we need to defend that
and promote that.
(END VIDEO CLIP)
NEWTON: Defend and promote that as you are trying to get a deal in some way, shape or form with Britain. Nic Robertson is CNN's International
Diplomatic Editor. Nic, I'm really going to lean on your experience at that Irish-border.
You have so many decades of it, you and I have talked before about it was always going to come down to this. In terms of actually finding solutions,
is there a way? Because right know, I kind of don't see where this is going. It seems to be the dividing line literally, a border that is
dividing line in trying to get a deal.
NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: You know, from the beginning, it's been the square peg that people are trying to get into a
round hole. And it's still an issue. It is the peg is no less square, the hole is no less round.
That you know, there was some hope a couple of weeks ago when Theresa May came up with her Chequers plan which offered frictionless border, it has to
be a frictionless border. Offered a sort of a solution that would go so way to meeting what the European Union wanted.
The European Union said, yes, and we can perhaps have some technical accommodations, the border doesn't have to be at a border. But all those
seems to have fallen in a way. Theresa May herself has said there's no real technical solutions that can work.
The difficulty is that is a land-border with Ireland that is going to be the European Union's land border with Britain, it doesn't have a land-
border anywhere else. And the difficulty is, Theresa May is propped up politically by 12 members of parliament from Northern Ireland who
absolutely do not want to see a reduction of that Britishness, i.e., what the European Union they feel wants us to put a border in the Irish sea.
That's how they interpret the European Union's current position that you don't have to have checks at the border, you can have them somewhere else.
So this is still all in the negotiation, but I go back to that point, no one is coming out with any language yet that fits not just what both sides
want, but the whole spectrum of people.
Politicians in her camp, Theresa May's camp and now the specter of what the Labor Party and Britain is laying at her feet.
NEWTON: Before we move on to Theresa May sitting down with Donald Trump, I want to put a fine point on that. You know, it is not secret that the EU
does not believe that Theresa May can get any deal around ratified. Is that -- are they right? Is that a clear affair right now?
ROBERTSON: You know, there are reports -- we don't have the details ourselves, but there are reports that the EU leaders have been meeting
behind closed doors, and actually for the first time on the agenda discussing the issue of what happens if there's a no deal.
We're also hearing that, you know, what Theresa May is going to hear from President Trump -- and we've heard echoes of this before that Britain needs
to get out of the European Union cleanly and completely to separate its regulation from EU regulations.
That way can get the best trade deal with the United States which is what Theresa May wants. But this is a problem at the border with Northern
Ireland, her proposal at the moment calls for regulatory alignment which means that goods can pass across that border because Britain's customs
regulations or alignment, Europe's customs regulations.
Products regulations are relying on both sides of the border, and this doesn't fit with what she'll be hearing from President Trump today. She's
been squeezed on many sides at the same time.
NEWTON: An incredibly difficult meeting going right now, and more to come for Theresa May. Our Nic Robertson, appreciate it. Now Mercedes Benz
slogan is the best or nothing. Apparently, the best person to lead the German company into the future is a Swedes history is being made at
Daimler.
[15:40:00] (COMMERCIAL BREAK)
NEWTON: Dr. Z or is it Zetsche Dieter, head of Daimler shares fell 1.5 percent in Frankfurt before recovering after the owner of Mercedes
announced a new succession plan, and that will see its first-ever non- German CEO, it is significant. Industry legend, Zetsche Dieter will step away in 2019, I'm looking for all my pronunciations here, to Peter and Ted,
they're my Swedish head of R&D, and that's significant.
The fact that he's the head of R&D, Ola Kallenius will take over, he's been tasked with leading a transition toward electric cars. CNN's senior auto
writers, the man I am turning to here to my left, Peter Valdes-Dapena is here for us. Let's discuss first this change.
You know, our producer Tom Foster pointed out to me that it is not just they're going to a Swede, but it's the head of R&D, and that, that is --
PETER VALDES-DAPENA, CNN SENIOR AUTOMOTIVE CORRESPONDENT: Yes --
NEWTON: Trend.
VALDES-DAPENA: Two things, head of -- not with a background in financing necessarily. Cars also was most recently responsible for development
including R&D of new models like electric cars. Obviously, a big push at Daimler and other European and U.S. automakers towards electrification as
we also simultaneously move away from diesel which was a big deal in Europe for a long time.
Mercedes just revealed their first production electric SUV that they're going to be coming out with soon. Audi also recently unveiled one and BMW
announced their plans for one. So the push is now on for real in that direction. And she's creating a new electric sub-brand for its cars.
NEWTON: And it's interesting, people going towards that electric angle, and yet, we have BMW yesterday have been saying that look, their forward
guidance is not looking so good. The stocks was down significantly. What are we seeing there in terms of the larger auto industry?
I have been saying that if we can't get a luxury brand like BMW in this economy to be guiding forward on betting profits focus --
VALDES-DAPENA: Yes, well, a lot of it -- there's a number of issues in Europe in particular with some new fuel economy regulations coming out.
Also tariffs are a big deal that are hitting BMW which I find ironic, which is of course the whole reason that we're fighting these trade wars
supposedly here in the U.S. is to bring manufacturing jobs here.
Mercedes -- rather, BMW's largest auto manufacturing plant in the world is Spartanburg, South Carolina. And they're being hurt by this threat of
tariffs for manufacturing in the U.S.
[15:45:00] But I'm sure not the outcome that would have been intended. Company should be punished for having a factory here in the U.S.
NEWTON: Anyway, that's certainly making headlines in South Carolina as well where everyone is puzzled. We will try and discuss what is the
breakout on tariffs everyday here in terms of how it will affect each industry. Now, announced just in the last few minutes, Robert Lighthizer;
the U.S. Trade Representative saying they're going for a fast track deal with Japan, it will still take months.
But they are going to start negotiating that trade deal between the United States and Japan. Be here, everyone knows that the holy grail for American
car manufacturers is Japan. Asia in general has been a closed market, but Japan in particular.
VALDES-DAPENA: Well, they will. Obviously, China is a big market there. Japan is kind of a mixed bag, even with fairly open markets, U.S. --
America is about a hard time making it there for a number of reasons including cultural ones and other reasons.
So there's been a tough market to crack as it is. I'm not sure how enthusiastic American automakers are about trying to sell their products in
Japan when they've got China to worry about.
NEWTON: OK, but how do you bring all this together when it comes to the automobile, manufacturers looking for. Because you know, apparently, the
surplus, the U.S., Japanese surplus is two-thirds cars, two-thirds --
VALDES-DAPENA: Yes --
NEWTON: Autos. How is all of that going to resolve itself unless you have fewer Japanese cars coming into the United States and more American cars
going to Japan --
VALDES-DAPENA: Well, one thing is, many of these Japanese manufacturers, Honda, Toyota, Nissan have very large factories in the U.S. So obviously,
wanting them to build more of the cars that they sell here in those factories has still built vast majority, most of them they sell in the
U.S., they build here. Well, want to do more of that.
But then also, aside from trade, it will be great to see U.S. manufacturers find a way to crack that market. Jeep for example, has been able to do it.
Jeep for example is doing pretty well in Japan.
Great to see other brands figure out how to make it their -- in markets where small cars for example are preferred. Something where U.S.
automakers cost-trading on trucks and SUVs often don't do so well.
NEWTON: Yes, and then that's been part of the problem, right? In terms of trucks, SUVs, things that don't really sell well in that Japanese market.
Peter, thanks so much, really appreciate it. A strike, a Central Bank shake-up rumors of a new deal with the IMF, just another week, the saga
that is Argentina's economy.
I'll speak to the country's foreign minister next.
(COMMERCIAL BREAK)
[15:50:00] NEWTON: Argentina's peso continues to weaken as investors eagerly await word of a new bailout from the IMF. President Mauricio Macri
is under mountain pressure and then a dote of bad headlines. Luis Caputo, Argentina's Central Bank governor of just three months resigned Monday.
Reports suggest there was friction between Caputo and the IMF. He raised interest rates to 60 percent, the highest in the world. And then on
Tuesday, commerce in Argentina was brought to a halt, a national strike opposing the president's reforms closed the main port and shut down public
transit.
At the United Nations meantime, Mr. Macri is doing his best to try and restore that all important investor confidence. He says his government
will pass a zero deficit budget to make the economy less vulnerable. The Argentine Foreign Minister is Jorge Faurie, he joins me now here in New
York.
And I thank you for your time, sir. Listen, everything I just listed there is a tall order, many people understand the challenges ahead. I want to
turn first to that IMF bailout. I know you're going to tell me you're the foreign minister, but I'm sure you know, do you expect that -- to those
negotiations to end and for that IMF bailout to be introduced really under terms favorable to Argentina.
JORGE FAURIE, FOREIGN MINISTER, ARGENTINA: I think that we are already finishing the negotiations and the dialogue with the IMF. Sure enough,
this dialogue we are having with you, I think that the Minister of Economy for Argentina who is now in New York too in a dialogue with the IMF and
Madam Lagarde, they will be coming with a news of an agreement that we expect to be favorable for the Argentinean people.
NEWTON: So if I hear you correctly in the next few hours, in the morning, but we could hear about this in the next few hours.
FAURIE: I think that it would be in this afternoon later on.
NEWTON: Perfect, great, we will take you at your word on that, and then we'll have the conditions that Argentina wanted, and that is for this
bailout to really be stepped up in terms of that infusion of cash. I have to ask you though, will that do the trick?
I mean, we've had many experts here on the show talking about the political atmosphere in Argentina, and that even if the economics gets sorted, that
the political atmosphere is quite challenging.
FAURIE: Well, the -- when you remake reforms, sometimes difficult for the people to accept. We know that there are lots of sacrifice to be done.
But though, the sacrifice we request to everyone in Argentina to do -- today -- to be a more competitive country, and much of all to be -- to have
a sound economy going on.
NEWTON: You are -- you and your cabinet continue to say that, and yet, the people of Argentina do not seem to want to hear that. We're talking about
a zero deficit budget which you know will be incredibly painful. What are you saying to your counterparts around the world to really make it known
that you do have a handle on the very difficult politics surrounding it?
FAURIE: What I'm telling to my counterparts in the world, and I get the answer from them that we have to pursue these reform because that is what
is going to put us on our feet, in our economy. We know that the sacrifice are very strong for all of us, for all the Argentinean people.
But we have to do so because we cannot spend more than what we earn. We have to cut our deficit and that is our principal aim.
NEWTON: But for Argentina, for people in Argentina, this is a recurring nightmare. We all have people from Argentina who have left the country,
never gone back, they are now -- the value has gone back, it's now dealing with the same nightmare especially when you look at the interest rates and
the peso.
What will convince them that this won't just happen again?
FAURIE: I think that we all have to faith in our own capabilities to go through this difficult time, but the proposal that we are doing is very
clear in life, if you spend more than what you earn, you are in a bad position. So we have to assume that we have to spend more that we earn and
we have to prepare ourselves to earn more to be able to spend.
NEWTON: With elections coming up though, it is quite a treacherous time, is it not?
FAURIE: Well, everything in life sometimes are trying proofs, and we are trying to go over this and the elections are at the end of this year, and
we are very clear in the faith that we have the -- all the measures we have taken now and in the first semester of next year will enable us to be in a
better feet for the election time.
NEWTON: And we will see if this IMF bailout does indeed give you a new chapter and better chapter to start in Argentina. I do want to ask you as
well about Venezuela, there has been some news on this today, certainly, you along with some neighbors in Canada have decided to refer Venezuela to
the International Criminal Court regarding human rights abuses.
But I have to ask you, I've been to Venezuela several times, most recently in May, it does not seem that Argentina along with its other allies and
neighbors, it's been able to do anything to influence the situation inside Venezuela.
[15:55:00] What can change in the next few months?
FAURIE: Madam, when you have a dictatorship, that the one which is now running in Venezuela, you have to assume (INAUDIBLE) a new, whatever you
can. What we have been able to do so has clearly shown that Venezuela is a dictatorship and that they are making gross violation of human rights in
the country, and that we have to fight whatever means we have at our disposal.
We want the Venezuelans to resolve their own problems by themselves, but we are clearly saying to the world, that there are gross violations which are
crimes against humanity. That's what has been going on at the international court in The Hague.
NEWTON: And what would you say to the United States with President Trump not ruling out the fact that he could even get militarily involved in
Venezuela. What would be your advice to him?
FAURIE: I think that what President Trump prefer is that we are willingly to help the Venezuelans in each of the different sectors of the Venezuelan
society to find a solution.
NEWTON: But does that mean that the United States should in fact if they feel they need to interfere militarily in Venezuela?
FAURIE: Look, that is something that is not on my possibility to decide --
NEWTON: Would you --
FAURIE: What are they going to do?
NEWTON: So, would you back that?
FAURIE: I'm sorry?
NEWTON: Would you support that, the United States getting involved --
FAURIE: I think that we have to help all the Venezuelans to fight for themselves, to resolve this situation in which they are. They have a
dictatorship and they have to do their best to change the situation and become a democratic country.
NEWTON: I thank you for your time as we all await --
FAURIE: Thank you very much --
NEWTON: The confirmed news on that IMF bailout, appreciate it.
FAURIE: Thank you, thank you very much.
NEWTON: Now, the closing bell is just moments away, we will be right back with a final look at the markets.
(COMMERCIAL BREAK)
NEWTON: Literally low, we were talking here, the market has dropped. U.S. stocks had see-sawed after the Fed announced its latest rate hike, but they
seem to have fully digested all that that means and then it fell hard, dragged down by those financial shares.
Investors feeling that those financial committees are not going to be doing so well. The Fed believes more rate rises are likely this year even though
the President Trump has bashed the Fed for raising those rates.
Jerome Powell said the Fed won't bend to political pressure, and now investors will be watching President Trump of course, he is due to hold a
press conference in the next hour from now and will likely be asked about those rising interest rates.
(BELL RINGING)
Then -- I can hear the closing bell there, that's QUEST MEANS BUSINESS, I'm Paula Newton, "THE LEAD" with Jake Tapper is next.
END
