BUSINESS-01
Mexico Trump Rally; Chinese Vice Finance Minister Says Trade Brings U.S. and China Closer Together; U.S. Stocks Boosted by Oil Rally; Greece to Receive $11 Billion in Bailout Funds; Netflix Faces Quota for European Content; Whole Foods Targets Millennials with New Market. Aired 4-5p ET - Part 1> Brian Stelter > Overveldt; Michael Froman; Walter Robb > hotter, we take a special in-depth look at the allegations being made by Mr. Trump and try to get to the truth over what's real and what's campaign hyperbole. Michael Froman, says trade deals aren't the problem, they are the solution. And China's deputy finance minister, says even Donald Trump can see the benefit in Chinese trade. Donald Trump's fundamental claim, that the U.S. is being ripped off and China is responsible. These allegations may be popular with supporters, but economists do not think they are 100 percent accurate. Up nearly 2 percent, 1.9 percent, oil prices are heading to the highest level in some seven months. Brent is just a few pennies away from $50, and it's all happened remarkably quickly. European stocks, they finished higher with consumer demand and business confidence figures from Germany. It was banking stocks which saw a boost on news of a breakthrough in the debt deal with Greece. The U.S. trade gap is growing and the biggest gap is with China. In April the U.S. imported more goods than it exported to the tune of $57 billion higher than previously reported. China's not yet signed on to or been invited to The Transpacific Partnership, the agreement between the U.S. and 11 other nations around the Pacific Rim. The United States hopes it will level the playing field for American manufacturers in an area of the world where low- cost manufacturing has put the U.S. at a distinct disadvantage. Netflix is unimpressed with the European Commission. The EU's top regulator is providing a quota for streaming services. Whole Foods wants to get more millennials pushing their shopping trolleys. Whole Foods is opening its first market specifically targeting the younger set in Los Angeles. > Entertainment; Government; Policies; Donald Trump; Youth; Whole Foods; Oil; Energy; Stock Markets> [16:00:00] RICHARD QUEST, CNN HOST: The bells are ringing. The cheering and I'm not surprised. Look at that green. Two days in a row. Straight out of the gate. The market rises sharply, and it holds on to those gains, and now the late -- oh. My word. I've come all necessary after that and that's what you call a thrilling gavel on Wednesday, the 25th of May. It may take me a while to recover from that. Tonight, Trump, trade and China. We have a special program on the numbers behind the Trump and trade rhetoric. We're also going to talk about the breakthrough in Brussels on Greece's debt. Belgian's finance minister will be joining us, and think of it as binge watching with a continental flair. The EU wants Netflix to get more European, and with an hour together we have so much to do. I'm Richard Quest. I mean business. Good evening. As the rhetoric between Donald Trump and China over trade gets ever hotter, tonight's GUEST MEANS BUSINESS, we're taking a special in-depth look at the allegations being made by Mr. Trump and trying to get to the truth over what's real and what's campaign hyperbole. With trillions of dollars in trade deals at stake, the U.S. treasury secretary has told CNN tonight he could do better in defending free trade. In California Donald Trump's holding a campaign rally a day after he called China the greatest abuser in U.S. history. Tonight, we delve into Donald Trump's views on China. We speak to the policy-makers on both sides of the Pacific. You're going to hear from the U.S. Trade Representative, Michael Froman, who tells me trade deals aren't the problem, they are the solution. And China's deputy finance minister, tells me even Donald Trump can see the benefit in Chinese trade. In a moment I'll ask the former Ambassador to China, Gary Locke, if Trump can make a deal with Beijing. What's it like negotiating with the Chinese. First though the U.S. Treasury Secretary has a message for the protectionist, he tells him you're wrong. Donald Trump and Bernie Sanders both say America's trade agreements will hurt the middle class and kill jobs. Jack Lew was speaking with Christiane Amanpour a short while ago and he said the U.S. is strong when it's economy is open. (BEGIN VIDEO CLIP) JACK LEW, U.S. TREASURY SECRETARY: I think if you look at the period since World War II, one of the things that has led the United States to have the influence that we have in the world is our leadership in the global economy. Now, the impact on U.S. workers, we know that trade-related jobs pay higher salaries. We know that the markets around the world that are growing will be less open to the U.S. if we don't have good trade agreements. We also know that the practices internationally are not going to meet the standards that we think are appropriate in terms of labor standards and environmental standards unless we have agreements that drive things in the right direction. In fact, we do, and like the transpacific partnership agreement, have an agreement that drives standards forward around the world. Now, your question about why that's not seen that way. Obviously trade is always a difficult issue because, you know, it's easy to look at when things are being sold abroad, and it's easy to inflame sensibilities as if that's the only thing happening. Frankly, we who support trade have to do a better job making the case that I've made, and also we have to pay attention to things like trade adjustment assistance so that workers who are adversely affected have the support they need to move forward in their own careers. Christine Amanpour, CNN ANCHOR: Donald Trump on trade says we are like a third world country. He describes your country, the United States, as being a third world country on trade saying that America makes the worst trade deals ever. How do you as Secretary of the Treasury respond to that? LEW: I'm not going to comment on any specific comments being made in the political season, but I would say that if you look at the details of what's in TPP, for example, The Transpacific Partnership, it has high standards in labor practices, high standards on environmental practices, health standards. What we would do when we approve TPP is we'll bring the rest of the world up to a higher standard, which we already meet. That means that will be more competitive. (END VIDEO CLIP) [16:05:00] QUEST: That's the scene from the U.S. Treasury. Now, Donald Trump is speaking in California after a chaotic day outside of a Trump rally in New Mexico. Protesters lit fires. They threw rocks and they smashed a door to the convention center where the event was being held. Inside, Trump stirred up the crowd by once again referring to a familiar foe, China. (BEGIN VIDEO CLIP) DONALD TRUMP, U.S. REPUBLICAN PRESIDENTIAL CANDIDATE: China, which has been ripping us off, the greatest abuser in the history of this country, China has been ripping us -- and I have many friends in China. They agree with me 100 percent. They can't imagine, they can't even believe that they can get away with what's happening. (END VIDEO CLIP) QUEST: So there you have Donald Trump's fundamental claim, that the U.S. is being ripped off and China is responsible. These allegations may be popular with supporters, but economists do not think they are 100 percent accurate. Let's start with the question of U.S. manufacturing. The claim is that jobs have gone, declined by more than 5 million since the turn of the century in 2000, which coincidentally is when China joined the WTO, the World Trade Organization, 18 down to 12 million. Even the Fed admitted two years ago, negative and statistically significant relationship and the change in U.S. policy and subsequent employment growth for manufacturing. So it seems like it's a done deal. China joins, manufacturing jobs go. China's responsible. Not so fast. The economist, Diane Swonk, says the job losses began well before China came on the scene. (BEGIN VIDEO CLIP) DIANE SWONK, FOUNDER, DS ECONOMICS: Really what we've seen is a decline decade in the making. It started back in the 1970s and accelerated into the 1980s and then continued in the 1990s, even as manufacturing had a resurgence. So laying this all on the door of China alone is sort of missing the point. We've been in a globalized economy for a long time, and what we've seen is that even as manufacturing jobs have dissipated, things like the number of vehicles produced in the United States is still very high. (END VIDEO CLIP) QUEST: So if manufacturing jobs loss is not necessarily because of China, well, Trump has frequently accused China of being a currency manipulator making it difficult for U.S. companies to compete. Look at the yuan, the Chinese currency, or the renminbi and you'll see how it has weakened to a five-year low. Today it's at a five-year low even though the course over the past ten years clearly did suggest that the dollar was in the ascendancy and, therefore, they were artificially keeping it down. But China spend billions trying to stop the Chinese currency collapsing lately, and Diane Swonk believes the currency manipulator doesn't tell the whole story. (BEGIN VIDEO CLIP) SWONK: Unfortunately, there's sort of a gap between understanding what the symptoms of the problem, is the trade deficit with China is a symptom of a much larger problem both in the U.S. and China, dysfunctions in both of our economies. And the way to have a more healthy deficit or a smaller deficit and pivot is for both of us to shift gears, which we don't seem willing to do. Instead, we're taking the path -- we're at a fork in the road. We're taking the fork in the road we know, protectionism, isolationism, closing down our borders, and we know how that ends. That's a path pock mocked with land mines. (END VIDEO CLIP) QUEST: So you've got manufacturing, and you have a currency question. If you put them both together, well, of course, you know where you end up. You end up with a trade deficit and over here I'll show you the numbers, the trade deficit. Last night Donald Trump said the trade deficit is $500 billion. The campaign website describes it as $300 billion. The actual number $366 billion last year. But not so fast. The U.S. has run trade deficits since the 1970s, before China was opened up to U.S. trade, which is why Diane believes it's not about bringing the deficit down, it's how you do it. (BEGIN VIDEO CLIP) SWONK: It's a ruse to say they are a currency manipulator. If they can manipulate their currency to where they wanted it, they certainly wouldn't have as much capital flight. They wouldn't be dealing with as many problems that they're dealing with right now. Ideally they be in a world where they move to market reforms and allow their currency to flow. But if that were to happen tomorrow you'd have a major devaluation in their currency and that would raise the ante on the people arguing with a market move that they were manipulating their currently. (END VIDEO CLIP) [16:10:00] QUEST: Let's get perspective on all of this. Those are the allegations. Gary Locke is a former U.S. Ambassador to China. He's also a former U.S. commerce secretary. He knows this subject backwards. He joins me now live from Seattle. Ambassador, very simply, Donald Trump, does he have a point that China, I'm not going to necessarily use the pejorative raping the U.S. when it comes to trade as he says, but certainly it's a bad set of deals. GARY LOCKE, FORMER U.S. AMBASSADOR TO CHINA: Well, actually, we in America have benefitted from our trade with China. For instance, China is America's number one export destination for all that we grow and process off of our farms. And so there are in fact millions of American jobs that depend on export of services and goods to China. QUEST: But you'll agree -- you will agree that the bilateral deficit with China is heavily weighted in the Chinese favor. LOCKE: Yes, we have a trade deficit with China, but as your previous speaker talked about and mention the it's much more complicated than that. We've actually had a U.S. trade deficit with the entire world starting in the `70s, well before China ever joined the WTO. We do have trade disagreements with China, but we've actually been taking them to the world court, the WTO, much more frequently and we've been winning many of those cases and forcing China to live by the rules. That's why, for instance, the TPP is such a strong trade agreement with other countries, which China very much is wary of because this trade agreement sets a very, very high standard in terms of protection of health and human safety, environmental rules and regulations, which China is fearful that someday will apply to them and other countries will apply to China and that's why it's important. QUEST: Well, I said the TPP, China is not part of the TPP. So at the moment China, you know, the argument goes, and we have to put this into the U.S. political context because both sides, both Clinton, Hillary Clinton and Donald Trump now say they oppose the TPP. LOCKE: Well, yes, they do oppose it, and I suppose we can say we can always do better but this is in fact a very high standards agreement addressing many of the concerns that people have raised about making sure that there's a level playing field for U.S. companies when they deal with producers and exporters and manufacturers and growers, farmers in other countries. That's what the TTP is trying to do to address these concerns. QUEST: Donald Trump has rightly or wrongly, he has -- he's latched on to something when he talks about China and he talks about currency manipulation. He talks about disastrous trade agreements. He talks about taking advantage, the biggest abuser of the U.S. Are you saying, ambassador, he is wrong? LOCKE: Well, I don't think he's being very accurate about it. I think he's over -- he's very dramatic about all of his statements, but the reality is that it's so much more complicated than that. We in America benefit from our trade, our exports of goods and services to China, and if we were to have 50 percent tariffs on everything that's coming from China, China would then turn right around and put similar tariffs on all the things we send and make and export to China. That would mean virtually no more Boeing airplane sales. No more GE turbines, caterpillar tractors and things like that that go to China or medical goods and supplies or environmental technology. So actually what he's calling for would actually end up in a trade war and everybody would lose in a trade war. And not only would things coming from China be much more expensive for everyday consumers, but a lot of the millions of jobs from our farms, to our factories and to our high tech industries would be lost, and so there would be a lot of jobs in America that would be at risk with a trade war that would happen under Donald Trump. QUEST: Do you think, because you've been -- you were secretary of commerce so you are well aware of the trade -- the significance of commercial trade with China and as ambassador when you were based in Beijing, ambassador, do you think the Chinese appreciate the rising level of anger that there is now in the United States over a perception of the U.S. is being taken for a ride? LOCKE: Well, I think the Chinese have always been aware of the many criticisms against some of their policies and that's why the Commerce Department has taken them basically to court. Imposed tariffs and sanctions on them for improper subsidies of many of their manufactured goods coming into China, and so forth, and so we've tried to level the playing field and they have taken notice. But, again, you know, what's really interesting is that many manufacturing jobs are actually moving back to the United States, because we have low-cost energy. We have a very adaptable workforce and the cost of labor is now a much smaller component of the cost of making an item, and as wages gun in China, they are losing that competitive advantage. The low-cost manufacturing work is now moving from China actually down to Southeastern Asia, to Vietnam and other places. [16:15:00] QUEST: All right, ambassador, thank you for joining us. You've given us that point of view. That's the scene from the U.S. perspective, so I now turned and I asked the Chinese Vice Minister of Finance about the fairness on the same points that you've just heard Gary Locke answering, the significance of this trade relationship between the U.S. and China. (BEGIN VIDEOTAPE) ZHU GUANGYAO, CHINESE VICE FINANCE MINISTER: We believe that the majority of the Chinese people and American people support very strong relations of China and the United States. Last year the trade volume of more than 558 billion U.S. dollars and the FDI already more than 4140 billion, and we see this very close connection by trade. And investment made in China and the U.S. more closely together. QUEST: Secretary Clinton and Donald Trump, they both believe that there is a trade imbalance, an unfair trade relationship with China. GUANGYAO: We have confidence to American people. We know that both Chinese people and the American people benefit from our relations. Even for Secretary Clinton, that's -- as you say, that's, Mr. Trump, they are two candidates they understand where the real U.S. interest. That's my personal feeling. QUEST: So you're not worried, for example, Donald Trump saying he's going to increase trade tariffs by 40 percent, 45 percent. GUANGYAO: If that's the U.S. government policy, we'll seriously treat that. If there's just one candidate for presidential election, we say, let's let U.S. people to decide. QUEST: China just can't be a factory of final assembly goods brought everywhere from everywhere else. And you know the issues there. What is the medium term? GUANGYAO: Must step aside and reform to enhance the quality of goods made in China, and to forcibly to benefit for the Chinese people. And the Chinese people enjoy much better income of growth, and then we also share the benefit with all people globally and that's our responsibility. So in this regard we particularly hold that's the China/U.S. We can work together to build our real model relations of our major economies, our major countries. (END VIDEOTAPE) QUEST: And over the next few days you'll hear more from Mr. Zhu on the questions of the Chinese economy and how the strengths and weaknesses of that economy and how internally it relates to debt. As we continue tonight, oil is flirting with $50 a barrel. The good times are far from rolling at Shell. The energy giant is continuing to cut staff by the thousands. It's QUEST MEANS BUSINESS. (COMMERCIAL BREAK) [16:20:35] QUEST: Up nearly 2 percent, 1.9 percent, oil prices are heading to the highest level in some seven months. Brent is just a few pennies away from $50, and it's all happened remarkably quickly. All of it comes as the U.S. says its crude supplies may have fallen by more than 4 million barrels in a week. So if supplies have fallen, this is one reason why you're starting to see an uptick in price, but look at the way brent has moved the oil prices. This graph takes us from November the 14th. Now this is the precipitous fall. It comes down. This is after the Saudis made their policy, and in `15 we say well and truly down. We get to the low point earlier this year. It's about 26 and change, I seem to remember, but now you start to get this climb back up again and brent has almost doubled from those lows that we saw back in January. It's still way down from the high point of over 120, but even so I draw the line across to 50 over here. It's a long way to make up. But it's clearly the momentum seems to be there, and the rise in oil prize gave a big boost to stocks. Straight out of the gate the market went up and actually with the exception of a small hiccup towards the end, nearly closed at the best of the session. What is going on? There's a perversion in the market when higher oil prices give a stronger DOW. We've seen this right the way through. Paul La Monica is here to explain this relationship. Why? PAUL R. LA MONICA, CNN MONEY CORRESPONDENT: It is a bit perverted, as you point out. I think one of the big concerns that people are going to have to ask themselves about going forward is consumers weren't spending as much as we thought they would when gas prices and oil prices were a lot lower than they are now. Are they suddenly going to start cutting back? We've had a lot of retailers reporting lousy results and giving weak guidance and higher oil prices aren't going to help. Obviously it's going to help some of the workers that may, may eventually get their jobs back. Too little too late for Shell. QUEST: But even though allowing for the fact that the oil and energy industry is a sizable part of the markets so, you know, I can't remember what percentage of the Dow is made up by the oil companies, so that would explain -- LA MONICA: Right, you've got Exxon Mobil and Chevron. QUEST: That's an element of the component within the DOW. But even so, higher oil prices do take a toll on the economy. LA MONICA: They definitely do. We've seen what happens when oil prices skyrocketed well above $100 a barrel. I think what people are trying to go figure out now is what is that happy medium? That proverbial goldilocks- ian type price that will be just right for everyone. It wasn't $28 a barrel, it sure as heck wasn't over $100 a barrel, maybe it's in the 50- 55ish range, we'll have to see. QUEST: The DOW at 49 and the DOW nearly at 18,000 again. Good to see you sir, again. LA MONICA: Thank you. QUEST: European stocks, they finished higher with consumer demand and business confidence figures from Germany and not surprisingly because of those numbers Germany saw the best of today with the Dax now over 10,000. It was banking stocks which saw a boost on news of a breakthrough in the debt deal with Athens. It will address Greece's request for debt relief. Eurozone finance ministers they went late into the night. They secured compromise. It not only gets the Eurozone on board. It gets the money to Greece. It keeps the IMF happy and it releases $11 billion in bailout funds. It also gives a road map for debt relief down to 2018. The IMF has agreed in principle to rejoin the bailout packages and Greece will receive the next installment in June. The Eurogroup president, Jeroen Dijsselbloem, sounded pleased with the outcome. (BEGIN VIDEO CLIP) JEROEN DIJSSELBLOEM, EUROGROUP PRESIDENT: I think it's an important moment in the long Greek program, an important moment for all of us. Since last summer where we had a major crisis of confidence between us, that confidence has begun to recover. (END VIDEO CLIP) Johan Van Overtveldt, the finance minister for Belgium joins me now on the line from Luxembourg. Minister, always good to talk to you. I'm just wondering when I look at this deal, I mean, how -- it's fiendishly complicated. How realistic is it? [16:25:00] JOHAN VAN OVERVELDT, BELGIAN FINANCE MINISTER (via telephone): Well, I totally agree with the Chairman Dijsselbloem. There's still much work to be done, first of all, by the Greek government but then also by the institutions as they are called, the IMF, the ECB and the European commission. It's promising that we get this deal together, but like I just said, there's still a lot of work to be done and a lot of things to be sorted out. Not only in terms of the debt restructuring that we have agreed on and also in terms of follow-up on structural reforms. The pension system and the labor market, the tech system in Greece and I think that's where the important issues are. We cannot get the Greek economy growing again if we can get the structural reforms right. We're on the right track but there's still a lot of work to be done. QUEST: OK, now, I looked at the debt restructuring proposals which are some way down the road. They are bordering on the arcane, this idea of smoothing out the maturities. I mean, I'll be honest with you, minister. I didn't understand them. Do you? VAN OVERVELDT: I think I understand them. And you may wonder whether I think or I understand them. But it's complicated. You are right, but nothing in this whole thing about resets has remained simple. Everything has gotten complicated as usual. Due to a lot of circumstances, but the important point to note here is that already a lot of things have been done in the past in terms of debt restructuring. The average outstanding time of the Greek official debt is already close to 30 years. So we can't do much more. We will do more but we can't do much more and, again, the debt restructuring is important but it's not the major thing. The major thing I cannot repeat that enough is the structural reforms. QUEST: But that structural reform is slow and it's on the way, I'll grant you, minister, but even you must agree. The new taxes, the continuing austerity, there is more to be done and the Greek simply, basically the Greek people are saying they can't take much more. VAN OVERVELDT: Well, that's a little bit of the history of the past with respect to these programs. Everybody is telling me or a lot of people are telling me why don't you -- why do you insist on these programs because they clearly have not worked in the past? The answer is quite obvious. The programs have never been applied properly. I mean, there have been cuts in spending, true. What has been lacking enormously is structural reform. So it has been an economy not on one leg but on a half leg, and it's really hard, as you probably know, to move around in an efficient way on half a leg, and that is what has been happening with the Greek economy, and the only way we can get the Greek economy again on a structural growth path and an agreed economy is structural reforms. QUEST: Minister, thank, sir. The line is getting a bit crackly. Structural reform is certainly the message we hear from you loud and clear. Next time I see you we can discuss exactly it a what those debt restructurings are really all about. As we continue tonight, Donald Trump says the United States is losing to China when it comes to trade. The man responsible for making those trade deals says the U.S. can't win if it doesn't play. We're going to talk more about Donald Trump and trade. (COMMERCIAL BREAK) [16:31:08] QUEST: Hello. I'm Richard Quest. There's a lot more QUEST MEANS BUSINESS as we continue. When we'll be looking at the continental content in European Netflix. They'll be a lot more of that if the European Commission gets their way. And the supermarket for millennials has opened in Los Angeles. It's called 365. It's owned by Whole Foods and the chief executive will join us to discuss why millennials need their own supermarket. Why don't they shop like the rest us do? Before that, this is CNN, and on this network, well, the news will always come first. At least ten people have been killed in a suicide attack in Kabul. The apparent target was a bus carrying court employees to the Afghan Capital in a neighboring province. The Taliban has claimed responsibility for this attack only hours after the group's new leader was announced. An audit shows that Hillary Clinton failed to follow the rules or inform key State Department staff regarding her use of a private e-mail server while she was the Secretary of State. The Clinton campaign says the secret secretary's e-mail practices were in line with those of her predecessors. President Obama has expressed his deepest regret to the Chinese Prime Minister Shinzo Abe for the murder of a woman in Okinawa prefecture. A former U.S. marine stationed at the U.S. air base there is believed to have been responsible for her death. (BEGIN VIDEO CLIP) BARACK OBAMA, U.S. PRESIDENT: We did discuss the tragedy that took place in Okinawa, and I extended my sincerest condolences and deepest regrets. The United States will continue to cooperate fully with the investigate and ensure that justice is done under the Japanese legal system. (END VIDEO CLIP) QUEST: Seven people died when a ship packed with migrants fleeing the Middle East capsized in the Mediterranean as these appalling pictures show. Sailors from the Italian navy saw the vessel turn on its side as the passengers shifted position on deck. Thankfully around 500 people were rescued. U.S. treasury secretary says a Brexit would not end the so-called special relationship between the U.S. and the U.K. In an interview at CNN, Jack Lew says any trade deal may have to wait if Britain votes to leave the union. (BEGIN VIDEO CLIP) LEW: We will continue having the special relationship between the United States and the U.K., whatever decision the voters of the U.K. make, but we think it's clearly a strong economic and national security interest to keep the U.K. in Europe. Now, we will continue working on trade negotiations with Europe either way. As the president said when he was in the United Kingdom a few weeks ago, any separate conversation with the U.K. would have to come behind that.
