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QUEST MEANS BUSINESS
Threats To Trade; Stock Market CEO; "Sputnik" Moment; World Economic Forum Brings Corporate Execs, Economists, And Political Leaders Together To Thrash Out Global Economic Problems; Federal Reserve Leaves Rates Unchanged, Continues QE2 Policy
Aired January 26, 2011 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN ANCHOR, QUEST MEANS BUSINESS: Indeed we are.
Russia won`t be brought to its knees. The Russian president tells the world, terror cannot win.
The State of the Union: What about the state of the U.S. economy?
And, oh, yes, while all this is going on the Dow Jones is over 12,000.
I`m Richard Quest in Davos, where it is cold, but I still mean business.
President Dimitry Medvedev stands defiant tonight. He says Russia is ready to do business at the World Economic Forum, despite attempts by terrorists to derail the visit. The forum marked Monday`s bombing in Moscow with a moment`s silence.
Then, it was down to business. Mr. Medvedev said that Russia has a key role in the global new reality, the theme of this year`s conference. He said it had been thought the terrorist had hoped he would cancel his visit. Nothing like that. And then Mr. Medvedev said Russia would not be diverted.
(BEGIN VIDEO CLIP)
DIMITRY MEDVEDEV, PRESIDENT, RUSSIA (through translator): They expected and hoped that the president of Russia would not come here to attend the forum, among other things, of course. This is the criteria used to choose the time and place for committing that act of terrorism. But they miscalculated. Russia is aware of its place in the world. Russia is aware of its responsibilities to its citizens and will comply with them and its responsibility to the world community. This is the reason why, on this day, I am speaking from this rostrum.
(END VIDEO CLIP)
QUEST: Russia still reeling from Monday`s terrorist bombings makes its pitch to Davos. Now to get reaction from the man once ranked as Russia`s richest, or one of them; the billionaire Oleg Deripaska knows a thing or two about going through a tough time. Head of RUSAL, the world`s biggest aluminum producer, who was badly hit by the financial crisis, but came back from the brink with a fortune that "Forbes" puts at over $10 billion. Oleg joins me now.
Good evening to you.
OLEG DERIPASKA, CEO, UNITED COMPANY RUSAL: Good evening.
QUEST: As you heard, the president, President Medvedev speaking, obviously the condolences went to the president, and rightly so. But his decision to come here, what message did you take from that?
DERIPASKA: I think it was important for him to show the efforts the Russian government will do this year, and the coming years, in order to promote foreign investment in Russia.
QUEST: That-those efforts, he talked for example, about somewhat obliquely, Khodorkovsky talked about citizens being convicted of crimes, he talked about no new taxes, he talked about creating an environment. But how far is that from the reality do you think?
DERIPASKA: It is a very difficult matter, but I think what is important is commitment. Yeah. And of course we have a-a very serious case yesterday, but in reality, you know, Russia is committed to have not just modernization and diversification of economy, but really part of the global involvement (ph) and openness. And, you know-
QUEST: But the difficulties that Russia faces, are balanced, aren`t they, by the huge resources that the country does have at its disposal, particularly with energy prices being very high. So, Russia, like China, is one of the real players here this year, isn`t it?
QUEST: How are you noticing people reacting to Russia, here, do you think?
DERIPASKA: Positives. They just want to know how to do business in Russia. You know, how to lower the risk and how to promote their products. I think it is important, you know, you mentioned China, because we have the longest border with China. Russia and China border more than 2,000 kilometers. And most of our enterprise, which like in Siberia, or Eastern Siberia, just 300 kilometer proximity to China. From Russia to Europe it is more than 16 days, from Siberia to Russia, from Siberia to Shanghai, just five days, by train.
QUEST: So creating the environment that allows that to thrive is really crucial, though, isn`t it? And how much more do you believe the Russian government has to do to create that favorable environment for business?
DERIPASKA: A lot.
QUEST: There is quite a bit to be done?
DERIPASKA: A lot.
QUEST: But do you think they have got the message that they have to do? That the money will not flow unless they do that?
DERIPASKA: Yes, and it was done not just because they suddenly in a year, it was not good result for the last year, because Russia was lagging behind, China, India, Brazil, in terms of foreign investment. And I think it was important they recognize rather quickly and start acting.
QUEST: Look, I can`t end this interview without just asking a straight forward question. You can say, yes, no, or I`m not going to answer. How accurate is $10 billion?
DERIPASKA: Very inaccurate.
QUEST: Very inaccurate?
QUEST: But it is more than the price of coming to Davos. Many thanks, indeed. I appreciate your time. Thank you.
DERIPASKA: Thank you.
QUEST: Now, it is only day one of the meeting of the World Economic Forum here in Davos and we have already heard from some of the big names in business. Here is a little taste of what we`ve heard in Davos.
KLAUS SCHWAB, FOUNDER, CEO, WORLD ECONOMIC FORUM: We don`t want to have this meeting here, as a meeting of despair. There are so many opportunities in the world. How do you fight the syndrome of a possible burn out? You fight it by new inspiration and by new self confidence.
MIN ZHU, SPECIAL ADVISER, IMF: We see quite a strong economic recovery going on last year, and going on this year, which is good. But downside risk remains and there are issues on the European sovereign debt is still very important for the entire market. And also, on the U.S. side, we`ll see very much the housing market and the very high unemployment rates. And we expect to see rather strong growth within the United States, but it can be jobless growth, which is also of concern.
LORD LEVENE, CHAIRMAN, LLOYDS OF LONDON: It is expensive here. Normally, in our part of the insurance industry, the second half of the year is tough, because that is when you get the Atlantic hurricanes. Last year started off with a big earthquake in Chile, then there was a matter of an oil rig, which went down in the Gulf of Mexico. And then, of course, we found there weren`t many hurricanes that did much damage in the second half of the year, which was good, until suddenly, we get these huge floods in Australia. So it was an expensive year.
NOURIEL ROUBINI, ECONOMIST: I would say that it is now a significant increase in oil energy and food prices. It is problematic, I would say, for three reasons. One is leading to a rise in inflation, especially in emerging markets, that are overheating. Secondly, the negative income effect for all the commodity importing countries, so it could reduce consumption and growth in advanced economies. And three, it is leading now to social and political instability. What has happened in Tunisia, is happening right now in Egypt, but also riots in Morocco, Algeria, Pakistan, are related not only to high unemployment rates and income wealth inequality but also these very sharp rises in food and commodity prices. So, it could be a source of actually political instability. Not only economic and financial fragility.
QUEST: Trust is becoming a scare commodity for businesses in the U.S. A survey by Edelman found that only 46 percent of Americans said they trusted business in 2010; down from the year before. Around the world trust in corporations rose by 2 percent.
Trust is an issue that Richard Edelman is here to talk about this evening. The chief exec and president of Edelman.
Richard, 46 percent of Americans say they trust business. How serious is that?
RICHARD EDELMAN, EDELMAN: Look, it is down from 54 percent from the year prior. It is an echo decline. In other words, there was a recovery last year, but this year we have seen a drop off again. And it is really because the fighting between business and government and also, I think the fact that the U.S. was the epicenter for corporate crisis last year.
QUEST: Yes, but what do they think? Do they think that business is just a bunch of crooks and villains? Or they have no morals and ethics, or both?
EDELMAN: Richard, they have bigger expectations for business. They want business to succeed. They realize government can`t fix the problems. And that business actually creates jobs. But it was a disappointing year last year.
QUEST: And if you take, for example, where business stands in the hierarchy, it is pretty low.
EDELMAN: It`s true. But there is a shining light here, which is that actually trust in CEOs rose substantially last year. And I think it is because there is a sense of accountability, if you don`t perform, you go. And also that in crisis, actually they want to hear from the CEO first.
QUEST: OK, what is the significance of this? Because we have always known that tax men and journalists come somewhere near the bottom of the professional league; but we still get on, and we pay our taxes and I still do my job. So what is the significance of this?
EDELMAN: People want to hear from those with credentials and authority. And they expect in a time of uncertainty, to actually have a clear story from someone who has the facts. And CEOs have made that grade.
QUEST: If we look at government now and the role that government is playing in this crisis, and particularly I`m thinking, obviously we`ve got this slow growth; we have this-still intractable problems. People are worried about these things, too.
EDELMAN: Governments role is as the referee. It cannot be as the primary actor. And I think that has been a distinction that was drawn clearly this year.
QUEST: In what sense, though? Because government, you say it is the referee. But it is more than that. Government sets the rules and everybody else plays by the game.
EDELMAN: But I think smart businesses aren`t waiting for government to establish policy. They are going out and saying, listen this is the right way to proceed. And then government hopefully enacts that kind of legislation.
QUEST: You have been coming to Davos for a few years.
QUEST: Nobody seems to really understand what this phrase, the "new reality", or "shared norm for the new reality" is all about. Do you?
EDELMAN: I think that the idea for business is to do something that is in the interests of society, as well as making profit. You have to have a sustainable business model. I think that is a very clear message, from all the CEOs who are succeeding. You know, whether it is GE or PepsiCo, or others, they have the idea now that they have to satisfy all stakeholders, not just Wall Street.
QUEST: And to do that, it is just about impossible. You are going to offend somebody. You are going to annoy somebody else. And you are going to fail in the third degree. Or am I just being too pessimistic?
EDELMAN: It is the idea of having long-term shareholder value, not short term. You can`t just make the quarter, burn the furniture in order to do that It is the idea of having something that is actually going to be in the long-run successful.
QUEST: OK. It is a pleasure to have you. I thank you for coming this evening.
EDELMAN: Thank you so much.
QUEST: We do actually have some news that I need to bring to you. This, into CNN, in the last 15 minutes. The Egyptian trade minister, that trade and industry minister, was Rachid Rachid, has canceled his visit to the Davos forum. Rachid is also acting investment minister. Did not give any reason for his decision to stay away. Egypt has been rocked by unprecedented protests against the 30-year rule of President Hosni Mubarak. You have seen the pictures on the network.
A moment away from hearing a statement from the Federal Reserve. No rise in interest rates expected. We could hear news on quantitative easing. This is a picture of the markets at the moment. It is a landmark day. The Dow is over-oh, it is easing back a bit, 12,005. We`ll talk more about that after the break. QUEST MEANS BUSINESS good evening. We`re in Davos.
QUEST: Welcome back, QUEST MEANS BUSINESS. We are live from Davos tonight. And we are watching for an interest rate decision from the U.S. Federal Reserve. Now, look it is usually pretty accurate. It comes at quarter past the hour. By my reckoning it is any second now.
While we wait for the Fed we do need to put some perspective on all the stories we are talking about and WPP chief executive Sir Martin Sorrell.
MARTIN SORRELL, CEO, WPP: Hello, Richard, what I do for you, freezing cold. Late in the evening after a long hard day.
QUEST: Yeah, yeah, yeah.
SORRELL: Go on.
QUEST: How many years have you been coming here?
SORRELL: Oh, a long time. More than I care to admit, 22 years actually.
QUEST: 22 years?
SORRELL: Yes, unbelievable.
QUEST: And you are still-
SORRELL: When Davos was very, sort of much smaller. Actually much more intimate. And it has lost its intimacy. I have to say has got too big.
QUEST: You have said it is too big.
SORRELL: Absolutely. I`ve said that to Klaus for the last two or three years. I think something should be done about it. I think it is just too many people.
QUEST: But it is a bit of a miss that it was ever three people in a room just with a cup of coffee and a schnapps.
SORRELL: Well, that was, you know, that was in the smoke filled rooms. And that was dangerous. I mean, the fact that it got bigger and more open and more transparent, I think, was good news. But I think the scale is too great. And it has lost its intimacy, to some extent. And we used to have much more in-depth-like most of life, it has become a little bit too superficial. And I think one has to dig a bit deeper. So-
QUEST: Of course, you in-
SORRELL: My mother used to say good things come in little packages. That`s right.
QUEST: Of course, your industry bears no responsibility for the ephemeralization of society?
SORRELL: No, absolutely not. We don`t believe in super consumption anymore. We believe in responsible consumption.
QUEST: That is your program (ph).
Let`s talk about your meeting today. Because you had a one-on-one, you had a private meeting.
SORRELL: We had about a 50 to one, actually.
QUEST: 50 to one, fine.
SORRELL: With President Medvedev.
QUEST: What did he say?
SORRELL: A private session of the International Business Council.
It is Chatham House rules, so I can`t tell you, thankfully. But I had-I could say-I should say that he was extremely realistic, open, transparent, and very frank about how Russia is trying to develop foreign direct investment in Russia.
I`m a bull on Russia, a bull on Eastern Europe. We are seeing a shift in Europe to the East, to Russia, to Germany, and to Poland. That triumvirate is a very powerful set of economies that is eclipsing, actually, the power of Western Europe.
QUEST: The Fed has just announced. Has apparently left interest rates unchanged. That is not a surprise.
SORRELL: That is not a surprise according to you.
QUEST: No. Well, not a surprise.
SORRELL: Right again.
QUEST: If we take that decision by the Fed.
QUEST: Bearing in mind the State of Union last night.
QUEST: What do you make of this in the U.S. economy and the need to cut the deficit, but at the same time invest?
SORRELL: Well, it was quite interesting. We had a session this morning, Zumin (ph), and Nouriel Roubini, and three CEOs. And what came out of that was a concern amongst the two economists there, one and IMF economist in China, that about inflation, that the one thing could knock off course, for a reasonable year. I mean, Nouriel Roubini was probably a little bit less doctor doom and doctor death than usual. That would knock us off course is inflation and a rise in interest rates.
We then had a private session with Larry Summers, Martin Wolf (ph), and another Chinese economist, Yi Dakou (ph). And they were more optimistic actually, generally. And so, you know, I think the gorilla in the room, as I try to put it this morning, is the U.S. deficit. We are not going to get anybody dealing with the U.S. deficit in front of the U.S. general election in 2012. So, 2013 is going to be an interesting year. And the State of the Union message was very philosophical and about a vision, it did lack details, which is understandable, because that is not the role of the State of the Union. But the detail-the devil will be in the detail.
QUEST: As we look, though, at the complexities, because everybody is obsessed by China at the moment.
QUEST: Everybody is obsessed by these emerging markets. You just now have talked about Germany, Poland, and Russia, as being-
SORRELL: Well, Germany would be in the older category.
QUEST: Right, but what part of the world do you like most in terms of where you want to-
SORRELL: I love football analogy. Division I, is BRICs, and next (ph) 11 and sivits (ph), as the economists call it. There is Division II, is the U.S. and Germany. Don`t underestimate those big economies. Division III is Western Continental Europe, France, Italy, Spain, U.K. U.K. maybe be getting into Division II, because they at least they have tried to tackle the deficit. And Division IV is Japan. Japan, shows no signs of changing. It has been going like this for almost 20 years. And we don`t see much response there.
So that is how we would grade the world. And by the way that is a reflection of our clients thinking about where they are putting their money and where they are putting their investments.
QUEST: Martin, many thanks.
SORRELL: Thank you, Richard. A pleasure as always.
QUEST: What an extraordinary scarf.
SORRELL: This came from the European Championship Final between Manchester United and Chelsea, where? In Moscow.
QUEST: Many thanks indeed. Next year will you invite me to one of those private meetings?
SORRELL: I don`t think. That is up to Klaus and the IBC. We keep the media out.
QUEST: You said that with real-you said that with real--
SORRELL: With real relish.
QUEST: With real relish.
Lovely to see you.
SORRELL: Thank you. Thank you very much.
QUEST: Thank you very much.
Let me remind you of the Fed decision that took place. The Fed, the Federal Reserve, has kept interest rates in the zero bound, as they are at the moment. They say, "to promote a stronger pace of economic recovery and help ensure inflation at levels consistent, the committee has decided to continue expanding its holding of securities." That is in other words, QE2 continues. There had been thoughts, and fear, that they would actually take a pause of QE2. But there is a key phrase it will continue, in particular, the securities to $600 billion of longer term Treasury debt.
The markets and how they are reacting to what has taken place at the moment. You can see the Dow Jones on your screen. It is now up 28 points, at 12,005. So the gains that we have seen are being maintained, but they haven`t suddenly roared ahead for the moment. All eyes, of course, will be on how this will play out. Maggie Lake is in New York.
Maggie, I`m reading the decision. You are slightly ahead of me with the decision. No surprise on the rate, but they are firm that they are continuing with QE2.
MAGGIE LAKE, CNN FINANCIAL CORRESPONDENT: Not only are they firm about it, Richard, but it was a unanimous decision to keep the stimulus in place. There had been a little bit of question about that. We have four new voting members on the board and these regional bank president, the way the Fed works, it rotates. Four new ones on and people weren`t sure whether any of them were going to step out in dissent. The fact that they didn`t and they are unanimous, things are steady as she goes. It is exactly what the stock investors wanted to see.
You are right. There is not any big spur of buying, but no one expected that. What they were more worried about was some sort of change, some idea they might start to withdraw some of that. Or sound really hawkish about inflation, that would have spooked the markets. So this very much in line with what has been happening.
Let`s take a look at the Dow, in fact, because we have gotten over that 12,000 mark. Not important except to be one of those round psychological levels, but they do matter. We dipped just below it, right now. But it has been a sort of steady creep up there. And a lot of people are saying that the reason the markets haven`t pulled back more is because you have the supportive policy coming from the Federal Reserve. So stock markets looking for that to continue and it seems it will.
When they are talking about the economy, Richard, it is a delicate balancing act, because they want to show improvement where they see it, but they also don`t want to sound too optimistic, that would have lead market participants to believe that it doesn`t need the help. And they would start to withdraw. They talk about labor markets. Housing markets remain weak and insufficient business spending. So there are clearly weak spots, and that is what they are targeting.
QUEST: All right. I`ve got to jump in here, Maggie, because when you factor this in to the fears that there is a second downward leg, on the housing market, then of course-and of course, the states themselves as they head towards their own severe budgetary restrictions. Maggie, the U.S. economy is grown because of stimulus.
LAKE: Right. Well, and that-and Bernanke is the first to say that. Listen, we need to keep the support in there. Remember there are a lot of forces in the U.S. worried about what the Fed is doing. They don`t like it. They want to see them step away, get back to a more traditional role. Then Bernanke has been arguing, we are not ready yet. There is still a lot of weak spots. And Richard, really what the Fed is watching a lot of people say, even more than housing is that unemployment rates, we have a dual mandate here, price stability and employment. And so they are watching that and saying the economy is not ready. They think it is taking hold but it is not there yet. And Bernanke, in particular, wants to make sure the chairman, that they don`t do something too soon that would put that at risk.
QUEST: All right, Maggie. Maggie Lake is in New York.
Now across the Atlantic, the U.K., we know, voted to hold off on interest rates going up for the time being, but as we got the minutes from the MPC, the Monetary Policy Committee, the calls for rates to go up are growing. Now Andrew Sentence, who has been on this program, has been the only member of the MPC to vote in favor of raising the basic rate. Now he`s been joined the newcomer to the committee, Martin Weale. It comes a day after we learned the U.K. economy`s surprise contraction because of the bad weather. Rising inflations are a particular cause for concern. The minutes suggest inflation could go up to perhaps 4 to 5 percent.
In London the FTSE finished almost 1 percent up on the day. One company that was down 1 percent was Barclays, who announced they are planning to lay off 1,000 workers in its British retail branches. Solid day on the Continent. I think if you look at those numbers you see the Xetra DAX had the best of the session.
Ovation Davos style, the world`s power brokers take time out from talking. They honor a survivor. You`ll probably know him better when he sings a tune. Well, that is being disrespectful, it is an opera singer of great voice. You`ll hear from Jose Carreras, after the break.
JOSE CARRERAS (SINGING OPERA)
QUEST: By jingo, you don`t hear that every year at Davos.
Magnificent grace notes there from the Davos newcomer, Jose Carreras. The world knows him as one of the Three Tenors. Jose Carreras has also beat leukemia and he is helping others. In fact, the Three Tenors concerts were conceived originally to raise money for his leukemia foundation. Now, today, Davos honored Jose Carreras with its Crystal Award. I was privileged to ask him how he felt on this particular ovation.
JOSE CARRERAS, OPERA SINGER: Well, I can tell you that for me it is wonderful when I receive any recognition because of my singing career, because of my profession, but it is, of course, it is even more touching for me and I appreciate it more when the awards they come because of my work against leukemia, to fight against leukemia; this is a very important goal in my life and I am very proud every time people recognize that.
QUEST: Anybody look at you would say well, it is a magnificent thing that you are doing, and that foundation that you have created, the money you have raised, and the help that you have given. But I suspect, from your point of view, this was something you felt you had to do. It was something you wanted to do.
CARRERAS: Well, after personal experience, of course, you are sensitized, (ph) and you feeling that with the people, with science, with people that supported you during your process, here, the process of your illness. And you are feeling in debt. And I thought the best way possible to pay such a debt is creating an initiative, in this case a foundation, that fights against the same disease I was suffering from.
QUEST: And as we look at the way in which artists do take on board social changes and social issues, I`ve been to Davos a few years, I can tell you, so. And you know, whether it was Angelina Jolie, or somebody else on the-there is an importance when a famous person puts their name to a cause.
CARRERAS: Well, I think that the popularity of an artist depends on which, in which field, of course. But the popularity of an artist, I think it helps. And it of course, no wonder there are so many artists that are involved in social causes, because the sensitivity of an artist, and because they go around the world.
QUEST: You ever wonder why people come to Davos, it is the sheer range and variety of the people that you will meet.
On CNN, in 30 minutes from now, you will meet the actor George Clooney who passionate about focusing the world`s attention on the situation in Sudan. He is going to talk about what he saw on a recent trip to the African nation, "PIERS MORGAN TONIGHT". That is in 30 minutes from now.
When we come back on QUEST MEANS BUSINESS, we`re going to be talking about the issue of trade, the Doha Round.
But before we go to that, I`ll have a look at our humble surroundings, masked by this beautiful cold, Davos Swiss skyline.
Back in a moment.
QUEST: Hello, I`m Richard Quest, QUEST MEANS BUSINESS.
This is CNN.
QUEST: And where, well, the news always comes first.
And we start in Egypt, where a government crackdown is underway against protesters. The Egyptian authorities have announced an official ban on rallies. Defiant demonstrators returned to the streets for a second day. They`re throwing firebombs and rocks. Police have responded with teargas, beatings and reportedly hundreds of arrests. Protesters are calling on President Hosni Mubarak to step down.
The Egyptian trade industry minister has canceled his visit to Davos because of what`s taking place.
More anti-government protests in Tunisia. Riot gas -- riot police tear-gassed demonstrators in the main government quarter in the city of Tunis. The protesters want the new interim government purged of anyone linked to the ousted president and they want his party disbanded. The media says thousands of people also took to the streets in Tunisia`s second largest city during a general strike.
Top transportation security officials in Russia are out of a job tonight following Monday`s airport bombing. Russian President Dmitry Medvedev sacked the head of the transport police for the region that includes Moscow over security lapses at the airport. Thirty-five people were killed. More than 100 were wounded in the blast. So far, there`s been no claim of responsibility.
President Medvedev has been in Davos, as you`ve heard on this program. It was an abbreviated visit. The Russian leader decided to shorten his trip because of the attack, but still delivered an opening speech and is heading back to Moscow. Despite the bombing, Mr. Medvedev said the financial summit was too important to miss completely.
Other than really big issues, of course, is always trade. And trade minister, likewise, are not missing Davos. They will make a final push here to help conclude the long-running Doha trade talks. At least they`ll try and give it a new oomph. The situation is becoming critical. The need for agreement is crucial. Without it, according to some, trade barriers are going up around the world. The shutters are coming down on growth. In 2010, some warned we were already entering a currency war with the potential for a trade war.
Last night on this program, Ben Verwaayen, the chief executive of Alcatel-Lucent, told me that failure to make a deal on Doha is not an option.
(BEGIN VIDEO CLIP)
BEN VERWAAYEN, CEO, ALCATEL-LUCENT: We cannot go back to protectionism. And you can see a lot of rhetoric around the world that if we`re not very carefully, people are going to do their own things. They`re going to close the curtains and look in -- inside. We need to get the Doha rounds now concluded.
(END VIDEO CLIP)
QUEST: Now that was Ben Verwaayen.
With me is the director-general of the WTO, who says a deal can be done, but maybe not this year.
Pascal Lamy has been talking to trade ambassadors.
What are they saying and what are you saying about when a Doha Round can be reached?
PASCAL LAMY, DIRECTOR-GENERAL, WORLD TRADE ORGANIZATION: Well, what matters, at the end of the day, is what the big bosses say. And what the G20 leaders have said, last November, in Seville, is that they want it to be done this year, using what they call this window of opportunity now.
Since then, the mood in Geneva has changed. People are back to work. There`s quite a lot of energy in the system. Whether or not this will result in a conclusion this year is still unclear, but the mood, the odds are much better than they were last year.
QUEST: Are you more optimistic?
LAMY: I`m never optimistic. It`s a disease I cannot afford. But -- but what I can tell you for sure -- and I, again, had a meeting before with the ambassador before coming to Davos, where we will be discussing this with the ministers. They want to get it done.
Now, does this mean that they will crack all the remaining little knots?
I`m not sure. But the thing is clearly accelerating.
QUEST: The core issue remains between the developed and the developing, the services and the goods. At this Davos, there will be trade ministers meetings taking place, which you`ll be involved in.
LAMY: Of course, and ministers will, as usual in Davos, touch base on what remains to be done, which, Richard, I wouldn`t say is opposing developed countries and developing countries. Most of what remains to be done, the sort of, you know, 20 percent of the deal that remains to be done, you`ve got some developed countries on one side, some developed countries on the other side, some developing on one side and so on. So it`s much more complex.
QUEST: How worried are you, though, about the risk of protectionism if this doesn`t con -- if -- if a deal isn`t done or if people don`t come back from the brink -- we know about currency wars at the moment and we know that things are starting to move in some -- in the wrong direction.
LAMY: You`re correct. The protectionist risk remains. For the moment, it`s been controlled. It`s been OK so far. There are pressures. The governments have resisted them. And the WTO system has helped keeping these pressures at bay.
So short-term, I don`t see any wave of protectionism because we`ve controlled the system. But the risks are still there.
Now, the link with the round is not with today`s protectionism.
LAMY: What we are working on is 10 years from now, protectionism. This is what we have to address to the round.
QUEST: Before we finish, I do just want to refer to a quote from yourself. Today you said: "The concept of a country of origin is obsolete." You talked about: "It no longer makes sense to think of trade in terms of them and us." You wrote it in an article. "It no longer makes sense to think in terms of trade of them and us."
It`s inevitable to think (ph) it`s them and us.
LAMY: It`s inevitable -- it`s been inevitable for centuries. The problem is that we`ve changed. We`re now in the 21st century. Look at what you are wearing and what we`re using.
Has one of these things you`re wearing or using been done in one country?
QUEST: But then the whole...
LAMY: I said at least in three or five or six countries.
QUEST: Which makes the measurement and the trade statistics -- and we know, for example, the iPhone out of China is the biggest example everyone`s using...
QUEST: -- as to whether it`s a bilateral deficit with the U.S. It makes it a nightmare for you.
LAMY: In some ways, yes. In other ways, it makes things much more simpler, because if things are made in the world, you know, where exactly does it come from matters a bit less. And, by the way, it helps a lot developing countries...
LAMY: -- and it`s creating world trade. So there are very good sides to that.
QUEST: I`m not going to ask you a yes or a no Doha Round in 2011, 2012, but many thanks, indeed.
Thank you very much.
LAMY: Thanks, Richard.
QUEST: Thank you very much.
Now, it has been a big day in the markets. The markets -- the Dow Jones did actually go above 12000, dip back down again.
In a moment, the NASDAQ boss -- we`ll want to know from him what lies ahead.
It`s a very busy day in Davos.
QUEST: It`s all happening on day one in Davos. And, quite frankly, the speed at which everyone is out of the gate is remarkable. Plenty of stories creating a buzz, especially regarding someone who won`t be attending. News Corp boss Rupert Murdoch reportedly has canceled all his Davos plans. He`s traveling to London instead to try and push through that deal, the planned take over of the British satellite company, BSkyB -- a deal that looks to be in trouble.
One person presumably had problems getting here, Captain Chesley Sullenberger. He was the pilot who managed the emergency landing on the Hudson two years ago. He`s here to host a session called, "Leadership Under Pressure."
And we told you last night how important those sideline deals were. A perfect example -- BP and Rosneft agreed to expand their partnership they announced this year -- only already they`ve announced the oil companies say they`ve struck a deal on a framework agreement.
Plenty for us to talk about and gossip about.
And the Dow Jones is over 12000.
The chief executive of The NASDAQ Group, Bob Greifeld, joins me now.
Bob, good to see you.
ROBERT GREIFELD, CEO, NASDAQ-OMX: Good to be here.
QUEST: It`s one of those interesting days. The Dow went over 12000. I know it`s only a number, but they do have a certain importance, don`t they?
GREIFELD: They do. They do.
QUEST: But what that importance is I`ve never quite (INAUDIBLE)...
GREIFELD: Well, what I would say it`s not so much Dow 12000, but look at the fact that equity inflows actually reversed, a reversed trend line in the last month. So we`ve lived through the last two years with sort of net equity outflows, right?
GREIFELD: That means investors pulling money out. They`re starting to come back into the equity marketplace. And I think their appetite, the risk appetite has improved. And that`s directly tied to macroeconomic forces.
QUEST: Now, every one of us makes that judgment when we do our pensions, our EISAs (ph), 401(k)s, whatever you like.
QUEST: And that`s because people saw that there were equity gains last year and are moving back into it.
GREIFELD: Yes. Well, I think it`s that. And it`s also they have a belief in the future. Right, when you buy an equity, it`s the highest expression of confidence you can -- you can indicate, that you believe the economy is going to do well.
QUEST: But what`s interesting is that after they`d been beaten over the head in 2008, where people saw net wealth dramatically reduced, they`ve got appetite for risk again.
GREIFELD: It`s coming back, right. But let`s understand, the trend line is very short right now. But we do have a clear, you know, decline in the equity outflows. Now we`ve seen a reversal. Let`s hope it continues.
QUEST: Are you surprised at the number of IPOs and the number of I -- the -- the level -- the extent and the fact that they`re getting away?
GREIFELD: I wouldn`t say surprised, but we`re certainly pleased. We saw that develop in 2010. The second half of 2010 was stronger than the first half, which was stronger than all of 2009. We`re ready to start having a good, healthy pipeline in 2011.
QUEST: What`s driving it, though?
GREIFELD: Well, you see a lot of companies that have truly innovative products that the market wants. You also have companies coming back to the public markets that had been taken out by private equity in -- in the years, in the past. And most exciting to me is last year, you saw the return of the venture capital backed IPO.
QUEST: So you`ve got a -- you`ve got venture capital. You`ve got equity markets. And you`ve got...
GREIFELD: Private equity.
QUEST: Private equity. And you`ve got -- you`ve got IPOs all merging together to create liquidity in the market. But you`ve got companies sitting on $2 trillion in the bank.
GREIFELD: Well, I think that will change. You know, it ties back to what your belief is in the future, your investment opportunities and, clearly, the political climate will help.
GREIFELD: So we feel optimistic you`ll see greater investment. One of the conversations I had with a CEO today, he said they have been taking relatively minor shots with that capital, now going to 11, their relative - - their N.A. position, to have the confidence to make a bigger bet.
QUEST: OK. I`ve got to ask you, flash crash.
QUEST: The flash crash. My word, I was on air when it happened.
QUEST: I thought I was going to lose me lunch...
GREIFELD: I don`t think so.
QUEST: -- as we watched this thing go down.
Are -- a yes or a no -- are we at risk of another flash crash?
GREIFELD: What I would say is the exact set of circumstances, if they recurred today or tomorrow, we would not have a flash crash.
QUEST: So we would?
GREIFELD: We would not.
QUEST: We would not have a flash crash.
GREIFELD: We would not. Make that clear, we would not.
GREIFELD: So we put protections in place that would prevent that from happening, given that same set of circumstances.
QUEST: Right. But the -- but the philosophical point is whether or not fast trading, all the other new mechanisms are simply too clever for their own good.
GREIFELD: Well, I don`t think it was that. I think it was the fact that the world became quite competitive in equity trading and we lost some of the benefit of having one monopolistic control over it.
QUEST: Right. Oh...
GREIFELD: So we had to put a rules structure. We`d like, you know, obviously, the NASDAQ, we like it...
QUEST: All right...
GREIFELD: -- when we owned all the trading. So we do have to have a rule set in that applied cross market. So today, if we call a trading halt, all our trading competitors will respect that.
QUEST: Bob, many thanks, indeed.
GREIFELD: Thank you.
QUEST: Lovely to have you on the program.
GREIFELD: Good to be here.
QUEST: Thank you very much.
GREIFELD: Thank you.
QUEST: You`d better get out -- get into the warm.
Many thanks, indeed.
Now, changes in the weather here in Davos.
We finally got some snow. The trees look absolutely glorious, as you can see.
Pedram is at the World Weather Center.
And I do need to know, Pedram, whether there`s more on the way.
PEDRAM JAVAHERI, CNN METEOROLOGIST: All right. I think you`re all set now. You`ve got enough snow our there. We`re done with the snowfall in the forecast, Richard, for at least the next couple of days. And as we take a dive out there toward Davos and go beneath, say, the Pelassue (ph) and the Alphubel Range right there in the Swiss Alps -- and you`ve got to get up about 1,500 or so meters, the highest -- the highest city there in Europe. And the temperatures, right now, Richard, feeling it, at five below zero. Factor in the winds out of the south at nine kilometers per hour, it feels downright chilly out there, minus nine degrees.
And, again, the forecast really not getting much warmer, but certainly breaking out some sunshine in the next couple of days on into the beginning portion of the weekend. So we`ll call it partly cloudy skies, a few degrees below seasonal averages for both the high temperature and also the low temperature across portions of Switzerland in the next couple of days.
But across areas where, Richard, you`re more fond of, perhaps, or are more used to it there, London, temperatures a little cool, especially when you factor in the breezy conditions they`re feeling even out toward Plymouth. Winds currently about 38 kilometers per hour. Dublin even sitting at 24 kilometers per hour. But high pressure in place here giving you that northerly flow, making it feel pretty cool outside.
But really, the -- the most persistent storm is that one right off the coast of Portugal. It`s produced very heavy rainfall on the Madeira Islands out there and in the Sushall (ph), coming in with rainfall totals in excess of 130 millimeters in the last 24 hours. Now, that`s the highest rainfall total they`ve seen since the February floods of 2010 and, also, that`s more than the average rainfall they see in a typical month for the month of January.
So it shows you, a fairly potent storm system. And you can follow the track here. It goes through the southern portion of Europe. Some scattered snow showers possible in the next couple of days. But again, talking about minimal, at best, with dry conditions and breezy conditions across northwestern Europe, and, really, the travel delays going to be minimal with this, mainly areas to the south there around Zurich seeing some snow showers, some moderate delays, perhaps. And even Munich could see some moderate delays in the afternoon hours.
But areas that are seeing significantly higher delays coming out of the northeastern United States, look at these mini snowmen being made out there in New York City today. And the photo caption for this photograph said that these were Brazilian tourists that have never seen snow. And there you go. They`re having the time of their life out there, as the snow showers begin coming down.
And pretty impressive accumulations, as this storm system begins to push offshore here, picks up some good moisture from the Atlantic Ocean there and the other cold air coming in from Canada and the components, certainly, together here to give us 20 to 25 centimeters in the next couple of days of snowfall. And that goes from New York all the way out toward Connecticut into Boston, Massachusetts, where we have delays here upwards of five hours from LaGuardia and also New Jersey there in Newark. And Philadelphia, two-and-a-half hour delays possible, Richard, in the next few hours here in the Northeast.
QUEST: The one thing we can say is that they certainly know how to handle the snow in Switzerland.
QUEST: All right, Pedram.
Many thanks, indeed.
Now, when we come back in just a moment, dealing with the deficit -- the U.S. president gave his take on the economy in the State of the Union. We`ll get the Chamber of Commerce reaction, in just a moment.
QUEST: What the difference all that snow makes -- beautiful scenes at Davos.
And so, too, America. The new reality means tough competition. President Barack Obama acknowledged the challenge presented by progress in the world`s emerging economies. It was the State of the Union and the president said the U.S. is facing a "Sputnik moment." Only investment and innovation could help the country keep its lead.
Tom Donohue is the president and chief executive of the U.S. Chamber of Commerce.
I asked him if he approved of the president`s message.
TOM DONOHUE, PRESIDENT & CEO, U.S. CHAMBER OF COMMERCE: I think the president said the United States has to become more competitive, has to be realistic about the competition we face at home and around the world and that we`re going to have to make investments in some of those issues while cutting costs in other areas. He was very, very clear about that, except we didn`t get the particulars.
QUEST: OK. And the devil is always in the detail with these things.
But is it possible to embark on an investment strategy in the areas he talked about -- education, skills and jobs -- whilst cutting the deficit?
The question is where does the money come from?
For example, on roads, bridges, airports, all that have trust funds that are paid into by the users, we can increase the funds there. In some of the other areas where we`re going to do improvements, it`s going to come -- there`s $200 billion worth of private money sitting there right now that go into infrastructure if the government gets off the dime.
QUEST: But the reality is the gridlock that exists and the -- the deep political divide is what is preventing real action.
DONOHUE: That may be a historical issue. But look what we just did in -- in the lame duck session. We made serious improvements in a number of factors, including continuing the tax cuts so that we can get people back to work and we can get this economy going.
QUEST: How realistic is it for the U.S. to embark on a -- a -- an infrastructure of -- of improvement in investment?
DONOHUE: How insane would it be for the United States not to try and bring their infrastructure up to -- to par because the infrastructure is the table on which we run our whole economy. We can`t compete without it.
QUEST: But what we saw from the Chinese president`s visit is that there is still so much to do. And even though the U.S. talks a good talk, walking the walk is not going to happen any time soon.
DONOHUE: That -- I think it might be fair to say that this Congress and this administration now thinks that some walking is the only way for them to maintain their political position and strengthen our economy.
QUEST: The rest of the world looks at the United States sometimes with admiration, sometimes with horror. But now they`re starting to look at the United States economically with skepticism.
DONOHUE: I don`t believe that. I believe that they have questions about what the United States is going to do about over regulation and trade and its own infrastructure. But just look where we`re going to be in 2011. We`re going to have a 3.5 percent economic growth.
Tell me, in the Western world, who`s going there?
Nobody but us.
QUEST: So when you compare the US` position and, say, China -- let`s just choose China, because eventually, simply on nominal values, it will overtake the U.S. in -- in the size and scale of -- of economies...
DONOHUE: Not in our lifetime.
QUEST: But it will.
DONOHUE: Maybe, because they have 1.3 billion people. But the bottom line is, 40 percent of the global economy is the E.U. and the U.S. working together.
QUEST: That`s Tom Donohue of U.S. Chamber of Commerce.
There are millions of Tweets out there and we`ve dug through a pile of them to find the most interesting from business and leaders here in Davos.
For instance, one Tweet from the top, Canada`s minister of industry, Tony Clement Tweeted today: "Some here are predicting continued erosion of manual jobs to emerging economies. I think with value-added innovation, this is not inevitable."
Philip Jennings, the general secretary of UNI Global Union, has declared on Tweet: "I`m challenging American business to reinvest in America. They`re sitting on $2 trillion. Use it." One perhaps interesting view from a union man.
And finally, Mark Palmer, of the chief executive SteamBase quotes a Microsoft scientist who says: "We need a World Health Organization for cyber security."
I`ve just Tweeted a link to a riveting article titled, "A Hefty Price for Entry to Davos." If you want to find out how much they`re paying to get in here, then head to Twitter.com/richardquest. That`s the address on the screen where you can find out this interesting article.
Now, when we come back in just a moment, you`ll see the salubrious environment from which we are broadcasting here. And I`ll also have a Profitable Moment.
QUEST MEANS BUSINESS.
Good evening to you.
QUEST: Tonight`s Profitable Moment.
It would have been entirely understandable if President Medvedev had canceled his visit here. It could have been seemly for him to be seen with the global elite while his country is in mourning.
But instead, the president delivered a somber and powerful speech on why it was important to be here, what he called "Russia`s responsibility."
President Medvedev, far from avoiding nasty issues like the jailing of Mikhail Khodorkovsky, he tackled it head-on, saying, "Conviction of citizens are key signs of democracy." He warned that Russia didn`t need lecturing.
The message was clear -- no new taxes, stronger regulation and a friendly environment. Russia has sent the message, but now it needs to prove it can live up to the words.
And that is QUEST MEANS BUSINESS for tonight.
I`m Richard Quest in Davos.
Whatever you`re up to in the hours ahead, I do hope it`s profitable.
"PIERS MORGAN TONIGHT" is just ahead after the news headlines.