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QUEST MEANS BUSINESS
Free Range Roaming; Single Market; Global Recovery Falters; Markets Rebound; Pork Acquisition Concerns; Exxon Blocks Discrimination Ban; Dollar Sliding
Aired May 30, 2013 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, HOST: Drop the charges. The EU says let cell phone users roam free around the continent.
The Nikkei nosedives, US growth falters. It's a busy day in the global economy.
And the world's most electrifying stock. The secrets of Tesla's success.
I'm Richard Quest. I mean business.
Good evening. Brussels wants to drop roaming charges and bring digital freedom to the EU. If the commission gets its way, calling home from Lisbon to London, Majorca or Madrid, Paris and Prague. Any one of the bloc's 27 nations, it'll cost the same as if you were calling across the street. And the same goes for downloading data.
The digital commissioner, Neelie Kroes, wants the additional rates gone by the middle of next year. She says breaking down barriers is good for growth. The EU has already capped the cost of roaming charges. Currently making a call within the union should cost no more than 38 cents a minute. Data is no more than $1 a megabyte.
And when you consider most people chew through around 6 megabytes a day, you're looking at more than $40 a week for data alone, and certainly the caps have been welcomed to make these costs cheaper.
The issue, of course, it's taken the union seven years to get to the point when they're talking about a single digital market for telecoms. The EU first proposed the regulation of the mobile networks in 2006 and aimed to reduce roaming charges by up to 70 percent. There were limits on what companies could charge to make and receive calls while they were traveling.
The new rules became binding in 2007. In 2010, the EU introduced data roaming limits of $65 if you're traveling in the region. Operators had to send a warning once you reached 80 percent and cut off a view unless you made a specific request specifically to extend beyond that.
So, now the gloves are off. The commission says a single digital market must lead to a one-price across the continent, or at least stiffer competition. The phone companies see this is a regulatory attack, so I asked the commissioner whether she was prepared for the telecos to fight her all the way.
NEELIE KROES, VICE PRESIDENT, EUROPEAN COMMISSION: Yes, I am. That is the clear answer to your question. Adding to that, also the telecom operators mention themselves that they have to change their attitude and that they want a new approach, that they want an open market without borders.
You can't get only sweet in such an approach. There is sweet and sour in such a proposal, and we should be aware that we are running out of time. If I'm looking at the situation of today and looking at the situation of telecom operators, they badly need, indeed, new business models and also getting opportunities in one single market.
QUEST: Is the idea that you will pay the same price whether you're calling in your home market or whether you are calling to other side of the union?
KROES: What I'm looking for is one market. And we do have that crown jewel already. We do have a single market. But only not in telecom. Isn't that crazy? For talking about telecom, talking about digital issues that are at stake, we should be aware that per definition, it is borderless, and we still keep a market with borders.
QUEST: I understand that you want a single market and you want no borders, but as follows, as one plus one equals two, does that mean, ultimately, one price for one call anywhere in the union?
KROES: You will get offers from different players in the market. There will be competition and quite a number will be aware that if they are offering a decent price and a good quality that consumers are interested in that, that the business world is interested in that. And then, it is indeed giving a boost to the economy, it's giving a boost to growth of jobs.
QUEST: Is it your intention that data roaming ultimately also is included as part of a single market with a one-price-fits-all?
KROES: Elsewhere in the world, governments, companies, regulators, are aware that there is a lot at stake in that modernization of the approach. That we should do, too. So, yes data is involved in this whole process and therefore we need to be aware that new business models are at stake.
QUEST: The commission's been slow in the past at grabbing this nettle and forcing the telecom companies to do what consumers want. Can you categorically tell me tonight, Commission, you are determined that you're going to get this through?
KROES: Yes, I'm determined. I'm also mentioning that this link to each other, talking about a market that is functioning, where new business models are at stake. So, not that old-fashioned way of approaching. And at the end of the day, everybody will have to realize that in an open and borderless market, it is competition that is at stake.
QUEST: Something you will have views about, I have no fear or doubt, @RichardQuest. The roaming costs and charges, certainly I know as we all travel the continent, even with various plans, tolls -- bills can be exorbitant, @RichardQuest on roaming charges.
In a moment, we're talking about the recover you Europe, the US, and Asia. The US is growing quite nicely but shares fell out of bed in Tokyo, after the break.
QUEST: Nearly four years after the recession ended and the US recovery is underway, and depending on your point of view, it is either sustainable or grindingly slow.
These are the latest numbers, it was the revision on Q1, which shows the way the US operates and does the numbers, the economy grew at a 2.4 -- at seasonally adjusted annual rate. Now, that was just a tad lower than the original estimate of 2.5, so not a major revision.
The reason, of course, when you look down and dig deep, private consumption held up, so the consumer is still very much part of the economic success story, but it is the US government which saw an 8 percent drop during the quarter, and that took its toll on the numbers. The GDP report will be revised once more for a final number next month.
If GDP in the US is OK, well look at this, just cut right into that number. Another gut-wrenching day for investors in Tokyo. The market opened right at the start down, never really recovered and, in fact, drifted off even further towards the end.
The market is now exactly a week, it's plunged more than 7 percent. Analysts did warn the sell-off was overdue. It's still up for 30 percent on the year, but in having given back -- what? -- 12, 15 percent, we're in the area of official correction, and we've given up the best of the gains that we've seen in recent weeks.
So to France, where the numbers of job seekers rose 1.2 percent. There's now 3.2 million people, the highest point since government in France kept -- started records in 1996. It's a serious setback for President Hollande, who's vowed to tackle unemployment, especially amongst young people.
The president, seen with the German chancellor, she's spending a day in Paris. The leaders are discussing it all before their European Union meeting next month.
Holger Schmieding is with me, chief economist at Berenberg Bank based in London. We have a lot to get through here, don't we?
HOLGER SCHMIEDING, CHIEF ECONOMIST, BERENBERG BANK: Yes, quite a bit.
QUEST: Let's start with that US GDP number. You can literally take it as half full or half empty. Which is it for you?
SCHMIEDING: I think it's more half full. This is not a bad number, 2.4 percent. We will likely see a bit of a slowdown near-term, followed by a significant rise in US growth later in the year. Why? At the moment, consumers are having a bit of a fiscal hit. But over time, we will have the strong housing markets supporting consumer spending. We should get decent growth late this year and next year.
QUEST: When you talk about decent growth, you're wanting to see 3, 3.5 percent.
SCHMIEDING: No, that's too much. That would be nice, but I don't think we'll get there.
QUEST: So, 2.5 to 3?
SCMIEDING: 2.5 is a pretty good number for a country that, after all, has to correct its fiscal policy, 3 is possible, but that would be quite a lot.
QUEST: Are we seeing the sequester effect yet, or do we still have -- I mean, you see this minus 8 percent on government expenditures as part of that number. So, we've had the effect of the fiscal cliff and the act that came in then. We've got the greater taxes, and now we're starting to see some sequester.
SCHMIEDING: Yes, the sequester is not very much in these numbers --
SCHMIEDING: -- yet, but will be in future numbers. Having said that, consumers do get support from other quarters, such as the housing market and the labor market.
QUEST: So, Japan. What on Earth is going on? For a market that doesn't move much to have 7 percent down and then a 5 percent down, should we be concerned?
SCHMIEDING: Not really. Abenomics is a high-risk experiment. The market has gone up so much a correction was overdue. Abenomics, we will only learn late this year, whether it's going right or wrong. At the moment, we can be nervous, but there is nothing at the moment going wrong, seriously, in Japan, as to suggest that this correction should go on much further for much longer.
QUEST: So, we saw and we have seen over the last two or three years of QE in the US and in Europe volatility follows on, and we'll get more volatility when the Fed starts to pull back. So, is this just a reflection of that same story in Japan?
SCHMIEDING: To some extent, it probably is that story, but the Japanese story has a lot of own elements. This is an extremely aggressive monetary push. We don't quite know how it will work, so there is generally uncertainty.
But with such a push, on the other hand, it is likely that companies and consumers in Japan will be supported for quite a while. We are likely to get the better economic numbers to justify a somewhat higher market.
QUEST: One final thought does occur to me. Forgive me not giving you warning. Mark Carney -- excuse me. Mark Carney at the Bank of Canada had his last meeting today, no changes there. But he's arriving at the Bank of England. In this city, are people expecting big things?
SCHMIEDING: Yes, people expect that Carney will deliver significant stimulus, possibly by taking Fed-style guidance on rates to Britain.
QUEST: Many thanks, indeed, for joining us. Good to talk to you.
Now -- forgive me, for some reason or another, the throat's decided to go. The weaker than expected US GDP report has gone down well on Wall Street. Traders are hoping it means the Fed will hang onto QE and maintain the bond-buying program. Stocks are up some 74 percent. It's a gain of just about half of one percent. It's the same story -- 74 points, I beg your pardon -- a half a percent.
Stocks rebounded in Europe. Miners gained as gold climbs back above $1400 an ounce. One analyst said the appetite hasn't waned. Investors are still waiting to buy on the dips.
We'll take a break. When we come back, I'll tell you about Jon Bon Jovi and his band. QUEST MEANS BUSINESS, good evening.
QUEST: This is a pig. Now, that much we can all agree on. And in the financial markets at the moment, the price of pork and pigs is what we might describe as hot. The Chinese bid to take over the world's biggest pork producer is running up against food safety fears.
Last night, we told you that Shuanghui International has offered nearly $5 billion for Smithfield Food, which is based in the US state of Virginia. It will be biggest acquisition of a US company by a Chinese if - - if -- it goes ahead.
Now, the reason, of course, is the love of pork in China. Average Chinese pork consumption per head, 86 pounds. That's up from 70 pounds in 2002. So, while the Chinese are actually eating more of the stuff, the Americans are actually eating less of it. So, that's that part of the animal.
But the deal has prompted fresh concerns about standards in the Chinese food industry. Shuanghui has apologized in 2011 after the firm was implicated in a pork contamination case when additives were allegedly found in the affiliate's meat products.
And, of course, in terms of Smithfield, there have been questions about why certain additives are no longer being put into the pork and whether or not this is to make the whole thing more attractive for the Chinese consumer.
So, we've looked at A and B. What about C, D, E, and F? If you're going to talk about the rest of the animal and what it means, then let's go to the Chicago Mercantile Exchange where Scott Shellady has -- joins me now.
You're wearing a cow, not a pig, but we'll take it. But you're still -- we're still in the farm yard, so we'll all right. Listen, this business with pork, what do you make of it on the S -- in the CME, where you're trading the futures?
SCOTT SHELLADY, SVP DERIVATIVES AT TREAN GROUP: Well, actually, it's been -- it's given the futures a little bit of a bid. Not a bid in the front months, but a bid towards the far-dated options because ultimately, it's going to be good for the farmer and good for the US economy here in our meat and packing industry as a whole.
But I'm not like the rest of the world here and want to get too bent out of shape over it. We have a family farm and we've got food concerns, we've got food shortage concerns. But I think at this moment in time, it's being a big overblown.
You mentioned that per capita consumption of pork in the Chinese region or China region. Well, that is almost three times the per capita consumption of pork for the average American. So, I hate to use the pun, but there's a little bit of fat in those numbers --
SHELLADY: -- number one. But number two is that, you know what? The US farmer is very resilient, and he's good to come to the forefront if there is such a shortage.
QUEST: So, in this environment, though, we have increasing consumption at the same time you have these food additive scares and you have questions of whether the US market is comfortable or would be comfortable with the Chinese owning such a major producer. What's the view there?
SHELLADY: I think mild trepidation would be the best way to put it. We're not quite sure -- I think our imaginations may be our own worst enemy at this moment in time and we're not quite sure how this will all work out going forward. It sits a little uncomfortably, obviously, as you think it would be --
QUEST: But why? Let me interrupt you. Why -- why would it be uncomfortable? What are you frightened of? What's the trepidation about?
SHELLADY: Like I said, I think their imaginations are their own worst enemy. They don't know what they don't know.
I lived in London. If you had somebody come in and buy one of your biggest producers of something and it was a foreign entity like China, it just kind of doesn't sit well as what could happen to that industry if there's a shortage or what would happen if they want to buy some more. The questions that knock on from this are many.
QUEST: Good to talk to you tonight. Thank you very much, indeed, for joining us. I appreciate your discussion and putting it --
SHELLADY: All right.
QUEST: -- a market perspective. Joining me from Chicago.
Now, Exxon-Mobile shareholders have voted against banning discrimination against employees based on their sexual orientation. For the 14th year in a row, they have done so. Board members say a specific anti-discriminatory clause is unnecessary since they already have an all- inclusive zero tolerance policy.
Heather Cronk is from GetEQUAL, an organization committed to making equality a reality. She joins me now from CNN Washington. All right.
On one level, Ms. Cronk, on one level, it might be very politically correct to have a specific anti-discriminatory policy on the books. But if Exxon-Mobile has what it says is a zero tolerance policy in place, then merely window-dressing it with a specific would be pointless.
HEATHER CRONK, CO-DIRECTOR, GETEQUAL: Well, actually, what they're doing right now is window dressing. So, if someone experiences discrimination in the workplace while they work for Exxon-Mobile or even as they're applying for a job at Exxon-Mobile, right now they have no recourse if they experience discrimination.
So, it's great that the company says in word that they have a zero tolerance policy, but in reality, that actually doesn't have any teeth to it. What we're looking for is Exxon-Mobile and other companies across the country to say, look, not only do we have a zero tolerance policy, but we'll back that up with a policy that has some recourse to it.
QUEST: But you -- the other side to this, of course, is that they also say that they follow in terms of, for example, benefits to same-sex partners, they make it quite clear they follow best policy in the individual countries. So, in France, now --
CRONK: That's right.
QUEST: In France, now, of course they will be offering benefits. In the United States, the federal government doesn't. You surely can't necessarily complain about that.
CRONK: Well, that's right. Actually, we wrote to Exxon-Mobile three years ago when we started this campaign to get them to add a non- discrimination policy, and that's exactly what they told us, that in countries where this is the law, we comply with the law.
So, this is partially about Exxon-Mobile, but it's also partially about the US government. And because Exxon-Mobile is such a giant federal contractor with the US government doing billions of dollars a year in work with the government, actually, President Obama has the power --
QUEST: OK, let's --
CRONK: -- to sign an executive order that would say every federal contractor has to have a non-discrimination policy.
QUEST: OK, let's cut to the sort of the core of this. Are you suggesting that Exxon-Mobile, this giant company, willingly, knowingly, wantonly, whatever adjective you want, discriminates because it's anti-gay, it's in pro-marriage, it's a right-wing -- what are you suggesting here?
CRONK: Well, look. There are two things to note here. So, one is that this isn't just big oil, right? A lot of people say, well, look, this is just a big oil problem, they're behind the times. But actually, Exxon- Mobile's peers and contemporaries in big oil have far higher scores on the Human Rights Campaign's corporate equality index --
QUEST: If it's the -- so, but why do think they --
CRONK: -- than Exxon does. On a scale of 0 to 100 --
QUEST: -- but why --
CRONK: -- Exxon has a negative 25 score.
QUEST: But that's not answered the point. The point is, or the question is, why do you think they're doing it? Do you think they're doing it out of some blatant discrimination?
CRONK: That's a great question. And that's a question that one of our partner organizations, Freedom to Work, just filed a lawsuit about. So, Freedom to Work followed the suit of many other civil rights organizations over decades in history and put two identical resumes in front of Exxon-Mobile. One resume indicated that the applicant might be gay --
QUEST: Are you --
CRONK: -- and the other indicated other political affiliations but not gay. And the one who had the resume that indicated that she might be gay --
QUEST: Ms. Cronk --
CRONK: -- got no callback from Exxon. The other resume did.
QUEST: Are you having difficulty tonight basically saying to me you are calling Exxon-Mobile discriminatory?
CRONK: Oh, no. I'm totally happy to call Exxon-Mobile a discriminatory company. I'm completely comfortable saying that. I don't know why they're choosing for the 14th year in a row to vote this down. I have no idea why. I would love to hear that reasoning from them. But I have no problem at all saying that they are a discriminatory company.
QUEST: We thank you for joining us. Good to see you in Washington, where I'm afraid the weather doesn't look terribly pleasant tonight. But good to have you on the program tonight. We'll talk about this more.
A Currency Conundrum tonight now for you. Preparations are underway for an expedition to an Australian island where a handful of copper coins aged about a thousand years ago were discovered. The origins of the coins could call into question who discovered Australia. Where are these coins from? Indonesia, Tanzania, or Portugal?
The currencies tonight. The dollar is sliding, a two week low against he euro, down against the pound. Those are the rates, this is the break.
QUEST: Hello, I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment. This is CNN and, on this network, the news will always come first.
(BEGIN VIDEO CLIP)
QUEST (voice-over): Hezbollah's TV network, Al-Manar, is about to broadcast a new interview with the Syrian president, Bashar al-Assad. Fighters from the Shiite militant group have been backing up Syrian government forces in the war against the rebels. Hezbollah network says the president told the interviewers that Russia had delivered the first shipment of sophisticated air defense missiles to his country.
One of the main suspects in the gruesome murder of a British soldier last week has made his first appearance in court. Michael Adebowale just confirmed his name and address before being taken back to jail. He and another man are accused of hacking the soldier to death on a southeast street in London.
A letter sent to the White House has been turned over to the FBI Joint Terrorism Task Force for tests. It looks similar to a letter sent to the New York mayor, Michael Bloomberg, which tests showed contained the poison ricin. A law enforcement official said the White House letter was addressed to the president.
(END VIDEO CLIP)
QUEST: The old American dream, driving from sea to shining sea, New York to Los Angeles, and now do it in an electric car and hope you'll make without the battery conking out or finding somewhere to charge it up again. Tesla Motors in the U.S. is to triple the number of high-powered charging stations by the year's end.
The chief exec, Elon Musk, says it's about the freedom of the road.
(BEGIN VIDEO CLIP)
ELON MUSK, CEO, TESLA: It is very important to address this issue of long-distance travel because when people buy a car, they're also buying so much as a sense of freedom, an ability to go anywhere that they want and not feel fettered. So we had to make something that was really quick to charge.
(END VIDEO CLIP)
QUEST: Yes, quick to charge. Those quick chargers are few and far between. It's fine if you live on the West Coast of the United States. That's where they are. Tricky if you're planning a trip right across the country over to the East.
Now once the new super chargers are in place, a 13-minute zap will give the car a range of 150 miles, and there are plenty of existing power stations across America. The standard charging is at a snail's pace. You're probably better off to take a bus.
So the question, of course, becomes not just finding the chargers but also the super chargers. And that's propelling Tesla stock forward. Since it floated on the Nasdaq just three years ago, the shares have gained 338 percent.
Maggie Lake in New York joins me to put in place what's behind the company's surge.
(BEGIN VIDEO CLIP, "BACK TO THE FUTURE")
MAGGIE LAKE, CNN CORRESPONDENT (voice-over): This car of the future made jaws drop in the 1980s film, "Back to the Future." Today, the all- electric Tesla roadster is the talked-about sports car. From A list fans like Leonardo DiCaprio to rave reviews for the S sedan from "Consumer Reports"...
UNIDENTIFIED MALE: This car performed better than any other car we have ever tested.
LAKE (voice-over): -- Tesla is all over the headlines. The positive press has lit a fire under the stock. TSLA, which debuted in 2010, is up over 200 percent so far this year. Despite minuscule sales so far, billionaire CEO Elon Musk is setting his sights high.
UNIDENTIFIED FEMALE: What do you see Tesla becoming as big as Ferrari?
MUSK: Well, I think much bigger than Ferrari but -- and hopefully bigger than Porsche.
LAKE: Musk is bullish, but the 10-year-old firm remains highly controversial. Its decision to sell directly to consumers through the Internet or its showrooms like this in the middle of a mall, bypassing independent dealers, has rattled the industry.
UNIDENTIFIED MALE: (Inaudible) programs within the Department of Energy --
LAKE (voice-over): In Washington, Republicans blast the White House for handing out cheap loans to Tesla and other clean energy startups, triggering a firestorm in the 2012 campaign.
MITT ROMNEY, FORMER GOVERNOR OF MASSACHUSETTS: Car companies like Tesla and Fisker making electric battery cars, this is not research, Mr. President. These are the government investing in companies.
UNIDENTIFIED MALE: You don't actually take out the battery and put in the battery.
LAKE (voice-over): Musk denies charges that the U.S. played favorites with Tesla.
MUSK: We probably could have succeeded without the loan, but I think the loan allowed us to get here faster than would otherwise have been the case.
LAKE (voice-over): And just last week, Tesla paid back the entire government loan nine years early.
LAKE: And there's no noise at all?
UNIDENTIFIED MALE: There's no noise at all.
LAKE (voice-over): Tesla has also reported its first-ever quarterly profit. Critics say that profit would have been a loss without revenues from environmental credits that might soon run out. And they blast taxpayer-backed subsidies that make these pricey vehicles a bit more affordable for their wealthy buyers.
LAKE: Tesla hopes to one day market less expensive vehicles. Until it does, some may question whether the company can ever fulfill its promise to bring electric cars to the masses -- Maggie Lake, CNN, New York.
(END VIDEO CLIP)
QUEST: Two planes, the Airbus A350 and the Boeing 787-10X, which hasn't even been designed or sold yet, and Singapore Airlines has given both manufacturers major orders. The deal is worth about $17 billion at list prices. They are two medium to long haul range planes.
Singapore is buying 30 of each of them. The 350 is due to fly later this year; the 787-10X, a modification on the Dreamliner, Boeing is deciding whether to start offering it.
This is reported to be SQ Singapore Airlines' biggest ever order announced in its single day. And of course, Singapore is going for a big change in its strategy, muscling in on both budget and, of course, regional airlines with these new planes. Massive order, 60 planes, $17 billion at list.
The weather forecast now, Tom Sater is at the World Weather Center.
TOM SATER, AMS METEOROLOGIST: Thank you, Richard.
International flyers, business flyers, you can expect in Singapore, if you're going in or out, the typical delays for the late day thunderstorms into the evening period. And I'll take you around the world. We're going to start in the U.S. where, again, an outbreak of severe weather and a tornado watch includes Oklahoma City and the devastated city of Moore and that community.
We had an outbreak yesterday, not as violent as we even saw on Tuesday, with a slight risk. But again, the ground is heating up and we're going to see an outbreak, most likely will be some wide, even long track tornadoes as you see the tornado watches in the middle of the country. That slides eastward. So the risk really as we get into Friday will still be in the Midwest, into the Great Lakes.
Thursday travelers, look for the possibility in Chicago to St. Louis this threat will slide eastward for Friday, even though it's been in Thursday in New York City with the low clouds and the fog. That most likely will extend into your Friday travels if you have plans to make it to the northeast of the U.S., including to Boston area as well.
In Europe, we've got a pesky area of low pressure that has really been responsible for a funnel cloud in Turkey. We had three waterspouts off the coast of Croatia. We had one injury from strong winds in Slovakia.
The severe storm threat will continue to be here as we get into late Friday and Saturday. We even had hail in Poland, 2 cm diameter hail as well as 3.5 centimeters. So, again, not only a slight risk, but in north central Bulgaria into Romania, a moderate risk. So keep that in mind if you have plans there.
The rainfall, really just swirling around. We've got a really large thunderstorm cell just south of Berlin. That's going to leave a mark, most likely some wind damage. Munich, Frankfurt, possibility of 45-60 minute delays expected on Friday. Geneva as well.
Elsewhere in parts of Asia, we've got rain right now in Tokyo. That'll slide through for the morning hours. Hong Kong has been dry but the funnel system will provide thunderstorms mainly inland. Calcutta has been looking at rainfall there. And there you go, as your possibility of late day thunderstorms as we get into Kuala Lumpur, Melbourne rain showers as well. Happy trails, Richard, back over to you.
QUEST: Many thanks. I'm off to Hamburg tomorrow, Cape Town next week, where I know the weather is appalling. Right. We thank you for that, Tom Sater.
When we come back on QUEST MEANS BUSINESS, the humble bicycle gets a modern makeover. A British inventor has a brain wave and it's quite loopy. QUEST MEANS BUSINESS.
(BEGIN VIDEO CLIP)
QUEST (voice-over): The "Conundrum," a handful of ancient copper coins could shift the myth that Captain James Cook discovered Australia. We asked you where the coins are from. Is it -- the answer, B, the island off Tanzania. Once the former kilwer salt on it (ph), it's now a World Heritage site. The coins have only been found outside Africa once before.
(END VIDEO CLIP)
QUEST: Cycling is about to take a turn for the better. And inventors gone back to the drawing board truly back to basic to build a better bike. And it revolves around a smoother ride. I started by renting London's Boris Bikes to see just what's different between the old and the new.
(BEGIN VIDEO CLIP)
QUEST: The bicycle wheel with spokes has been the way it is. That is until now.
This is the Loopwheel, which if the inventor has his way, will overturn centuries of cycling.
Why does this work better?
SAM PEARCE, INVENTOR, LOOPWHEELS: This works better because we've got rid of the spokes and in its place we've put these composite springs. These composite springs allow the rim to move relative to the hub in all directions and it isolates you from the road noise, from the high-frequency road noise that gives you shoulder ache, wrist ache.
QUEST: What's this made of? I mean, it doesn't seem very springy.
PEARCE: No, because it's designed for your body weight, not for a hand on the rim. It's made from a composite material which we've spent four years developing.
So the spring has a compression force but also is laterally stiff. So it doesn't feel like a wobbly jelly wheel.
QUEST (voice-over): Around and around they go, modern wheels with metal spokes and pneumatic tires dating back more than 100 years.
So why change anything?
PEARCE: So I was just at an airport and I noticed that a woman pushing a buggy across the concourse hit the curb. The child was flung forward out of the seat. And I thought why can't the wheels work in all directions, the suspension work in all directions?
I'm really in design consultancy, and we've plowed all my consultancy money back into designing the wheel, developing the wheel. And in the last six months, we've decided to try and fund the project where we get the general public to pledge for wheels and bikes so that we can get the money to tool up so we can mass produce this wheel in the U.K.
QUEST: Now for the ultimate test, the cobblestones. The Loopwheels are much smoother and it's certainly less jarring on the back. All in all, a more pleasant experience than traditional wheels with spokes.
Spokes or loops? Loops or spokes? The humble bicycle may not have changed, but what's down below, certainly a revolution.
(END VIDEO CLIP)
QUEST: And that, of course, is a revolution of a remarkable kind. The new wheels, by the way, they will cost you the princely sum of about $1,800, which of course is an expensive way to get back on the road.
And that's QUEST MEANS BUSINESS for this Thursday. I'm Richard Quest in London. Whatever you're up to in the hours ahead, I hope it's profitable. I'll see you next week.
ISA SOARES, CNN CORRESPONDENT: From the 400-year-old canals of Amsterdam in the Netherlands, a very warm welcome to MARKETPLACE EUROPE. I'm Isa Soares. This city, which for generations, had to navigate in a particular way to cope with the water is the venue for this year's European Inventor Awards.
(BEGIN VIDEO CLIP)
SOARES (voice-over): Coming up, how collaboration is helping one Dutch company paint a more sustainable future. And what Europe needs to do to remain competitive.
THIERRY SUEUR, V.P., INTELLECTUAL PROPERTY, AIR LIQUIDE: We have no choice. To not innovate, to die. It's clear.
SOARES: Fifteen inventors from 11 countries have gathered here to be honored for the contributions they've made to making our lives easier. And that's everything from the U.S. Report prosthetic hands and furniture hinges. They say necessity is the mother of invention. So I've been along to visit one Dutch company that puts innovation at the very heart of its business model.
SOARES (voice-over): Examining your product like doctors examine genes, here at AkzoNobel, the world's largest paint maker, color is the base of the entire business.
At its research lab, paint that is used for homes, cars, planes and boats is diligently put through its paces. It's carefully sprayed and analyzed, weather tested to see if it can withstand freezing temperatures, shaken and stirred. Once outside the forensics continue.
JOE KEURENTJES (PH), TECHNOLOGY AND OPEN INNOVATION DIRECTOR, AKZONOBEL: What you see behind us are testing piles that we use to see how colored paints, how they stay in the sunlight, how they survive and what they look life after a couple of years of use. And of course, you want them to be as bright as they were in the very beginning.
SOARES (voice-over): But when you're selling 20 million units of paint and creating up to 6,000 colors every year, where the difference is not so black and white, you're more than just a robot.
KEURENTJES (PH): If you want to survive in the long run, you need to innovate. So R&D -- or RD&I, as we call it, is a vital part of that story. There's a lot going on in the world around us. So we are looking at what we are doing more and more, is looking around in academia, in small companies, spinoffs, all these kind of things, to see what are the new developments and see how we can implement them.
SOARES (voice-over): Before looking out, though, the company has had from within rethink what's inside their tins. Last year it invested over 370 million euros in research and development. Two-thirds of that was directed solely at the fillability.
KEURENTJES (PH): Of course, we are never completely sure what our competitors do. But we think we can outsmart them by especially by applying open innovation technologies. If we think about pigments that we typically use for white paints that's starting in the outside. I mean, why an awful lot of those.
And if you look at the -- one of the only opportunities that you see around that is as white as titanium dioxide, it's the skin of a beetle. So we are looking at nature to see how we could eventually mimic that to get around the traditional type of materials that we have been using so far that are being produced in a very energy intensive way.
SOARES (voice-over): Like its paint, this company is looking for a durable and sustainable business model. Innovation is seen may just help it through this metal.
Over the canapes the conversation amongst the finalists turn to collaboration. China and children, how to nurture the next generation of inventors.
PETER MARSH, JURY MEMBER: I don't think you need to worry too much about China or India or anywhere else. That's what you do need to worry about is young people coming into universities or scientific institutes to replenish the stock of decent people at the moment.
AJAY V. BHATT, FINALIST: If you are E.U. at such a community or magnet where they had a place like Silicon Valley, I think it will foster a lot of innovation.
JORG HORZEL, FINALIST: Work is cheaper; labor is cheaper in Asian countries. But I think there is still a lot of knowledge in Europe that can be kept here and can be protected by patents.
MARTIN SCHADT, FINALIST: Here in Europe, we have to be very careful to take care of our young people, to motivate them at a very early age, to get interested in science and technology and to eventually work in the field.
SOARES (voice-over): Europe will need to keep the creative juices flowing to ensure it doesn't lose ground.
We'll find out who's won later in the program. And I'll be talking to patents and how to protect your investigation. Thierry Sueur, Air Liquide, joins me after the break.
SOARES: Welcome back to European Inventor Awards in Amsterdam, where we're finding out very shortly who has won.
Now in the last 10 years, a number of patents have been filed by European companies has risen from 160,000 to 260,000. While this may indicate a healthy drive for innovation, in China the number of patents being filed has soared. (Inaudible) Europe, be worried.
SUEUR: When you make an innovation, you could hide yourself; you could say nobody will know what I'm doing. But if you file a patent application, as any patent application is published, 18 months after filing, everybody will know what you have been doing. And this will help further companies for the stakeholder to make innovation.
So it's a system which really enhance the creativity of the companies.
SOARES: For a lot of business, getting that patent is timely; it's costly. A patent a tax on innovation.
SUEUR: First of all, you have to pay for the system. Patent offices, (inaudible) big organization, 1,000 people. Somebody has to pay for that. And it makes sense that those who are using the system pay for it.
Now we are seeing in many circumstances that patent offices were becoming profit centers. And there there is a question of balance.
Making sure that the patent office survive and can address the issues and can pay the people is normal. Making the patent office a profit center is probably going too far.
SOARES: How do you see this unified global patent system? Because it's not place yet. How will it improve business?
SUEUR: Europe has a unique market. And as patent is an economic tool, it makes sense to have one patent when you have a market. This is the answer by the (inaudible) patent. You have one territory and you will have one patent.
So first, it makes sense.
Second, instead of the present situation, where you have to go to German court, U.K. court, French court and others, you will have the right to go to one court somewhere in Europe, depending on where you were entrenched (ph).
And this (inaudible) will apply for all the E.U. territory, at least for these 25 countries. And this will be a major achievement to have one litigation, where you could have five, six or seven litigations.
SOARES: Would you say it's important for companies to be focusing on innovation? Because that leads to prosperity in many ways?
SUEUR: Well, you have no choice. If you don't innovate, you die. It's clear. So it's even not (inaudible) innovate or not. You innovate, it's a question of surviving.
The question is how you innovate, how much money you put and how creative you are, finding the right people, collaboration with others because further time, when everybody was doing everything the same companies over, you have to compare it with academia.
You can to compare it with customers. You have to compare it competitors from time to time. This is the importance. So that you might surmise the chances to have success.
SUEUR: (Inaudible) surge in patents in China. How concerned should Europe be about that?
SUEUR: First of all, we have to understand that China has a strategy. The strategy is to become an innovative country. They invest a lot in R&D and they know that R&D and I.T. are connected to each other. That's why there was giving some incentive to Chinese people for filing patent applications. That's why you have so many patent applications in China and so many litigations.
There are more litigations in China than in the U.S., which is strange. And over most of the litigation in China are between Chinese people. In Europe, probably we should file more. I think if you compare Europe to China of course, but even to U.S. or Japan, probably the number of patent applications is not big enough. But it's also connected to the fact that innovation is lower in Europe than it is in Japan or U.S.
(END VIDEO CLIP)
SOARES: As they collected their awards, the finalists were entertained by a dazzling performance.
SOARES: That's it from this award-winning edition of MARKETPLACE EUROPE from Amsterdam. Thank you very much for watching. We'll see you next time.