1 00:00:02,600 --> 00:00:12,960 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Leye. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:28,120 Speaker 1: Bloomberg dot Com, and of course on the Bloomberg. Yeah. 5 00:00:34,080 --> 00:00:37,280 Speaker 1: Dropping by the studio alongside Tom, and I'm really pleased 6 00:00:37,280 --> 00:00:40,120 Speaker 1: to say it's the former chairman of Morgan Stanley Asia, 7 00:00:40,240 --> 00:00:42,720 Speaker 1: formerly the chief economists for the bulk of his thirty 8 00:00:42,800 --> 00:00:46,080 Speaker 1: year career at the firm. It's Stephen Roach, the Yale 9 00:00:46,240 --> 00:00:49,879 Speaker 1: University professor. Good morning to Stephen. Good morning, Jonathan, good 10 00:00:49,880 --> 00:00:51,440 Speaker 1: to see you. Good to see you, sir. So you 11 00:00:51,560 --> 00:00:56,440 Speaker 1: authored Unbalanced the co Dependency of America and China. If 12 00:00:56,480 --> 00:00:59,000 Speaker 1: you have to rewrite that now, Professor, how different would 13 00:00:59,000 --> 00:01:02,920 Speaker 1: it be, if at all? Well, Jonathan, I mean, you know, 14 00:01:02,960 --> 00:01:05,399 Speaker 1: you can always look back on a book and say 15 00:01:05,400 --> 00:01:08,920 Speaker 1: what you might have done a little bit different. But 16 00:01:09,040 --> 00:01:11,919 Speaker 1: what I like about the book is is the framework. 17 00:01:12,000 --> 00:01:15,760 Speaker 1: It's um it's now about four years old, but it 18 00:01:15,800 --> 00:01:19,360 Speaker 1: was a framework that looked at the intersection between an 19 00:01:19,360 --> 00:01:22,960 Speaker 1: economy that consumes too much and saves too little America 20 00:01:23,760 --> 00:01:27,720 Speaker 1: and an economy that UH consumes too little and saves 21 00:01:27,720 --> 00:01:31,120 Speaker 1: too much. UH. The United States and two nations that 22 00:01:31,200 --> 00:01:37,440 Speaker 1: have really because of those UM complementary UH imbalances became 23 00:01:38,200 --> 00:01:41,959 Speaker 1: very intertwined. And so I ended the book by saying, 24 00:01:42,040 --> 00:01:46,720 Speaker 1: you know, this is a collision course UH if they 25 00:01:46,800 --> 00:01:51,960 Speaker 1: don't address their imbalances. And what's happened since the book 26 00:01:52,040 --> 00:01:55,760 Speaker 1: was published is that UH the US elected a president 27 00:01:55,800 --> 00:02:00,360 Speaker 1: who said, UH, We're fine, you're not UH, and we're 28 00:02:00,440 --> 00:02:03,880 Speaker 1: going to push you uh to change the way you behave, 29 00:02:04,000 --> 00:02:06,040 Speaker 1: but we're not going to change. And that's sort of 30 00:02:06,080 --> 00:02:10,880 Speaker 1: an asymmetrical response to the framework that that I laid out, 31 00:02:10,960 --> 00:02:15,000 Speaker 1: And I would certainly update the book to reflect that 32 00:02:15,800 --> 00:02:19,840 Speaker 1: destabilizing impact, but I'd use the same framework UH to 33 00:02:19,880 --> 00:02:24,320 Speaker 1: assess its implications. Professor, you anticipated the tension if nothing changed, 34 00:02:24,360 --> 00:02:27,000 Speaker 1: and ultimately nothing changed, and here we are with the tension. 35 00:02:27,240 --> 00:02:29,240 Speaker 1: There are some people that think, some people in this 36 00:02:29,280 --> 00:02:31,200 Speaker 1: market even that we could get a ceasefire at truce 37 00:02:31,520 --> 00:02:33,520 Speaker 1: at the end of this month of the geatswinc Do 38 00:02:33,600 --> 00:02:35,880 Speaker 1: you look at this as a generational story though, is 39 00:02:35,919 --> 00:02:37,839 Speaker 1: something that's going to play out for years and years 40 00:02:37,840 --> 00:02:41,919 Speaker 1: and years? I do Jonathan I think UM both presidents 41 00:02:41,960 --> 00:02:47,760 Speaker 1: certainly wanna lower the the friction that that has been 42 00:02:47,800 --> 00:02:51,680 Speaker 1: building UM over the past a couple of years. And 43 00:02:51,720 --> 00:02:56,000 Speaker 1: there may be some type of sort of stand still 44 00:02:56,000 --> 00:03:00,760 Speaker 1: agreement that has reached UH in Buenos Aires UM on 45 00:03:01,200 --> 00:03:07,480 Speaker 1: December one. But the fundamental clash between two systems, especially 46 00:03:07,520 --> 00:03:14,799 Speaker 1: over this UH deep issue of innovation, technology transfer, intellectual 47 00:03:14,840 --> 00:03:18,679 Speaker 1: property rights UH and the role that the state plays 48 00:03:19,120 --> 00:03:21,960 Speaker 1: UH in supporting or not supporting that in the case 49 00:03:22,000 --> 00:03:25,119 Speaker 1: of the US, UH, those those are gonna be long 50 00:03:25,160 --> 00:03:27,280 Speaker 1: standing issues that I think we're gonna have to grapple 51 00:03:27,360 --> 00:03:30,720 Speaker 1: with for many, many years to come. Are you still 52 00:03:30,760 --> 00:03:34,000 Speaker 1: the toughest grader at Yale? Are you? Are you qualities 53 00:03:34,040 --> 00:03:36,320 Speaker 1: c roach? Is that what they call you? I'm still 54 00:03:36,560 --> 00:03:42,680 Speaker 1: I'm a fair grad Tom, fair and balanced. How you know, 55 00:03:42,840 --> 00:03:46,160 Speaker 1: it's a incredible to think about the great inflation pressures 56 00:03:46,400 --> 00:03:49,840 Speaker 1: anybody who faces at these elite universities. I want you 57 00:03:49,920 --> 00:03:51,720 Speaker 1: to do a course right now with the President of 58 00:03:51,720 --> 00:03:56,560 Speaker 1: the United States. My experience in macroeconomics and your expert 59 00:03:56,640 --> 00:03:59,960 Speaker 1: at this is a linkage of trade dynamics. Was say 60 00:04:00,080 --> 00:04:04,720 Speaker 1: vings equally investment as equals IE run by how you 61 00:04:04,760 --> 00:04:09,400 Speaker 1: would speak to President Trump right now to explain why 62 00:04:09,480 --> 00:04:12,840 Speaker 1: we have a trade deficit and how it's removed from 63 00:04:12,880 --> 00:04:17,359 Speaker 1: the Navarro fears of China. Don't look at trade in 64 00:04:17,520 --> 00:04:24,120 Speaker 1: isolation thing. It is an outgrowth of the macro economic balance. 65 00:04:24,160 --> 00:04:26,599 Speaker 1: As you just put it between saving and investment. On 66 00:04:26,640 --> 00:04:30,960 Speaker 1: a surveillance chalkboard, you're gonna say, America under saves. Continue 67 00:04:31,560 --> 00:04:37,120 Speaker 1: our savings rate, uh, domestically adding it up for businesses, households, 68 00:04:37,120 --> 00:04:40,920 Speaker 1: in the government sector, adjusting for depreciation. What you must do? 69 00:04:41,680 --> 00:04:43,120 Speaker 1: Why is it a point to me when you say 70 00:04:43,200 --> 00:04:46,640 Speaker 1: depreciation A good point to Pharaoh? Your point to me 71 00:04:46,720 --> 00:04:51,320 Speaker 1: about a depreciable asset. Now you're you're you're an appreciating asset. 72 00:04:51,360 --> 00:04:53,960 Speaker 1: But depreciation is important to take out because you want 73 00:04:54,040 --> 00:04:57,279 Speaker 1: the saving that's left over to fund the net growth 74 00:04:57,680 --> 00:05:01,640 Speaker 1: in your capital stock. And so net domestic savings rate 75 00:05:01,640 --> 00:05:04,719 Speaker 1: in the US right now average is about three percent 76 00:05:04,880 --> 00:05:10,240 Speaker 1: of national income, which is well below half. It's already 77 00:05:10,279 --> 00:05:13,600 Speaker 1: depressed average in the final three decades of the twentieth century, 78 00:05:13,600 --> 00:05:16,359 Speaker 1: and the lowest savings rate for any leading nation in 79 00:05:16,360 --> 00:05:18,920 Speaker 1: the history of the world. So, lacking and saving and 80 00:05:18,960 --> 00:05:22,520 Speaker 1: wanting to grow, we import surplus savings from abroad. We 81 00:05:22,600 --> 00:05:26,400 Speaker 1: run a massive current account deficit and a multilateral trade 82 00:05:26,400 --> 00:05:30,320 Speaker 1: deficit with a hundred and two countries to attract the capital, 83 00:05:30,520 --> 00:05:33,200 Speaker 1: and so China is a piece the biggest of a 84 00:05:33,320 --> 00:05:37,560 Speaker 1: multi Mr President, thank you my essay of the Week 85 00:05:37,640 --> 00:05:40,320 Speaker 1: John Parros and Michael Corbett, who runs a small bank 86 00:05:40,360 --> 00:05:44,440 Speaker 1: in New York, and Corbett says, hey, service sector are 87 00:05:44,480 --> 00:05:48,960 Speaker 1: the dynamics of the American service sector in our trade 88 00:05:48,960 --> 00:05:53,080 Speaker 1: balance measurement. Sure there there you know we we we 89 00:05:53,160 --> 00:05:57,640 Speaker 1: look at trade balances in both goods and services UH 90 00:05:57,680 --> 00:06:01,839 Speaker 1: and and the balance of payments depth US. It reflects 91 00:06:01,880 --> 00:06:05,240 Speaker 1: that we don't have as big a deficit when we 92 00:06:05,279 --> 00:06:08,359 Speaker 1: had our surplus and services in but we still have 93 00:06:08,680 --> 00:06:15,680 Speaker 1: a deficit. And um sure we can um attempt to 94 00:06:16,440 --> 00:06:23,240 Speaker 1: um temper the shortfalling goods UH with a growing surplus 95 00:06:23,279 --> 00:06:27,440 Speaker 1: and services. But services by definition are less traditable. They're 96 00:06:27,440 --> 00:06:30,279 Speaker 1: becoming more tradeable right now, and so there's a limit 97 00:06:30,279 --> 00:06:32,599 Speaker 1: as to how much we can expect that offset. You 98 00:06:32,640 --> 00:06:34,680 Speaker 1: have both done a great job of going through the 99 00:06:34,680 --> 00:06:37,839 Speaker 1: economic conditions. The result in a deficit between one country 100 00:06:38,000 --> 00:06:40,240 Speaker 1: and a group of other countries, and I think that's 101 00:06:40,279 --> 00:06:42,159 Speaker 1: fair enough. And I think you're also making a strong 102 00:06:42,200 --> 00:06:45,200 Speaker 1: point that the ultimate measure of a relationship as to 103 00:06:45,240 --> 00:06:47,159 Speaker 1: whether it is fair or not, it is not necessarily 104 00:06:47,440 --> 00:06:50,400 Speaker 1: the trade deficit. That does not mean that what China 105 00:06:50,520 --> 00:06:53,440 Speaker 1: is doing is fair. There are some big issues some 106 00:06:53,520 --> 00:06:56,119 Speaker 1: big tech firms that would like to operate in China 107 00:06:56,279 --> 00:06:58,800 Speaker 1: and can't, Professor, there are a series of issues that 108 00:06:58,839 --> 00:07:01,919 Speaker 1: need to be addressed. The President isn't completely off base, no, 109 00:07:02,040 --> 00:07:05,880 Speaker 1: but Jonathan, I mean, honestly, I've looked at the evidence 110 00:07:05,960 --> 00:07:09,680 Speaker 1: that the allegations that you know that China steals you know, 111 00:07:09,760 --> 00:07:12,840 Speaker 1: hundreds and hundreds of billions of dollars a year in 112 00:07:12,920 --> 00:07:18,760 Speaker 1: terms of technology and intellectual property. Those estimates their their 113 00:07:18,800 --> 00:07:22,280 Speaker 1: package and slick documents with beautiful profonds and nice covers. 114 00:07:22,640 --> 00:07:24,720 Speaker 1: They are not worth the paper they're printed on. They 115 00:07:24,720 --> 00:07:30,320 Speaker 1: are pathetically weak in the way they identify the loss 116 00:07:30,360 --> 00:07:34,880 Speaker 1: to America from Chinese intellectual property theft. There's not one 117 00:07:34,920 --> 00:07:39,000 Speaker 1: shred of evidence, for example, that the trade representative Robert 118 00:07:39,040 --> 00:07:43,080 Speaker 1: Leitheiser can assemble to um talk about these allegations of 119 00:07:43,160 --> 00:07:47,000 Speaker 1: force technology transfer through joint ventures. He admits it. He says, oh, 120 00:07:47,040 --> 00:07:49,920 Speaker 1: it's behind closed doors. It's it's something we so we 121 00:07:49,960 --> 00:07:52,800 Speaker 1: have to look at proxy evidence through some you know, 122 00:07:53,320 --> 00:07:58,880 Speaker 1: absurd survey conducted by the U S. China business. The 123 00:07:58,920 --> 00:08:01,400 Speaker 1: majority of goods counts if it goods the town up 124 00:08:01,400 --> 00:08:04,400 Speaker 1: at the border come from one single country, professor, and 125 00:08:04,400 --> 00:08:06,560 Speaker 1: that's China. But you know how much that you know 126 00:08:06,560 --> 00:08:09,800 Speaker 1: what that number is. That number is one point eight 127 00:08:10,320 --> 00:08:13,160 Speaker 1: billion dollars, and so they use that one point eight 128 00:08:13,160 --> 00:08:20,680 Speaker 1: billion dollars to plow it up of counterfeit goods. I'm 129 00:08:20,720 --> 00:08:23,360 Speaker 1: just trying to say that China is still cheating and 130 00:08:23,360 --> 00:08:25,480 Speaker 1: there are some issues that need to be addressed. Look, 131 00:08:25,840 --> 00:08:28,320 Speaker 1: I again, I've looked at the data, Jonathan. One point 132 00:08:28,360 --> 00:08:32,760 Speaker 1: eight billion doesn't exactly translate into the allegations of two 133 00:08:32,760 --> 00:08:37,920 Speaker 1: to three billion. There are three pieces of UM technology 134 00:08:38,000 --> 00:08:41,800 Speaker 1: theft that are reported in this so called i P 135 00:08:41,960 --> 00:08:45,560 Speaker 1: commission UH, but it was headed up by Dennis Blair 136 00:08:45,559 --> 00:08:48,719 Speaker 1: and John Hundson. One is the smallest, the one you 137 00:08:48,800 --> 00:08:52,600 Speaker 1: pointed out to is pirated and counterfeit goods. Then their 138 00:08:52,679 --> 00:08:56,880 Speaker 1: software UH. And then there's the big one of the 139 00:08:57,360 --> 00:09:00,040 Speaker 1: alleged theft through trade secrets they have no ever and 140 00:09:00,120 --> 00:09:04,360 Speaker 1: some trade secrets they build models. But there's zero evidence 141 00:09:04,600 --> 00:09:06,720 Speaker 1: on the amount of my teeth that they can be 142 00:09:06,720 --> 00:09:10,760 Speaker 1: attributed to that very large, amorphous construct. We'll get you 143 00:09:10,800 --> 00:09:12,920 Speaker 1: on after our g meetings. What do they John, like, 144 00:09:12,920 --> 00:09:24,280 Speaker 1: in ten days a month, We've got to get the 145 00:09:24,679 --> 00:09:28,160 Speaker 1: evidence that has become part of the accepted wisdom. John. 146 00:09:28,160 --> 00:09:31,320 Speaker 1: I wanted a major shout out to the New York 147 00:09:31,360 --> 00:09:34,640 Speaker 1: finest the New York Police Department, and particularly the Fire 148 00:09:34,720 --> 00:09:38,720 Speaker 1: Department over what I witnessed last night. Uh, the sheet 149 00:09:38,800 --> 00:09:41,280 Speaker 1: of ice that was Madison Avenue, I mean sheet of 150 00:09:41,360 --> 00:09:47,800 Speaker 1: ice and unaccountable heavy trees down, crushing cars like and 151 00:09:47,800 --> 00:09:51,280 Speaker 1: they're still there this morning. I mean, it was extraordinary. 152 00:09:51,679 --> 00:09:54,920 Speaker 1: And it goes to our team corralling our guests in 153 00:09:54,960 --> 00:09:57,640 Speaker 1: the in Just that Steve Roach could even be here 154 00:09:57,679 --> 00:10:01,400 Speaker 1: today is like a big deal. It is a big deal. 155 00:10:01,600 --> 00:10:04,840 Speaker 1: I mean, how long was it from New Haven? I mean, guy, 156 00:10:05,160 --> 00:10:10,840 Speaker 1: I was driving from Yale last night to my home 157 00:10:10,880 --> 00:10:13,439 Speaker 1: in New Canaan, Connecticut. It takes me forty five minutes. 158 00:10:13,440 --> 00:10:15,800 Speaker 1: It took me four and a half hours. May parkway 159 00:10:15,840 --> 00:10:20,040 Speaker 1: was closed. I had to back down a ramp and 160 00:10:20,080 --> 00:10:24,760 Speaker 1: thank God for GPS, found my way to barely made 161 00:10:24,800 --> 00:10:26,880 Speaker 1: it a limp tone. I mean, this has happened many 162 00:10:26,920 --> 00:10:30,600 Speaker 1: times before, but just massive thank you from all of us, 163 00:10:30,640 --> 00:10:33,000 Speaker 1: Steve Roach for for being her John. I tried to 164 00:10:33,000 --> 00:10:36,600 Speaker 1: get oh, I tried to get this, of course, but 165 00:10:36,679 --> 00:10:39,600 Speaker 1: we couldn't get the helicopter was fifth Avenue clear this morning? 166 00:10:39,679 --> 00:10:44,760 Speaker 1: Are you okay? Tom makes the polar exhipedition up Fifth Avenue. 167 00:10:45,080 --> 00:10:49,640 Speaker 1: It was a tough It was tough. Left turn. I 168 00:10:49,679 --> 00:10:54,560 Speaker 1: bet it was real. Left turn could be expensive, yeah, 169 00:10:54,720 --> 00:11:00,439 Speaker 1: I bet. I bet the Carlisle up a few blocks. 170 00:11:01,200 --> 00:11:04,360 Speaker 1: Struggling professor, it is great to have you with us 171 00:11:04,400 --> 00:11:07,000 Speaker 1: before the before the quick break, we were talking about 172 00:11:07,520 --> 00:11:10,040 Speaker 1: theft and the difference between that and what I might 173 00:11:10,080 --> 00:11:13,959 Speaker 1: call polite coercion. Can we accept there was some polite 174 00:11:14,000 --> 00:11:17,280 Speaker 1: coercion to get many companies to wealp ride in China 175 00:11:17,600 --> 00:11:22,280 Speaker 1: and share technology voluntarily. Look, I don't know what the 176 00:11:22,400 --> 00:11:27,440 Speaker 1: right word is, Jonathan Um. The joint venture structure is 177 00:11:27,559 --> 00:11:31,280 Speaker 1: a structure that's controversial. The China and many many other 178 00:11:31,360 --> 00:11:36,360 Speaker 1: developing economies have used over the years to um frame 179 00:11:36,600 --> 00:11:41,160 Speaker 1: the way in which multinationals from developed nations participate in 180 00:11:41,200 --> 00:11:45,200 Speaker 1: their markets. Uh and um uh. If you want to 181 00:11:45,200 --> 00:11:47,040 Speaker 1: do business in China, and I was part of a 182 00:11:47,160 --> 00:11:49,960 Speaker 1: joint venture. We were kind a construction bank. We built 183 00:11:49,960 --> 00:11:53,680 Speaker 1: the first investment bank in China. See I see ce. Uh, 184 00:11:53,840 --> 00:11:57,200 Speaker 1: you have to go into a joint venture. Uh. And 185 00:11:57,360 --> 00:11:59,120 Speaker 1: when you're when you're in a joint venture where the 186 00:11:59,200 --> 00:12:05,000 Speaker 1: partner in China anywhere else, you share people, ideas, systems, idea, products, 187 00:12:05,320 --> 00:12:10,280 Speaker 1: distribution channels. Uh and um, you work together to build 188 00:12:10,280 --> 00:12:14,440 Speaker 1: the best business you can Uh. And certainly that involves 189 00:12:14,800 --> 00:12:18,280 Speaker 1: knowledge of how products are designed in other countries. Is 190 00:12:18,320 --> 00:12:22,080 Speaker 1: that forced? Uh? You know, it's it's it's all you know, 191 00:12:22,160 --> 00:12:24,560 Speaker 1: sort of semantic. Well, we can use the auto industry 192 00:12:24,760 --> 00:12:27,720 Speaker 1: as an example. There was a big, big tariff on 193 00:12:27,760 --> 00:12:31,720 Speaker 1: the imports of luxury autos. Effectively, many of these companies 194 00:12:31,760 --> 00:12:34,880 Speaker 1: were not forced, but heavily incentivized. If you want access 195 00:12:34,920 --> 00:12:37,520 Speaker 1: to the Chinese market, you've got to produce on shore, 196 00:12:37,920 --> 00:12:39,880 Speaker 1: and you've got to have a partnership, you've got to 197 00:12:39,880 --> 00:12:42,559 Speaker 1: share the technology. So it's a pretty big decision that 198 00:12:42,679 --> 00:12:46,880 Speaker 1: some of these companies have got a general decision, and 199 00:12:48,000 --> 00:12:50,720 Speaker 1: that's now the biggest market that the point, the point 200 00:12:50,760 --> 00:12:53,080 Speaker 1: being that it's the illusion of openness to then turn 201 00:12:53,120 --> 00:12:55,480 Speaker 1: around ten years later and say we're going to drop 202 00:12:55,480 --> 00:12:58,040 Speaker 1: our auto tarriffs when the companies are already they're producing, 203 00:12:58,080 --> 00:13:00,440 Speaker 1: they're not going to leave again and start exports. And 204 00:13:00,480 --> 00:13:02,600 Speaker 1: I think the president in this administration might look at 205 00:13:02,640 --> 00:13:04,880 Speaker 1: this situation and say, what if these are the rules 206 00:13:04,920 --> 00:13:07,920 Speaker 1: for China, why is it different coming the other way? 207 00:13:08,000 --> 00:13:10,520 Speaker 1: Why can a Chinese tech firm open help here freely 208 00:13:10,880 --> 00:13:13,000 Speaker 1: when the likes of Facebook can't play the play the 209 00:13:13,000 --> 00:13:16,920 Speaker 1: game over that? Well? Look, the President um UH uses 210 00:13:16,960 --> 00:13:20,280 Speaker 1: the word reciprocal UH, and I think that that's an 211 00:13:20,320 --> 00:13:25,160 Speaker 1: important concept to evaluate many of these allegations. If if 212 00:13:25,360 --> 00:13:30,760 Speaker 1: if we're UM allowing the Chinese to operate with one 213 00:13:30,800 --> 00:13:32,880 Speaker 1: set of rules in this country and they're allowing a 214 00:13:32,920 --> 00:13:35,920 Speaker 1: different set of rules in their country, then there's there's 215 00:13:36,200 --> 00:13:41,040 Speaker 1: clearly UH room to negotiate. And this underscores UH. You 216 00:13:41,080 --> 00:13:44,800 Speaker 1: know a proposal that I and many others have have 217 00:13:44,920 --> 00:13:47,200 Speaker 1: supported for a long time, and that is, come on, 218 00:13:47,320 --> 00:13:50,960 Speaker 1: let's do a bilateral investment treaty between the US and 219 00:13:51,040 --> 00:13:55,960 Speaker 1: China to put these market opening UH moves on a 220 00:13:56,000 --> 00:13:59,720 Speaker 1: common playing field. And we've negotiated this thing for now 221 00:14:00,000 --> 00:14:02,800 Speaker 1: almost a dozen years, and we can't do it. We 222 00:14:02,880 --> 00:14:05,120 Speaker 1: have a great deal maker as president, Why can't you 223 00:14:05,200 --> 00:14:10,520 Speaker 1: do a bilateral investment deal? Mr President. It's a debate 224 00:14:10,600 --> 00:14:12,720 Speaker 1: that will continue. It will and the professor will be 225 00:14:12,760 --> 00:14:16,839 Speaker 1: back hopefully the drive to the studio. I'm going to 226 00:14:16,920 --> 00:14:20,440 Speaker 1: do the walk by bird darvesh. I'm not going back. 227 00:14:22,480 --> 00:14:25,200 Speaker 1: We thank Dana Telsea for her wisdom on Burgdor earlier 228 00:14:25,240 --> 00:14:26,600 Speaker 1: this week, and of course we're doing a lot of 229 00:14:26,640 --> 00:14:30,920 Speaker 1: retail as well, retail study. You guys got some expensive taste, 230 00:14:30,920 --> 00:14:37,040 Speaker 1: haven't you? Dropping by burg doorves together in the together 231 00:14:37,800 --> 00:14:41,000 Speaker 1: winter coats. Winter coats are big, right and nice? Yes, 232 00:14:41,120 --> 00:14:44,880 Speaker 1: winter coats are They had to mortgage vet builders. You know. 233 00:14:45,040 --> 00:14:48,360 Speaker 1: I got to TJ Max wouldn't compleat you guys get 234 00:14:48,400 --> 00:15:02,840 Speaker 1: to God's how am I meant to introduce the next 235 00:15:02,880 --> 00:15:05,800 Speaker 1: guest without just saying and here's someone from Britain. To 236 00:15:05,880 --> 00:15:08,400 Speaker 1: talk to someone from Britain. He's so much more than 237 00:15:08,400 --> 00:15:11,560 Speaker 1: that is Anthony Phillipson, British Consul General to New York. 238 00:15:11,600 --> 00:15:14,520 Speaker 1: Good morning to Anthony, good morning, how are you. You've 239 00:15:14,560 --> 00:15:16,960 Speaker 1: got a tough job. What are you telling businesses in 240 00:15:17,000 --> 00:15:19,080 Speaker 1: the United States as to what on earth is coming 241 00:15:19,080 --> 00:15:22,080 Speaker 1: on in the UK? What we're telling them is that 242 00:15:22,120 --> 00:15:23,800 Speaker 1: the Prime Minister set out at the beginning of this 243 00:15:23,880 --> 00:15:26,880 Speaker 1: process her ambition to deliver, on the result of the 244 00:15:26,920 --> 00:15:29,160 Speaker 1: referendum in June two thousand and sixteen, to do so 245 00:15:29,240 --> 00:15:32,400 Speaker 1: in a way that would ensure an orderly, smooth withdrawal 246 00:15:32,440 --> 00:15:35,560 Speaker 1: from the EU and also look towards an ambitious future 247 00:15:35,600 --> 00:15:38,640 Speaker 1: partnership with the EU as but as an independent member, 248 00:15:38,800 --> 00:15:41,360 Speaker 1: as an independent country at the same time as being 249 00:15:41,400 --> 00:15:43,800 Speaker 1: able to go our own way in the world and 250 00:15:43,800 --> 00:15:46,040 Speaker 1: do ambitious free trade agreements, including with the likes of 251 00:15:46,040 --> 00:15:49,240 Speaker 1: the US. But crucial thing throughout all that is the 252 00:15:49,280 --> 00:15:53,360 Speaker 1: need to deliver some certainty and some continuity. And I 253 00:15:53,360 --> 00:15:55,680 Speaker 1: would say that's what the withdrawal agreement, the draft withdraw 254 00:15:55,760 --> 00:15:59,080 Speaker 1: Agreement that's just been published does. It delivers the smooth withdrawal. 255 00:15:59,120 --> 00:16:01,520 Speaker 1: It delivers an implementation period that gives a certainty in 256 00:16:01,560 --> 00:16:05,200 Speaker 1: continuity in order to them put in place the future 257 00:16:05,240 --> 00:16:07,640 Speaker 1: partnership that's set out in the outline political Declaration. Is 258 00:16:07,720 --> 00:16:09,920 Speaker 1: a long way to go, but we're getting there. If 259 00:16:09,920 --> 00:16:12,000 Speaker 1: the UK is in the Customs Union, can they go 260 00:16:12,080 --> 00:16:15,560 Speaker 1: about dealing with other countries and setting up other trade treaties. 261 00:16:16,600 --> 00:16:19,040 Speaker 1: So the Prime Minister has made clear in the outline 262 00:16:19,040 --> 00:16:22,480 Speaker 1: political declaration makes clear that in terms of our future partnership, 263 00:16:22,520 --> 00:16:24,280 Speaker 1: we will not be in the Customs Union, when will 264 00:16:24,320 --> 00:16:26,680 Speaker 1: not be in the Single Market. We will remain within 265 00:16:26,720 --> 00:16:29,800 Speaker 1: the frameworks for the duration of the implementation period, but 266 00:16:30,200 --> 00:16:32,720 Speaker 1: as I say, that's important to deliver certainty in time 267 00:16:32,720 --> 00:16:35,880 Speaker 1: for business to plan for those future arrangements. During that 268 00:16:35,960 --> 00:16:39,800 Speaker 1: implementation period, we will also be able to look to negotiate, 269 00:16:40,400 --> 00:16:43,640 Speaker 1: agree and ratify trade agreements. We just won't be able 270 00:16:43,680 --> 00:16:45,920 Speaker 1: to implement them until we're out of the implementation period 271 00:16:45,920 --> 00:16:49,560 Speaker 1: towards the early and then we'll be able to do 272 00:16:49,640 --> 00:16:51,440 Speaker 1: what we what we want to do to get through 273 00:16:51,480 --> 00:16:55,000 Speaker 1: the implementation period. Ultimately, there needs to be a solution 274 00:16:55,080 --> 00:16:59,280 Speaker 1: to the Irish border, doesn't that there does so basically 275 00:16:59,320 --> 00:17:01,600 Speaker 1: were clinging to hope that that solution will come around 276 00:17:01,600 --> 00:17:04,399 Speaker 1: in the next couple of years. No, we are planning 277 00:17:04,440 --> 00:17:06,600 Speaker 1: to bring about that solution in the next couple of years. 278 00:17:06,600 --> 00:17:09,040 Speaker 1: We have always made clear that the only way we 279 00:17:09,080 --> 00:17:11,680 Speaker 1: can deal with the issues around the Irish border, which 280 00:17:11,680 --> 00:17:14,920 Speaker 1: were committed to doing with and we we always have been, 281 00:17:15,520 --> 00:17:18,600 Speaker 1: is through that future partnership. In order to deliver a 282 00:17:18,680 --> 00:17:21,120 Speaker 1: trade arrangement between us that means that we don't need 283 00:17:21,200 --> 00:17:25,720 Speaker 1: that those checks at the border during What the EU 284 00:17:25,760 --> 00:17:27,800 Speaker 1: and the Irish government have said is that they want 285 00:17:27,920 --> 00:17:30,359 Speaker 1: certainty that there won't be any gap between the end 286 00:17:30,359 --> 00:17:33,040 Speaker 1: of the implementation period and the future partnerships. And that's 287 00:17:33,040 --> 00:17:34,760 Speaker 1: where the concept of the backstop has come in. And 288 00:17:34,760 --> 00:17:37,959 Speaker 1: the Prime Minister made very clear yesterday and both her 289 00:17:38,040 --> 00:17:41,000 Speaker 1: statement to our Parliament and also in a press conference 290 00:17:41,359 --> 00:17:43,440 Speaker 1: that you know, we we know we needed to agree 291 00:17:43,480 --> 00:17:45,359 Speaker 1: the backstop because without it that you would not have 292 00:17:45,400 --> 00:17:48,359 Speaker 1: agreed to withdrawal agreement. But we needed to agree a 293 00:17:48,400 --> 00:17:51,320 Speaker 1: backstop that operated in a way that we could we 294 00:17:51,359 --> 00:17:54,440 Speaker 1: couldn't get trapped in indefinitely and it would deliver the 295 00:17:54,480 --> 00:17:56,199 Speaker 1: certain two we need. And that's what we believe we 296 00:17:56,240 --> 00:17:58,400 Speaker 1: have agreed in the draft agreement is just joining us. 297 00:17:58,400 --> 00:18:01,600 Speaker 1: The British Council General to in New York, Her Majesty's 298 00:18:01,600 --> 00:18:06,080 Speaker 1: Trade Commissioner for North America, Anthony Phillipson, with us. Now. 299 00:18:06,520 --> 00:18:09,520 Speaker 1: Mr Phillipson, what I find fascinating, and I mentioned earlier 300 00:18:09,520 --> 00:18:13,359 Speaker 1: a sky TV survey which shows a stunning support for 301 00:18:13,400 --> 00:18:16,760 Speaker 1: the Prime Minister while all these other conflicting parties have 302 00:18:16,920 --> 00:18:22,919 Speaker 1: minorities support beneath that, Can she affect a constructive outcome 303 00:18:23,119 --> 00:18:29,160 Speaker 1: of Brexit with a with a minority coalition, or by definition, 304 00:18:29,280 --> 00:18:32,560 Speaker 1: does she and the Conservative Party have to attain a 305 00:18:32,640 --> 00:18:37,080 Speaker 1: majority a majority voice to get this done. I think 306 00:18:37,080 --> 00:18:39,600 Speaker 1: the Prime Minister is very clear in her press conference yesterday, 307 00:18:40,000 --> 00:18:42,920 Speaker 1: and I think it really really explicit that her aim 308 00:18:43,000 --> 00:18:46,280 Speaker 1: from the beginning has been to deliver a Brexit that 309 00:18:46,320 --> 00:18:48,520 Speaker 1: delivers for the British economy, for the British people in 310 00:18:48,600 --> 00:18:51,600 Speaker 1: terms of prosperity in security. That is the deal that 311 00:18:51,640 --> 00:18:56,320 Speaker 1: she has proposed. It's the deal that the Cabinet has agreed. 312 00:18:56,400 --> 00:18:58,520 Speaker 1: It's the deal that she is now taking to Parliament, 313 00:18:58,560 --> 00:19:01,960 Speaker 1: starting with her statement yesterday, running through the special summit 314 00:19:02,080 --> 00:19:03,800 Speaker 1: with the EU on the twenty of November, and then 315 00:19:03,880 --> 00:19:07,080 Speaker 1: up to a parliamentary vote some time after that. She 316 00:19:07,240 --> 00:19:09,480 Speaker 1: is also starting to make the case and has always 317 00:19:09,520 --> 00:19:11,400 Speaker 1: been making the case actually to the British people about 318 00:19:11,400 --> 00:19:14,000 Speaker 1: the type of Brexit that will deliver on the referendum 319 00:19:14,000 --> 00:19:16,600 Speaker 1: result in June two thousand sixteen. That I think is 320 00:19:16,640 --> 00:19:19,159 Speaker 1: the case that she's making very powerfully and very coherently, 321 00:19:19,400 --> 00:19:21,280 Speaker 1: and we'll keep doing over the next few weeks and months. 322 00:19:21,760 --> 00:19:26,280 Speaker 1: You represent all of Britain to North America. I'm representing 323 00:19:26,280 --> 00:19:28,720 Speaker 1: on the bloomber of the charter Barclays, which is how 324 00:19:28,760 --> 00:19:31,520 Speaker 1: the challenging two days to say the least. I mean, 325 00:19:31,520 --> 00:19:33,840 Speaker 1: I understand the Royal Bank of Scotland's got its own 326 00:19:33,880 --> 00:19:37,880 Speaker 1: story in drama with Sir our Davies and the rebuilding there. 327 00:19:38,320 --> 00:19:41,880 Speaker 1: But what is the the immediacy of this for the 328 00:19:41,920 --> 00:19:45,560 Speaker 1: financial system of the city. What is the urgency to 329 00:19:45,640 --> 00:19:50,640 Speaker 1: get something done? I think there are two parts, well 330 00:19:50,680 --> 00:19:52,359 Speaker 1: at least two parts to the to an answer to 331 00:19:52,400 --> 00:19:55,720 Speaker 1: that question. One is that what the city and the 332 00:19:55,760 --> 00:19:59,399 Speaker 1: financial services sector more broadly across the UK have wanted 333 00:19:59,480 --> 00:20:02,760 Speaker 1: is some set of predictability about what the future arrangements 334 00:20:02,760 --> 00:20:04,000 Speaker 1: are going to be and that they will have time 335 00:20:04,000 --> 00:20:06,280 Speaker 1: to plan for them. And I think the withdrawal Agreement, 336 00:20:06,280 --> 00:20:09,720 Speaker 1: the implementation for the Political Declaration sets out that that 337 00:20:09,760 --> 00:20:12,520 Speaker 1: way forward. As I've mentioned. The other thing though, that 338 00:20:12,560 --> 00:20:14,880 Speaker 1: they want to know is in the context of the future, 339 00:20:15,440 --> 00:20:17,680 Speaker 1: not only what will be that arrangement between the EU 340 00:20:17,800 --> 00:20:20,280 Speaker 1: and there are some specific references to how we will 341 00:20:20,280 --> 00:20:23,480 Speaker 1: deal with financial services in the Political Declaration that talk 342 00:20:23,560 --> 00:20:25,840 Speaker 1: about close and structured co operation between the UK and 343 00:20:25,840 --> 00:20:29,200 Speaker 1: the EU, which is important, but also talking about recognizing 344 00:20:29,840 --> 00:20:32,480 Speaker 1: that each side will have regulatory and decision making autonomy 345 00:20:32,840 --> 00:20:35,480 Speaker 1: and really putting a premium as well on financial stability 346 00:20:35,600 --> 00:20:39,160 Speaker 1: as well as market integrity and fair competition. But crucially, 347 00:20:39,200 --> 00:20:40,720 Speaker 1: I think what it also allows us to do is 348 00:20:40,720 --> 00:20:43,200 Speaker 1: to continue to think about the role of the City 349 00:20:43,200 --> 00:20:45,480 Speaker 1: of London, the role of the UK financial services sector 350 00:20:45,760 --> 00:20:47,600 Speaker 1: in the global economy of the future, which is not 351 00:20:47,680 --> 00:20:49,560 Speaker 1: only going to be a story about our relationship with 352 00:20:49,600 --> 00:20:51,200 Speaker 1: the EU, it's going to be a story about our 353 00:20:51,520 --> 00:20:55,240 Speaker 1: continuing deepening relationship with the US, who've been taking forward 354 00:20:55,280 --> 00:20:58,320 Speaker 1: through a regulatory working group of group between the Treasuries 355 00:20:58,560 --> 00:21:01,280 Speaker 1: back in March, and also of course the other growth 356 00:21:01,280 --> 00:21:03,840 Speaker 1: economies of the world. So it's a forward looking agenda. 357 00:21:03,880 --> 00:21:05,720 Speaker 1: I think it's an ambitious at agenda and that's one 358 00:21:05,720 --> 00:21:07,520 Speaker 1: that we want to take forward with the industry. If 359 00:21:07,560 --> 00:21:09,960 Speaker 1: I was going to communicate any bias this morning, I 360 00:21:10,000 --> 00:21:12,200 Speaker 1: would say it's towards the city of London. I want 361 00:21:12,240 --> 00:21:15,400 Speaker 1: to see the City of London do well. Many other 362 00:21:15,440 --> 00:21:17,959 Speaker 1: people want to see the city of London. The square 363 00:21:18,000 --> 00:21:21,280 Speaker 1: mile flourish over the coming generations, and there'll be some 364 00:21:21,320 --> 00:21:23,879 Speaker 1: people listening to this and saying this all sounds great. 365 00:21:24,119 --> 00:21:25,920 Speaker 1: I don't think it's going to get through Parliament though 366 00:21:26,160 --> 00:21:30,080 Speaker 1: then what so, as I said earlier, the Prime ministerant 367 00:21:30,280 --> 00:21:32,399 Speaker 1: has begun setting out the case to Parliament and there 368 00:21:32,400 --> 00:21:35,960 Speaker 1: will be obviously a crucial vote, a meaningful vote sometime 369 00:21:36,320 --> 00:21:39,359 Speaker 1: in the next few weeks um and the Prime Minister, 370 00:21:39,480 --> 00:21:42,399 Speaker 1: I think would just reiterate, I would reiterate on her 371 00:21:42,400 --> 00:21:45,119 Speaker 1: behalf that we have set out the way forward. We 372 00:21:45,119 --> 00:21:47,840 Speaker 1: believe it's a brick that delivers on the result of 373 00:21:47,840 --> 00:21:50,600 Speaker 1: the referenum. It delivers for the city, it delivers for 374 00:21:50,640 --> 00:21:53,640 Speaker 1: the British economy, and as Liam Fox I saw said 375 00:21:53,680 --> 00:21:56,800 Speaker 1: in an interview in the UK this morning, it is 376 00:21:57,400 --> 00:21:59,600 Speaker 1: the deal that that works and that is the one 377 00:21:59,640 --> 00:22:01,720 Speaker 1: that the one is now getting behind and we'll try 378 00:22:01,720 --> 00:22:04,320 Speaker 1: and push through parliament. Final question, we have the statement 379 00:22:04,359 --> 00:22:07,240 Speaker 1: from the Prime Minister at the end of yesterday and 380 00:22:07,280 --> 00:22:10,160 Speaker 1: at the end she would said that she would do 381 00:22:10,359 --> 00:22:13,639 Speaker 1: a Jeffrey Boycott and everyone in the United States crashed 382 00:22:13,680 --> 00:22:16,919 Speaker 1: their head and said, who on earth is Jeffrey Boycott? 383 00:22:17,240 --> 00:22:20,359 Speaker 1: Can you communicate Tom Keane and some of our listeners 384 00:22:20,359 --> 00:22:23,960 Speaker 1: who Jeffrey Boycott is. Anthony Jeffrey Boycott is one of 385 00:22:23,960 --> 00:22:28,320 Speaker 1: our most famous opening Test cricket batsman, famous for his 386 00:22:28,640 --> 00:22:33,359 Speaker 1: obduracy and his his focus on occupying the crease and 387 00:22:33,359 --> 00:22:36,040 Speaker 1: putting runs on the board. And I think I've known 388 00:22:36,040 --> 00:22:37,680 Speaker 1: for a long time actually that he's a particular hero 389 00:22:37,760 --> 00:22:40,000 Speaker 1: of the Prime Minister, and I think she's reflecting all 390 00:22:40,000 --> 00:22:42,560 Speaker 1: of those qualities in this process. There we go Anthony 391 00:22:42,600 --> 00:22:45,119 Speaker 1: Phillipson with a bit of cricket at the Fox. This 392 00:22:45,200 --> 00:22:48,920 Speaker 1: will be on her podcast worldwide and important conversation with 393 00:22:49,000 --> 00:22:51,080 Speaker 1: the Councel General John. What did you learn there as 394 00:22:51,119 --> 00:22:53,760 Speaker 1: an expert? And that it's really important that this deal 395 00:22:53,800 --> 00:22:56,120 Speaker 1: gets through to have some kind of certainty for business. 396 00:22:56,440 --> 00:22:58,600 Speaker 1: I think the real problem is that there's many people 397 00:22:58,600 --> 00:23:01,200 Speaker 1: that doubt this gets through Parliament. What I've also learned 398 00:23:01,240 --> 00:23:03,119 Speaker 1: over the last couple of weeks as well is that 399 00:23:03,160 --> 00:23:05,480 Speaker 1: the Brexiteers that have criticized the Prime Minister and the 400 00:23:05,480 --> 00:23:07,520 Speaker 1: deal that she's come up with have totally failed to 401 00:23:07,560 --> 00:23:09,800 Speaker 1: come up with an alternative. And what you've started to 402 00:23:09,840 --> 00:23:12,760 Speaker 1: see is many of those Brexiteers actually acknowledge this that 403 00:23:12,800 --> 00:23:14,560 Speaker 1: this is as good as we can do. And I'm 404 00:23:14,560 --> 00:23:16,119 Speaker 1: not going to hang it out of one paw, but 405 00:23:16,520 --> 00:23:19,960 Speaker 1: in the sky TV poll that Brexiteers were a small 406 00:23:20,640 --> 00:23:24,600 Speaker 1: part of the debate. Look at Michael Gove. Michael Gove 407 00:23:24,640 --> 00:23:26,280 Speaker 1: is getting behind the Prime Minister and saying this is 408 00:23:26,320 --> 00:23:28,600 Speaker 1: as good as we can do. He didn't say that 409 00:23:28,640 --> 00:23:31,160 Speaker 1: on the campaign trail, did he. Why has Mr Johnson 410 00:23:31,200 --> 00:23:39,760 Speaker 1: been silent? Am I wrong? Very quiet? And yeah, but 411 00:23:39,800 --> 00:23:41,639 Speaker 1: I think you're right, he's been very very quiet. You 412 00:23:41,680 --> 00:23:43,680 Speaker 1: know who else was very quiet in the referendum though? 413 00:23:44,240 --> 00:23:48,119 Speaker 1: Thereason Mack And what job did she end up with? Yeah? Well, okay, 414 00:23:48,200 --> 00:23:51,760 Speaker 1: that's that's everyone's got a strategy. The wars of the 415 00:23:51,840 --> 00:24:07,080 Speaker 1: Tories will have more for you. That was wonderful, you know, Tom. 416 00:24:07,160 --> 00:24:08,919 Speaker 1: One of the things that everybody's gonna have to do 417 00:24:09,000 --> 00:24:11,080 Speaker 1: is get to learn the names of the new members 418 00:24:11,119 --> 00:24:14,800 Speaker 1: of Congress. We have some new members of Congress. They'll 419 00:24:14,840 --> 00:24:18,680 Speaker 1: be taking their seats obviously in January. Margaret Brennan, she's 420 00:24:18,720 --> 00:24:20,520 Speaker 1: the only one who has been on the fifth floor, Ray, 421 00:24:20,840 --> 00:24:23,520 Speaker 1: Margaret Brennan is the only one ever gone up where 422 00:24:23,520 --> 00:24:27,560 Speaker 1: the they're so far away from Capitol Hill. If they're lucky, 423 00:24:27,640 --> 00:24:31,119 Speaker 1: they'll see Speaker Pelosi like once in the first eight weeks. 424 00:24:31,200 --> 00:24:32,960 Speaker 1: I see that, and that's why they got the carrier 425 00:24:32,960 --> 00:24:35,480 Speaker 1: pigeons on the ledge right, just to send out those 426 00:24:35,520 --> 00:24:38,399 Speaker 1: messages have how to vote. Margaret Brennan joins us the 427 00:24:38,440 --> 00:24:41,720 Speaker 1: host of Face the Nation. Of course, you can listen 428 00:24:41,840 --> 00:24:45,200 Speaker 1: to Face the Nation on Bloomberg Radio Sundays at two 429 00:24:45,200 --> 00:24:47,879 Speaker 1: pm in New York and in Washington, d C. And 430 00:24:47,960 --> 00:24:50,480 Speaker 1: also on Bloomberg one of six, one Boston New Report. 431 00:24:50,680 --> 00:24:54,840 Speaker 1: Face the Nation this Sunday, two pm on Bloomberg Radio. Margaret, 432 00:24:55,080 --> 00:24:59,040 Speaker 1: You've got some rookies coming into the UH, into the studio. 433 00:24:59,160 --> 00:25:00,960 Speaker 1: What what tell us? What is the focus is going 434 00:25:01,000 --> 00:25:04,040 Speaker 1: to be on we do? They're bright eyed and bush 435 00:25:04,040 --> 00:25:07,239 Speaker 1: detailed and hopeful and optimistic, and now we're bringing them 436 00:25:07,280 --> 00:25:10,359 Speaker 1: to Washington, UM and and we're gonna ask them, Okay, 437 00:25:10,640 --> 00:25:13,240 Speaker 1: you're here, what as a freshman class they're going to 438 00:25:13,359 --> 00:25:16,800 Speaker 1: trying to do? When Democratic the majority in January. We've 439 00:25:16,800 --> 00:25:20,560 Speaker 1: got Representative Dan Crenshaw, Republican Texas to you know, has 440 00:25:20,920 --> 00:25:24,080 Speaker 1: really become um well known in popular culture because of that, 441 00:25:24,119 --> 00:25:26,960 Speaker 1: appears on side at Vive last week. But we also 442 00:25:27,000 --> 00:25:29,640 Speaker 1: have a number of Democrats. One of the first Native 443 00:25:29,640 --> 00:25:33,879 Speaker 1: American women to be elected from New Mexico will be 444 00:25:33,960 --> 00:25:37,480 Speaker 1: joining us. And we're gonna be asking what this new complexion, 445 00:25:37,560 --> 00:25:40,560 Speaker 1: this new diversity that we're seeing, this record number of women, 446 00:25:40,680 --> 00:25:45,280 Speaker 1: what that actually means legislatively? Uh, it sounds good. What 447 00:25:45,440 --> 00:25:48,880 Speaker 1: isn't it translate to in terms of policy shift, if anything? 448 00:25:49,359 --> 00:25:54,760 Speaker 1: And where will they be focusing their efforts? Uh? In January? Remember, 449 00:25:54,800 --> 00:25:58,000 Speaker 1: Democrats also have to vote the week after Thanksgiving on 450 00:25:58,119 --> 00:26:01,240 Speaker 1: who their leader will be. Fancy Pelosi says she's got 451 00:26:01,240 --> 00:26:03,960 Speaker 1: the boat lined up. She will once again return to 452 00:26:04,000 --> 00:26:07,680 Speaker 1: the Speaker's role. But there's someone of a whisper campaign 453 00:26:07,680 --> 00:26:11,080 Speaker 1: about trying to run someone against her, and so far 454 00:26:11,440 --> 00:26:14,360 Speaker 1: no one is jumping in. What Nancy Pelosi says are 455 00:26:14,520 --> 00:26:17,600 Speaker 1: warm waters. Well, you know, I got the chance yesterday 456 00:26:17,600 --> 00:26:21,800 Speaker 1: to speak to Anna Eshu, congresswoman from the eighteenth District, 457 00:26:21,800 --> 00:26:26,800 Speaker 1: Democrat from California, and she concurs basically with the sort 458 00:26:26,800 --> 00:26:29,640 Speaker 1: of in sympathy with what you're saying that Nancy Pelosi 459 00:26:29,720 --> 00:26:32,800 Speaker 1: will be the next Speaker of the House. But she 460 00:26:32,880 --> 00:26:35,680 Speaker 1: did mention that one of the topics that she believes 461 00:26:35,760 --> 00:26:39,959 Speaker 1: is going to get a lot of attention. Is healthcare specifically, 462 00:26:40,000 --> 00:26:43,520 Speaker 1: because that was an issue that was raised in all 463 00:26:43,560 --> 00:26:46,159 Speaker 1: of the polling as to why the results of the 464 00:26:46,160 --> 00:26:49,560 Speaker 1: mid term turned out the way they did. Yes, uh, 465 00:26:49,680 --> 00:26:53,520 Speaker 1: and you hear that from Republicans Europe, from Democrats. Um. 466 00:26:53,640 --> 00:26:56,280 Speaker 1: Nancy Pelosi and her last week said that is her 467 00:26:56,400 --> 00:27:01,280 Speaker 1: north star. That's being as speaker. One of her motivations 468 00:27:01,400 --> 00:27:04,240 Speaker 1: is to protect the Affordable Care Act. Now, what does 469 00:27:04,280 --> 00:27:07,160 Speaker 1: that mean in terms of any wiggle room to reform 470 00:27:07,160 --> 00:27:10,480 Speaker 1: it or in any way to change um or or 471 00:27:10,720 --> 00:27:14,000 Speaker 1: reaffirm protections for pre existing conditions, Because you saw that 472 00:27:14,200 --> 00:27:18,680 Speaker 1: huge ship among Republicans running saying now they do want 473 00:27:18,680 --> 00:27:23,000 Speaker 1: to protect pre existing conditions, because so many Americans said 474 00:27:23,119 --> 00:27:25,800 Speaker 1: this was important to them, even though the Trump Justice 475 00:27:25,840 --> 00:27:29,520 Speaker 1: Department has been arguing the opposite case here. Um and 476 00:27:29,520 --> 00:27:32,000 Speaker 1: and so it's one of the big things. It's one 477 00:27:32,040 --> 00:27:35,520 Speaker 1: of the pocketbook issues that people voted on and voted 478 00:27:35,560 --> 00:27:39,240 Speaker 1: for change. Margaret Brennan's CBS News drove forward the conversation 479 00:27:39,320 --> 00:27:42,680 Speaker 1: earlier in the week, discussing a more than active Mr 480 00:27:42,800 --> 00:27:45,960 Speaker 1: Mueller as well. We're gonna have news flow before we 481 00:27:45,960 --> 00:27:49,000 Speaker 1: get to face the Nation on Sunday. Do you just assume, 482 00:27:49,040 --> 00:27:52,480 Speaker 1: as a grizzled Washington veteran that Friday is Mueller time. 483 00:27:54,240 --> 00:27:56,720 Speaker 1: We're holding our breath. It feels like one of those days. 484 00:27:56,800 --> 00:27:59,560 Speaker 1: And our Justice Department reporter Paul Reid has been changing 485 00:27:59,760 --> 00:28:03,760 Speaker 1: and ointments are expected. Um, at this point, they don't 486 00:28:03,760 --> 00:28:07,840 Speaker 1: look like surprises. Roger Stone, UM and others have been 487 00:28:07,840 --> 00:28:12,240 Speaker 1: out there identifying the Styles's expecting some some issues. Um, 488 00:28:12,240 --> 00:28:14,720 Speaker 1: but hold your breath. Let's see what happens. We know 489 00:28:14,800 --> 00:28:17,080 Speaker 1: the President has the top of mind because he's been 490 00:28:17,080 --> 00:28:20,160 Speaker 1: talking about it on Twitter anti reporters these last few days. 491 00:28:20,359 --> 00:28:23,080 Speaker 1: Does he have proper legal counsel on these matters? What 492 00:28:23,119 --> 00:28:26,080 Speaker 1: does the CBS reporting of the depth of the President's 493 00:28:26,080 --> 00:28:31,320 Speaker 1: council and the White Houses counsel on Mr Mueller's investigation. Well, 494 00:28:31,320 --> 00:28:33,879 Speaker 1: the question isn't so much what council does he have, 495 00:28:33,960 --> 00:28:37,040 Speaker 1: as does he take any counsel? That's he keeps his 496 00:28:37,080 --> 00:28:40,440 Speaker 1: own right and that's been the frustration of his UH 497 00:28:40,640 --> 00:28:44,280 Speaker 1: past lawyers like John Dowd and Ty Cobb and others 498 00:28:44,320 --> 00:28:46,280 Speaker 1: who have worked either for him or at the White 499 00:28:46,320 --> 00:28:50,320 Speaker 1: House around him. Don Began as well, UM, who just 500 00:28:50,440 --> 00:28:55,200 Speaker 1: recently departed from the job. It sounds like from uh 501 00:28:55,400 --> 00:28:57,960 Speaker 1: what we've been hearing that the president is looking at 502 00:28:57,960 --> 00:29:01,920 Speaker 1: answering some of those questions here right from the Special Council, 503 00:29:02,520 --> 00:29:05,600 Speaker 1: uh Rudy Giuliani and others have been, you know, urging 504 00:29:05,640 --> 00:29:08,200 Speaker 1: against it. What we will, We will see what happens 505 00:29:09,080 --> 00:29:12,040 Speaker 1: on a Friday. As you say, Marple, look at the clock. 506 00:29:12,200 --> 00:29:13,840 Speaker 1: They do. They look at the clock. We do too. 507 00:29:13,840 --> 00:29:15,880 Speaker 1: We have to go, Margaret, Thank you so much, Margaret Brennan. 508 00:29:15,920 --> 00:29:19,560 Speaker 1: Of course, watch CBS your local stations Face the Nation 509 00:29:20,120 --> 00:29:23,400 Speaker 1: Sunday morning. You can hear two pm in New York, Washington, 510 00:29:23,480 --> 00:29:27,160 Speaker 1: d C. And Bloomberg one oh six one Boston Newbury Report. 511 00:29:27,680 --> 00:29:45,120 Speaker 1: Do that. I'm Bloomberg Radio two PM Sunday afternoon. This 512 00:29:45,360 --> 00:29:47,920 Speaker 1: is the interview of the year for me and Pim 513 00:29:48,000 --> 00:29:51,880 Speaker 1: Fox because the weekend beckons where we will either be 514 00:29:51,920 --> 00:29:57,880 Speaker 1: at Sephora or probably more likely at Glossier with various offspring. 515 00:29:58,440 --> 00:30:01,480 Speaker 1: Now we speak to an Authoriti Dy on this and 516 00:30:01,560 --> 00:30:05,120 Speaker 1: I will introduce her, Stephanie with Sink of Jeffreys. And 517 00:30:05,160 --> 00:30:09,040 Speaker 1: she doesn't follow individual companies, but she is an expert 518 00:30:09,160 --> 00:30:12,880 Speaker 1: on the life that Pim Fox and I leave Hi, everybody, 519 00:30:12,880 --> 00:30:16,600 Speaker 1: It's me Ingrid Nielsen. I've got three point eight million 520 00:30:16,640 --> 00:30:21,160 Speaker 1: subscribers on YouTube. Face masks I love right now and 521 00:30:21,280 --> 00:30:24,360 Speaker 1: that is our weekend life. Stephanie, wonderful to have you 522 00:30:25,000 --> 00:30:29,200 Speaker 1: with this. What happened? Makeup used to be like, you know, 523 00:30:29,320 --> 00:30:32,040 Speaker 1: three choices and there was the rich choices in the middle. 524 00:30:32,120 --> 00:30:35,880 Speaker 1: And YouTube is taken over your world of cosmetics. And 525 00:30:35,920 --> 00:30:38,240 Speaker 1: am I right that the whole beauty face max thing 526 00:30:38,720 --> 00:30:43,200 Speaker 1: is booming? You're right. We have been in a hyper 527 00:30:43,400 --> 00:30:47,360 Speaker 1: cycle hyper something over the last five years. Fresh and fantasy, 528 00:30:48,840 --> 00:30:52,960 Speaker 1: yes versus fancy other things. She is using beauty as 529 00:30:52,960 --> 00:30:55,680 Speaker 1: a fashion accessory. Really, let's think about the number of 530 00:30:55,720 --> 00:30:58,840 Speaker 1: selfies that are being taken every single day, particularly by 531 00:30:58,880 --> 00:31:03,120 Speaker 1: millennials and Gen Z years. The amount of visual validation 532 00:31:03,360 --> 00:31:08,880 Speaker 1: she's seeing in a small screen is playing into her 533 00:31:08,880 --> 00:31:15,880 Speaker 1: behavior like that visual validation, that's right. And what she's 534 00:31:15,920 --> 00:31:20,960 Speaker 1: finding in the beauty industry as well is a wild 535 00:31:21,160 --> 00:31:25,640 Speaker 1: and enormous discovery rich zone of new brands and new products. 536 00:31:26,240 --> 00:31:29,400 Speaker 1: And we're just seeing for the first time this year 537 00:31:29,440 --> 00:31:34,360 Speaker 1: in a moderation in that enthusiasm and that participation in 538 00:31:34,400 --> 00:31:38,320 Speaker 1: that consumption. But it has been a tremendous multi year 539 00:31:38,400 --> 00:31:42,880 Speaker 1: cycle of consumption and and to your point, the marketing 540 00:31:42,920 --> 00:31:47,080 Speaker 1: mechanism has been altered and I think permanently to where 541 00:31:47,800 --> 00:31:51,120 Speaker 1: the voice of the industry is now becoming these content 542 00:31:51,240 --> 00:31:56,560 Speaker 1: creators in social and video formats like YouTube, where they 543 00:31:56,560 --> 00:32:00,000 Speaker 1: are educating the consumer. I want him to jump in here, Pima, Hi, everybody, 544 00:32:00,040 --> 00:32:04,560 Speaker 1: it's me. Tina tries it it world's most powerful facial Well, 545 00:32:04,560 --> 00:32:07,480 Speaker 1: you know task tech secret. Tom went to use a 546 00:32:07,560 --> 00:32:09,800 Speaker 1: marker in his house and he picked something up in 547 00:32:09,840 --> 00:32:12,200 Speaker 1: the semi darkness of the early morning and it turned 548 00:32:12,240 --> 00:32:16,280 Speaker 1: out to be lipstick. This whole idea of marketing buy one, 549 00:32:16,360 --> 00:32:20,080 Speaker 1: get one free, the samples that are given out. Does 550 00:32:20,120 --> 00:32:23,840 Speaker 1: that work in the beauty industry differently than it does 551 00:32:24,120 --> 00:32:29,240 Speaker 1: in other industries, other consumer products businesses? Is the conversion 552 00:32:29,320 --> 00:32:33,880 Speaker 1: rate higher? Well, we're finding and I think your your 553 00:32:33,920 --> 00:32:37,840 Speaker 1: introduction is the zones of discovery have changed. So instead 554 00:32:37,840 --> 00:32:42,400 Speaker 1: of a department store counter with an expert quote unquote 555 00:32:42,440 --> 00:32:45,640 Speaker 1: in a white lab coach informing you on what you 556 00:32:45,680 --> 00:32:49,680 Speaker 1: need to use for your regimen, we are finding consumers 557 00:32:49,680 --> 00:32:53,920 Speaker 1: increasingly gravitating towards places like Alta and Sepphora, which are 558 00:32:54,080 --> 00:32:57,760 Speaker 1: open fields of this self discovery. You can walk up 559 00:32:57,760 --> 00:32:59,920 Speaker 1: to a display, you can try the product. You can 560 00:33:00,320 --> 00:33:02,280 Speaker 1: take a makeup wipe and wipe it off and try 561 00:33:02,280 --> 00:33:06,080 Speaker 1: a different product. And so there's this ability to develop 562 00:33:06,160 --> 00:33:09,520 Speaker 1: your own regimen based on the discovery of the brands 563 00:33:09,520 --> 00:33:13,520 Speaker 1: that you're learning about. And in many cases, content is 564 00:33:13,560 --> 00:33:15,760 Speaker 1: reading people towards your grant. You can jump in here 565 00:33:15,760 --> 00:33:17,080 Speaker 1: on the money side, but all I know is the 566 00:33:17,160 --> 00:33:19,320 Speaker 1: regiment is light in your wallet. That's what I know. 567 00:33:19,400 --> 00:33:22,800 Speaker 1: Of course, it's but it's also transfer money from one 568 00:33:22,880 --> 00:33:25,280 Speaker 1: part of your wallet to another part. Because there's got 569 00:33:25,280 --> 00:33:29,920 Speaker 1: to be limited dollars. Where does that money come from 570 00:33:29,960 --> 00:33:35,040 Speaker 1: that goes into and skin care products? Fantastic and timely question. 571 00:33:35,120 --> 00:33:37,080 Speaker 1: This is something that we're trying to solve for right 572 00:33:37,120 --> 00:33:39,600 Speaker 1: now because we have seen this hyper cycle and beauty. 573 00:33:39,640 --> 00:33:42,160 Speaker 1: And to your point, if we have wage growth in 574 00:33:42,240 --> 00:33:45,400 Speaker 1: the three four percent range and we have spending growth 575 00:33:45,400 --> 00:33:48,760 Speaker 1: in this category in the double digits, she's borrowing from 576 00:33:48,800 --> 00:33:52,959 Speaker 1: somewhere else to fund that binge. And one suspicion we 577 00:33:53,040 --> 00:33:56,280 Speaker 1: have is that she has been borrowing from her traditional 578 00:33:56,440 --> 00:34:01,720 Speaker 1: fashion wallet. And because beauty is being as a fashioned category, 579 00:34:02,320 --> 00:34:05,640 Speaker 1: particularly given the mont content being created about it. He 580 00:34:05,680 --> 00:34:09,120 Speaker 1: has been borrowing from those other areas and for the 581 00:34:09,200 --> 00:34:12,600 Speaker 1: first time just this fall. And we're watching this very closely. 582 00:34:12,640 --> 00:34:14,360 Speaker 1: And you know, today in the market, even with the 583 00:34:14,400 --> 00:34:19,359 Speaker 1: department stores out reporting, this is the first quarter where 584 00:34:19,360 --> 00:34:22,640 Speaker 1: the department stores have not called out beauty as a 585 00:34:22,719 --> 00:34:28,839 Speaker 1: driver of their business interesting rather apparel, footwear, accessories. They're 586 00:34:28,840 --> 00:34:32,880 Speaker 1: starting to take a leadership role in the growth within 587 00:34:32,920 --> 00:34:36,600 Speaker 1: the exectionary categories. Just joining us the interview of the week, 588 00:34:36,640 --> 00:34:39,879 Speaker 1: Stephanie was thinking with us with Jefferies is we look 589 00:34:39,960 --> 00:34:44,239 Speaker 1: at the research in the thinking behind this ginormous business. PIM. 590 00:34:44,239 --> 00:34:47,960 Speaker 1: All I can say is Kathleen Lights, Hey guys, it's me. 591 00:34:48,200 --> 00:34:50,040 Speaker 1: Here are a few mass that I love. I hope 592 00:34:50,080 --> 00:34:54,240 Speaker 1: you enjoy. Thanks for watching. XO xo xo xo. Well 593 00:34:54,320 --> 00:34:56,440 Speaker 1: that's what you gotta do when you put out your tweets, 594 00:34:56,520 --> 00:35:00,440 Speaker 1: is all those exos you know? You you mentioned definitely 595 00:35:00,520 --> 00:35:04,200 Speaker 1: the shift in dollars from one area to another. I'm looking, 596 00:35:04,239 --> 00:35:07,719 Speaker 1: for example, to shift in investment dollars. A company like 597 00:35:07,840 --> 00:35:13,480 Speaker 1: Alter Beauty stock is of forty percent so far this year. 598 00:35:14,800 --> 00:35:18,080 Speaker 1: Are they are these these businesses a really high margin right. 599 00:35:18,120 --> 00:35:20,120 Speaker 1: I mean this is the gross margin on this stuff 600 00:35:20,160 --> 00:35:26,799 Speaker 1: can be upwards of yes, particularly from the vendor perspective. 601 00:35:26,880 --> 00:35:28,840 Speaker 1: So if you just use two companies in the public 602 00:35:28,880 --> 00:35:31,200 Speaker 1: market as a proxy, a company like an estate Lauder 603 00:35:31,280 --> 00:35:36,359 Speaker 1: enjoys gross margins of and Alta um you know, at 604 00:35:36,360 --> 00:35:39,600 Speaker 1: the operating margin level is in the low comid genes, 605 00:35:39,719 --> 00:35:43,120 Speaker 1: and so we see these business as being relatively stable 606 00:35:43,160 --> 00:35:46,680 Speaker 1: from a margin perspective. Ultimately comes down to the velocity 607 00:35:46,719 --> 00:35:50,760 Speaker 1: of consumption. And Altos actually experiencing a very interesting period 608 00:35:50,800 --> 00:35:54,759 Speaker 1: in their evolution where they're continuing to grow from a 609 00:35:54,840 --> 00:35:59,080 Speaker 1: unit basis perspective, and they're continuing to come you know, 610 00:35:59,120 --> 00:36:02,640 Speaker 1: seven percent, and so we can clearly see that the 611 00:36:02,719 --> 00:36:08,480 Speaker 1: consumer traffic within beauty is migrating towards Alta's environment, and 612 00:36:08,520 --> 00:36:12,840 Speaker 1: they have a thirty million person loyalty program, very sticky. 613 00:36:13,160 --> 00:36:14,560 Speaker 1: But the other thing I would put on top of 614 00:36:14,560 --> 00:36:18,399 Speaker 1: that is they signed a very interesting exclusive partnership with 615 00:36:18,600 --> 00:36:26,439 Speaker 1: Kylie Jenner. So to your common influencers hundred and ten 616 00:36:26,520 --> 00:36:29,839 Speaker 1: million followers. You know, we don't think that's necessarily going 617 00:36:29,880 --> 00:36:33,600 Speaker 1: to be critically important for sales, but man, that is 618 00:36:33,680 --> 00:36:37,640 Speaker 1: a huge point of validation for Alta highly Jenner loves 619 00:36:37,680 --> 00:36:40,920 Speaker 1: your company, Stephanie of PIM and I are looking out 620 00:36:41,000 --> 00:36:43,919 Speaker 1: literally onto the floor that Robin Williams was the years 621 00:36:43,920 --> 00:36:46,880 Speaker 1: ago in Bloomingdale's in their makeup as well? Are they 622 00:36:46,960 --> 00:36:50,560 Speaker 1: the loser? Is that iconic floor at Bloomingdale's the loser 623 00:36:50,640 --> 00:36:54,800 Speaker 1: in all this? Well, I think the baton has shifted 624 00:36:54,880 --> 00:36:58,600 Speaker 1: from baby boomers to millennials being the population driver of 625 00:36:58,640 --> 00:37:01,360 Speaker 1: the category. And so if we think about millennials today 626 00:37:01,400 --> 00:37:05,000 Speaker 1: and they're late to mid twenties, they grew up in 627 00:37:05,040 --> 00:37:08,080 Speaker 1: the core of the mall, not in the anchors. These 628 00:37:08,080 --> 00:37:12,160 Speaker 1: are your Abercrombie, American Eagle Pack soun kids. So they're 629 00:37:12,280 --> 00:37:18,440 Speaker 1: very comfortable shopping by category domain. The Alta and Sophora 630 00:37:18,480 --> 00:37:22,600 Speaker 1: cater to that mindset. You go into a store and 631 00:37:22,640 --> 00:37:26,680 Speaker 1: this is a very well defined category that you're shopping. 632 00:37:26,680 --> 00:37:29,600 Speaker 1: You're not shopping for footwear inside of Alta, You're shopping 633 00:37:29,600 --> 00:37:32,120 Speaker 1: for beauty and beauty only. And so I think it'll 634 00:37:32,120 --> 00:37:37,200 Speaker 1: align with their school of thought and their comfort level. 635 00:37:37,760 --> 00:37:40,000 Speaker 1: And also I think it gives them the power. The 636 00:37:40,080 --> 00:37:43,640 Speaker 1: consumer has the power in these environments, not the woman 637 00:37:43,760 --> 00:37:45,920 Speaker 1: standing behind the counter. And I think what we're finding 638 00:37:45,960 --> 00:37:48,680 Speaker 1: with millennials and young people in gen Z in particular, 639 00:37:49,200 --> 00:37:54,080 Speaker 1: they don't trust the institutional representation and message that woman 640 00:37:54,120 --> 00:37:55,759 Speaker 1: just wants to sell you a bunch of things you 641 00:37:55,800 --> 00:37:59,680 Speaker 1: don't need. That's their mindset Versus if I can go 642 00:37:59,719 --> 00:38:03,240 Speaker 1: in and self discover, then I'm using my own intellect, 643 00:38:03,400 --> 00:38:07,000 Speaker 1: my own confidence, my own experience to guide and build 644 00:38:07,000 --> 00:38:10,040 Speaker 1: my own basket. And there's an empowerment element to that, 645 00:38:10,520 --> 00:38:13,840 Speaker 1: and I think that's why we're seeing specialty beauty companies 646 00:38:14,520 --> 00:38:19,879 Speaker 1: outperform and take share from legacy formats like department stores. Well, 647 00:38:19,920 --> 00:38:23,040 Speaker 1: that's almost as if it's a d I y experience, right, 648 00:38:24,600 --> 00:38:26,600 Speaker 1: it is, And it's remarkable if you look at some 649 00:38:26,680 --> 00:38:31,080 Speaker 1: of the data. Consumers will spend twenty to thirty minutes 650 00:38:31,160 --> 00:38:34,080 Speaker 1: inside of an ultar store. It's almost a vacation from 651 00:38:34,080 --> 00:38:37,560 Speaker 1: her life for her. She goes in, she plays with product, 652 00:38:37,920 --> 00:38:40,760 Speaker 1: she learns about new things, and she's among her tribes. 653 00:38:41,080 --> 00:38:43,920 Speaker 1: She's with people that like beauty too. So it's a 654 00:38:44,040 --> 00:38:49,080 Speaker 1: very interesting tom there. Today we're going I think you're doing, Stephanie, 655 00:38:49,160 --> 00:38:51,520 Speaker 1: what are you doing tomorrow? Can you come over? And 656 00:38:51,560 --> 00:38:55,200 Speaker 1: takes cherubs down a glassier so they can be with 657 00:38:55,239 --> 00:38:58,719 Speaker 1: their tribe. It's going to bring your Stephanie. This is 658 00:38:58,800 --> 00:39:03,360 Speaker 1: This has been the d informative go away Stephanie with 659 00:39:03,480 --> 00:39:12,120 Speaker 1: stick with Jeffreies. Thanks for listening to the Bloomberg Surveillance podcast. 660 00:39:12,480 --> 00:39:17,400 Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or 661 00:39:17,560 --> 00:39:21,880 Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom 662 00:39:21,960 --> 00:39:25,839 Speaker 1: Keene before the podcast. You can always catch us worldwide. 663 00:39:26,280 --> 00:39:27,400 Speaker 1: I'm Bloomberg Radio