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Quest Means Business

U.S. Bashes South Korea, Asks for Help on China; Central Banks to Play Key Role in Coming Half; Cyberattack Disruption Continues for Maersk; U.S. Army Europe General on Russian Threat. Aired 4-5p ET

Aired June 30, 2017 - 16:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

(SIMULCAST OF CNN DOMESTIC)

[16:07:45] RICHARD QUEST, CNN HOST: For the moment, there we leave our colleagues at CNN in the United States. As they're covering the shooting

at the hospital in the Bronx. When there's more details, of course, we will bring them to you.

As we continue tonight on QUEST MEANS BUSINESS, the Trump administration is publicly challenging two of America's biggest trading partners. It all

happened after the commerce secretary lamb basted South Korea's trade restrictions. The President's top economic advisor appeal to the South

Koreans they help in combating China's predatory practices, which includes everything from firm ownership rules, to intellectual property theft. This

question of trade at the same time geopolitical matters of South Korea, North Korea and China, was very much on the agenda as you can see.

President Trump and his South Korean counterpart holding bilateral talks at the White House and the U.S. President said we would renegotiate what he

called a rough trade deal with South Korea. His top advisers agree and the two countries should help balance it out with China.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: The fact is that the United States has trade deficits with many, many countries and we cannot allow

them to continue. And we'll start your South Korea right now. But we cannot allow that to continue.

[16:10:03] WILBUR ROSS, UNITED STATES SECRETARY OF COMMERCE: So, the amount of very specific problems, I think the way to address is to deal

product by product with what we can do to change the export side and what we can do to reduce the bad influence side.

GARY COHN, DIRECTOR, NATIONAL ECONOMIC COUNCIL: As you know, much of our biggest problem on trade has to do with our economic relationship with

China. And we have maintained a very large trade deficit with China. And it continues to grow. As Wilbur said, China has many predatory practices.

At some point, we'd be interested to hear how you're dealing with the Chinese policies and how you can help us in dealing with Chinese policies.

(END VIDEO CLIP)

QUEST: So, three top U.S. officials, Jeremy Diamond is at the White House. Jeremy, when I watch this live, I thought it looked rather odd. Here you

have the South Korean President, basically being given a talking to by the U.S. administration and it all happening in public.

JEREMY DIAMOND, CNN WHITE HOUSE REPORTER: Yes, we've got two things going on here that are really interesting. First of all, which you pointed out

there, you had the President of the United States, some of his top economic advisers, publicly shaming the South Korean President over that trade

imbalance that the two countries have that the U.S. has with South Korea. And saying that this deal is a rough deal for the United States that this

deal going to be renegotiated. Something that the South Koreans would obviously very much like to dispute.

And then you also have the president's top adviser, Gary Cohn, on economic issues saying, listen we'd also like you to help us understand a little

better how we can confront China's unfair trading practices. They're both berating the South Koreans over their trade practices with the U.S. and

also trying to enlist their help in confronting Chinese trade abuses, which is of course, something that effects not only the United States, but also

South Korea.

QUEST: When the President also said that his patience with North Korea is over. You're now into a very complicated environment. Where the

president, the U.S. President wants the South Koreans' help with Pyongyang or dealing with that crisis. But he wants to renegotiate trade at the same

time. What's your understanding of the undercurrents here?

DIAMOND: What's interesting to point out here, is that the U.S. President, Donald Trump, and the newly elected South Korean President are not on the

same page exactly when it comes to how to deal with North Korea. President Moon of South Korea was of course, just recently elected on a platform of

deeper engagement with North Korea. Just as president Trump is now growing increasingly frustrated in saying that the U.S.' patience with the North

Korean regime has all but run out.

As you point out, President Trump wanting to renegotiate the deal with South Korea. All of these factors, of course, don't happen separate from

one another. They're all very much linked together. And so, President Trump now faces the tough task of not only trying to renegotiate a trade

deal with South Korea that will be more adventurous to the U.S., but also trying to convince the South Korean president to join him in taking a

harder line on North Korea an potentially as well on China.

QUEST: One of the world's most intractable issues at the moment. Jeremy Diamond, excellent. Have a good holiday weekend.

DIAMOND: Thank you. You to.

You heard National Economic Adviser, Gary Cohn, talking of China's predatory practices and how the U.S. is South Korea who would work together

against them. With when it comes to trade there's really no competition between China and South Korea.

So obviously on QUEST MEANS BUSINESS container a report. China accounts for 15 percent of all U.S. trade. Almost five times as much as South

Korea. $106 billion deficit, a deficit of $8 billion for South Korea. So, it's 15 percent versus 3.2 percent. And the U.S. trade deficit, which the

president has vowed to reduce, is more than 100 billion and only 8 as you can see from the numbers. So, Victor Cha, joins me now. Senior adviser at

the Center for Strategic International Studies joins me from Washington. This is fascinating because obviously the U.S. wants help from South Korea

vis-a-vis the China trade relationship. But you tell me, sir, what help can South Korea give?

VICTOR CHA, SENIOR ADVISOR AND KOREA CHAIR, CSIS: Well there are a couple of things, Richard. I think first of all, the fact that the Trump

administration is looking to improve the free trade agreement with South Korea is something that works both ways in the sense that it's an

opportunity for both the United States and South Korea, to put things on the table that they believe will make this a better trade agreement.

[16:15:00] I mean this agreement was negotiated initially over seven years ago. So, there's a lot of updating that could be done. But in terms of

the -- go ahead.

QUEST: You talk about that trade. It's seven years old. But that's not very long in trade negotiation terms. And when that trade negotiation was

done, it was very much thought of as a win-win at the time. Although I'll grant you in the U.S. there were serious reservations about it. Weren't

there?

CHA: There were serious reservations about it. Just as there have been with all U.S.-negotiated trade agreements. I was in the U.S. government

when this agreement was first negotiated. And there were elements. There are carve-outs in certain areas like rice and agriculture and some

services. But the real problem with this agreement, I think from the perspective of the United States, is that in the implementation of the

agreement, there was a feeling that all elements of it were not being implemented fully in the spirit of the agreement. And so, this is an

opportunity to improve on the agreement for both sides.

QUEST: Do you get the feeling that the South Koreans are prepared? If we take, for example, the NAFTA example, the Canadians and the Mexicans both

say they will allow modification. They will allow an updating. But they didn't want a wholesale renegotiation of NAFTA. What's the South Koreans

perspective? What will they allow to be renegotiated?

CHA: It's a good question. We don't really know yet. I think going into this summit, a lot of the focus were on other security issues. And I think

many people believe that the Trump administration was not going to be that aggressive on the trade agenda in no small part as you just mentioned,

because they are preoccupied with the renegotiation of NAFTA. However, to everybody's surprise, the President came out pretty strongly on trade. So,

I would imagine there's a very vigorous negotiation take place behind the scenes now.

QUEST: You were you in the government. You know this backwards, upside- down and round and about. And sir, was it politic, bearing in mind the whole question of phase. Was it politic to berate or embarrass the South

Koreans in the way the administration did when they went through the deficiencies of the trade relationship?

CHA: Well I don't know, I can't tell you what the atmospherics were like in the room. All I saw was the Oval Office readout as well as the two

press statements and those look like two allies who were very much in sync in North Korea and some of the security challenges. But very open about

the fact that there's a trade deficit and that there are things that need to be addressed. So, I think in that sense I think the Koreans appreciate

that President Trump is a straight shooter. He sort of says this is what I like and this is what I don't like. And so, what they wanted coming out of

the summit was an agenda that they can work with, with the president. And so, they feel like they have one now.

QUEST: We're very grateful that you came to talk to us, the details we'll need more help from you. Thank you, sir, for joining us.

Now Wall Street is sitting upon a pile of cash. The global stocks post one of their strongest first halves in years. You may not feel you've broken

out or you may not feel you've made the most of it. We'll talk about the second half of the year and the first half after the break. It's QUEST

MEANS BUSINESS, good evening.

(COMMERCIAL BREAK)

QUEST: Allow me to update you with the Breaking News here on CNN. The authorities reporting that one person has been killed at a gun attack at a

hospital in New York City. The police say the gunman is also dead. It's believed four to six people are also wounded. Local officers are telling

CNN the attacker is believed to have been a former employee at the hospital. Although we don't know too many details, it would appear at the

moment, that we're not looking at a terrorist attack. But there's nothing there that suggests this is more than the facts upon which we are able to

report at the moment.

Now the first half of the trading year is over. This is how the market closed today. The Dow ends the half by recovering from yesterday's losses,

it was a good day in the sense we were down at the exchange on "QUEST EXPRESS." We went up and then we went right up in the afternoon. I think

what's interesting here is the way in which the market was unable to hold that high point and I'm guessing that it's because going into a weekend

with a holiday July the 4th celebrations, Monday's a short day. Holiday on Tuesday, you don't want to be long in the market. You want to square

yourself up. That could be why we saw the late sell-off. The market which had been up over 100 points to close up 62 points.

The halftime scores, at the end, the Dow Jones Industrials is for the half- year so far, up 8 percent. The S&P is up 8.2 percent. Interestingly, as you can see here, is the U.S. market that's absolutely showing the best

gains, only the XETRA DAX was up 7.4 percent. But even that has fallen in the last couple of days. Despite all the drama on Capitol Hill, it's the

U.S. market with the FTSE clearly lagging far behind.

On the key players in the second half, they're going to be central bankers. All three major central banks see policy tightening, the question is how

far. You've got Janet Yellen who clearly is a the front. She plans more interest rates, whether we get one or two. Certainly, there's another,

certainly, probably in the pipeline. And then there's the issue of how to run down the balance sheet by not reinvesting bonds that are coming to

fruition.

In the midfield you have Mario Draghi, where you've got him in Frankfurt saying prudence is need. But he's confused investors because there are

other comments that suggest rate hikes or at least a tapering of his QE is on the way. And playing defense, Mark Carney at the Bank of England. Now

his view on interest rates in the U.K., he says some removal of stimulus is likely. His chief economist doesn't necessarily fully follow this through.

But Carney's view is also about whether or not business inventory investment is maintained. If it is, he believes then the U.K. would have

higher interest -- or should have rates. Mohamed El-Erian is chief economic advisor at Allianz, joins me from Newport Beach, California. So,

hikes from Yellen. Prudence from Draghi. Confusion from Carney. Is that about sum it up?

MOHAMED EL-ERIAN, CHIEF ECONOMIC ADVISOR, ALLIANZ: It does and it speaks, Richard, to an evolving paradigm. Central banks are less willing to pump

in liquidity. They are more concerned about the level of asset prices. But they can't figure out quite how to emerge from this extraordinary

period of stimulus without disturbing markets. So, it's a very delicate operation.

QUEST: But you've got to still due in QE and yet Janet Yellen -- I mean, she can easily or relatively easily start the process of running down the

balance sheet over whether it be the next five, ten or 15 years.

EL-ERIAN: That's absolutely right. The balance sheet is going to be like watching paint dry. There's not going to be much excitement. They're

going to do it in a very smooth and boring fashion. What's more interesting is does she continue to normalize interest rates?

[16:25:00] Does she hike once, twice more this year? In the face of weak inflation data and in the face of an economy that's not doing great. The

only reason they would continue doing so and I think they will continue hiking, is because their more worried about financial instability down the

road.

QUEST: Right, Governor Carney, now today we've got GDP numbers, revised just still .2 percent in the first quarter in the United Kingdom and people

are saying in the U.K., the question of stagnation or even dare I say recession. Because as I've written in my newsletter tonight, the risk in

the U.K. is on the down side, surely.

EL-ERIAN: Yes, I mean Governor Carney is in the toughest position. Because he's looking at the possibility of the one thing that policy makers

hate, stagflation. Low growth, high inflation. Inflation is at 2.9 percent. It will most likely go up about 3. But growth as you point out

is sluggish. So that is the worst combination for a central back and he's going to have to make a decision. I suspect that he will end up tightening

as well.

QUEST: How can he tighten? How can he tighten with growth so fragile -- it's a rhetorical question here, because to some extent you know, you're

right. It would depend on his mandate. But if growth is so fragile, tightening could kill it off. But what are his options?

EL-ERIAN: That is the risk. He would tighten for two reasons. One is his mandate, he's got a 2 percent inflation target. Inflation is well above

and could stay there. Two is the head winds to the U.K. economy are not things that monetary policy can treat. Monetary policy cannot resolve the

Brexit problem. Monetary policy cannot deal with productivity. There's a limit how much can he do on the growth side.

QUEST: Very tricky times, good to see you, sir. I hope you'll have a good weekend or holiday weekend, July 4. Thank you.

EL-ERIAN: Thank you for having me.

QUEST: Forthright views and we'll follow on what he's been talking about. Companies coming up are struggling to recover from a worldwide cyberattack.

The Danish shipping giant Maersk is still working to resolve problems. The Chief Commercial Officer joins me after the break from Copenhagen

(COMMERCIAL BREAK)

QUEST: Hello, I'm Richard Quest. There is more Quest Means Business in just a moment where we'll be talking to the Chief Commercial Officer at

Maersk, which still has major port space and disruption from Tuesday cyber- attack.

The economic war at the U.S. army's commanding general in Europe tells me about Russia's new military strategy. All of that still to come.

But of course, this is CNN, and as you've come to expect and rely upon, on this network, the news always comes first.

[16:30:00] QUEST: The police say a gunman is dead after a shooting of multiple people at a hospital in New York. Sources tell CNN a woman's body

has been found next to the shooter. Who died of a self-inflicted wound. Law enforcement says there are five victims, three are in serious

condition. Sources say the gunman is believed to be a former hospital employee. Same-sex couples in Germany could soon have equal rights under

the law to marry and adopt children. Lawmakers voted by a wide margin to legalize same-sex marriage and are expected to easily pass the upper house

next week. The chancellor Angela Merkel voted against the measure. Claim it was a vote on conscience.

U.S. President Donald Trump says Washington's patience with North Korea is over. Mr. Trump spoke alongside South Korean President Moon Jae-In at the

White House. Completely surrounded defacto capital of ISIS. The commander of forces says his troops control all roads in and out of Raqqah.

London Council leader has resigned as the fallout continues from the Grenfell Tower fire. The former head of the Chelsea Council says he

accepts his part of the responsibility for the fire. On Thursday, the council cut short the meeting after trying to ban the public. The shipping

giant Maersk continues its recovery after the major cyberattack on Tuesday. It expects things to be in their words close to normal by Monday. Now some

terminals including Rotterdam, Los Angeles and Port Elizabeth in New Jersey are still running mainly on manual operations. Vincent Clerc is the chief

operating officer at Maersk, we're glad you're joining us live from Copenhagen. How bad did the situation get? And do you yet understand how

your computers were infected?

VINCENT CLERC, CHIEF OPERATING OFFICER, MAERSK: So, on Tuesday as the screens started to get dark and we had to make the decision to take down

our entire IT infrastructure in order to protect it and to assure a prompt recovery. We found ourselves with the task of having to move 15 percent of

global trade on basically without i.t. back-up. Relying largely on manual processes and hard work of all our colleagues all around. And it's been

really hand-to-mouth now for 72 hours and I think we have a lot to be proud of about how we've handled the crisis so far and the work that our people

have done.

QUEST: Do you think Maersk was targeted? Or were you just you know, a hapless victim where the virus was able to get into your system?

CLERC: We will have to do further investigation, once we've come over the crisis. But for now, we see that the virus has been sitting wide and broad

and we think that we have just been the victim where the virus has been able to penetrate our infrastructure. And start to infect it and we have

to take it down as a cautionary measure.

QUEST: I understand there are more unknowns than knowns at the moment. About this. And I also understand it's not simplistic. Even though my

question may sound naive. But how does a giant company that spends hundreds of millions of dollars, euros or pounds a year on i.t., how do you

get infected?

CLERC: That's a good question and a question that, that we will have to spend some time answering here in the near future. I think for now in the

last 72 hours you can imagine that all the resources have been dedicated to restoring a semblance of normalcy for our customers, for our colleagues so

that we can get back to our job and do fulfill our mission. Today's our customers, but it's clear that as we get towards this normalcy we will have

to ask ourselves some tough questions about how this was possible. And whether we had adequate protection against such malware.

QUEST: Let's not spend too much time about what has happened. Let's look to the future. Because on this program all this week, experts have said to

us, infection in some cases is inevitable. The issue is how you recover from it. And I'm guessing that tonight your director at management is

thinking, our plan for recovery wasn't robust enough. Would you agree with me?

[16:35:00] CLERC: Not at this stage. Think our plan for recovery so far is progressing. We live in the Maersk, it's one large network platform

where all the systems are intertwined and bringing it back to life takes, takes a while. Our plan as we have communicated is to get back to a

semblance of normalcy already of Monday opening in Asia where a lot of our activities take place. And that's pretty much the plan we've been on to a

few hours into the crisis and the plan we continue to track against. So far, I would say that our cybersecurity team seems to have made the right

calls and the plan that they have sketched is so far working. But it is obviously causing a lot of pains for colleagues and customers which we're

not taking very lightly.

QUEST: Did you pay a ransom? Was any attempt to pay a ransom on the ransomware?

CLERC: We did not pay anything, no.

QUEST: Would your advice be to any company, that faces this situation, I mean, it's an impossible situation, your systems are literally stymied.

And yet, you're told if you pay a couple of hundred euros or bitcoins, you might get them back, and yet you're told not to pay what do you do?

CLERC: Well in our case we didn't pay and we relied on the business continuity procedures that we had in place and they have shown to work.

There's been a lot of hiccups, you mentioned a few in your introduction and we're still working on straightening some of them. But by and large, I

think that we have had the proof over the last few days, that the company was actually prepared to weather a storm and is able to do it in the best

possible way.

QUEST: One of the most important things that can you talk about tonight and tell other chief execs, other CCOs, CMOs, anybody in the "C" suite

watching tonight, that things well it might happen it could happen, Maersk must have done something wrong or whatever it might be. What would your

advice be to anybody in the c suite listening to you tonight?

CLERC: I would say that I mean for me just a few days ago, we did nothing that, that we knew that such attack would happen. We know that they are

likely to be more common in the future. We did not take, we did nothing that could hit us so hard and so fast. And we have had to learn a lot and

there's certainly a lot of learning we have to get to. But there's certainly also for other companies a lot of questions to ask to make sure

that they have appropriate security and do not have to get through the last 72 hours.

QUEST: You've just beautifully summed it up. Haven't you, sir? This thing happened faster and is more brutal and more damaging than one

imagines it's going to be like. Is that correct?

CLERC: Yes. Because basically our entire business runs on the interchange of data across the different systems as we transport the goods, and as the

data gets paralyzed we have to resort to manual processes, we have to resort to efforts that are simply with the size and the magnitude of the

operation that we run are extremely difficult to pull off.

QUEST: Very grateful that you've joined us, Vincent Clerk. It's important that we hear from those being affected. They talk in such honest terms, we

appreciate it.

QUEST MEANS BUSINESS tonight. President Trump has been called the Twitter in chief and he also likes to think of himself as America's CEO. Most

residents of the "C" suite stay off Twitter. A social media adviser said it is a platform with huge potential and comes the deep pitfalls.

[16:40:00] (COMMERCIAL BREAK)

QUEST: You know, you read that and you know it's just straight out of the PR department. You have the on-message tweet, Jeffrey Immelt. Great

discussion with POTUS.

Then you have the off-message tweets like T-Mobile's John Legere who was forced to defend this video, which directed vulgar language at the

Electronic Frontier Foundation. And then you have the plain weird. Elon Musk if you're allowed to just tweet, I love flaws. And Javier Buron

advises executives on their use of social media. He joins me now. There's a sort of authenticity, that is required in a CEO tweet. Take Lloyd

Blankfein of Goldman Sachs. If that's true, can you certainly say that about the president.

JAVIER BURON, CEO & CO-FOUNDER, AUDIENCE: Absolutely. Yes, we can say that about the president, how that authenticity goes to every single tweet.

QUEST: Is that good or bad? If the president likes to think of himself as the America's CEO, how do you interpret these tweets?

BURON: I think it's good. I think it's good, tweeter, at the end of the day, it's a platform for internet people, person to person. And Twitter is

about seeing every side. On the other day, a CEO is about another side of a company, a more humanized side. Now it's true that there are some

pitfalls to avoid. But that humanization of the company is absolutely something good. And that human part is -- is very good.

QUEST: Right. So, what would you say to a CEO or do you say to a CEO comes to you for advice and says look, I don't want to just tweet, gosh my

company made a very good product, my results are brilliant. But at the same time, I don't want to bring the house down around my ears. What

should I tweet?

BURON: Yes. So, I mean the first is that they have to be on Twitter. That's the first one. Once they join, the first thing is about the

humanity, no? And it's about things that you know, we --

QUEST: Is there any, is there any evidence that your consumers care?

BURON: Absolutely. For example, we have Richard Branson, that I follow and I love, his Twitter account and he tweets about things that about his

family. He tweets about things that he cares personally. So that, and as well, another other thing I would recommend in that personalization is

about a tweet storm. So, when they think about something very strongly and they tweet many times.

[16:45:00] QUEST: Finally, to those senators who have told President Trump to stop tweeting in the early hours of the morning as he did this week who

have told him that it's not presidential to tweet such material, what would your answer be?

BURON: I mean, I don't want him to stop tweeting, because I think you now, it's very important, I prefer for them to tweet and to say what they have

to say to the world. Than being quiet. Obviously, it has some pitfalls, so we need to be very careful, I need to be very carefully plan what you're

going to tweet.

QUEST: Careful planning with tweeting, does not immediately appear to be the strategy of the U.S. president. Donald Trump's presidency has been

plagued with accusations involving Russia next week the country's two leaders are finally set to meet face to face. We'll hear from the

commander of the U.S. Army in Europe. And his thoughts about the Russians, how real is that Russian threat. It's QUEST MEANS BUSINESS on a Friday.

(COMMERCIAL BREAK)

QUEST: The kremlin says details of the meeting between Donald Trump and Vladimir Putin has not yet been agreed. The two presidents are set to meet

for the first time at the G-20 which takes place in Hamburg, in Germany next week. The commander of the U.S. Army in Europe says there's only one

thing Russia respects and that is of course strength. I spoke to Commander Ben Hodges who joined me from Germany and I asked the general how likely it

now is that we could see a Russian invasion. When you think about it, how realistic is it, a Russian invasion, on European soil?

BEN HODGES, COMMANDING GENERAL, U.S. ARMY EUROPE: The best way to keep it unlikely is by demonstrating strength and by a great alliance, the most

successful alliance in the history of the world sticking together. 29 nations in NATO now. So, I think by NATO sticking together. And by the

United States commitment in Europe remaining strong, we will keep the prospects of a Russian attack very unlikely. But I believe that when you

look at the history of Russia over the last three or four centuries, they only respect strength. And if we look if we look like the alliance is not

unified or if we look like there is not resolve, then I think the risk of a possibility of some kind of aggression absolutely increases. Now, I don't

imagine that it would start off in a way that we might have imagined in the '70s or '80s when I was a very young officer serving in Germany it would be

something that would involve cyber. It would involve so-called little green men, other forms of pressure and intimidation, the misuse or use of

misinformation, economic pressure all of these things that undermine countries in the west that want to be associated with the west.

[16:50:00] QUEST: You raise a very valid point. If the aggression, and yes of course, you can have Russian aircraft testing your resolve. But as

you say, the real aggression would come cyber, it would come through economic. In that environment is NATO well qualified to handle that sort

of attack in.

HODGES: So, the alliance was based on collective defense, collective security now 29 members and under the leadership of our secretary-general

and the North Atlantic Council, I would say that NATO is probably as well prepared and agile in this domain as any other large organization in the

world. It gets a lot of attention if leaders, each of the nations are invested in it. Certainly, the United States and in my case the United

States Army has invested in capabilities and training, part of the protection from cyber, part of it is hardware, part of it is the software

and there's discipline and training. I actually feel very confident that the alliance is prepared to operate in this sort of environment but it's

not something you can rest on.

QUEST: You can take my next question somewhat slightly tongue in cheek. Aren't you and I to some extent men of a certain age dinosaurs, when it

comes to these new forms of aggression we're seeing this attack that's spinning round the world, we don't know where from.

HODGES: We believe it started in Ukraine. In this environment what you saw, tanks and missiles. I'm surrounded by great young men and women.

Very talented soldiers that are very attempt at this. My job is unleash their talent. Contributing to our security of our networks and of the

alliance. But also, when you think about how Russia conducts war. It's not you know, tanks or cyber or economic or misinformation. It's the full

combination. You think of a spectrum of national power. So, what makes their misinformation effective and their cyber and other attempts, economic

power is the fact that it's backed up by a very strong military. Particularly their army. Which has been under a modernization program

since about 2007. And in fact, they have a whole of government approach to prepare for a possibility of some sort of conflict so it's not cyber or

tanks, it's the entire combination of all that they do and that's how they approach intimidating potential adversaries. Certainly Russia, we're not

at war with Russia, but they are a peer adversary with a lot of capability.

QUEST: Do you think bearing in mind what your commander in chief has said. What the U.S. president has said, in terms of burdens sharing, in terms of

the money that is now required. The 2 percent recommended, recommended for NATO defense. Do you think the message has got through to NATO members,

that defense costs and there's no such thing as a free lunch?

HODGES: Secretary-General Stoltenberg has been very clear ever since he became the secretary-general of the responsibility of each nation to do its

part. Article 3 of the Washington treaty which created NATO said it's the responsibility of each nation to do all it can to defend itself. And every

president since Eisenhower has called on allies to do more. But what I saw at the Wales summit in 2014, the NATO summit in wales where all 20 nations

agreed they needed to move towards that 2 percent. That was three years ago, that's been reaffirmed since then. I have seen several nations

already increasing their defense spending, their investment. I think by the end of this year, at least three more countries will have achieved that

2 percent, but it's also, there's things beyond just defense investments, that's very important. It's essential, but I see Germany, Poland.

[16:55:00] The Netherlands, countries stepping forward, accepting leadership. The United Kingdom in many ways that are contributing to the

overall security of the alliance, we've got to continue to keep pressure on our allies to do their part b. You we heard minister of defense from

Germany yesterday affirm that Germany is committed to the 2 percent goal. I think as long as the United States does it. The U.K. and the nation like

Germany then I think that, that's a positive sort of pressure on the rest of our allies.

QUEST: Now you can download our podcast as a show. It is available by all the major providers and can listen to it at CNN.com/podcast.

And there will be a Profitable Moment after the break.

(COMMERCIAL BREAK)

QUEST: We're very pleased to bring you tonight on our profitable Moment. The views of the chief commercial officer at Maersk. A brutally honest

view on how the company has dealt with this cyberwarfare crisis. It happens faster than you expect. It's more devastating than you planned for

and you have to be much more reactive than you ever imagined it would be like. And what we've learned from him tonight is that every company needs

to again look at both sides of the equation. To prevent the infection in the first place, but that's almost becoming an inevitability that you will

get infected at some point. It's how you return and restore your business and what Maersk has discovered is, that's not an easy thing to do in

today's global interconnected economy. And that's QUEST MEANS BUSINESS for tonight. I'm Richard Quest in New York, whatever you're up to in the hours

ahead, I hope it's profitable. Have a great weekend and I'll see you on Monday.

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