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Quest Means Business
Dow's Losing Streak Continues; The State Of South Dakota Versus Silicon Valley, One Of The Least Populous States In The Country Sued Online Retailers And Won; Oil Prices Have Been Moving On; The Intel CEO Is Out Over An Office Romance; The Wife Of Israeli Prime Minister Benjamin Netanyahu Has Been Charged With Fraud And Breach Of Trust; The U.S. Commerce Secretary Is Denying Any Suggestions He Engaged In Insider Trading Of Shares; Retail Veteran Weighs in on Court Ruling; First Lady Melania Trump Makes Surprise Visit to Texas Detention Center; Croatia Beats Argentina 3-0; France Through to Last 16 After Beating Peru; Denmark, Australia Battle to 1-1- Draw; New Zealand Prime Minister Gives Birth to First Child; Supreme Court Delivers Tax Blow to E-Tailers; Goldman Sachs: Trade War will Likely Get Worse; New Indian Tariffs on U.S. Goods Take Effect. Aired: 4-5p ET
Aired June 21, 2018 - 16:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BIANNA GOLODRYGA, CNN CORRESPONDENT: The Dow's losing streak continues. It is Thursday, the 21st of June. Tonight, a retail revolution. The U.S.
Supreme Court strikes a blow for bricks and mortar. Caught in a bad romance, Intel CEO quits after a workplace relationship, and oil prices
sink as the Saudi's speak to CNN. We will hear the Energy Minister on this program. I am Bianna Golodryga and this is QUEST MEANS BUSINESS.
Tonight, the state of South Dakota versus Silicon Valley, one of the least populous states in the country sued online retailers and won. The Supreme
Court ruling in South Dakota versus Wayfair may just change the way we shop online forever.
In an extremely rare move, judges overturned a 20th Century decision to bring the law up to date with 21st Century retail. Previously, online
retailers didn't have to add sales taxes to their prices if they had no significant physical presence in the state where it was sold. One study
says, it was causing states up to $13 billion a year.
Today, the Supreme Court said states can force out of state retailers including online ones to collect sales taxes. Brick and mortar retailers
will rejoice at today's ruling. For e-commerce giants, however, this means putting their prices up as sales taxes come into play.
Wayfair, Priceline, Overstock and Amazon all fell on the news. The states themselves stand to received more income as they collect taxes from online
retailers. Money that has been lost as traditional retailers go out of business.
The decision could also drive prices higher for consumers. My next guest wrote the South Dakota bill that lies at the heart of the case that went to
the Supreme Court. South Dakota lawmaker, Deb Peters joins me on the phone. Thank you so much for joining us, we appreciate you taking time
out.
DEB PETERS, SOUTH DAKOTA STATE SENATOR, DISTRICT 9: Good afternoon.
GOLODRYGA: So, talk about the ramifications of this decision, one that we mentioned you helped co-write for your state?
PETERS: Well, I looked at the intro and I am intrigued. I actually don't think there is going to be that big of a ramification for consumers or
retailers. I think we are going to see a level playing field for all retailers. I think everybody is going to be playing by consistent in the
same rule, just like our agriculture producers are already today.
GOLODRYGA: And so when you say that you don't expect much ramifications, clearly, online companies have the opposite reaction given what we saw
happen with our stock prices. Do you think they are just overreacting?
PETERS: I do.
GOLODRYGA: And so for...
PETERS: The technology exists today.
GOLODRYGA: The technology exists and for your state though, for consumers, there is no concern whatsoever on your part that there may be some
unintended consequences as far as prices going up?
PETERS: As far as prices going up, no. I don't believe that it will. If you're avoiding paying a tax that is already legally due and owed, you're
evading tax law, and so if you're worried about leveling of playing field, and closing a tax loophole, that's exactly what South Dakota Senate Bill
106 said. It is close the sales tax loophole and allowed all retailers, whether they were brick and mortar or online to sell the exact same
products using the exact same tax code and then only competing on price.
GOLODRYGA: So, does this then come down to state revenue? Was that the biggest factor in you supporting this bill, money coming in to the state?
PETERS: Actually, thank you for the question. Absolutely not. The State of South Dakota actually in conjunction with passing this piece of
legislation that challenge the Quill versus North Dakota case, in a second piece of legislation, we said, for all of the new money that comes in, we
are going to reduce our tax rate.
So, essentially, what we have said is, if we get to broaden our ways, we are going to lower our rates and therefore, our consumers overall will have
a reduction impact.
GOLODRYGA: So consumer you say will benefit ultimately from this decision. Let me ask you when it goes back to the issue of what's unfair and what is
fair in the 21st Century economy. We have the larger companies, obviously, Amazon, Wayfair even Etsy, but what about the smaller companies, when it
comes to innovation, when it comes to startups. Are you concerned at all that this doesn't make the level field - the playing field level in the
case of smaller companies wanting to get a foot in the door, too.
PETERS: Again, that's a wonderful question. So, in my real life outside of being a State Senator, I am a CPA. I work with entrepreneurial
companies and setting them up and trying to get them to understand all of the laws whether it is the Department of Labor, the Internal Revenue
Service or the Department of Revenue.
[16:05:12]
PETERS: And I would tell you that the programs and the stock where this is available for the small business is easier to implement than a Walmart or a
Target. I think the entry point into doing retail business in the United States or anywhere in the world is absolutely the most simple that you can
possibly do and it is not expensive at all.
And in South Dakota, because we are a streamlined sales compact state, we provide free software. We do vendor compensation, so basically, if you are
a retailer and you're collecting and remitting in our state and you're going through the streamlined sales tax compact process, you would get a
fee - a reduction of your sales tax that you're remitting. We provide free software. We have audit protections already in place. We have simplified
our definitions, and on top of that, this law is not retroactive.
And those are some of the key points that the U.S. Supreme Court made in order to say, "You know what, you're right the 20th Century tax law is
obsolete. We need to move in to the 21st Century. Technology exists. The software exists and the point of entry for business today is so easy."
GOLODRYGA: Yes, fascinating. Justin Kennedy, in his remarks called it essentially a tax evasion, so I know you say that there are - in your
opinion, it's not much of a ramification going forward, still this is a huge blow for e-retailers and big news obviously that we are covering today
and we will continue to cover going forward. I want to thank you so much for calling in, Senator Peters. We appreciate it.
PETERS: No, thank you. I appreciate.
GOLODRYGA: Thank you.
PETERS: Thank you for the time.
GOLODRYGA: Thank you. Well, later in the program, I will be speaking to the former Toys R' Us CEO and Target Vice Chairman, Jerry Storch.
The Supreme Court ruling and worsening trade fears push U.S. shares lower across the board. It's now down eight days in a row for the Dow, the worst
streak in 15 months. Boeing, Caterpillar, 3M were the biggest losers. They're all companies that would suffer in a trade war with China.
European markets closed in a sea of red, meantime. The E.U. is ready to slap tariffs on more than $3 billion worth of U.S. goods beginning Friday.
Daimler is warning profits will fall this year because it expects China to raise tariffs on cars from the United States. It is now one of the first
multinational companies to admit that what we have been speculating all along, a trade war between the U.S. and China will hurt.
Daimler stock was hit more than four percent lower, Volkswagen, BMW and Peugeot also fell. John Bozzella is the CEO of Global Automakers, a trade
association that represents the U.S. operations of international carmakers, so a big day for you. We appreciate you joining us today. Talk about the
significance of this for Daimler.
JOHN BOZZELLA, CEO, GLOBAL AUTOMAKERS: Yes, you know, when you look at it, this is significant. Many of us have been saying for several months now
that we are concerned that the tit for tat tariffs back and forth that is taking place between the United States and its trading partners is going to
have impact. It's going to increase prices on consumers here in the United States, it is going to increase production costs on U.S. auto production
and it is going to invite retaliation for our trading partners and I think, unfortunately, we are seeing our fears come to light now.
GOLODRYGA: And they also will impact the company's earnings as well, you predict.
BOZZELLA: Well, we are at least seeing indication that maybe some adjustments might be required in part because of these actions, and that's
unfortunate. You know, the reality is the uncertainty here and now, the beginnings of the tariffs going into effect themselves you know are
certainly creating challenges for automakers here in the United States.
GOLODRYGA: And a trade war is something that the Europeans definitely want to avoid and they are trying to find any other alternatives to find a
compromise of sort. What all are the other alternatives for the German carmakers in particular?
BOZZELLA: Well, look, the most important alternative always is more trade and more trade agreements. We want fewer barriers and fewer walls put up
between the countries with regards to economics and trade, and so the alternative obviously is to negotiate a trade agreement. We have been
believers for some time in the idea of a United States-European Union trade agreement that would address automotive trade barriers like tariffs, yes,
the E.U. has a 10 percent tariff for vehicles from the U.S. going in.
The United States has a 2.5 percent car tariff, but also a 25 percent truck tariff. So resolving those tariff differences would be helpful through
negotiations and also, aligning our regulatory regimes between the two trading markets would be hugely helpful.
So, the answer I think is more trade and more trade agreements.
GOLODRYGA: What impact would a trade war have on consumers in particular?
BOZZELLA: Oh, well there is no question that prices would go up.
[16:10:10]
BOZZELLA: It is very competitive. We have the most competitive and innovative car market on earth here in the United States and so, I think
what you'd see is you'd see prices go up, especially if you combine the tariffs we are seeing now between the United States and China, with the
steel and aluminum tariffs which are already raising production cost in the United States and then potentially, if the U.S. Commerce Department
concludes in its investigation of the National Security threat of auto imports and auto parts, if you can imagine, the cumulative effect of those
tariffs, if they are actually imposed would be significant price increases on consumers, no question about it.
GOLODRYGA: As you said, nobody wins in a trade war. John, thank you so much for joining us.
BOZZELLA: Thank you.
GOLODRYGA: Well, oil prices have been moving on. CNN's interview with Saudi Arabia's Oil Minister. Prices dropped two percent before recovering
slightly. It's a huge week for the oil markets. OPEC ministers are getting together in Vienna to talk output. CNN's John Defterios is in
Vienna on the eve of OPEC supply decision and he joins me live.
John, good evening.
JOHN DEFTERIOS, CNN EMERGING MARKETS EDITOR: Hello, Bianna. It's quite a bold gesture here by the Minister of Energy for Saudi Arabia, Khalid Al-
Falih at the OPEC seminar which precedes the OPEC meeting on Friday. He called for a special session into the seminar and asked me to do the
onstage interview, where clearly, he wanted to lay out his policy.
On one hand, he had an olives branch to the other players like Iran and Iraq suggesting it takes all 14 members of OPEC and 10 to make a decision.
We need collective action. But he said, "Let's call it like it is." He sees a shortage in the second half of 2018 in terms of supplies of 1.8
million barrels a day and wants to have the conversation of putting in a million barrels a day in the third quarter, easing it on the to market to
allay any fears about rising prices.
They were very sensitive about the rise up to $80.00 a barrel in May and the U.S. criticism by Donald Trump and even the Indian Minister was here in
Vienna. Let's take a listen to Khalid Al-Falih earlier today.
(START VIDEO CLIP)
KHALID AL-FALIH, MINISTER OF ENERGY, SAUDI ARABIA: We'll have to come to a consensus. I am very respectful with the views and input that we would
receive from each and every member of our grouping and I'll be sensitive to them, but at the end of the day, I think our first and foremost
responsibility is to our consumers and to the market.
We will not allow neglect to materialize again because we think that is bad for the collective industry interest of consumers and producers, but at the
same time, we are not going to allow a shortage to materialize to the point where markets will be squeezed and consumers will be hurt.
One thing you can be assured of is we will be responsive and we will release supplies to make sure that no shortage materializes.
DEFTERIOS: Is it good compromise point to have collective decision making here going to 100 percent compliance as a group as a opposed to 130
percent, 140 percent, 150 percent because of destruction of production in Venezuela and Libya most recently?
AL-FALIH: Easy for you to say, "Let's just go back to 100 percent compliance." But some of the extra conformity that we have seen by
producers is involuntary. So, reallocating it to other countries like Saudi Arabia may be a technical solution, but it may not be politically
acceptable to others.
(END VIDEO CLIP)
DEFTERIOS: Khalid Al-Falih, the Minister of Energy of Saudi Arabia. He is talking about the political considerations. OPEC sources, tell me,
including Iranian sources, the political twist here is that Iran wants language in the final communique condemning the U.S. sanctions against both
Iran and fellow OPEC member, Venezuela as well.
So, they have the plural across about production and closing that gap between Saudi Arabia and Iran, but also a difficult position for Saudi
Arabia, an ally of the United States to condemn it, for the sanctions against its regional rival, Iran.
It's pretty complex. A lot of heat this evening going into that meeting on Friday, Bianna.
GOLODRYGA: Yes, complex indeed. Interesting to hear him say that they are going to do whatever it takes to make sure no shortage materializes as
well. John Defterios will be covering the story from Vienna all week and we'll be coming back to you tomorrow. Thank you.
Well, a 36-year career ends abruptly. The Intel CEO is out over an office romance, and the wife of Israel's Prime Minister charged with breaching
public trust to fund an extravagant lifestyle.
[16:15:10]
Intel CEO Brian Krzanich has resigned. The tech giant says he violated the company's policy for managers by having a consensual relationship with an
employee. They have named an interim CEO.
The news sent Intel shares down more than 2 percent. The company recently said it's on target to post record second quarter results. Krzanich isn't
the only person who has lost a job over a relationship violating company rules.
Priceline's CEO Darren Hutson resigned for a relationship with an employee who was not under his direct supervision. That was against company policy.
Mark Hurd was forced out of HP after admitting false expense reports related to a relationship with a former employee, and Harry Stonecipher
resigned from Boeing for a consensual relationship with a female executive.
Nancy Shenker is the founder of theONswitch and the author of, "Don't Hook Up With A Dude In The Next Cube." She joins us live from Scottsdale.
Thanks so much for joining us.
So, first off, your reaction to the news that the Intel CEO stepped down.
NANCY SHENKER, FOUNDER, THEONSWITCH: It's sad on a number of levels. Here was a long-term career that was destroyed because of a failure to follow
the rules, and it is also from what I understand, an extramarital affair, so his wife and his kids are now involved in this public -very public news.
So, it's just sad was the first thing that came to mind when I heard about it. Ironically, when I wrote the book, it was primarily geared for 20-
somethings entering the workforce, but it's clear that we need to really start paying attention at all ages and stages around this whole issue of
inter-office romance.
GOLODRYGA: Yes, talk about the rules that brought down these executives because it wasn't necessarily, for some cases at least that they were
having a relationship with someone at the company, it was that somebody was subordinate to them, correct?
SHENKER: Exactly, and when you are the CEO of a company, everybody is basically an employee. So, people at that level have to be especially
careful about following their own rules or conversely, sitting down with Human Resources and saying, "Maybe we should revisit our company policies."
Not to be flip about it, but there may be company policies that need revisiting.
Because office romances are nothing new. I know of a lot of very successful relationships that began in the workplace including Bill and
Melinda Gates and the Obamas, so it's not necessarily that fraternizing is a bad thing.
[16:20:10]
SHENKER: It's the levels and the power thing. In this case, it's not really clear what the circumstances were, but as I said, the fact that he
was the CEO of a company, he should have been following his own rules.
GOLODRYGA: Nancy, what impact if any, has the #MeToo Movement had on companies and their Boards to maybe revisit some of these rules and not
just have them written in fine print somewhere, but actually something that they are serious about imposing?
SHENKER: It's such a complex issue. I worked in corporate America for many years, and we all went through harassment training and we all read the
rulebook, but it really needs to be part of an ongoing dialogue and the dialogue needs to include the Human Resources Department and I think, in
the past, HR professionals, not all, but many when issues like this came up, either did the ostrich thing or protected the CEO or avoided the issue.
Whereas now, they really need to become a part of the discussion and we need to be able to separate what is harassment, what is a misuse of power
versus two people having a romantic interest in each other and having a relationship.
So, it gets very ambiguous.
GOLODRYGA: Yes, it's so important to have that conversation, too. You know, so many people I know don't even know where their HR is, who their HR
officer is, so I think having this conversation hopefully will address some of these unanswered questions. A very important topic to have.
SHENKER: And also that - yes, and also that fear you have, you know, I was in the situation once where two people were having a relationship. They
were both consenting adults, but it made the rest of us in the department uncomfortable. And that's a really tough conversation to have, who do you
have it with?
GOLODRYGA: Yes, you have to factor in the unintended consequences as well. Nancy Shenker, thank you so much for joining us.
SHENKER: Thank you so much.
GOLODRYGA: The wife of Israeli Prime Minister Benjamin Netanyahu has been charged with fraud and breach of trust. Prosecutors say Sara Netanyahu
misused public funds to pay for meals and private chefs at the Prime Minister's residence. She has repeatedly denied any wrongdoing.
Oren Liebermann joins us from Jerusalem. Oren, great to see you. Obviously, we know that the Prime Minister has his own legal concerns, but
when it comes to Sara Netanyahu, anyone who has been following the Netanyahu family, this isn't necessarily a surprise as far as her lavish
lifestyle trends.
OREN LIEBERMANN, CNN CORRESPONDENT: And these criminal investigations have been going on for some time now, so the public here certainly very familiar
with it. There had been a number of investigations all of which had these catchy names, furniture gate, electrician gate and a few others, but a
number of those were dismissed.
The Attorney General saying there wasn't enough evidence. Not this one though. Not the case we're talking about here, which is known as the meals
ordering affair. In it, prosecutors say Sara Netanyahu ordered from some of the most expensive restaurants in Jerusalem repeatedly and handpicked
high-end waiters and waitresses to serve her and her family at the Prime Minister's residence from 2010 to 2013, then prosecutors say her and the
Deputy Director General of the Prime Minister's office essentially concealed that in the paperwork, changing the names of waiters and
waitresses to cleaning staff or extra manpower intentionally to hide that.
And that's where you get these charges that were handed down today in Jerusalem magistrates court of fraud and breach of trust. As you point
out, Sara Netanyahu has denied any wrongdoing. Her lawyers have said the indictment sheet is false and hallucinatory, so Bianna, there, just like
her husband, Israeli Prime Minister Benjamin Netanyahu very much firing back at the accusations she is facing.
GOLODRYGA: Calling it fake news, right, and a witch hunt. Separate the two investigations and charges both are facing - both the Prime Minister
and Sara Netanyahu and can they in fact bring the First Family down?
LIEBERMANN: So, I wouldn't say that the investigations against Sara Netanyahu have the potential to bring down the First Family here. They're
essentially enough in the public eye and not a big enough case to have that power, of course, a very different story for the investigations against
Prime Minister Benjamin Netanyahu, he has already been named the suspect in two of those cases - case 1000 and 2000 where police say they have enough
evidence to indict on fraud, bribery and breach of trust, and he has been questioned as a suspect in a much bigger case, a third case.
That process is very slow. The Attorney General is working very methodically, very deliberately there, but if an indictment is handed down,
the expectation here is that that has very much has the power to take down Prime Minister Benjamin Netanyahu as his coalition partners essentially
pull their support at that point.
GOLODRYGA: That involves media magnates both in Israel and in the U.S. as well. Oren good to see you. Thanks so much.
[16:25:10]
GOLODRYGA: Well, the U.S. Commerce Secretary is denying any suggestions he engaged in insider trading of shares. "The New York Times" and "Forbes"
reported details of a transaction by Wilbur Ross in shares of a shipping company saying Ross sold the stock knowing a negative news report was about
to come out.
Ross says the reports contain unfounded allegations. According to "The Times" the transaction is worth between $100,000.00 and $250,000.00 and
occurred last autumn. In a statement to CNN, the Commerce Secretary says, "The bottom line is that I have complied with the ethics laws of the United
States."
Norm Eisen is the Chair at Citizens for Responsibility and Ethics in Washington. He is also the Senior Fellow with Brookings and was the White
House ethics czar under President Obama. Norm, great to see you. So, let me start off by asking, with the Commerce Secretary under President Obama
facing similar allegations be able to walk away saying, "I did nothing wrong."
NORM EISEN, CHAIR, CITIZENS FOR RESPONSIBILITY AND ETHICS: Well, no Commerce Secretary, no Cabinet member under any administration would be
able simply to issue a statement denying liability and end the matter given these very serious questions that have been raised.
So, this is not going away. It demands an investigation no matter who the President is.
GOLODRYGA: And the Commerce Secretary is a job that involves Senate confirmation. How does something like this get past the Senate when they
are confirming him in the process of confirming him?
EISEN: Well, there are two sets of allegations here, both of which are based on facts that emerged after the Secretary was already in the job.
One set of issues about short-selling some stock in a company and the question there is when he made these short sales, essentially, the company
stock would go down. Did he have insider information? That's a violation of American law, if we did. We don't know the answer.
And then there is the second set of issues where he promised to get rid of some stock, this is what the "Forbes" article focused on, and he signed his
forms under penalty of false statements that he got rid of it. It turned out, he hadn't gotten rid of this stock and it matters because it related
to his job.
So, there are two sets of very serious allegations. He said he did nothing wrong, but how can we take his word for it? It has to be investigated.
GOLODRYGA: And "The New York Times" released the e-mail, portions of the e-mail that they had sent to him specifically stating that they were going
to be doing a story about his investment in this Russian company - a Russian-tied company, subsequently, a few days later, he appeared to short
the stock.
Let me ask you about the other company in question or the other country in question, that is China. He obviously is leading the charge of trade
negotiations with China and yet, a Chinese-owned sovereign wealth fund reportedly invested $500 million alongside and paid fees to his company
years before obviously he became Commerce Secretary, but that investment could still be benefiting his family.
Is that ethical? Is that legal?
EISEN: Well, the Secretary's continuing financial positions, the questions about them, the constantly changing stories from him, from the Department
of Commerce - these are very serious matters and I should say that the issues that have popped in recent days are part of a larger pattern of
questions like those that you're asking.
And there have been multiple requests to take a look at this, but I think you know, in every - the life of every Cabinet member, there is a tipping
point. For Scott Pruitt, the tipping point was when his luxury lobbyist lodgings came out. For Wilbur Ross, I think the tipping point on this
whole package of questions are these allegations of insider trading.
Now, in fairness, he denies it, but we can't take his word for it given the pattern that you're pointing out, the larger question swirling. This needs
to be independently investigated by the United States Department of Justice, by prosecutors, by the Office of Government Ethics and I think
you're going to see that an investigation is going to be launched that will look at more than one of these questions.
GOLODRYGA: Well, as of today, the Secretary said his investments are in compliance. The question is how can we be sure of that. Norm Eisen, great
to have you on. We appreciate it.
EISEN: Always a pleasure. Thanks.
GOLODRYGA: And coming up after the break, a Supreme Court decision spells trouble for online retailers. I will be speaking to the former CEO of Toys
R' Us and Hudson's Bay.
[16:30:08]
(COMMERCIAL BREAK)
GOLODRYGA: Hello, I'm Bianna Golodryga, coming up in the next half hour of QUEST MEANS BUSINESS, new nations are entering the global trade war. Now
India and Turkey hit the U.S. with tariffs.
And one of the world's top biggest stars is having the tournament from hell. But first, these are the top news headlines we're following at this
hour. U.S. First Lady Melania Trump made a surprise visit to a detention center in Texas, housing dozens of immigrant children.
The trip came one day after President Trump signed an executive order to put a stop to his own policy separating families at the southern border.
The wife of Israel's Prime Minister has been charged with fraud and breach of trust. Prosecutors allege Sara Netanyahu misused government money to
pay for meals and chef at the Prime Minister's residence.
Her lawyers slammed the indictment, denying that she committed any felonies. And World Cup action, the big question is what happened to
Argentina's Lionel Messi as his team failed to Croatia 3-0. That means Croatia through to the last 16, big blow for Messi.
France will join them after beating Peru 1-0. Nineteen-year-old Kylian Mbappe became the Les Bleus youngest scorer at the World Cup. Australia-
Denmark battle to a 1-1 draw, both are still in contention for the knockout phase, but the Socceroos will have to defeat Peru.
New Zealand's Prime Minister Jacinda Ardern has given birth to a baby girl. She wrote on Instagram, "welcome to our village, we won", and posted with
this happy photo. Miss Ardern is just the second world leader to give birth while in office after the late Pakistani Prime Minister Benazir
Bhutto in 1990.
And returning to our top story tonight, the U.S. Supreme Court has delivered a major blow to online retailers. Judges say states can force
them to collect sales taxes in states where they have no significant physical presence.
I'm joined in the C-suite tonight by retail veteran. Jerry Storch is a former CEO of Toy R Us. He's also a former vice chairman of retail giant
Target. And he served as the chief executive of Hudson's Bay's own owner of Lord and Taylor. Great to have you on set with us --
JERRY STORCH, CEO, STORCH ADVISORS: Great to be here.
GOLODRYGA: First reaction to the ruling. Are you surprised?
[16:35:00] STORCH: I'm not surprised really, although I thought this court might take the easy way out and just say, well, this is already decided,
live it up to Congress with time to make the law which is what the minority said.
Majority struck a blow for common sense and bringing the taxation scheme into this century instead of 1800s. So the idea that somehow it will be
too burdensome for online sellers to collect sales taxes is ludicrous, it always has been because these are very technological and proficient
companies by and by.
You know, and they have total ability to accomplish this. And in fact, they accomplished it further for their bricks and mortar partners when they
do business together, so this was long overdue.
GOLODRYGA: And some have actually advertised that the consumer should shop with them for the discount they will be getting for the sales tax they're
not going to be paying.
STORCH: It may not seem like a lot, you know, where there's five percent, seven percent, eight percent, depends on the state that you're in. But
actually, it is a lot when you realize that most retailers only make a single digit percent of sales as profits on the bottom lines.
So it's going to 100 percent of the profits of many retailers. And when you have a sales tax holiday which many states do right before back to
school in the U.S., you find that people flood into the stores to get that free or no tax day.
So it does make a huge difference, and it gave an unnecessary advantage to online retailers versus brick and mortar which was particularly important
during the growing days of online retailer. You've seen so many bankruptcies and closures on main street as a consequence of this.
So it's dire overdue and it will be a level playing field now and consumers will choose who to shop with and how, not based upon who has a sales tax
advantage, but based on who has the best package of goods and services.
GOLODRYGA: How much of that competition and the pressure from online retailers do you attribute to the downfall of Toy R Us?
STORCH: Well, that's a very complex situation, it was a very leverage company, I think part of that great firm is they took that private in 2005,
couldn't have seen what was going to happen to retail in the future.
And at that time it was a huge cash cow and so was heavily leveraged. What happened was, the Internet happened, a lot of things changed, so it
required much more capital investment and there were much lower margin rates due to pressure from online shop.
Including by way this tax advantage which in early days Amazon didn't collect sales taxes even on their first product sales. So that was
definitely an issue in the early days. So it meant that the margins were much thinner to live through with the recession and what followed.
And so I think it's a combination of factors, not just -- not just the Internet, but that was certainly a factor, but also just the extreme
leverage on the company.
GOLODRYGA: Any political factor at all, given that the president had a wild there almost weekly, gone after Amazon for the lack of taxes that he
says that they're paying and for the free ride they were getting.
STORCH: Well, I don't think the Supreme Court was influenced by politics. When you look at the make-up of the majority on the court, it was an
unusual combination for conservatives and liberals who are -- who came out in favor of this judgment.
So I don't think it was politically influenced. I have been here on CNBC before and I've said that I thought that even though I know a lot of people
don't agree with Trump on a lot of things and we're questioning his motives vis-a-vis, you know, Amazon and "The Washington Post" --
GOLODRYGA: "Washington Post" --
STORCH: That I have said I thought he was basically right that everyone should be collecting sales taxes and that always should have been the case
and it was sort of nonsense that we had the institution to begin with. It was a -- it resulted in the government picking winners and losers in the
retail landscape which is something we never want to do.
GOLODRYGA: But brick and mortar company should not get too comfortable with this decision --
STORCH: Sure --
GOLODRYGA: Right, because e-commerce isn't going anywhere.
STORCH: No, I think what's important to remember here is that the good bricks and mortar companies have been built in their online arms. But
those -- the e-commerce arms, the bricks and mortar retailers had other unfair disadvantage versus e-commerce only companies.
So you could have a situation where you've had an office in one place that it was the Internet arm of bricks and mortar company function identically
to the e-commerce-only company. And then the office right next to it e- commerce-only company, and the e-commerce-only company didn't have to collect sales tax.
And the Internet arm of bricks and mortar company did. Big companies(ph) saying why are those bricks and mortar companies so bad at the Internet?
Well, one big reason was they were forced to collect sales tax because they had stores, you know, whereas the e-commerce-only company did and that was
just wrong.
GOLODRYGA: And consumer shop for convenience, they also shop for the better deals. And when they hear about the ruling today, the first
question they're going to ask is what does it mean for me? Are they going to be paying more now because of this ruling in online shopping?
STORCH: Well, no one wants to pay taxes, let's face it. But eventually, there will be sales taxes and every -- so with the Internet, it's going to
take a while because the states have to take action in order to -- eventually, what a -- eventually, there will be taxes on everything on the
Internet.
But look at it this way, the poor guy on main street who is starting up his store and has to compete with an online retail out of state, you know,
where there's a 5-day percent cost advantage over the guy on main street in your community the store, you know, now we'll see that he has level playing
field with the out-of-state competitor, and that makes sense.
GOLODRYGA: Yes, Justice Kennedy called it a form of tax evasion.
STORCH: It wasn't, it was totally wrong. And you know, we were all supposed to remit use taxes to the state where we live when the retailers
didn't collect it, but I don't know of any who would pay a use tax on the products that they bought from Amazon.
[16:40:00] GOLODRYGA: Well, Jerry Storch, great to have you in the C-suite --
STORCH: It's a pleasure --
GOLODRYGA: Thanks for coming in, we appreciate it. Well, Lionel Messi wants to be known as the greatest footballer to ever play the game. But
after a stunning loss for Argentina last hour, he's on the verge of World Cup elimination.
(COMMERCIAL BREAK)
GOLODRYGA: Argentina has been embarrassed by Croatia at the World Cup in Russia. Moment's ago, a 3-0 loss have left Argentina and Lionel Messi, one
of the biggest stars at the World Cup on the brink of elimination.
World Sports' Don Riddell is with us. And Don, we saw spectators and Argentina fans crying in the stands there wondering what on earth happened
to their team and what on earth happened to Messi?
DON RIDDELL, CNN WORLD SPORTS: Quite right, Bianna, yet, it was embarrassing for Argentina, it really was a humiliating capitulation, a 3-0
defeat. I just read this is the biggest or their worst group stage defeat in the World Cup since 1958 and it leaves their hopes of progressing in
this qualification in serious doubt.
This was not the performance anybody was expecting for Argentina, in some ways, we shouldn't be surprised because they really did struggle through
qualifying and needed a Messi hat-trick in the last game just to get to this tournament.
But I think many people believe that with Messi in the team, this team can overcome so much and they just assumed that they would still be able to do
well in this tournament. But we are seeing after the first two games that that is not the case.
They really labored to a 1-1 draw against Iceland in the first game, then this. And they may well need other games in the group to get their way,
otherwise they might not even get out of the group stage, which will be quite remarkable.
GOLODRYGA: And Messi may be taking a phone call from LeBron James right about now to figure out what if anything he can do to win and come back.
When it comes to the rivalry of course though between the two stars Messi and Ronaldo, this really is at least thus far Ronaldo's World Cup.
RIDDELL: Oh, no doubt about it. Of course, two games, Ronaldo already scored four goals, he's the leading scorer in the tournament, he'll be
fancing a crack at the golden boot the way things are going for him and Portugal, but Messi must just be absolutely devastated about the way this
is unraveled for him and his team so far.
You know, and it wasn't just Argentina were poor defensively today, I mean, offensively, they just couldn't get anything going. One of their strikers,
Sergio Aguero in the first half went a full 21 minutes without even touching the ball.
They missed several glaring opportunities before they completely folded at the back. And yes, their situation is really quite desperate. You
mentioned the fans in the stadium looking devastated, it was exactly the same back home in Buenos Aires, the supporters there just watching the
game, kind of, you know, through their -- through their hands.
[16:45:00] There is Diego Maradona, he just -- he just can't believe it. I will say that a lot of other football fans are really enjoying this, we've
been out speaking to supporters in Red Square in Moscow, and some Brazilian supporters kind of gate crashed the party because they were celebrating
this.
They actually loved what they have seen, not good for Argentina --
GOLODRYGA: Some celebrating, some crying --
RIDDELL: Not good at all --
GOLODRYGA: Big day tomorrow, though we got Nigeria and Iceland, you know, Iceland is the team no one can hate right about now.
RIDDELL: Yes, they're so popular, Iceland, just look at what they've achieved coming from a country of what? Three and thirty thousand people,
the smallest team and then they qualified for the World Cup, taking it to Argentina in the first game, getting a point off them.
So Iceland very popular. It is going to be interesting to see what happens in that game because that will determine what Argentina has to do in the
last game. It's a bit complicated to get into all the permutations.
But what I will say is because Argentina conceded 3 goals today, they have a goal difference of minus 3, and that really could be handicap for them if
this group ends up being close, which it looks like it's going to be.
GOLODRYGA: Well, Don, I'm not ready just yet to bet against Messi, we'll leave it there.
RIDDELL: All right.
GOLODRYGA: Thanks for joining us, and we'll be back with more in just a moment.
(COMMERCIAL BREAK)
GOLODRYGA: Further escalations seems likely, and that's Goldman Sachs warning to its clients about the bugging trade war between the U.S. and
China. Greg Autry co-wrote the book "Death By China" with Donald Trump's trade adviser Peter Navarro. He's joining us from Los Angeles.
Great to have you on Greg. We appreciate it. Everybody we've interviewed thus far on this show seems to agree with the consensus that nobody
benefits from a trade war. What are your thoughts?
GREG AUTRY, AUTHOR: I think there's a selective process and who gets interviewed in these things to begin with. But --
GOLODRYGA: We are here --
AUTRY: Nobody benefits -- nobody benefits from a trade war, and we've had a trade war going on for 30 years, we just haven't done anything about it
and certainly we haven't benefited from it.
GOLODRYGA: Are tariffs the right approach to dealing with what many would describe and agree with you as unfair trading practices by China?
AUTRY: They're one of the easiest ways to deal with it, and I think the key point is simply standing up and making it clear that we're not going to
accept the status quo which is we're not going to play on a field that is totally tilted in China's advantage.
There's a lot of other things we need to do, but tariffs are something the president can do and the president can do quickly, so that's where you
start.
GOLODRYGA: Is unilateral action best though, I mean, many would say we agree with you that something needs to be done to combat China's unfair
trading practices, the best way to do it is through a coalition like TPP.
AUTRY: Well, you know, we had the WTO set up, and the Bush administration about -- administration made multiple complaints to the WTO about China's
unfair trading practices in a variety of categories, from solar power to metals.
[16:50:00] and in every case, China found a way around those things one step at a time to trans-shipping or assembling in other countries. And the
trading partners frankly just didn't stand up, they were happy to let the U.S. become the buffer and the absorber of Chinese over capacity so they
can continue to export whatever products they exported to China.
Eventually, you've got to stand up and say the United States cares about its economic future, its workers and it cares about making sure that it's
treated fairly and we've got to do that. It'd be great to have our trading partners on board for that as well.
GOLODRYGA: The president on a number of topics goes back to saying, he's inherited this mess, right? Whether it comes to Iran, whether it comes to
North Korea, whether it comes to China and trade relations with the country.
Are you concerned at all that given how strong China is now as the world's number global power, that we've missed the window of this sort of tit-for-
tat trading tariffs that maybe you're a proponent of, maybe it's something that should have been done 10, 20, 30 years ago as opposed to today.
AUTRY: Absolutely, would have been a lot better if the two W. Bush administration had stood up to it. Obama clearly inherited the mess, he
kicked the can down to Trump, Trump is finally standing up to it.
So it would have been a lot better to do it. But the fact that it exists is something that needs to be done unless we just want to concede, become a
seller of raw agricultural products and become a resource colony essentially of a nation who does not have our interest in mind and does not
share our ideological principles.
GOLODRYGA: And so a president who I would say enjoys most support from his own base that then presidents have, I would say going back to the last 20,
30 years, this seems to be the one issue that Republicans, his own party members who have supported him on every other issue oppose him on because
of concerns about what this would mean for their constituents at home.
What is your message to those who oppose the president?
AUTRY: Frankly, I think they're much more concerned about the large multi- national corporations that they backed their campaigns on both sides. They're down 10, the Republicans have been sold out on this for years, it's
why they were always happy and embraced yet another free trade treaty no matter how bad the results of the previous one were.
Jobs are great and as long as they can convince their constituents they care more about chief consumer products, then their jobs, they can get away
with taking the money and for the multi-nationals. I think that that routine is ending, it doesn't carry weight with their constituents any
longer and in reality, people do care more about their jobs and their children's futures than they do about whatever the price of the iPhone is
today.
GOLODRYGA: Greg Autry, we'll have to leave it there, thanks so much for your time.
AUTRY: Thank you.
GOLODRYGA: Appreciate it. Well, while the trade war focus has been on China, retaliatory measures are ramping up against the U.S. around the
world. India's tariffs went into effect today, they're hitting 30 American products with levies worth $240 million in response to the Trump
administration's tariffs on steel and aluminum.
Chidanand Rajghatta is live in Washington. He's the foreign editor at the "Times of India". So we have another emerging market as a player now in
retaliatory measures. How significant are these for now at least threats coming out of India?
CHIDANAND RAJGHATTA, FOREIGN EDITOR, "TIMES OF INDIA": Well, it's a slippery slope, and let me say this first that the trade differences have
been there between countries for the longest time. Nobody disputes that and there are mechanisms to deal with it.
What has happened with the Trump administration is the public ramping up of rhetoric. You have now sort of emptied up so much that you have brought --
you know, you put pride on the table and you're actually publicly beating up countries whether it's China, India, E.U. with very offensive language
and you accuse countries of stealing and cheating and use language like that.
It's offensive and what happens is a lot of countries don't -- they might have negotiated in prior with, now it's a question of pride and they're not
going to back down. So with India, it's now -- although the volume of trade is not as great as China, it's actually one-tenth of China, but he
equated them with China.
So there's a dollar for dollar retaliation from India and that's what most countries do. But the second point I wish to make, with a lot of countries
that the United States has trade issues with, you allow them to either run a surplus or you suffer a deficit for other reasons.
It may be strategic reasons. In the case of India, it was because you want to prop up India as a strategic counter-way to China, and because
immigration, such a hard burden topic in this town right now. Let me say, even in Latin America, you don't mind a little bit of job fly to, you know,
Latin American countries because you want them to grow, you want them to have jobs there.
[16:55:00] You don't want immigrants coming at your border. So I find this administration's policy baffling. The fact that they, you know, ramp it up
so much and made such a public spectacle of it and carried dispute into public domain with very offensive language is kind of unsettling and I just
find the whole thing infantile.
GOLODRYGA: And you're right because when it comes to aluminum and steel trade, it's minuscule between the two countries, but I read that it's the
pharmaceutical industry that really has Indian economist and Indian government officials concerned because what tariffs could mean for that.
RAJGHATTA: Absolutely, and it's going to hurt everybody, it's not just the pharmaceutical industry in India, it's almond growers in California, it's
apple growers in Washington state, India is a growing market, you could have -- one word to this country with you know, a little bit of give and
take.
And the deficits is not astonishing, it's $23 billion, it's like what? One- fifteenth of what you have with China --
GOLODRYGA: Yes --
RAJGHATTA: So this was not a major issue, and there are -- there are other things on the table. Like I mentioned, there's a strategic deal here, you
want -- Obama administration and the Bush administration proceeding that for 16 years.
Actually, even going back even further, you always wanted to push India up as a global player --
(CROSSTALK)
As had against China.
GOLODRYGA: That's right and the development of the country --
RAJGHATTA: Right --
GOLODRYGA: Would mean to the world. I'm sorry, I'm cutting you off just because we are tied on time, we have seconds left --
RAJGHATTA: Sure --
GOLODRYGA: But I appreciate you joining us --
RAJGHATTA: Thank you --
GOLODRYGA: Today, thank you. And that's QUEST MEANS BUSINESS, I'm Bianna Golodryga and you're watching CNN, keep it here.
(COMMERCIAL BREAK)
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