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Quest Means Business
Lawmakers Vote On President Trump's USMCA Trade Deal Hours After Impeaching Him; Bank Of England Confirms An Unauthorized Audio Leak; The World's Oldest Central Bank Is Finished With Negative Interest Rates; President Trump Speaks a Day After He was Impeached By House; CNN Investigates Amazon's Efforts to Prevent Counterfeits; Stocks Hit Record Highs, Shrugs Off Politics in Washington. Aired 3-4p ET
Aired December 19, 2019 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[15:00:25]
ELENI GIOKOS, CNN BUSINESS AFRICA CORRESPONDENT: It is the final hour of trading on Wall Street. U.S. markets are hitting record highs. The Dow is
up four tenths of a percent. S&P and NASDAQ are also sitting at record territory. Here is what investors are watching.
Dissidence in the Halls of Congress. Lawmakers vote on President Trump's USMCA trade deal hours after impeaching him.
Every second counts at the Bank of England. Regulators are looking into how traders got early access to market moving information.
And fake products real risks. Companies warn copycat versions of their products sold on Amazon pose a safety risk. We put them to the test.
Live from the world's financial capital, New York City. It's Thursday, December 19th. I'm Eleni Giokos in for Richard Quest and this is QUEST
MEANS BUSINESS.
A very good evening to you. Tonight, a house divided on impeachment, united on trade. In a rare and historic move, the President of the United
States was impeached late Wednesday evening in Washington. Democrats in the House accused Donald Trump of abusing his power and obstructing
Congress.
Now, those same lawmakers will vote to hand the White House a crowning achievement, a new trade deal between the U.S., Canada and Mexico. All the
while markets are shrugging it off.
The Dow is marching on now at an all-time record high. Mitch McConnell in the meantime, the top Republican in the Senate says he'll sit on the USMCA
trade deal until the matter of impeachment is settled.
Nancy Pelosi, the Democrat Speaker of the House knows the numbers in the Senate are not in her party's favors, so she is happy to drag out the
President's trial and won't commit to sending the impeachment to McConnell and the Republicans.
So it's a game of chicken between two of the most powerful people in the country.
(BEGIN VIDEO CLIP)
SEN. MITCH MCCONNELL (R-KY): It's like the prosecutors are getting cold feet in front of the entire country, and second guessing whether they even
want to go to trial.
They said impeachment was so urgent that it could not even wait for due process, but now they are content to sit on their hands.
REP. NANCY PELOSI (D-CA): I heard some of what Mitch McConnell said today, and it reminded me that our founders, when they wrote the Constitution,
they suspected that there could be a rogue President.
I don't think they suspected that we'd have a rogue President and a rogue leader in the Senate at the same time.
(END VIDEO CLIP)
GIOKOS: Well, Manu Raju is on Capitol Hill for us. Manu, we heard Nancy Pelosi today as well as last night, and I guess the message is that they do
not want to send the Articles of Impeachment to the Senate until they are sure what they say is going to be a fair trial and they want to make sure
that they're also in control of the rules. How is this going to play out?
MANU RAJU, CNN SENIOR CONGRESSIONAL CORRESPONDENT: Well, right now, Chuck Schumer, the Senate Minority Leader and Mitch McConnell, the Senate
Majority Leader, they are expected to meet actually as soon as this hour to discuss about -- to discuss the process going forward.
Now, essentially, the way that it's expected to go down is like this. The hope among the Democrats is that they could get some assurances from
McConnell about how the trial would play out in January and if they are satisfied with that, then that would lead to the next step.
So the House would take a vote and begin the process that would close out the proceedings essentially on the House side by naming people who would
carry out the prosecution on the Senate side, and then they would transmit those articles from the U.S. House over the U.S. Senate, and that could
begin the trial.
But there are a lot of questions because if Chuck Schumer and Mitch McConnell can't cut a deal or can't reach any sort of agreement about what
the trial for President Trump could look like, then what do the Democrats decide to do?
And that is an answer that is just not clear yet. I've tried to press the Speaker about this very issue. She would not say exactly what it would
take for her to send those Articles over other than saying that -- suggesting that there should be some sort of process, a fair process in her
mind. But what does that exactly mean? It's unclear.
So there have to be more discussions that will take place today, but almost certainly this is going to be punted, ultimately until after Christmas,
because lawmakers are all leaving town by the end of today and they may have to wait until January to resolve some of these questions.
GIOKOS: And this is interesting, right? Because it is a timeline issue and timing is going to be everything. We're heading into an election year.
We know the Republicans want to get this over and done with.
[15:05:06]
GIOKOS: The Democrats however, we are hearing perhaps want to drag their feet until they are sure of what they say, is going to be a fair trial.
And as you also mentioned, we don't really know what that really means.
RAJU: Yes, that's exactly right. Because Chuck Schumer issued a letter earlier this week detailing four witnesses that he wants to hear from
including Mick Mulvaney, the Acting White House Chief of Staff, as well as John Bolton, the former National Security adviser, people who did not come
before the House Impeachment Inquiry, because the White House intervened and said that the House Democrats should not be talking those individuals.
Well, the Democrats in the Senate side are saying we need to hear from them during the Senate trial. But Mitch McConnell has said absolutely not. We
will not hear from witnesses who the House did not consider because McConnell says the House should have went to court to get those witnesses
if they wanted to talk to them.
So they're launching this procedural fight right now about who actually will testify in the Senate and that's a question that probably will -- the
two sides are almost certainly not going to resolve.
So they may ultimately decide to punt on some of those key issues about which witnesses will testify until later and just begin at least the
opening arguments of that trial in January, but that still needs to get sorted out between the two leaders.
GIOKOS: Yes, exactly, and it also depends on how quickly they can get through this. We also heard Mitch McConnell was talking about dragging,
you know, their feet on the trade deal and that is going to be a really big sore point for the Democrats.
And we were talking about this being a game of chicken between two of the most powerful leaders in the country at this stage. What are you hearing
on the ground with regards to that?
RAJU: Well, it's expected to pass the House as soon as today that trade deal between the U.S. and Mexico and Canada, a very significant agreement
that the Democrats cut with the Trump administration.
But the problem for the Senate Republicans is that the deal does not go -- is not necessarily satisfactory to a lot of them. A lot of them don't like
the concessions that the Trump administration made with the House Democrats.
So a lot of them are not in a hurry to move on that. But nevertheless, Mitch McConnell has indicated that they will approve that trade deal, but
not as he said until after that Senate trial.
So the ultimate approval of that key agreement could wait until maybe February, it maybe later, depending on what happens here. Because the
Senate's action is going to be consumed by this trial of the President.
GIOKOS: Manu Raju, thank you very much for joining us. Great to have you on the show.
RAJU: Thank you.
GIOKOS: So it has been historic days in Washington. You wouldn't know it on Wall Street, however. We're seeing record highs across the board since
the Democrats began their Impeachment Inquiry back in September.
The S&P 500 is up more than seven percent. Investors know the chances that Donald Trump gets removed from office are exceedingly low.
The market also made gains during the impeachment of Bill Clinton back in the 1990s. In the early 1970s, stocks plunged 32 percent when impeachment
proceeding started against Richard Nixon until the day he resigned.
Greg Valliere is the Chief U.S. Policy Strategist at AGF Investments. He joins me now. Sir, good to have you with me. Why are the markets not
responding to Donald Trump's impeachment?
GREG VALLIERE, CHIEF U.S. POLICY STRATEGIST, AGF INVESTMENTS: Well, I'd say two reasons. Number one, as you said the outcome looks pretty likely
that Trump will get acquitted in the Senate.
Number two, the news has been great in the last month or so. We got a trade deal or a partial trade deal. We got a phenomenal unemployment
report, more and more science that there is not a recession that's imminent. So I think the really good news has been a factor as well.
GIOKOS: We have had really good economic data that has come through and it's really evidenced in the way that money has been flowing into the
equity markets. I guess the question is here, how much momentum does this market have? And is the 2020 election going to create any uncertainty in
your mind?
VALLIERE: Well, when everyone thinks the same way, I get worried and the market now is so euphoric, getting a little frothy. When the market gets
frothy, a lot of professionals start to get nervous, we may be getting close to that point.
So I do think, however, that the economy is in pretty good shape. First quarter may grow around two percent. This quarter, the fourth quarter,
they grow at a two and a quarter percent.
But when we talk about the general election, I mean, there are a lot of political risk. As of today, I think Trump is the favorite to win
reelection.
GIOKOS: Yes. And that's an interesting point that you make, because the reality is many have noted just how well the markets have been doing and
that the economy has been doing under his leadership. If there were to be a change, how would that impact markets?
VALLIERE: Well, I think if it was an Elizabeth Warren or a Bernie Sanders' stage, it would be pretty negative considering their positions. If it was
Joe Biden or Pete Buttigieg or maybe Michael Bloomberg, I think the markets could live with them. They're more moderate.
But kind of change I think brings with it the threat of volatile markets. So I think the markets have been so uniformly sanguine for the last couple
of months that can't last forever.
[15:10:10]
GIOKOS: Yes. I read your recent notes, "The Grinch Alert."
VALLIERE: Right, right.
GIOKOS: So what are the big risks here? I mean, you know, the Grinch kind of stealing the euphoria. The impeachment drama isn't actually over as yet
and then the trade deals, that's a big one.
VALLIERE: Well, there's no real trade deal yet. They said they had an agreement in principle last week, but the details aren't out yet.
Trump is still a tariff guy. He is looking at Western Europe -- at French wine and things like that. That still has got to be a concern for the
markets.
The big concern for me is that the Fed which provided a life preserver this year, is not going to be back in 2020. I think the Fed stays on the
sidelines. So if the markets are hoping for any monetary policy gift, it is not going to come.
GIOKOS: Yes, okay, so inflation. How are you seeing this playing out in the next year? I mean, we know the Fed doesn't want to really move on
interest rates and if you've got frothy market that could mean, you know, an increase in inflation and then you've got to see a Fed move at some
point.
VALLIERE: Well, once again, if everybody in the world thinks that inflation is dead, I get worried. And there are some things to be
concerned about.
The labor market is so tight, wage pressure might start to build up again. I think that's a very big concern, and really all the inflation indicators
except the one that the Fed uses is already at about two percent. So I don't think inflation is going to heat up. But I don't think inflation is
going to be dormant either.
It is something -- it is one of many reasons why I think the Fed's easing is over.
GIOKOS: Yes, so lots to ponder over as we head into the New Year. Happy Holidays to you, sir. Great to have you on the show.
VALLIERE: Same to you. You bet.
GIOKOS: Much appreciated. All right, so the U.S. Congress takes the one hand and gives with the other. On Wednesday, the House impeached the
President; today, it's poised to greenlight his signature trade achievement -- USMCA.
At a rally Wednesday night, Trump bragged about the deal. Listen in.
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: I came in and I remember the speech so well. I said, why are you allowing them to steal your car
companies? Why are you allowing them to go to Mexico and to go from China? Well, they come in from China, they build them in China. They sell them
into our country with no tax, and you lose your jobs, you lose your factories, the companies leave, and you get nothing. Why are they -- I
asked that a long time ago, and we've stopped it. We've stopped it.
[APPLAUSE]
TRUMP: You will see that. We just made the USMCA. We're getting rid of NAFTA, which I think is the worst trade deal ever.
[APPLAUSE]
(END VIDEO CLIP)
GIOKOS: All right, Mary Lovely is a Senior Fellow at the Peterson Institute in Washington. Really good to see you again, Mary. Thanks so
much for joining us.
And there you heard President Trump talking about NAFTA being the worst trade deal ever. Is the USMCA a win for everyone here?
MARY LOVELY, SENIOR FELLOW, PETERSON INSTITUTE IN WASHINGTON: No, I mean, USMCA is NAFTA with a few changes, a little bit of update and some roll
back on access to the U.S. market, but really only in the auto sector.
GIOKOS: How do you see this working at the moment? We know that we've got to get the final signatures. We've got to see this approval process coming
to the fore. Do you think that everyone is going to be game on this?
LOVELY: Yes, I do. And I think it's largely because of the changes that were made to appease the House Democrats. Those changes tightened up the
enforcement of labor provisions, particularly the right to unionize in Mexico and how we're able to monitor those changes and enforce those
changes, and also a bit of tightening on the environmental agreements.
So the Democrats are on board. I think eventually, Republicans who are not happy because this process is not to their liking, also because it really
rolls back access and probably decreases competitiveness of the North American automobile industry. They're going to have some grumbles. But in
the end, Mitch McConnell will get the votes for the President.
GIOKOS: Yes. And let's talk about the Phase 1 trade deal as well, because that is a big game change, and finally putting trade tensions to rest.
However, we have seen, you know, conversations leading up to almost finalization and then it's falling apart as well. Do you think that we are
finally getting to the end of this?
LOVELY: I do. I believe we are finally getting to the end of this. I believe that neither side wanted the December round of tariffs, which would
have fallen largely on cell phones and laptops.
I think both President Xi and President Trump need at least a ceasefire in this. It is good for both economies. It's time for them to talk about the
things that were at issue.
So this trade war was hurting both sides. It really wasn't -- an increased escalation wasn't going to get us anywhere.
And so I think we have a ceasefire, and I think it will hold.
[15:15:11]
GIOKOS: Yes. So I know that you've also mentioned just what kind of impact it's going to have on both sides, and once this is finalized, then
we have to tally up the consequences. And it's going to also impact U.S. businesses putting tariffs on Chinese imports.
What kind of figures are we looking at here? Because we heard the Fed Secretary earlier, talking about the fact that the USMCA deal could
possibly add half a percentage point of growth to GDP in the U.S. But we've also got to look at all the impacts, don't we?
LOVELY: Yes, I mean, I think that that number for the USMCA is highly inflated. The U.S. International Trade Commission, the government's own
analyst, said that it's, you know, without considering certain types of uncertainty, it's actually a loser for the U.S. economy, mainly because it
increases the price of autos and will hurt that sector.
So I think we have to separate out sort of the rhetoric from what we know or what we think we know based on our economic models.
As far as the China deal, we saw that tariffs are just not a very good instrument to get change in China. The tariffs were hurting American
businesses. We still are going to have 25 percent tariffs on $250 billion of goods, which are largely imports that U.S. manufacturers use to keep
America competitive.
We also saw how much retaliation by foreign partners hurt particular segments. With the China conflict, it was U.S. farmers, but also other
producers. And lastly, we see how easy it is to go around these things.
You know, China just moves a factory offshore only for its sales to the U.S. So tariffs are just not a very good instrument. We had a long
episode, where we'll be studying evidence for years, but the bottom line is going to be that this was a loser for the U.S. economy.
GIOKOS: All right, Mary, thank you very much for joining us. Good to have you on the show. Much appreciate it.
LOVELY: You're welcome.
GIOKOS: All right. And we are hours away from the final democratic debates of the year. You can watch it right here on CNN. It starts at
9:00 a.m. in Hong Kong, 1:00 a.m. in London. Don't miss it.
All right, the Bank of England confirms an unauthorized audio leak. The feed giving some high speed traders market sensitive data seconds before
everyone else.
And CNN investigation has found counterfeit child safety products for sale on Amazon as Clare Sebastian will tell us, buying the wrong one can be
dangerous. Stay with us.
(COMMERCIAL BREAK)
[15:20:18]
GIOKOS: Welcome back. So knowing what this man says a few seconds before everyone else can make all the difference. Regulators in the U.K. are
investigating where the traders got early access to market sensitive remarks from the Bank of England. The bank says a third-party supplier
leaked backup audio feeds to external clients. The feed reportedly gives traders a five to eight-second advantage.
In a statement, the bank says, "This wholly is unacceptable use of the audio feed was without the bank's knowledge or consent and is being in
investigated further." We've got Hadas Gold standing by for us in London.
Five to eight seconds. That is enough to get a head start on significant trades. What happened here?
HADAS GOLD, CNN BUSINESS REPORTER: Yes, so this is first reported by "The Times" of London and it is really unprecedented for a Central Bank to have
this happen just as you said with the audio file.
So typically any announcement, a press conference, for example, by Mark Carney, the President of the Central Bank here, anything that he says
publicly is usually shown via video, but they always had a backup audio feed.
Now that audio feed was a little bit faster than the video feed. So what this third-party supplier was allegedly selling between 2,500 to 5,000
pounds access hedge funds - could get access to this audio file.
With that extra five to eight seconds, they could make trades on any news that might be coming, any indication for example of interest rates
changing. Now that can make you a lot of money if you're in these high frequency, high speed traders on things like currencies and bond markets
and that could be millions of dollars. And it's a huge advantage if you have those five to eight seconds ahead of everybody else.
So the Financial Conduct Authority in the U.K. is now investigating this because although high frequency trading is not illegal, if they had this
sort of five to eight-second advantage on everybody else that might be considered potentially some sort of having some sort of insider
information.
Of course, the bank is investigating this third-party supplier. They've cut them off entirely and now there are calls for the bank's Chief
Operating Officer to resign or to be fired because how this could be happening under her watch and according to "The Times," it's been going on
since at least the beginning of the year and how a third-party supplier was selling this and selling this allegedly with the pitch that you would get
information faster than everybody else.
But it is definitely putting a dark mark on the last few weeks of Mark Carney's tenure. He is stepping down on January 31st. Not exactly a good
look to have as you walk out the door.
GIOKOS: Yes, absolutely. Okay. Well, you spoke a bit about the fallout, but if you're talking about insider trading, to have this kind of
advantage, it's very well known that if you are paying for information that you shouldn't have, that there are going to be legal ramifications here.
And this is what's kind of perplexing about this whole thing.
GOLD: Yes, it is perplexing, because it's not exactly insider information like from somebody who is working somewhere from working in the bank that's
telling you what's going to happen. It's literally just having an advantage of hearing something ahead of what everybody else might be able
to hear and what everybody else will hear just five to eight seconds ahead.
So I do think how the F.C.A. rules on this will be very important and very interesting to see. Now, obviously, the bank doesn't want anything like
this happening again. But it will be interesting to see how they rule it and how they rule just having information a few seconds before everyone
else, whether that constitutes some sort of insider trading.
GIOKOS: Absolutely. And just how much they benefit from that, so right, that's going to be interesting to see as well. Hadas, thank you very much
for those insights. Appreciate it.
Okay, so European stocks ended Thursday mixed. The Bank of England held interest rates steady. The bank says it could cut rates on unstable global
growth or Brexit uncertainty leaving that door open. It also lowered its forecasts for U.K. GDP growth in the fourth quarter.
The Bank of Japan also held rates, but maintains its positive outlook on the economy.
All right, so the world's oldest Central Bank is finished with negative interest rates. It's the first to bring its target rate out of negative
territory. We'll be bringing you that story right after this. Stay with us.
(COMMERCIAL BREAK)
[15:26:17]
GIOKOS: The world's oldest Central Bank is ending its big experiment with negative interest rates. Sweden's Riksbank raised its key interest rate to
zero percent. It is the first Central Bank to exit negative territory.
Matt Egan is joining us now. So goodbye negative rates. Five years is what they had. I mean, it's a really long time to flush the market with
very cheap money. Why did they decide to reverse this?
MATT EGAN, CNN BUSINESS SENIOR WRITER: Well, it's so telling. Here you have one of the pioneers of negative interest rates and they're basically
throwing in the towel.
I think the fact that Sweden is retreating from subzero territory is really telling. It shows sort of this backlash against these extreme policies.
One, it's not really clear that negative rates in Europe and Japan that they've worked. I mean, growth is still relatively subdued. Inflation has
been missing. But there's also these unintended consequences, which I guess is what happens when you do an experiment, right?
There's issues as far as favors. They're getting crushed. They're not earning any money in the bank. Banks -- their profitability has really
been hurt as well.
And then it's also pushing pension funds and other investors to kind of really reach for yield and really take some gamble. So those are the
reasons why they've backed away.
GIOKOS: And it's interesting because, you know, the whole negative rates scenario is about getting cheap money into the market. But as you say,
there's no incentive to save. It's an incentive to borrow money as much as possible.
And now, do you think they are going to be dealing with ramifications of that? Because we've also been seeing that it has impacted debt levels in
the country, but of course, it's also, you know, kind of helped economic growth.
EGAN: Right. So it is interesting because you can't prove a negative. So no one really knows how things would be if Europe did not try to go with
negative interest rates, right? Things could be worse. That's what the Central Bankers would often argue.
But there are these side effects because it's actually increased the risk of a bubble. I mean, there's talk about how housing affordability in
Europe has really gotten stretched and valuations have gotten out of whack.
So what also is interesting here, though, is that despite all these concerns about negative rates, President Trump is almost kind of begging
the Federal Reserve to actually go into negative territory. He made a speech last month talking about this. Let's hear what he said.
(BEGIN VIDEO CLIP)
TRUMP: We are actively competing with nations who openly cut interest rates so that now many are actually getting paid when they pay off their
loan, known as negative interest. Whoever heard of such a thing? Give me some of that.
[LAUGHTER]
TRUMP: Give me some of that money. I want some of that money.
(END VIDEO CLIP)
EGAN: Well, there's no sign that the Federal Reserve is going to actually be doing that. They have sort of shied away from that. We have to
remember, they didn't even go to negative interest rates during the 2008 financial crisis. So it's hard to see why they would do that now.
The other big issue, though, is banks. I mean, banks, that's how Central Banks actually transmit their policy. But research shows that countries
that have negative rates, the bank profitability hurts and that means they're not able to lend as much.
GIOKOS: I think also, we have to be realistic here. Zero percent is not exactly expensive money. It's still cheap.
EGAN: Exactly.
GIOKOS: So let's see what everyone else does in Europe, whether they're going to follow suit. Thank you very much, Matt.
EGAN: Thank you.
GIOKOS: Great to have you on the show. Good to see you. All right, can you spot the difference between these two seats? Both were purchased on
Amazon. Only one of them passed the standard U.S. safety tests. Don't go anywhere. Coming up after this.
(COMMERCIAL BREAK)
[15:30:00]
ELENI GIOKOS, HOST, QUEST MEANS BUSINESS: All right, welcome back, and we bring you the latest from the White House. U.S. President has just spoken
one day after he was impeached by the house. Let's listen in.
DONALD TRUMP, PRESIDENT OF THE UNITED STATES: Was packed. Thousands of people couldn't get in. A section that really is a pretty much 50-50
section in terms of Democrat, Republican. We had every one of those people is voting for Trump-Pence, every one of them.
And is Michigan an important state? We brought back tremendous amounts of business, tremendous car companies coming in, everything else. And I'll
tell you, I was up there and I was thinking about -- I actually said it, it doesn't feel like impeachment. And you know what? It's a phony deal, and
they cheapen the word impeachment, it's an ugly word.
But they cheapen the word impeachment. That should never again happen to another president. And I think you'll see some very interesting things
happen over the coming few days and weeks. But to me, all I look at -- we have the greatest economy in the history of our country. We have never
done so well.
Our military being rebuilt, you take a look at the tax cuts, you take a look at the regulation cuts at levels that nobody has ever seen. We're
protecting our Second Amendment, which other people won't do. Now, we're doing things that nobody has ever done before, nobody has ever seen. We
have the strongest economy in the history of our country, and our country is doing well.
And you know, the other thing that I really saw from yesterday that I think you people have been covering politics for a long time. You've never seen
a Republican Party zero negative votes. Zero. That hasn't happened almost ever. Because the Republicans are not necessarily known for that. We have
better policy, they want open borders.
The Democrats, they want sanctuary cities. A lot of bad things happen, a lot of other things they have. We're doing tremendously on healthcare, the
individual mandate, you know, we won yesterday in Supreme Court. You saw that in -- well, the appellate division. We won yesterday, individual
mandate is now gone. That's tremendous savings. That was the worst part of Obamacare.
We take care of pre-existing conditions. They're not going to be able to do that. We're doing things that nobody has ever done before, and our
country has never done better.
[15:35:00]
So, we're really happy about it. And we're really happy to have Jeff on board. And we think in 2020 based on the polls -- I just saw -- a poll
came out in "USA Today" yesterday where I'm beating every candidate by a lot. I guess most of you saw it -- not that "USA Today" is a friend of
mine because they're not. But they had a poll that it was me against their top candidates on the other side, and I'm beating everybody by a lot.
And I think that's where we're going, and we have the best economy in history and if you remember the famous quote, "it's all about the economy
stupid." Well, I never believed it was all about the economy. But the economy is a big thing. When you have 401(k)s where people are up 70, 80,
90 and even more than that percent, they like Trump, and they like Mike. And we're going to have a good time. Thank you all very much. Thank you
very much. Thank you very much.
(CROSSTALK)
Thank you very much.
UNIDENTIFIED MALE: What's your strategy, sir, can you tell us a little bit about your strategy for the Senate trial?
TRUMP: We think that what they did is wrong. We think that what they did is unconstitutional, and the Senate is very capable. We have great
senators, Republican senators. We cut your taxes, we cut your regulations. We did things that nobody else would even think about being able to do.
And I think -- you know what? One of the things, Jeff, that we've done that nobody wants to talk about -- this week, I will have signed the 172nd
federal judge including appellate judges.
We'll have 182 by the end of the year, 182, it's unheard of. Now, President Obama was very nice to us, he gave us 142 empty positions, that's
never happened before. But as you know, that's said to be the most important thing that a president has. I happen to thing think military and
defense and all is the most important thing.
But this is right up there. We have 172 judges, we're going to have 182 by the end of the year or shortly thereafter. And it's the most incredible
thing, and two Supreme Court justices, two great ones. So, with all of the things we've done and we've done that with the Senate because what's never
said is that in the last election, we picked up two Senate seats.
Nobody talks about that. And we couldn't focus on the house, I couldn't focus on the house, we'll be very focused on the house this time. But I
couldn't other than Andy Barr who won against the same candidate that's now going against Mitch and -- he wasn't very good against Andy Barr and he
won't be very good against Mitch McConnell.
But we've had tremendous success. So, I'm going to let them decide what to do. That's going to be up to them. Thank you all very much. Thank you.
(CROSSTALK)
Thank you. Thank you. I think so, yes, he's doing a great job. Pat --
UNIDENTIFIED MALE: You think so? Yes --
TRUMP: Yes --
UNIDENTIFIED MALE: (INAUDIBLE) --
TRUMP: It looks like that, yes, Pat Cipollone, we have a couple of others that we're going to put in, but Pat has been fantastic as White House
counsel. Thank you everybody, thank you.
(CROSSTALK)
GIOKOS: All right, there we have some news out of the White House. President Trump speaking alongside Jeff Van Drew, Congressman that was
Democrat and now turned Republican. President Trump firmly focused on the successes that he's made within the economic environment in the U.S., and
trying to turn focus to that as opposed to the impeachment.
In fact, when he was asked about his thoughts on the impeachment, he called it wrong, unconstitutional. He also said that the Democrats have cheapened
the word impeachment. And that there are going to be interesting things that will happen in the next few weeks. So, definitely, one to watch that
we have some news out of the White House. In the meantime, QUEST MEANS BUSINESS will continue in just a moment. Stay with us.
(COMMERCIAL BREAK)
[15:40:00]
GIOKOS: A car seat that fractured on impact, infant sleep sacks with zippers falling off, toy party with dangerously strong magnets in a months-
long investigation, CNN found fake and dangerous baby products are turning up for sale on Amazon, the world's largest e-commerce site. Clare
Sebastian has the story.
(BEGIN VIDEOTAPE)
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT (voice-over): In a simulated 30 miles per hour collision, this infant car seat lurches forward and
fractures near the seat belt path, sending shards of plastic into the air, failing a standard test required on the U.S. Federal Safety Regulations.
This is where we bought that car seat, on Amazon.
Part of an alarming trend, copycat or counterfeit versions of popular children's products turning up for sale unchecked, unregulated, and in this
case, potentially unsafe. The seat repurchased is designed to look like Doona; a sort-after brand of car seat that folds out into a stroller. The
Amazon listing even used some of Doona's own promotional images, and it's $200 cheaper than the real thing.
Two pediatricians who watched this video told us a child in the seat would have been at serious risk of head and neck injuries. We also showed the
results to Doona.
AMIAD RAVIV, COMMERCIAL MANAGER, DOONA: It's unbelievable to see how a product that looks very much like ours performs completely different in a
crash test.
SEBASTIAN: We did put a genuine Doona through the exact same crash test in the same lab, it remained intact, meeting federal standards. Doona says
this isn't just an Amazon problem, it's been working with various e- commerce platforms for more than two years now to take down counterfeit products.
RAVIV: We've taken down just this year more than 40 pages which had infringing products or fake products just from the Amazon platform alone.
And if you assume that each one of these pages is up for, you know, three to seven days, then you're talking about a good period of the year in which
fake products, dangerous products are being sold on Amazon.
SEBASTIAN: Shortly after we purchased the fake car seat in October, the Amazon listing was taken down.
(on-camera): After seeing our crash test report, Amazon e-mailed customers who had bought the product, urging them to stop using it immediately and
offering a full refund. We reached the seller, a company based in China called Strollex(ph) by phone, a man who refused to identify himself told
us, quote, "my products are safe" and then refused to answer any more questions.
(voice-over): An Amazon spokesperson told us safety is a top priority at Amazon. We require all products offered in our store to comply with
applicable laws and regulations, and have developed industry-leading tools to prevent unsafe and non-compliant products from being listed in our
stores. Amazon says they regularly contact sellers requesting safety documentation.
However, they would not confirm whether they request those documents before a product is first listed on the platform.
(on camera): We've spoken to seven different baby and children's brand selling on Amazon, all of whom tell us, they face a constant game of whack-
a-mole when it comes to counterfeit and copycat versions of their products on the site, and it's hurting their businesses. Several of them also tell
us they have safety concerns.
(voice-over): The U.S. distributor of these popular infant swaddles told us one customer contacted them about a fake where the zippers were falling
off. A serious choking hazard for an infant.
[15:45:00]
The manufacturer of this white noise machine, the baby shoo-shoo design to help infants sleep says they have had multiple complaints from customers
who had turned out had bought fakes. One customer who bought the product last year told us it fell apart when she tried to change the battery.
Amazon says they strictly prohibit counterfeits and told us these are isolated incidents.
They're investigating and will take appropriate action against the sellers involved.
(on camera): Part of the issue is consumers look at Amazon as a trusted retailer. But most of the items sold on Amazon are not actually sold by
Amazon. In 2018, 58 percent of the company's sales came from third party sellers. And in many categories including toys and baby products, you
don't even need specific approval from Amazon to list your products on the site and start selling.
(voice-over): Amazon has stepped up its efforts against counterfeits. In 2017, they introduced a brand registry, a free program which allows
companies to register logos and other trademarked items to help detect fakes. They also have transparency which requires companies to label each
unit they produce with a unique code at the manufacturer's expense, which Amazon will then track.
And earlier this year, they launched Project Zero, which is a self-service tool for brands to remove counterfeits relying on artificial intelligence.
Sellers tell us it's not enough. In Norristown, Pennsylvania, Aaron Muderick keeps a wall of shame of imitation and counterfeit versions of his
popular party purchased from online platforms.
AARON MUDERICK, FOUNDER, CRAZY AARON'S: This was from Amazon.
SEBASTIAN: This one, he says not only violates in his thinking party trademark, it's also potentially dangerous.
MUDERICK: This is the bad magnet. There it is.
SEBASTIAN: Oh, my goodness.
MUDERICK: So, you can see how easily that could be ingested, and it's extremely powerful.
SEBASTIAN: And this is banned in the U.S.?
MUDERICK: It's banned worldwide.
SEBASTIAN: But crazy Aaron's fighting fakes and copycats is now part of the cost of doing business. Lady who runs their reception also spends 15
to 20 hours a week policing Amazon and other e-commerce platforms for violations.
MUDERICK: So with Amazon, you don't really speak directly to a person. You submit a form. And generally, we would submit a form that says this is
a clear trademark violation, and they would respond, and they would take it down. But then it just reappears.
SEBASTIAN: And they can't afford to let that happen, Muderik estimates copycat versions of his products on e-commerce platforms have shaved
between 10 and 30 percent of his sales. Amazon says it works hard to support the small and medium-sized businesses selling on its platform.
However, it also told us, quote, "sellers are responsible for meeting Amazon's high bar for product quality. And that's significant.
JASON DRANGEL, INTELLECTUAL PROPERTY LAWYER: There's a case called Tiffany v eBay which basically established that, you know, platform sellers are
sort of have a safe harbor and they're not liable for infringement.
SEBASTIAN: In 2010, an appeals court ruled eBay was not responsible for the third-party sellers offering fake Tiffany products on its platform
because they didn't see or inspect the products being sold.
DRANGEL: The platforms that exist now basically control the products. They understand the products come from a specific country, from a specific
seller, located in China, it's a different world. This is an authentic baby shark product.
SEBASTIAN: Jason Drangel has been working with the toy industry on counterfeiting cases for 15 years. He now represents some of the biggest
toy companies in the U.S. and deals regularly with online platforms.
(on camera): Do you worry that it's going to take a serious incident, a child getting injured for something to really be done about this?
DRANGEL: Yes, I mean, I'm actually shocked that it hasn't happened already, given the severity of the problem.
SEBASTIAN (voice-over): Consumers can also do their part.
DRANGEL: For the most part, if you are buying products on platform and the price is too good to be true, it's too good to be true.
SEBASTIAN: Look closely at who is selling something. On Amazon, the seller's name is not here, it's here. In this case, Piccolino Baby is an
authorized seller of Doona, but if you're not sure if the seller is authorized, contact the manufacturer to check. And once the product is
delivered, stay vigilant. There's a lot of tape.
ALISA BAER, PAEDIATRICIAN & CAR SEAT EXPERT: There's a lot of tape.
SEBASTIAN: Even before crash-testing our car seat, we had Alisa Baer; a pediatrician and car seat expert take a closer look.
BAER: Finding the instructions in a language that's not appropriate for the country where it's being sent, so this appears to be --
SEBASTIAN: Yes --
BAER: To be Chinese --
SEBASTIAN: Definitely --
BAER: That would be a red flag. If you look here, it says "aiways", not "always". All of the brands we spoke to are still selling their products
on Amazon. Many have told us the company's dominance over online retail means they simply can't afford not to. Any of these e-commerce provides a
global opportunity for their brands, it has also created a dangerous loophole for fakes. Clare Sebastian, CNN, New York.
(END VIDEOTAPE)
GIOKOS: All right, so when we return, Clare will be with us to discuss what can be done about the problem of online counterfeits, stay with us.
(COMMERCIAL BREAK)
[15:50:00]
GIOKOS: So, as you just heard, in a month's long investigation, CNN found fake and dangerous baby products for sale on Amazon. Clare Sebastian was
behind this investigation, and Clare, great to have you with us --
SEBASTIAN: Thank you --
GIOKOS: Fantastic reporting. Just looking at these car seats --
SEBASTIAN: Yes --
GIOKOS: When I see them, I mean, obviously this one has been crashed. But they don't look remarkably different. But you've got to look --
SEBASTIAN: Right --
GIOKOS: Closely at the details.
SEBASTIAN: Well, they've actually both been crashed. Both of these went through the same crash test. So, you can see the jagged edges that will
let --
GIOKOS: Yes --
SEBASTIAN: Here, this one fractured. But ultimately, there are -- there are some signs that we just showed you in a piece, there're some labels in
Chinese, but you really have to crash-test it to know just how unsafe it is. So, that's one thing that --
GIOKOS: I mean, one thing that really stands out, "aiways" --
SEBASTIAN: Yes --
GIOKOS: As opposed to "always", I mean, little things like that.
SEBASTIAN: Right --
GIOKOS: Knowing that there are signals that these are counterfeit goods.
SEBASTIAN: I mean, there are things that can be done about this when it comes to the law, but I think it's crucially important as well for
consumers to really be aware of this because as I said, a lot of people shopping on Amazon unaware of where they're buying from, that a lot of the
products are not actually sold by Amazon. So, you can really be aware --
GIOKOS: Exactly, so when you're buying a car seat like this --
SEBASTIAN: Right --
GIOKOS: It means you're a new parent. You're a new parent --
SEBASTIAN: Yes --
GIOKOS: I'm a new parent, we know what it's like. You want to make sure that your child is safe.
SEBASTIAN: Yes --
GIOKOS: Who is going to take responsibility at the end of the day because we've heard from Amazon saying, well, look, we're doing what we can, but at
the end of the day, there's a value chain of people that need to be watching very closely too.
SEBASTIAN: Well, this is the really big question in all of this is liability. Because right now, the law has favored the online platforms.
There has yet to be a decision in court that has held Amazon or any other e-commerce platform where third-party sellers are operating liable for a
defective or a counterfeit product that's been sold --
GIOKOS: Yes --
SEBASTIAN: By a third-party seller. Right now, courts treat them like a marketplace, like a flea market essentially. But lawyers and courts are
increasingly shifting their thinking. And there's actually a case next year that's going to be heard by the third circuit Court of Appeals in the
U.S.
It seems that big a deal that all of the judges are going to hear this case. A woman was blinded in one eye by a retractable dog leash. And she
has argued that because she couldn't find the seller on Amazon. That she should be able to sue Amazon. So, this is something that could set a
precedent while Amazon is held liable for the future, and that could unleash future cases.
GIOKOS: Absolutely. I mean, and looking at how babies could be impacted - - because this is not just one product, car seat obviously --
SEBASTIAN: Yes --
GIOKOS: Is a very big issue.
SEBASTIAN: Right --
GIOKOS: But you showed in your piece, there was a multitude of products --
SEBASTIAN: Yes --
GIOKOS: That are being sold. Some not dangerous, but some obviously dangerous.
SEBASTIAN: Right. I mean, it's really hurting the businesses that we spoke to, but you're absolutely right, that perhaps the much more important
issue is one of safety. It's counterfeit product where a trademark has been violated. It's copycat products like this one where it's more of a
kind of violation of their design pattern --
[15:55:00]
GIOKOS: Yes --
SEBASTIAN: Where it's clearly designed to look like a Doona, and then there's generics as well. We actually tested a generic party with a
magnet, and then we found the magnet was stronger than is allowed, given its size for children under 14.
GIOKOS: Kidding.
SEBASTIAN: Right --
GIOKOS: And so, how did you come across the story that had this investigations started --
SEBASTIAN: From shopping for myself from Amazon for my own child. You know, I came across several products and in later reviews, people were
saying, is this genuine? And that was honestly the first time that I had realized that in shopping on Amazon, you have to do your due diligence on
every item that you're buying.
GIOKOS: So, now, with Amazon, they've obviously made it very clear.
SEBASTIAN: Yes --
GIOKOS: You know, they start with CNN, next year, you're saying that this case is going to be --
SEBASTIAN: Right --
GIOKOS: Important and set a precedent. In the meantime, what are businesses doing to protect consumers?
SEBASTIAN: Well, the businesses that we spoke to are taking this extremely seriously. As you saw, it is now for them part of the cost of doing
businesses. Many of them have people who work on this every day, they included, you know, considerable resources to this Doona that the
manufacturer of this car seat has actually also crash-tested fakes that they have test bought on online platforms.
In some cases, there are lawsuits involved. They don't want to be associated with the fake that will lead to a potential injury in a --
GIOKOS: Yes --
SEBASTIAN: Child, so they are fighting this extremely hard. They have to protect their brands. But Eleni, the bottom line of this is that Amazon is
the biggest e-commerce right out there. They kind of --
GIOKOS: Yes --
SEBASTIAN: Afford not to be on there, and that in many cases according to the brands we spoke to, gives Amazon a special responsibility.
GIOKOS: Yes, they absolutely need to be doing a lot more on this. Thank you very much, Clare, great to have you on.
SEBASTIAN: Thank you --
GIOKOS: And well done on a fantastic investigation. So, we're just moments left to trade on Wall Street, we'll have the final numbers and the
closing bell right after this. Don't go anywhere.
(COMMERCIAL BREAK)
GIOKOS: So there're just moments left to trade on Wall Street. As you can see, the Dow is up more than 100 points, investors are shrugging off the
politics in Washington a day after Donald Trump was impeached in the House of Representatives, and then looking at the board of markets as well.
We've just seen green across the board, S&P and Nasdaq also sitting close to those -- and of course hitting record territories.
It's unbelievable to see the S&P 500 up more than 7 percent since the impeachment proceedings -- 7 percent since the impeachment proceedings
began against Donald Trump back in September. And that's of course, the sound of a close of trade in New York. And thanks so much for joining us
for QUEST MEANS BUSINESS, I'm Eleni Giokos, and the news continues right here on CNN.
(BELL RINGING)
END
