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tv   Bloomberg Surveillance  Bloomberg  January 17, 2017 4:00am-7:01am EST

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francine: theresa may prefers to present her brexit blueprints. she says she wants a new and equal partnership. we'rll talk if britain will lose access to the single market. >> as long as we have market access for the next two years, i think the pressure is not that high. the pressure is to create the option alley. ity.ptional francine: xi jingping is said
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to steal the spotlight in david: . this is "surveillance." a greatdavos, we have show lined up for you. here --a special show we will be talking to the finance minister of brazil. then we speak exclusively to the cfo of credit suisse. at 9:50, we speak exclusively to the ceo of bp. but first let's get straight to the bloomberg first word news with sebastian salek. the u.k. is likely to pull out of the single market and overholt links to the union as it seeks a new trading relationship with the block. message from the prime minister, expected to deliver it at 11:45 u.k. time as she sets out a hard plan for brexit. you will be able to watch it on bloomberg tv.
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deutsche bank may withhold bonuses from as much as 90% of bankers and traders, according to "the new york post," citing a unidentified people. they saly the top 10% are expected to receive a bonus, and those payments may be spread out over the next five years. a spokeswoman in hong kong declined to comment. turkish officials say the man who killed 39 people in istanbul has been captured. according to the state run paper, he was detained in istanbul along with another man and three women. the search for the malaysian airliner that disappeared three years ago with 279 people on board has been suspended. australia, malaysia, and china says the decision was made with sadness after searching more than 46,000 square miles of the southern indian ocean. the mh370 vanished while flying from kuala lumpur to beijing. global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries.
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salek.astian this is bloomberg. francine: thank you. we're gearing up for theresa may's the brexit speech. we're told she will say that the u.k. is likely to pull out of the european union's single market for goods and services and seek a completely new trading relationship with a bloc. that would be a disappointment for banks. the ubs chairman, axel weber, says he thinks banks will lose access, but that it is too early to turn contingency plans into action. >> i think it has been pretty clear from the start that it is very hard to renegotiate the stance of the u.k. with the european union. being in switzerland, we have seen that over many years -- if you are outside the eu, it's har beor every issue to renegotiated.
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sometimes they are long and winding. the european market rules had to be taken into swiss national wall before we were compliant and comparable with european regulations . this is a hard thing to achieve. life view has always been that britain has to start somewhere, and the there are two things they need to d. it's clear that the european relationship will be status quo minus, not as good as it was. they can negotiate many things but it is important for britain to step aside and renegotiate with the rest of the world their relationships on trade and financial services. i think the europeans are in an election campaign almost to the end of the year, and it's good for britain to do it parallel, but to focus through the end of the year. francine: if there are all these elections -- the timeline of negotiations would probably be longer than you think. >> absolutely. francine: if you are the chairman of the bank, what do you do? do you speak to employees to move people to europe now -- if
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you are out of the central market, the timeline is different if you are operating business or with the government. >> i think what's important for banks is optionality. banks need to create optionality, can case we do not have market access from the u.k. to the european markets, which is my working assumption, and being swiss we don't have it in the same fashion, we need to establish some focus in the european union, and we have done that. we created the european entity in wealth management of frankfurt. we have the option to move people around. francine: how many people? >> virtually, there is no sense in talking about that now, because it all depends on the final agreement. it really depends. since the city of london is a big feature of the u.k. economy, i think we will get some traction between the negotiations on financial services. for us, it's important to create
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optionality now, the let's wait and see what the final agreement brings. as long as we have market access, at least for the next two years, i think the pressure is not that high. the pressure is to create the optionality. francine: if we look at the banking landscape, are there clear winners and losers? and does it depend on whether the u.k. banks -- >> with all these things, it's not good to start from discussing an interim regime. but i think there will be a transition. it is usually phased in over many years, and i can imagine that part of the negotiation is let's agree on what the new relationship is, and then let's agree over what speed. the sheer process of putting european regulation and european laws into british laws, than changing them to match the features of the u.k. economy, is going to be a long time. francine: the u.s. would probably deregulate -- do you expect that to help, regarding banks?
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and what does that mean for european banks? >> my expectation is we will see less additional regulation and less intrusive regulation come out in the u.s. i don't think there will be parts of dodd-frank -- it will regulation.lback of most of what happened in the financial crisis showed that banks need better capital, better liquidity planning, more result ability, and that banks have put all of that in place. we wouldn't want to go back on some of the things we have changed. medium to long-term, will we are concerned with is that we already have a lot of capital and liquidity that is bolstered. further capital is not the answer to every problem in banking, and i think we are using more capital -- it's a bit like monetary policy. monetary policy also has run its course, and the u.s. government is likely to put in more fiscal in structural policy so that monetary policy can rebalance. we hope for that rebalancing on
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the regulatory side, that we will get less additional regulation and more settling of the regular tour framework. francine: that was axel weber, ubs chairman. later on, the cost cuts continue at credit suisse. we speak exclusively to the ceo. we'll be talking about bonuses, about the banking landscape, and of course davos. welcome to day one of the world economic forum, 2017. this is bloomberg.
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sebastian: this is bloomberg and here's your business flash. british american tobacco has raised the cash portion of its bid for full control of reynolds american. it would create the world's largest publicly traded tobacco company, and unified brands like lucky strike and camel. it was attracted to bat as it's a leader in the growing u.s. market for e-cigarettes. general motors plans to announce that it will invest $1 billion in u.s. plants and/or retain 1000 jobs, according to a person familiar with the matter. they say it is accelerated amid pressure from the president-elect. a rolls-royce holding has agreed to pay $807 million to resolve long-running investigations into bribery allegations. the jet engine maker will settle charges with the u.s. fraud
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justicend the u.k. department over claims that its representative bribed foreign officials to win business. the british penalty of 500 million pounds plus interest is the biggest ever issued against the company by the u.k. mobile energy has agreed to buy -- fto expand in america's shal. it would create the second-largest position in the delaware basin. the permian has been a hot spot because it is one of the few areas in the world where producers managed to make a profit. that's the bloomberg business flash. francine: thank you. i'm pleased to be joined by tidjane thiam, the credit suisse ceo, for an exclusive interview here in davos. thank you for being here. give me a sense of the banking industry. --had a panel this morning what does 2017 have in store for banking? interest rates are where they
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are, and they aren't going anywhere. >> will, you know, we don't really -- we don't forecast. but let's talk in general terms. there is the expectation that 2017 will be better. we have a number of things going in a direction. about the low interest rate environment, and that is certainly a change from the sector's. perspective i remember a conversation in june when things are much more difficult in terms of valuation. since then it has been significant. everybody,me for it's all the uncertainty and political agendas. in france, in the netherlands, in germany. balance between positive and less positive factors. francine: do you worry about deregulation in the u.s. impacting european banks? you're not a level playing field
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as long as your peers are over there. >> we think that for any industry, strong competition is healthy. i think that is where you need to start the discussion. we want competition because that provides innovation and -- a level playing field is not negotiable. it.we hope we can achieve luckily a credit suisse we have a significant investment in the u.s. anything in the u.s. is beneficial to us. but we are also dependent on i , 's. francine: i know you hate talking about your share price. but -- >> i hate talking about the short-term. long-term, i love talking about it. but 2016 -- how he described 2016 for credit
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suisse? things, and reset we did that in an incredibly tough environment. the fact is we had to come out, because it was urgent to raise capital. that was about the worst possible time for a bank to come up with a new strategy, because the market went into meltdown. we had to launch a whole new strategy in a very challenging environment. i think we have used it to our advantage, to accelerate the transformation, and i think we have achieved a lasting first few months. the level of cost savings achieved, the level of de-risking, we have continued progress on collecting assets. finally, the last event was to
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reach a resolution with the department of justice in america, which was honestly the biggest cloud hanging over shares since my appointment. francine: what is the revenue picture look like in 2017? is it difficult to forecast? >> it is, because it depends on a lot of things. everything we say is always market dependent. caveat that. but certainly we see a strength in fixed income. going,see the market global credit products going, you can see leverage finance. we have seen since the election activity picking up. so after a year, we saw a revenues really go down. shrunk,venue has
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hopefully 2017 will be better. obviously the market -- francine: we had news today about deutsche bank and the bonus pools, cutting bonuses for bankers. can you give us an indication of a will happen at credit suisse? >> it always generates a lot of interest. we have been clear on our philosophy, which is to pay on performance, and ultimately it's not my decision. we run the company to the best of our ability, and we decide what we deserve for having done that. that being said, i expect that even with all the progress underlined, i suspect it would be reasonable. francine: do you think markets and shareholders will continue about capital increasing measures? i talked -- the market keeps on pushing you on it. >> i believe i have given you a consistent answer, which is that
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capital is important, but we are strengthening our capital very much. it's very simple in my mind. i had to strengthen the balance sheet, because i know what they said. i think we have done, collectively, a good job. i think, post settlement, when the dust settles, people will see a glimpse of banking. francine: are you still committed to ipo? one of your biggest shareholders was on bloomberg couple weeks ago, and he said you may not have to do that. >> he did say that. look, it is our plan. we have been working very hard to be in a position to do it. we have also been cautious in saying second half of 2017, market conditions permitting. ipos are not a science. we are watching carefully. we're going full speed to
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implement it, and according to value. we go live on november 20 -- it has a board, a chairman. so still on track -- by the end of the year? >> second half, but ultimately it's a board decision. board -- the board has to make a decision. francine: how does the board look at the decision? they are looking at the pros and cons, evaluation? >> at the end of the day, they will weigh on the state of the market, the numbers in the business. there was a swiss bank newly , every, had a good year quarter has been up, which in a
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mature market -- francine: i have to ask about brexit. theresa may is going to outline her plan for brexit negotiations . having seen a copy of the speech we understand that she will say i'm writing to for go single market -- what is that mean? >> it doesn't really affect us in the short-term directly. i think like the other banks, we have always said that what we need is clarity. we need clarity as quickly as possible, because then we can plan. we have always put ourselves in a position to have optionality, and when we opened an office in dublin, it became part of our prime business. also keep in mind that we have a big platform and luxembourg, which is in the eu. we're lucky enough to have optionality. francine: how many jobs do you think could move to dublin, if you lose access to the single market, without some kind of transitional agreement? >> too early to put numbers on
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it. like every bank, we have a very active group -- we have had it for years, way before the referendum, working on this and developing scenarios and plans. we are waiting for the u.k. to say -- ultimately, look, we have been around since 1856. we as a bank operate in any given environment -- it's a decision for the british people. what weide, and we do can to address the environment. timewon't be the first there's an unexpected -- francine: what is the one unexpected event that you are for seeing that the markets aren't in 2017? swan, whatevery you want to call it. how would you deal with a trade war between china and the u.s.? what does that mean for markets? >> well, look.
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we are definitely for free trade, for an open market. it's clear that globalization -- over decades, it has been a force for good. it has some negative aspects, and maybe we have all been too quick in dismissing those. what you are seeing everywhere is a symptom, not a problem. the real problem is the fact -- companies, we need to focus on improving the underlying reality. every perception is created by a reality. there are people who consider themselves left behind by globalization. really, it's about mitigating the impact on them and creating options for them. francine: what does that mean?is it will redistribution or re-globalization? >> its accommodation of things.
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first of all, there's often too much focus on disruption. i deeply believe, and i think there's evidence for it, that technology net creates jobs. employment goes up. a clearly, jobs -- but clearly, jobs move. francine: so that means retraining. >> retraining, education. it means also a good narrative. it' needs to be said again and again. it has created a lot of jobs. most technology changes, so it's explaining better, and a lot of times labor is not completely mobile. live in ae region where employment has disappeared, the old coal mines etc., you do need a role of
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government. you need to go into those communities and have specific programs and actions. francine: but when you look at europe, talking about political risk, the french elections, german elections -- how do these politicians reconnect with an electorate that has just focused on brexit? >> i'm afraid that takes us very far from credit suisse. i'm going to stick to my current offer. i left politics. but more seriously, i think there's an understanding within political leaders of this dynamic. in the medium-term, it's potentially negative. we need to reengage and make sure -- i see signs of it everywhere. recognition but it's important to take everybody in
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this globalized economy. francine: what is the role of central banks? we talked in the past about janet yellen, the macroeconomy. is there a concern that the dollar gets too high, and janet yellen will be able to deliver on the three hikes she promised? >> well, you have to trust the fed. it's an extremely competent organization. and the dynamic is simple. an effort to keep jobs, but the problem is that every time the dollar goes up, it puts other jobs at risk. that ultimately puts economy growth at risk. it is holding that balance between the desire to protect employment domestically and the currency. every central bank has to do that. i think the fed has been through this many times and is well-equipped to deal with it.
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i think the dollar will strengthen. francine: you have always been thatng for a long time on emerging class in asia. are you concerned that trade wars will hurt that class more than the americans? >> well, it's not obvious. we like this line of entrepreneurs, and we believe more wealth is created with entrepreneurs and we want to serve them. one in sri lanka, a manufacturer doing great, so we support them. the thing to remember is that most of our asian clients -- large employers in tennessee, michigan, wisconsin -- the vision of the world that is divided in zones is not true
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anymore. i can't think of every single one of our asian clients is a global player. they have exposure. francine: but how can you be so certain that this doesn't get disrupted? i think it is too early to speculate. there's a lot of speculation -- i thinknd i think we have to reasonably expect that there will be -- there are a lot of business people, some of whom you and i knew, i see no reason to believe that they will not listen. we have to do what we always do, engage with government, make our case, and hope that things will
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of all. today, it's find it a relatively positive scenario. francine: we are talking about risk and how you price risk. sayingd from john cryan, that a lot of the european banking sectors might be too complex. do you think 2017 is finally the year where a lot of these banks d complex themselves? >> i think we are all in the process, all trying to achieve the same thing, which is to make ourselves simple, morrill is more resilient. 17 is a key year. in 16, we completely change the organization. a completely new platform. very hard cost-cutting programs that we have seen the results of. significantly shorter capital position. 10.2% mid-'15. 12% now.
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'17, it solidifying that for mem, and as we go, it is launching initiatives around more medium and long-term -- to change the way we do business, use of technology. theye will be a session -- helped us last year develop a single currency that we never had. mid december -- under the surface, there's a lot of reengineering, generating savings. guy: francine: are we getting closer to sharing costs with rivals? >> it's an idea. among the many other news we are we're working quite actively -- francine: first of all, when can we expect all that? we're>> if we have something wl tell you.
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francine: give me a sense of where the brunt of the cost cuts will happen. >> we took a lot of costs out of global market in 2016. and then we are continuing and efficiency program across the bank. believe isly when i that we should improve productivity 2% to 3% per mm. i think that -- her and i'm. -- per annum. difference between productivity and cost cuts because sometimes the most productive solution does not involve a cost got, but sometimes you can -- cost cut, but sometimes you can be hiring better people. initially we are investing, but that will generate savings later
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on because we have greater skills of people we are hiring. instance, the cost per employee is a really bad metric because what you want is a productivity, and sometimes you have to pay more to get more so i say 2% to 3% productivity improvement per annum. my improve -- my preference is that we never have an efficiency program. every three or four years you gain 10% to 15% and you do not need the big cost-cutting. francine: when will that end? tijane: i think 2018. francine: in 12 months or at the end? tijane: i think at the beginning of 2018. you will see more in 2017, in 2018, we have not talked about it but we have this big legacy at 75 billion and now we are down to 15.
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2017 we will 17 -- have dealt with the legacy. 2018 is really the first year when they have a much lower cost base, the legacy issue is off the table, and you can focus on driving the boat forward. francine: where do you see the main driver for the investment bank this year? tijane: i think fiscal income is going to do well to equities, we have a good franchise. it is doing well. that was masked by a specific activity that had volatile results, but we are externalizing that and we raised capital to put that in a specific vehicle, so i think we will have a reasonable year. if you compared to last year, we saw with brexit what happened to the ecm pipeline so from quarter to quarter volatility, but
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certainly the brunt of the year -- francine: are you expecting more volatility in 2017 van in 2016? will the markets be more sophisticated or binary? tijane: i cannot say. you can make an argument of ways. the reality will depend on what actually happens but you can make an argument that the future will be lower or higher. francine: what is the question you get the most by shareholders about credit suisse, and what do you answer them? is it still on your plan? is it well understood? tijane: i think it is well understood. i think we ought to see the execution coming through. what we said, strengthening the balance sheet, reducing the fixed cost base, creating pressure leverage, the question -- it we got a lot was
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was the biggest cloud removed, the number one. other people wanted to come in but they were afraid of coming surprisee have a nasty right after. francine: how many times did you see them to push that through, the doj? did you negotiate yourself personally? tijane: we are pleased that we have an agreement. we are very pleased with our shareholders and our clients that we reached an agreement. francine: one final question, because i know we have been freezing and we have been talking quite a lot. what do you think the globalization needs to do to change the perception of devils this year? is there any -- davos this year? is there anything they can do? we talk about the davos man and woman who are very
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pro-globalization. tijane: it is broader than davos. the only way to transfer perception is with change in reality. if you do not change the reality, every effort to change perception is futile. we need to change the -- francine: by doing things? yes in absolutely education, skilled people. , butnk lifelong learning it is this concept on earning that is a reality, and that is the way it is going to be. i think on the positive side, because i have two young children, i am always amazed about how of those debates are with the older people, and how this new world for them is just so natural. and they embrace it.
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i and still kind of medium-term optimistic. i do not think it is as bad as we say. a group or a generation or demographic that needs to be supported in the tradition, i think the tradition is made for the next generation. francine: thank you so much for great conversation, tijane thiam, ceo of credit suisse. that's go straight to the london studio. mark: consumer price growth increasing to 1.6%, yes, that is in december, the highest since july 2014. that was up from 1.2% in november, beating the 1.4% median forecast of economists. a separate reform showed the cost of imports soared at the fastest annual rate in more than five years. this comes after mark carney yesterday warned the consumers -- that consumers are facing had
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friends -- headwinds. the boe will publish new forecast next month, currently expects inflation to breach the 2% target within months. it is closing in on that. the core rate of inflation picked up to 1.6% in december. that also is the fastest rate since august 2014. inflation based on a separate measure, the retail prices index reached the strongest level since july 2014. amazing figures here, the cost of imports rising 16.9% year on year in december, the most since july 2011. annual growth and factories to 15.8%, alsoed a five-year high. look at sterling, a spike up, it was already up today after falling to the lowest level since 1985. the pound is up against the
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dollar, what a strong set of inflation figures as we await theresa may brexit speech later. francine: that is a big one to walk. we have the president of china talking shortly in dallas. let's get to john mickelthwait who is standing by with the finance minister of brazil. john: thank you, francine. let's talk about the brazilian economy. you had the central bank cut the interest rate by 75 basis points. yesterday you have the imf reducing its growth forecast to 0.2%. when do you expect to see robust growth of the sort you have talked about? >> we are expecting growth to start this quarter. and we will be accelerating throughout the year. the position for
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the last quarter of 2017, this year with the last quarter of last year, expectation is around 2% growth last quarter against last quarter. john: but for the whole year, what sort of number do you expect? >> if you compare average against average, it is a low number because of the very deep recession. and then the statistical carryover brings the number down by 1%. estimationthat activity in the market today is about a half a percent. expect toyou would bring your number down closer to the imf number? itwe are going to revise basically in about two weeks time. john: but lower than the 1% you would expect?
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>> let's wait. john: can we look at another number, interest rate currently around 15%. the president has talked about that coming down to a single digit. what would be a reasonable guess for when it gets down to single digits, is a two years away? five years away? what is your internal target for when you expect that interest rate to come down below 10%? >> we do not have a specific -- inflation is coming enabledongly, which has us to take steps on cutting the interest rate at a faster pace, but presently we have to watch inflation carefully because the expectations,or inflation expectations, and
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having established that, then the central bank will be able to gradually -- dropsas you expect to see more at the 25 basis point level? hernrique: i would prefer not to talk about what the central bank could do or should do. finance ministers talking too much. john: what about a pension reform, social security reform? that is with the congress at the moment. the you expect that to be -- get through? do you expect that to get through? hernrique: our expectation is that it is going to be approved by the house of representatives by the end of march, early april, and eventually approved by the senate in late may, early june. that is i think a reasonable expectation.
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john: is there a compromise that can be hashed out? are still seems to be a difference between the government and congress. hernrique: social security reform is a controversial one. it is subject to very heated debate. normal, but there are some critical points which are firmly established like minimum wage, , andars for men and women also some transition period. hopefullyre going to eliminate the double pension. people got tension because they spouseey have a deceased and at the same time because they are retired, this kind of thing. hernrique: you are a famously prudent man.
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you must have a plan b for what you can do if you do not get pension reform. you need to get money to come into the government. does that need -- mean you need to tax? hernrique: if social security is not approved, the reform -- which i think it is going to be -- and we have a good example io wherehe state of r social security is insolvent. there is a need to raise contributions dramatically for retired people. that is a good example. i think that is going to go through. if for some reason it does not go through completely, then there are several other measures. expenses,, to cut having several other benefits that could be cut. fiscal incentives also. in the last resort, raising taxes.
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john: when do you think brazil will get its investment grade back? hernrique: my theory about that as i do my job. they do their job. john: you must have somewhere, an idea when you think that would be possible. hernrique: the sooner the better, but i hope that is before 2018. john: 2018, we have the election coming up. to what extent is the president saying he is not going to run again handicapped? does that make it harder to deal with the congress? hernrique: i think that makes it easier because it opens the field, and all of the several parties which have candidates will not be worried about the president running, and will not be hasn't to support him in his desk hesitant to support him -- hesitant to support him in his basic reform. we have a difficult job and that
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would make it easier for those who get elected next year. john: you are one of the straight men of brazilian politics. people sometimes talk about you as someone who would run for president. would you think about doing that next year? i'm concerned about getting the brazil economy right on track and the future belongs to the future. john: i would be right to read this as a maybe? hernrique: simply the fact that i'm focused on doing my job today. john: thank you very much for talking to bloomberg. francine? francine: john mickelthwait, our editor in chief with the finance minister of brazil with a great interview. brent crude is trading near $56 a barrel after saudi arabia said output cuts will have to exceed it before the summer. we are here with bob dudley, a
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great pleasure to have you here to host in the snow. give me a sense of what you think opec can achieve. there was a lot of movement on the market, the first time with the agreement of russia in eight years but now saudi arabia is pushing back saying it may only last six month. bob: i think there will still be volatility but the agreement as current -- clearly a milestone. if you look at what is happening in the world about reductions of output, it does appear real. entries are coordinating and --king to decrease output countries are coordinating and working to decrease output so it is significant. francine: how do you view the oil market? you have the shale producers that could come back online. trying to figure out if it is at 60 or 62. if these production cuts do not cheat,lan, or if people
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what kind of level do you have two your forecast on for oil this year? 55. we are planning for we are looking at the curtailment that are happening in the middle east, the reductions coming out of some of the russian companies. it looks like there is a real commitment. there will always be some cheating on the margins, i am sure. but the really big players are cooperating. we have felt for a while the markets are essentially in balance right now. from month to month there will be some ups and downs, but we think now we can plan solidly but we are going to be disciplined in how we spend our capital. francine:'s price more important than market share for opec? -- it comes down to the fundamental economics. as i lookwindow forward this year into next year , between 55 and 60 with volatility up around it is
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probably a good place for us to plan. and shale, you do see the rig count coming back. francine: is there a trump effect on shale if ed regulates that? bob: it is too soon to tell. the fiscal terms in the u.s. are not bad though it is more the price that drives the economics. francine: what is your priority for bp? bob: get back growing here it we have worked hard to meet our obligations in the united states and we can draw a line under the final bill which is about $62 billion. we have six new major projects coming on in 2017. our focus now is to get our own engine moving again. francine: you need to make sure you have enough investment that the price of oil does not shoot up again, so the risk of sending us into a recession five to 10 years from now. bp will beot think
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able to drive that but i think we have a good plan to the end of the decade, and it has been a long time coming. francine: is this the inflection point, is this the year where you come back in force or are you more cautious than that? reachingink for us, the agreements with the u.s. government and states was a big milestone. it allowed us to understand our obligations going forward, that is one inflection point. fewg these deals the last months is another one getting the projects on in 2017, that will be an inflection point. francine: will you be able to cover your dividends? bob: $55 a barrel in 17 will cover it. 15 --ne: what if it is 50, can you cover it? sheet as strong now, but generally 55 is the target that we have laid out. francine: how much is the dividend a priority when you
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speak to shareholders? bob: they really wanted this year, there is no question about it. francine: what happens if they do not get it? bob: i do not think there is much risk of that. we have a dividend obligation of about $7 billion per year and are going to spend about $16 billion of capital. we have a lot of flex. francine: i was just making sure. you were talking about some of your investment projects this year and you have announced deals at the end of the year. are you expecting more deals in 2017? bob: this is a good batch of deals that was done and we expect more. shares to percent of our in abu dhabi to work to a concession of 55. we just reached a concession in your by john. -- azerbaijan. 3% here, 10% here on things we
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do today, this is rebuilding a good portfolio for the long-term , and we have to be a good long-term company. francine: if you are looking at extra deals, what will drive that? -- it hasnk if it is to be the economics. it has to be accreted to our shareholders. boltof those with a good on acquisition are things you are already in because you do not bring more overhead, and there will be the occasional really good thing that comes along, but we are not on the hunt to do deals. francine: d think deals in general will come back to the animal sector because of animal spirits? ceo's seeing the world in a better rose tinted glasses, and they are willing to pay cash? see someink he will consolidation in some areas of the world. that generally can happen. there is a sense in some people in the industry that we are
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somehow coming out of the bottom of the cycle so we have to do a deal. i do not look at it that way. i think we are climbing slowly out of a tough. in the industry. francine: could this be some of the asian producers being more optimistic than the western ones? bob: i think it depends on your view of the u.s. shales, as where i hear a lot of this. francine: do you see them consolidating at some point? will they be a force that will be able to speak with one voice? bob: i do not think so. there will be consolidation in bevate equities, there will some big players, but i do not see that giant consolidation you mentioned. francine: when will you increase capital expenditure, this year? bob: not this year and the year after, but after that we will see. at least the next two years we will stay within this disciplined framework. francine: what needs to happen
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for you to increase that, the price of oil or investments coming to fruition? bob: good investments may come along. if we made -- we made another deal in west africa and i think it has potential. basically it has a very tight -- we have a very tight framework. francine: are you here to do deals or are you talking about globalization? bob: a lot of the industry is here and the ministers from the countries we work in, this is a place to do work and get business done, progress things, or sort out issues. people say dallas you, and drink -- davos you drink champagne and the mountains but it is not. francine: do you know rex tillerson, and what kind of foreign policy will he do? bob: he does work all over the world globally and knows leaders
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globally. i think he will do a great job. francine: what is the one thing that people misunderstand about the chump administration? -- trump administration? them,isunderstand about it is early days. francine: people are still trying to figure it out. bob: i will just comment about russia, because bp has worked in russia for 20 years. i think there is a misunderstanding that rex somehow is easy on russia. he has always looked out for issues. exxon's it is not that he is a friend, nor do i think the trump administration is a friend of russia. i think they will have interests on both sides and work to that. francine: how should the west deal with vladimir putin? you know russia better than anyone. bob: the west has to deal with
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its own interests in mind at all times and the strong and very clear, and do not be ambiguous. what do: outside bp, you think is the biggest concern for oil producers this year? bob: i think there is some on the upside and some on the downside. some of the countries producing oil are right on the edge. venezuela seems to be defined economic gravity, there is trouble in my gery a and angle -- nigeria and angola. you could actually see a surprise, not a good surprise. the other areas are the opera producers and on oprah producers to stick with the commitments -- opec producers and non-opec producers to stick with the commitments and quotas. francine: are you worried that there will be a dent of demand coming from the emerging market? so. i do not think
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we look at the demand figures in china and north america. they continue to steadily grow, is calledk the size the carpark and the world continues to grow, so i do not see demand is the issue. i think it will be more the ability of the suppliers to have discipline or some of them cannot make it to the market. francine: bob dudley, ceo of bp with an exclusive conversation in demos. limp -- dallas. -- dallas. os.dav ♪
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francine: no cherry picking, theresa may repairs to present her brexit blueprint, looking for an equal partnership here it chinese president is said to -- capital andel the comeback. interview,sive tijane thiam tells us fixed and come will have a good year and cost cuts will not finish until 2018. this is bloomberg surveillance, i am francine lacqua in davos with tom keene. it is tropical here, very warm. tom: we have more snow, it is a little colder this year. in all the preparation of uncertainty, i have been stunned at the level of uncertainty conversation to conversation. to me that is the first theme. francine: a lot of that may
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change when we hear from two key newsmakers. the chinese president addressing the forum shortly and theresa may laying out her blueprint for the future. let's get to the bloomberg first word news. today, the british prime minister theresa may will deliver a low to business groups -- below to business groups -- w to business groups and is expected to call to leave the e.u. single market. she said she has no interest in anything that will leave the u.k. half in and half out. china's president is in the spotlight and davos to become the first chinese leader to address the world economic forum. russia has invited president-elect donald trump to send officials on syria for peace talks next week.
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those meetings would be moscow's first formal contact with the new administration. the russian former minister -- foreign minister said the fight against terrorism will be more effective with the u.s. under trump. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. riggs.lor this is bloomberg. much.hank you so equities, bonds, currencies, commodities. see here is the bond market beginning to move a little bit of currency movement, and i would suggest this is anticipation of the prime minister's speech. typically we have seen the 210 -- we have seen a push against the certitude of trump reflation. francine: i have not had time to look at the data check so i hope there is pound. i do not know what is priced in.
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it is clear when he spake to a lot of bankers, -- when you , they are ready to move people. they know they have to. maybe they are lying. unlikely. tom: true. francine: the new york times ceo mark thompson joins us along with john mickelthwait. the two real newsmakers. what an odd year 2017 will be for you. president obama was good for the new york times. what is president trump going to be like? mark: the key thing is we are living through a gigantic new unpredictable story. the story is multifaceted, it is linked. , atability in europe, brexit
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wild card in the white house, it should be a great year for news. and we think about the news business we need the raw material to make the money off of and we think there will be a plentiful supply. tom: i look at where we are in the beginning. i was unprepared for the level of uncertainty that i see here today. john mickelthwait, how important are the speeches? are they safe speeches? xi isi think president likely to be a safe speech. he comes on and will i suspect like a credible alternative leader. theresa may has a much more difficult problem where she is so far failed to get across exactly what she is pushing for a now she seems to be coming down one side of the fence. it is exactly the wrong answer. tom: when we go to the inauguration speech, which i do
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not think anyone understands where that speech is going, and then we go to the march 15 netherlands election. francine: your point seems that a lot of ceos are more worried about brexit than about donald trump. john: one of the things people are wrestling with is the pacing. the speech be an important milestone, but this is going to be years and years before ultimate certainty arrives. i think the businesses, not just a lot of american businesses ask the questions about brexit. it is the extent of the very length of time everything will last. francine: because it is a negotiation. almostit means brexit it assumes we have to leave the single market. goes,if the single market -- tom: help me with your global
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perspectives. i would suggest that theresa may's speech and the importance of it, and maybe she travels to davos, but it is overlaid upon the president-elect talking about 35% tariffs with bmw. if it really a reaction to brexit but also to this idea of where we will trade -- where will trade the? instead of the u.k. leaving the e.u. and becoming a steady-state, the fundamentals of global free trade and the balance between national interest and globalization is also in play. one of the reasons i think theresa may way -- maybe thinking about caution is because we do not know what the relationship between the u.s. and europe is going to be in terms of trade. you mentioned the netherlands elections and in april the french elections, there are so
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many variable elections. if i was may i would be step by step, she has got to get some more principles out today. life, darkprevious and i used to be involved and we were heavy it -- mark and i used to be involved and we were heavily involved with global trade. there is a definite danger that if you end up with an american-china confrontation -- essentially chancellor merkel suggesting to trump, we don't need you. this idea of a nato is an antiquity. ifncine: i would be careful you are a politician because you are talking to your own electorate. tom: they do that in davos? francine: you talk to your own person to make sure you get reelected.
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said you'veyou added 200,000. you need digital subscribers. we said several times to the market over the course of november and december, vague numbers. we were -- big numbers. we were seeing numbers we have never seen before, and although there was an initial surge we do not expect to continue the same way. we do think the news cycle and to some extent, the character of the new president means -- john: do you think this is the future of news? mark: my view is by far the most secure way of paying for high-quality journalism is asking consumers to engage a former relationship with the news provider and to pay. tom: help me with the new competition, and i look at the massive capital that mr. bezos has put into the washington post. how does the industry respond to
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another major player with a lot of honey question mark -- a lot of honey? bezos, and ir jeff think the washington post is a formidable competitor. i think it is great they are getting back into the game. story to, the trump some extent is the washington story, it is good news for them. greatk the fate of the news providers of the world is going to be less about our kind of year competition and much r competition pee and much more about the digital platform and the shift in advertising. it is the bigger forces that work around us rather than, will the wall street journal be up in the washington post down. that will still be part of the story but a smaller part. john: do you get more by
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circulation or advertising? mark: i think of advertising is being an important revenue string but in the end, a secondary string. when i'm specifically interested in is the largest possible number of deep relationships. not every person who has a deep relationship with the new york times needs to be a subscriber, but subscription is a good indication. i think that core engaged audience, and how big you can make it. john: how big do you think you can make it? mark: we should have ambition to getting to 10 million digital subscribers. john: how many outside of america? mark: --. tom: we have to continue to an important speech. they will continue with us as we go to the speech by mr. xi jinping of china. davos,n our coverage in
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four days. us one you stay with economics, finance, international relations, and a good cup of coffee. this is bloomberg. ♪
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>> for us, it is important to create option alley. as long as we have market access so at least for the next two years, i think the pressure is not that high. the pressure is to create the ionality.w eddie -- opt
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francine: we are 90 minutes away from the theresa may speech in london. tom: before that, the speech scheduled with the president of china. i look at what he was talking about, and it is a typical ceo response, just to delay. john mickelthwait, what are they waiting for? is there a touch point? john: i think article 50 is one and maybe, it depends on how this current speech goes down, maybe some will make decisions now. if you know britain is not going to be part of the single market, that makes a big difference. if you own a big bank and no passporting not happen, that makes a big difference. tom: sterling is back to 1985 levels. what does that mean to see weak sterling back to thatcher? think for people and the
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street, there is a certain point where currencies tend to be verrilli t. if it crashes -- verrilli t v --irility. holiday, they're beginning to see things are less expensive. mark: short-term, stocks have been strong in the u.k.. non-poundsarning in has helped them. is expected to hit the cost of living and people will feel it in the quality of life. francine: i want to switch to news and donald trump and your relationship. what will it be like? mark: i think unpredictability will be the key word. lunch, heme to started with a tweet about the
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failing nytimes and when he left the meeting he said we are a jewel for america and the world so go figure. media,o focused on the he regards himself in some justice as an expert on the media. he believes attack is the best form of defense. tom: you are going to go after him. mark: i will cover him objectively. tom: it will say all the fake news fit to print. what is fake news? mark: it is a slippery term, and it is extreme. it is alec baldwin dead at 59. a commercial untrue statement which is click based. i worry more about something that is very close but which basically is wild and sometimes , knowingly false assertion
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including me by politicians which masquerade as facts and factual statements. to me, the real poison in our public, in the language of politics is statements that do not sell like opinions, they sound like facts and they are just not true. it is not just kids and montenegro inventing things for money, it is political leaders. john: i think there is a self-correcting that goes on. there is a point at which the spread of fake news also helps the proper news come through. you can people argue on the right will be rude about the new york times and people on the left will be rude about the wall street journal. mark: people prepared to take the trouble and find out what is happening, i think that is true and it manages to make our businesses work better. when you look at the population as a whole, you can feel false ideas, exaggerated ideas of what , getting real
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political traction and changing electoral results. john: there is something trump.nt about donald we should cover him like we do any other president and analyze him like he is. a lot of people seem to be coming out, this is how we will cover him. mark: i absolutely believe we should cover him objectively. over to thet's head president of china, mr. chee jinping -- xi jinping. as the state and government, the deputy has your -- heads of international , ladies ands , i ammen, dear friends
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.elighted to come to davos this small, beautiful town in s is an important window in which we can take the power of the global economy. people from the around the world come here to exchange ideas and insights which will broaden their vision. wef andes the animating, cost effective brainstorming event, which i would like to call schwab economics. [applause] pres. xi: as you know, in 10 days time the chinese will
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celebrate the lunar chinese new year. about this time it is all in china, people visit their relatives, and friends. and this way they will strengthen their bond and friendships, so this time my wife and i and other members of the delegation come to davos to to save a year gratings to switzerland and the whole world. [applause] pres. xi: it was the best of times, it was the worst of times. these are the words used by charles dickens to describe the world after the industrial revolution.
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today, we also live in a world of contradictions. on the one hand, we are growing material wealth and advantages and technology. human civilization has developed as never before. hand, however, frequent regional conflicts, global challenges like terrorism , as well as poverty, unemployment, and the widening income gap, have all added to the uncertainties of the world. many people are wondering what
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has gone wrong with our world. question, one must first track the source of the problem. people blame economic globalization for the chaos in our world. economic globalization was one feud as the treasurer case founded by alibaba, but now it has become the pandora's box in the eyes of many. the international community finds itself in a heated debate on economic globalization. so today i wish to adjust the global economy in the context of economic globalization.
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make is thatant to many of the problems troubling the world are not caused by economic globalization. refugee wave the from the middle east and north africa in recent years have become a global concern. several million people have been displaced and some small children last their lives -- lost their lives while crossing the rough sea. this is heartbreaking to us. conflict and regional turbulence that have created this problem. and the solution to this problem lies in making peace, promoting
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reconciliation, and restoring stability. the international financial crisis is another example. it is not an inevitable outcome .f globalization rather, it is the consequence of excessive change in profit by financial capital and great failure of financial regulation. there is no point in blaming economic globalization for the world's problems, and that is simply not the case, and it will not help solve the problems. perspective,orical economic globalization results from growing social productivity , and is the natural outcome of scientific and technological advances. it is not something created by
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any individuals or any country. globalization has powered global growth and facilitated the movement of goods and capital, advances in science, technology, and civilization, and interactions among peoples. but we should also recognize is aeconomic globalization double-edged sword. when the global economy is under downward pressure, it is hard for us to make the case of global economy bigger. it may evenfact, shrink and this will strain the relations between growth and distribution between capital and
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labor, and between efficiency and equity. both developed and developing countries have felt the punch. voices against globalization have laid bare the pitfalls in the process of economic globalization, and we need to take that seriously. the chinese tend to say, honey melons come from bitter vines. sweet dates grow on thistles and thorns. in the philosophical sense, nothing is perfect in the world. one would fail to see the full picture if he claims something is perfect simply because of its merits, or if he views something as useless just because of its
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defects. true that economic globalization has created new problems, but there is no justification to write off economic globalization altogether. rather, we should adapt to and guide economic globalization. impact.its negative and deliver its benefits to all countries and all nations. there was a time when china also had doubts about economic surelization and was not whether china should join the world trade organization. but we came to the conclusion
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that integration into the global economy represents a historical trend. to grow its economy, china must have the courage to swim in the vast ocean of the global market. ofone is always afraid bracing storm and exploring the new world, he will get drowned in the ocean sooner or later. so what china did is to take a brave step forward to embrace the global market. share ofad our fair choking in the water and we have encountered whirlpools and choppy waves. learned how to swim in this process. it has proved to be the right
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strategic choice. whether you like it or not, the global economy is a big ocean that you cannot escape from. to cut off flows of capital, technology, products, industries, and people between economies and channel the waters in the ocean back into isolated , this is simply not possible. and indeed it runs counter to the historical trend. us history of mankind tells that problems are not to be feared. what should concern us is refusing to face up to the problems and not knowing what to
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do about them. bothe face of opportunities and challenges of economic globalization, the right thing to do is to cease every opportunity, joint we meet -- sees every opportunity, jointly meet challenges, and chart the course for global economic desk economic globalization. -- economic globalization. at the economic leaders meeting in late 2016 i spoke about the need to make the process of economic globalization more invigorated, more inclusive, and more sustainable. should act proactively and manage economic globalization is a process so as to release its positive impact and rebalance
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the process of economic globalization. we should follow the general trend, proceed from our respective national conditions, and embark on the right path way of integrating into economic globalization at the right pace. we should strike a balance between efficiency and equity to ensure that different countries, different social strata, and different groups of people all share in the benefits of economic globalization. responsibility that leaders of our times must take on. [applause] pres. xi: and the people around the world expect nothing less from a. -- from us. ladies and gentlemen, dear
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present, the most pressing task before us is to steer the global economy out of difficulty. the global economy has remained sluggish for quite some time now. the gap between the poor and the rich, and the south and the north is widening. the root cause is that three critical issues in the economic spirit have not been effectively addressed. robust driving force makes it difficult to sustain steady global growth. now at thegrowth is slowest pace in seven years, and growth of global trade is even slower than that. short-term policy stimulus has
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anded ineffective fundamental structural reform is just unfolding. the global economy is now in a period of moving toward new with the role of traditional engines for growth further weakening. despite the burgeoning new technologies such as artificial intelligence and 3-d printing, new sources of growth are yet to emerge. path for the global economy remains elusive. second, inadequate global economic governance makes it difficult to adapt to new
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developments in the global economy. lagardehristine recently told me that emerging markets and developing countries already contribute to 80% of global growth. in the past two decades, the global economic landscape has changed profoundly but the global governance system has not embraced those new changes, and is therefore inadequate in terms of representation and inclusiveness. the global industry landscape is also changing. change, valueal change, and supply change are taking shape. investment rules have not kept pace with these developments. problems suchcute
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as closed mechanism and segmentation of laws. the global financial market needs to be more resilient against this. but the global financial governance mechanism fails to meet the new requirement, and is unable to effectively resolve problems such as frequent volatility and desk in international financial markets and the buildup of asset bubbles. developmentn global makes it difficult to meet people's expectations for better lives. schwab observes in his book the fourth industry revolution,
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that this round of industrial revolution has extensive and far-reaching impacts such as growing inequality, particularly a possible widening gap between return on capital and return on labor. 1% of the world's thanation owns more wealth the remaining 99% combined. inequality in income distribution and uneven development space are worrying. over 700 million people in the world are still living in extreme poverty. , to have warmies
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food, and secure jobs is still a distant dream. this is the biggest challenge facing the world today. thes also what is behind social turmoil in some countries. that there are indeed problems with global growth, governance, and develop model. and these problems must be addressed. the founder of the red cross , "our real enemy is not the neighboring country. it is hunger, poverty, ignorance, suspicion, and prejudice."
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toneed to have the vision dissect these problems. more importantly, we need to have the courage to take actions to address them. first, we should develop a dynamic, innovation growth model. the fundamental problem plaguing the global economy is the lack of driving force for growth. innovation is the primary force guiding development. unlike the previous industrial revolutions, the fourth industrial revolution is unfolding at an exponential, rather than linear pace. we need to relentlessly pursue with then, only
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courage to and of eight and -- and thewe remove courage to reform we can remove blocks to global development. an0 leaders reached important consensus at the summit, to take animation as a key driver and foster new driving force of growth for both individual countries and the global economy. we should foster a new development philosophy, and rise above the debate about whether there should be more fiscal stimulus or more monetary easing . we should follow a multipronged approach to address both the symptoms and the underlying problems. we should adopt new policy measures and advance structural reforms to create more space for growth, and sustain its momentum.
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we should develop a new growth model, and sees the opportunities presented -- seiz e the opportunities presented. we should meet the challenges of climate change, an aging population. we should also address the negative impact of i.t. applications and automation in jobs. when cultivating new industries and new forms and models of business, we should always find ways to create new jobs in order hopestore confidence and to our peoples. second, we should pursue a well
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coordinated and interconnected approach to develop a model of open incorporation. today, mankind has become a close-knit community of shared future. countries have become mutually dependent with extensive converging interests. more countries enjoy the right to development, yet at the same time they should view their own interests in a broader context, and refrain from pursuing their own interests at the expense of others. should commit ourselves to growing an open global economy. the share the opportunities and interests through opening achievement outcomes. we should not develop the habit
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of retreating to the harbor but never encountering a storm, for this will never get us to the other shore of the ocean. must redouble efforts to develop global connectivity to enable all countries to achieve interconnected growth and shared prosperity. we must remain committed to developing free trade and investments. investmentde and liberalization and facilitation through opening up, and say no to protectionism. is just protectionism like locking oneself in a dark wit -- in a dark room. be keptnd and rain may
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outside, so our light and air. no one will emerge as a winner in a trade war. [applause] third, we should develop a model of fair and equitable governance in keeping with the trend of the times. ,s the chinese saying goes people with petty sureness attend to travel matters well people with great vision at 10 to governance. there is a -- attend to governance. there is a call for reforming the economic governance system. to newen it adapts dynamics and the international economic architecture, global governance system sustain global growth.
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countries big or small, small or weak, rich or poor, are all members of the international community. as such, they are entitled to participate in decision-making, enjoy rights, and for phil obligations on an equal basis. -- deserverkets and a voice. imf reform has entered into force, and its momentum should be sustained. adhere to multilateralism to uphold the authority and ethic of them -- efficacy of institutionalism. we should honor promises and honor rules. one should not select or bend rules as he sees fit. the paris agreement is an
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achievement which in keeping with the underlying trend of global development, all countries should stick to it instead of walking away from it, as this is a responsibility we must assume for future generations. [applause] fourth, we should develop a balanced, equitable, and inclusive development model. goes, ahinese model just cause must be pursued for common good. it is ultimately for the people to achieve more balanced development and make sure people have equal access to opportunities, and share in the benefits of development. it is crucial to have a sound development philosophy and model, and to make development
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equitable, effective, and balanced. thatould foster a culture values diligence, frugality, and workprise, and respect the -- the fruits of the hard work of all. priority should be given to addressing policy -- poverty, unemployment, the widening income gap, and the disadvantaged to promote social equity and justice. it is important to protect the environment while pursuing economic and social progress so as to achieve harmony between man and nature, and harmony between man and society. 2013 agenda for sustainable development should be implemented to realize balanced
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development across the world. [applause] readsxi: a chinese adage -- victory is in short when -- success is achieved when people pull their together. as long as we keep to the goal ,f building a shared community and working hand-in-hand, we will be able to create a better world, and deliver better lives for our peoples. ladies and gentlemen, dear thanks to 38 years ever form and opening up, china has become the world's second-largest economy.
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the right path leads to a bright future. far becauseme this the chinese people have under the leadership of the communist party of china, blazed a development path that suits china's actual conditions. path based on china's realities. china has in the past years succeeded in embarking on a development path that suits joining on both the wisdom of its civilization and the practices of other countries in both east and west. in exploring this path, china refuses to stay in sensitive to the changing times or blindly follow in others footsteps. all roads lead to rome. no country should view its own
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development path as the only viable one. neither should it deposes -- impose its development path on others. this is a path that puts people's interests first. china follows a people oriented development philosophy, and is committed to bettering the lives of its people. is of the people, by the people, and for the people. pursues the goal of common prosperity. we have taken major steps to alleviate poverty, and lifted over 700 million people out of poverty. good progress is being made in our efforts to finish building a
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society of initial prosperity in all respects. this is a path of pursuing reform as innovation. difficultieskled and challenges on its way forward to reform. china has demonstrated its courage to take on difficult issues, navigate treacherous rapids, and remove institutional hurdles standing in the way of development. these efforts have been enabled us to unleash productivity and social vitality. building on progress of 30 odd years of reform, we had introduced more than 1200 reform measures over the past four years, injecting powerful impetus into china's development. consuming,ath of development through opening up.
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china pursues and opening up strategy. china's development is both domestic and extort him -- external oriented. while developing itself, china shares more development outcomes with other countries and people. china's outstanding development achievements and vastly improved living standards of its people are a blessing to both china and the world. such achievement in development over the past decade of themselves to the hard work and perseverance of the chinese people. the quality has defined the chinese nation for several thousand years. we chinese know only too well
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that there is no such thing as a free lunch in the world. e will fall from the sky. for a big country with over 1.3 billion people, development can be achieved only with the dedicated and tireless efforts of its people. we cannot expect others to deliver development to china, and no one is in a position to do so. when assessing china's development, one should not only see what benefits the chinese people have gained, but also how much effort they have put in. not just what achievements china , but also what contributions it has made to the world. then we will reach a more balanced conclusion about china's development.
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between 1950 and 2016, despite its modest level of development and living standards, china provided more than 400 billion ,uan of foreign assistance undertook over 5000 foreign assistance projects, including nearly 3000 complete projects. had over 11,000 forning workshops in china over 260,000 personnel from other developing countries. since we launched reform and opening up, china has attracted
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over 1.7 trillion u.s. dollars of foreign investments, and made over 1.2 trillion u.s. dollars of direct unbound investments. making huge contributions to global economic growth. of thehe outbreak international financial crisis, ofna contributed to over 30% global growth every year on average. figures are among the highest in the world. these figures speak for themselves. china's development is an opportunity for the world. china has not only benefited from economic globalization, but also contributed to it.
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rapid growth in china has been sustained and a powerful engine for global economic stability and expansion. the interconnected development of china and a large number of other countries has made the world economy more balance. achievementrkable in poverty reduction has contributed to more inclusive global growth. and china's continued -- continuous progress in reform and opening up has lent much omentum to a opening -- much omentum to an opening world economy. we chinese know only too well what it takes to achieve prosperity, so we applaud the achievements by others. , and we wish them a better future.
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we are not jealous of others success, and we will not complain about others who have benefited so much from the great opportunities presented by china's development. we will open our arms to the people of other countries and welcome them aboard the express chain -- train of china's development. [applause] pres. xi: ladies and gentlemen, dear friends, i know you are all closely following china's economic development. let me give you an update on that. china's economy has entered what we call any normal in which major changes are taking place in terms of growth rate, development models, economic structure, and drivers of growth.
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the economic fundamentals sustaining sound development remain unchanged. besides a sluggish global china's economy is expected to grow by 6.7% in 2016, still among the highest in the world. economy is far bigger in and itan in the past, now generates more output than it did with double digit growth in the past. household consumption and the service sector have become the main drivers of growth. in the first three quarters of 2016, added value of the --
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, and domestic consumption contributed to 71% of economic growth. employmentncome and has steadily risen, while per-unit gdp energy consumption continues to drop. our efforts to pursue green development are paying off. economy faces downward pressure and many acuteulties, including mismatch between excess capacity and an upgrading demand structure, lack of internal driving force for growth, accumulation of financial risks, and growing challenges in certain regions. we see these as temporary hardships that occur on the way
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forward. and the measures we have taken measures we -- the have taken have produced good results. china is the world's largest developing country with over 1.3 billion people, and their living standards are not that high. this reality also means china has enormous potential and development. guided by the principle and vision of innovative coordinated , open and shared development, we will adapt to the new normal, stay ahead of the curve, and make coordinated efforts to maintain steady growth, accelerate reforms, adjust
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economic structure, improve people's living standards, and with these efforts we aim to achieve medium high rated we aia medium-high rate of growth, and upgrade the economy to the high end of the value chain. china will -- tom: the president of china speaking, and historic moment in the 47-year history of the world economic forum. world leaders gather here at davos for a most interesting speech. i thought it was very predictable, but there were some real moments. with president elect donald trump being inaugurated, president xi jinping is the one advocating for countries to be together. he said with trade wars, no one wins. tom: and the dickens quote early on from "a tale of two cities,"
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that gets the headlines. but for me the headline was electronicresident talking about a 35% tariff on bmw, and xi jinping today talking about trade. francine: just quickly for our terminal users, you can look at follow the president of china. you -- we have another important speech from theresa may, the prime minister. is she really ready to give up the single market? we will look for that interview at 6:45 a.m. in new york. this is bloomberg. ♪
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tom: this morning the prime minister will speak on a "new in people partnership." britain will demand a new european calculus. at thing, half out -- that is out of the question. not a lehman moment of 2009, but a trump clear as a present stranger. and a global trade war could come from 35% tariffs. american isolationism and a china that has shown up at davos with a vengeance. good morning, everyone. this is "bloomberg surveillance ," live from davos. i am tom keene. with me, francine lacqua. it is moment by moment as we go from one president to another in a moment. francine: if you look at the zeitgeist that is today, where --hear theresa may layout laying out her plans for read we have president xi jinping
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speaking. what does this reset main? we need to go -- tom: we need to go to another important conversation that is timely. francine: we are delighted to be president,kraine's petro poroshenko. thank you for joining us. will your relationship with the u.s. change now that president donald trump will be in the white house five days from now? : thedent poroshenko strongnt gained very bilateral support from the united states. this is the support from the american people, from the american congress, both the house and senate, and i am absolutely confident that we will do so with the future administration. francine: do you plan to meet
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with president trump to ensure that the loan guarantees provided by the u.s. will be there? issident poroshenko: this not only an economic question but of the political importance of this meeting. first world in the leaders to whom president trump called immediately after the election. a promising conversation. we agreed that immediately after the inauguration, my visit to washington, d.c., and the agenda for negotiation. tom: we speak on "bloomberg ofveillance" with all sorts people of all sorts of opinions. whether it is admiral james stavridis, whether it is joseph nye. neede for us the nato you after we saw the president-elect saying nato is a thing of the past. pres. poroshenko: i am absolutely confident the world needs nato. because after russia violated
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and annexed crimea, making aggression in the east of my country, russia completely destroyed postwar global security system based on the security council of the united nations. effectiveeft the only security mechanism in the world. that is why this is not only very important for the member states, but this is very important for the global security. you do use it -- do perceive it as a new isolationism? do you hearken back to the 1930's when you have the rhetoric from the president-elect? pres. poroshenko: i hate the idea of -- i am confident that movingure for a country on international trade -- this is the policy of my country. is why i was elected.
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i signed a comprehensive free-trade agreement with the european union. and now in 2.5 years, we have increased our turnout, 31% to 45%. we just weeks ago signed up for our canadian partners a new free trade agreement between canada and ukraine. today we speak with the chinese xi, aboutesident expanding our cooperation with china, including the acceleration for providing trade with the economic commission. and we agreed about the very practical steps which we undertake in the very immediate future to expand the cooperation between ukraine and china. that is why i doubt that it will be an alternative, if the world should provide economic growth.
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isolationism is not a good idea. president poroshenko, can you update us on what it would mean for the ukraine if the u.s. were to repeal sanctions on russia? pres. poroshenko: look, this is the question not about ukraine absolutely. this is a question about global security. if you allow anybody to make an aggression against a sovereign and independent country just for their wishes to reform the country, to build up western-style democracy, to fight for freedom and democracy, this is a question of value, not of sanctions. i want to remind you that we have a budapest memorandum. when the united states of america took the obligation to defend and support our sovereignty and integrity, when we voluntarily give up our nuclear weapons. pres. poroshenko: at the same time, people have been asking
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why the west was not quicker to react. sanctions, repeal will the e.u. also lift sanctions against russia? pres. poroshenko: if we are asking -- if you are asking me the person to most lift the sanctions, this is the president of ukraine. if the sanctions would be lifted, one russian troops get out of ukrainian soil, when they stop the occupation, this is exactly what we need. donate anything more, because immediately we demonstrated, on the territory that will be freed from russian occupation, we demonstrated a significant development. tom: there was a photograph yesterday put up by ian bremmer, the great international relationship with eurasia group. dr. bremmer had a photo with the last one standing of the leaders -- renzi gone. there was chancellor merkel alone. what do you need from chancellor merkel this year? pres. poroshenko: this is a very
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simple question because all the me as thetelling that unityian president need not only from germany, but unity from the european union, not just for ukraine but for the european union and the world. yesterday i had a long phone conversation with chancellor merkel, and we confirmed our effective cooperation and we agreed about the agenda of the very next day or weeks, and with that situation i am optimistic. i think that no matter who would be the leaders of the european union, this is the question for the future european union, and this is good for the people of
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ukraine and the european states. francine: when do you expect the next disbursement from the aid money, and in what amount? pres. poroshenko: that is a very good question because ukraine, for the end of the year of 2016, fulfilled everything in the memorandum. the stability of the bank and system nationalization, the biggest ukrainian private bank, which was the danger for insolvency -- we solved this in very few weeks. we should have a board meeting and we should have effective cooperation. it will be not only the money, but the most important thing is the message for the investor. please come to ukraine at this time. tom: i have asked you this question. there is a comedy program,
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"saturday night live" in the united states. there is the actor alec baldwin playing mr. trump third we notice that he had a russian pen on his lapel. address to the american people how they should respond to mr. trump suggesting that mr. putin is his good friend. you and the people of ukraine have lived this for any good number of years, including crimea and your eastern regions. how should america respond to a president that feels he has a unique dialogue with mr. putin? pres. poroshenko: that is a good question. first of all, i think that this is no unique dialogue as of now. but i think that president trump has a unique opportunity now to use all his influence to support in fighting for freedom and
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democracy. this negotiation would be successful, and if the result of this negotiation, russian takes their troops from ukrainian soil, really it is crimea. that is important and positive. at least i think that the window of opportunity still exists. with that situation, the american people supports this idea. if the situation would have any other development, which is also possible because unfortunately too many people do not trust vladimir putin, and we have a reason for that. , it would beuation very a big importance, the first steps of mr. trump as president of the united states. francine: you're just lodged a formal complaint with the
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international courts of justice. is this to keep the conflict in the public eye so that people talk about it, or are you expecting something that will change the conflict? pres. poroshenko: we use any opportunity we have in our hands to motivate russia to get out from our territory. of course, we will use diplomatic means. but at this in time, we build up a strong army, provide effective reform. we do more reforms than in the previous 23 years. and we also use a legal instrument because this is using on united nations convention the prevention of financing terrorism, and the united nations convention for the responsibility of violation of human rights, and we have more than enough evidence, and we make a long preparation, only 45 notes of our foreign minister. there will be plenty of meetings for every cases.
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yesterday it happened. appeal forrainian the international court against russia to be responsible for the aggression they make against our country, for the legal annexation -- for the illegal annexation of crimea. francine: thank you. we have great interviews coming up it also we will listen to the theresa may speech. we understand she is definitely ready to give up on the single market. 6:45 a.m. in new york, 11:45 a.m. in london. this is bloomberg from the world economic forum. ♪
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tom: good morning, everyone. the meeting of the world economic forum in davos, switzerland. -- it is a little colder this year, a lot colder than the last couple of years. francine lacqua and tom keene. my 13th year here, which i did not know. th for me.12 tom: let me do a data check. it is quite important, and it comes down to gauging and measuring the trump reflation trade. , the difference between the 10-year and the two-year is 1.16 percentage points.
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the trump reflection, statements of yield curve, we go up and it has been 13 days in a row of ebbbing, and today we go through key support heading back to the day of the election. francine: there have been key things. the inauguration on friday, the import speech from xi jinping, the first time a chinese leader shows up. and then theresa may speaks shortly. guests.ht now, two carmen reinhart, acclaimed for her work on the world economy with harvard. brynjolfsson joins us. carmen, let me start with you, please. there is the idea of your acclaimed book, "this time is different. with the struggle for global growth -- is this time different with the new technology? era, i get asked
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this considerably. the statement "this time is different" is not that nothing ever changes. i think that the biggest challenge is, one, it is better measurement of productivity. that is not that different. but the biggest challenges right now, at least in this for him -- , are coping with uncertainty, which is not a new phenomenon. the buzz word has been uncertainty. francine:'s productivity and populism -- are they linked? you displace jobs and put it -- carmen: i would be making things up if i told you i know the answer to that. i can say that populism and slumps are late. jolson, -- eric
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theg jolson -- is technology going to too few people, or is it really not in our economy? k: the big story is that most people are not really benefiting from it. it is going to the 1%, to a lot of people here in davos. the people in davos were ok for that -- ok with that for a decade or so. now we are seeing with the elections and the referenda that people are responding and they are angry because median incomes are lower than they were 20 years ago. francine: there is an assumption that global growth came from globalization. the winners are not giving enough back to the losers with globalization. globalization is nothing
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bigger story here. i think the longer-term story is technology and automation. yes, globalization is important, and i am all for free trade like every economist is. but what happened to the middle class has a lot more to do with them not being prepared for the jobs of the future. the skills that they have run out the ones that companies needed going forward, as a lot of the old jobs get automated. to bes plenty of work done, but there is not a good match. tom: we have a good class here. help me here. it is a charter here of the world -- it is a chart here the world as we used to know it. j now with eric world, is it a
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world of the haves and the have-nots? caken: tom, let them eat is not a new concept. i think a great era of prosperity, which i agree was not fully embracing globalization, was in the decades right after world war ii. true that with much of europe and japan we saw the rebuilding of those economies, practically from scratch. but much of that growth really was associated with pretty equitable income distribution. erik: more equitable. francine: but don't we need to make a distinction between advanced economies and the emerging markets? their biggest fear is not being part of the globalized world. carmen: i think we should not underestimate that if the u.s.
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veryengage in the kind of antagonistic potential protectionist trade war, do not underestimate that populism is to going to be confined wealthy european countries. i think populism could very well see a rise in places like mexico. tom: is technology transportable to these other nations? zero-sum,solationist, with a more mercantilist mindset, can you move entrepreneurship to other nations? erik: that is a certainty. technology knows no borders. when i visit those countries, i see people in the bullseye of the next wave of technological change. when there are tens of thousands of people working side by side
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of the chinese factories, the kind of work they are doing is rife for automation. wages thanower american workers, but they will not out-compete robots. thatine: can we assume technological advancement can actually create jobs as long as people are retrained? or does it automatically mean that people are left behind and that we you lose -- and that we lose job? erik: no and no. it depends on our choices. the educational system has not been preparing people, so unfortunately there is automation of jobs. tom: do we have a new president that has an economic construct that borchers -- that borders on 17th-century? seriously, jacob feiner in chicago -- is that what we are going back to? carmen: we do not have to go back to the 17th century. i think the biggest concern --
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and that is why i keep highlighting the word "uncertainty" -- most people agree that the great depression by the brought about wave of protectionism and an outright trade war. but it certainly aggravated, and that really was the message we got today, when we heard from the chinese premier. nobody wins. and i think that that is the biggest source of uncertainty. i think there is all sorts of uncertainty even with the overhaul in texas. but it is secondary to what it could mean on the trade side. let me just quickly add that it also begets the kind of concerns about that thy neighbor monetary policy. tom: i need to ask you, with your acclaimed work with ken rogoff and before ken rogoff. can you all -- can you say all
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clear before this financial crisis, that we have moved on to a new phase? carmen: a new phase of the crisis, yes. that the crisis is over, absolutely not. tom: thank you so much. from harvard. erik brynjolfsson -- look at a couple of summers ago, erik brynjolfsson with m.i.t.. coming up, and timely conversation, particularly off the conversation of theresa may. jacob frenkel on currency wars, a jacob frenkel on international trade. from the meetings of the world economic forum in davos, this is bloomberg. ♪
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>> if you need support, i think the government will provide it. i don't think france is going to get rid of some of its major banks. an electric moment with david rubenstein, kenneth rogoff, and john cryan. mr. rubenstein really coming to cryan.ens defense of john that is a political backdrop in davos. tom keene and francine lacqua, as always. francine: you know what struck me? john cryan was talking about the complexities of making banks simpler. i think there is a race to do that. there was great insight to get us started with madame lagarde and larry summers coming up in a little bit.
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here is first word news with taylor riggs. taylor: we are sticking with you in davos. xi jinping is calling for free trade in his first appearance in davos. an obvious message to president-elect donald trump. he says no one wins in this trade war. he also warned against making free-trade a scapegoat. >> the point i want to make is that many of the problems troubling the world are not calls for economic globalization. taylor: he also said he is worried about inequality in income theresa may is ready to renounce -- ready to announce that the u.k. is going out of the european single market. according to excerpts of her speech today, she will say the u.k. does not seek to hold onto business membership in the you british as the scripps have been pushing for the closest possible links with europe. inflation in the u.k. rose last month at the fastest pace in
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more than two years. consumer prices increased to 1.6%. the fall in the pound lead to surrogate in current -- led to surrogate import costs. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am taylor riggs. this is bloomberg. francine? tom? off i would suggest moving what we see with prime minister may's speech in a bit is a key indicator within the market. i called it the trump reflation indicator. it is the steepness of the yield curve in the united states. a 0.2 spread. it clearly has broken through any kind of support from the day after the election. it is our single best chart today. it clearly identifies how we have the joy of a trump reflation, we roll over and we have 10, 12, 13 days in a row of .isappointment, if you will that chart rolled over today.
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that is not exactly the chart. we will try to get that up in new york. francine: there it is. tom: there is the correct chart. that was my fault, folks. this i think shows the tension within the system. it is a good time to speak with jacob frenkel, one of the great academics in public policy, and of course at j.p. morgan international, as their chairman. jacob frenkel, i have been boating he recently. -- i have been quoting you recently. have we begun to ab away from the certitude of reflation? importants shows how expectation plays. that is the most important issue. policyace it -- no new -- you had up, down, on the
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basis of expected policy, not policy. therefore, we should wait and see how actual policies are unfolding. tom: how long do you have to wait and see? jacob: policy is a process. we will see some rhetoric, the temerity, the legislative process, but it is not something overnight. financial markets tend to overshoot and exaggerate events. the real economy percent back in order. that is why it is so important that we do not allow or create to disconnect from the financial markets and the real economy. today we still have disconnect. francine: this is academic, but we do this on "bloomberg surveillance." -- if we disappoint expectations, does that mean the next time people will not believe you? jacob: with credibility.
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if you default on credibility, you will need to stream it if this is not good enough, you need to act. seesaw is tohe start by actions which is the mechanism to breed credibility. banks have been the saviors of the systems when the 2009. started in 2008, they have remained, however, unfortunately, the only game in town. their efficacy has diminished. it is important now to facilitate the exit from the extraordinary unconventional policies. the united states is ready for an exit. it is ready, and as far as i am concerned, normalization is called for and soon. the reason is that in all dimensions, growth has recoiled.
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declined.nt has the duration of unemployment has declined. even prices are picking up. this is exactly the time for the u.s. to lead the way and to move on. people expect it. if you frustrate those expectations, credibility is lost. in this case, this is the time to do it. there is also damage of delayed normalization because there are disconnects. feed financial markets in an exaggerated way, you divest investors away from the real economy. tom: we have an historic moment today as the president of china speaks. frankele, if i read my from chicago years ago, back then it was a more rigid system. now we have a much more floating system except for the management
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of the renminbi. do you have the confidence that the president of china can effect a better china given the unique features of their financial system? jacob: to begin with, the relationship between two countries -- it takes two to tango. i saw the president of china's speech as a major message, a message that says let's recognize the fact that we are mutually interdependent. communicating using the same language. and we do that, with a tariff of 35% on any given foreign automobile? how does a nation or trade system respond to these substantial tariff ideas? jacob: it is a very relevant question. the point is that when you talk about those who promote
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protectionism and those who are anti-globalization -- when you talk to them, you recognize they are not against the gains of trade. -- this meansst that the policy is not calling for less trade. the policy means, let's make sure that we have a system adjustment, that there is retraining, and the discussion should shift away from trade toward fiscal policy and adjustments to making it more inclusive so that the gains are shared. otherwise it will be a tragedy. we should not allow it to fall victim to populism that is really uninformed. tom: we will come back. francine: jacob frenkel, just getting started there. also coming up in the next half hour, theresa may is set to
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deliver a speech on brexit. ofomberg has obtained parts the speech. she is willing to forgo the single markets. what does that mean for trade relations? how long will it take to negotiate? look for that. this is bloomberg. ♪
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move people, that can
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be done pretty quickly. as long as we have market access for the next two years, the pressure is not that high. the pressure is set to create option alley. that is the ubs chairman, axel weber, speaking. tom: the temperature was negative at the time. francine: one thing that we disagree, we said that they were trying to buy time. they are putting things in room, but they will a leave for people to move if they have to. about like what he said we are planning but we will wait. francine: we are back with j.p. morgan international chairman jacob frenkel. and jonathan ferro has not slept in about 26 months. thank you for joining us. -- what are we expect
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them from theresa may? is this a negotiating tactic? is this just a first step? >> when you have to remember with angela merkel is that she says what she means and she means what she says. she will come out in a few minutes, and we are expecting her to say that britain is leaving the -- is leaving the zynga market. that is probably what she plans to do. but beyond that we may not get much more. beyond that, it is clouded with uncertainty. she is still keeping a lot of stuff close to her chest. tom: if we go from the atlantic charter through all the different multilateral agreements, are we at a point where it there -- where there is a new policy calculus? jacob: i hope not. if we are going this way, we will validate the fragmentation through a structure that goes with it. that structure, if you believe that -- i would hope that this
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is really a negotiating step, at the end of which basically she would expect maybe better terms in the relations with europe. but the reality is britain staying alone outside is not a good solution. francine: there is a referendum and the people have spoken, and i guess he goes back to how she interprets that. she firmly believes that she will control immigration because that is what the people want, and they want to do their own lawmaking. john: that was the key conclusion from the referendum, and everything stems from that. the message from the people is complete on to get immigration, and therefore it is inevitable that you have to leave the single market. --t is guiding her thinker that is guiding her thinking through the whole process. francine: politicians can reconnect with their electorate,
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and whether central banks have any play in this. no question that while central bank were extremely effective and justified at the time immediately at the outset of the crisis, they have expanded their range of activities beyond what the convention is with unconventional policies. in a way, it has enabled older policies to beer less active. that is not healthy when you have an orchestra and all the musical instruments must play. tom: help me here with the idea of how currency fulton to this debate. i am just going to use -- of how currency folds into this debate. i'm going to use this.
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do whens a society the pain clicks in, in this case with a weaker pound-sterling? notb: most people do understand something goes up, something goes down, and the role of policy makers and educators. it is to make sure that we are not becoming too vulnerable to stop changes. because changes will take place, but we should not be overly exposed. making one more point about brexit and the exit and leaving the union. it is one way to look at it -- how to interpret the vote. then you interpret it in one way or another, and one way is leaving the single market and all the rest. another question, notwithstanding the referendum, which was about a specific point and time in history, is to imagine, how do we want the system to be 10 years from now? believe that awe
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fragmented system is not a healthy one -- tom: is anyone in the british government thinking out 10 years? jacob: what we do today -- francine: will have an impact, of course. john: in london they are pushing for this transition deal, that written would get a long period of time after britain leaves the e.u., and that gives them time to think about these deeply fundamental questions. one of the key questions that we might hear an answer to is whether she would go for a transition deal. tom: it is a busy morning. francine: we expect prime minister theresa may to show up any minute now. i believe that is lancaster house in central london. to your point about currencies, if you are a person on the street in the u.k., you look at inflation, right? and we forget that globalization
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is not only what people perceive, which is enriching the elite. it is getting cheaper products, being able to sell your products abroad. is there a misunderstanding by certain people in politics over globalization, the benefits of globalization to the countries and the citizens? jacob: it starts with the terminology. when you put all of the use of society on long-term globalization, obviously we are against globalization. we should change the narrative. what are the gains? secure that the gains are equally distributed? tom: you were the governor of the bank of israel during an exceptionally fractious time. do you believe there are checks and balances to the president-elect's rhetoric in washington that will allow for a
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more cohesive u.s. policy? jacob: there are three checks and balances in principle. one is markets. are the institutions themselves -- congress and whatever. third are foreign partners. if we believe that the world is interacting with each other, then -- tom: i hear applause, and it is not for you, professor. francine: theresa may has just taken to the podium. may: months ago the british people voted for change. they voted to shape the future for our country. they voted to leave the european union and embrace the world. and they did so with her eyes that the roadg ahead would be uncertain at times but believing it leads to a brighter future for their children and their grandchildren, too. it is the job of this government
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to deliver it. from negotiating our new relationship with the e.u. it means taking the opportunity of this great moment of national change to step back and ask ourselves what kind of country we want to be. my answer is clear. i want this united kingdom to period ofom this change stronger, fairer, more united, and more outward looking than ever before. i want us to be a secure, prosperous, tolerant country, a magnet for international talent and the home to pioneers and innovators who will shape the world ahead. i want us to be a truly global britain, the best friend and neighbor to our european partners, but a country that reaches beyond the borders of europe, too.
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a country that goes out into the world to build relationships with old friends and new allies alike. what weritain to be want the potential talent and ambition to become a great that israding nation respected around the world and strong, confident, and united at home. that is why this government has a plan for britain. deal abroad also ensures that we get a better deal for ordinary working people at home. it is why the plan that house how we will move this moment of change will build a stronger economy and a better society by embracing economic and social modern why our industrial strategy is being developed, to ensure that every make sure area can
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there is opportunity ahead. to reform our schools, to make sure that children can thrive in post-brexit britain. why as we continue to bring the breath is it -- to bring the deficit down, we will bring a balanced approach because it can transform the growth potential of our economy and improve the quality of people's lives across the whole country. it is why we will put the preservation of our precious union at the heart of everything we do. because it is only by coming together in one great union of nation and people that we can make the most of the opportunity ahead. the results of the referendum was not a decision to turn inward and retreat from the world because britain's history of culture is profoundly internationalist. we are a european country and proud of our shared european
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heritage. but we are also a country that has always looked beyond europe to a wider world. that is why we are one of the most racially diverse countries in europe, one of the most multicultural members of the european union, and why, whether we're are talking about india, bangladesh, australia, canada, new zealand, america, so many of us have close friends and relatives from across the world. instinctively, we want to travel to, study, and trade with countries not just in europe but beyond the borders of our continent. even now, as we prepare to leave the e.u., we are planning for commonwealthnial in 2018, a reminder of our unique and proud global relationships. and it is important to recognize this fact. june 23 was not the moment
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written chose to step back from the world. it was a moment we chose to build a truly global britain. other reasonse britain took such a decision is not always well understood among our friends and allies in europe. and i know many fear that this will herald a greater unraveling of the e.u. but let me be clear -- i do not want that to happen. it would not be in the best interest of britain. it remains overwhelmingly and competitively in britain's national interest that the e.u. should succeed. that is why i hope, in the months and years ahead, we will all reflect on the lessons of britain's decision to leave. so let me take this opportunity to set out the reasons for our decision and to address the people of europe directly. it is not simply because our history and culture is
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profoundly internationalist, important though that is. see that thein united kingdom's place in the european union came at the expense of our global ties and free trade across the wider world. there are other important reasons, too. our political traditions are different. unlike other european countries, we have no written constitution. but the principle of parliamentary sovereignty is the basis of constitutional settlement. we have only a recent history of devolved governance, that has rapidly embedded itself. expects to be able to hold their governments to account very directly. the international uneasilyons fit very
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-- why i know that while i know that britain is at times seen as an awkward member state, the european union has struggled to deal with the diversity of its member countries and their interests. david cameron's negotiations were a final attempt to make it work for britain. i want to thank all of those elsewhere in europe who helped him reach an agreement. know,e blunt truth, as we is that there was not enough flexibility on many important matters for the majority of british voters. i do not believe that these things apply uniquely to britain . britain is not the only member it is a strong attachment to a democratic government, to a nationalist -- i believehat there is a lesson in brexit not , because ourain
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continent's great strength has always been in diversity. there are two ways of dealing with different interests and you can respond by trying to hold things together by force, tightening a vice like grip that ends up crushing to tiny pieces the very things that you want to protect. or you can respect difference, cherish it, even, and reform the e.u. to preserve the diversity of its member states -- of the diversity within its member states. our leaving the european union was not a rejection of the values we share. the decision to leave the e.u. was not a desire to become more distant from our friends and neighbors. it was not to harm the e.u. itself or any of its remaining member states. we do not want to turn the clock back to the days when europe was less peaceful, less secure, and
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less able to trade freely. it was a vote to restore, as we did, our parliamentary democracy, national self-determination, and to become even more global and internationalist in action and in spirit. we will continue to be reliable partners with allies and close friends. we want to buy your goods and services as you are, trade with you as freely as possible, and work with one another to make sure we are all safer, more secure, and more prosperous through continued friendships. welcome, as our citizens will be welcome in the north. britain's unique intelligence capability will continue to help keep people in europe safe from terrorism. and at a time weather is growing concern about european security, britain's servicemen and women, countries,ropean
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will continue to do their duty. we are leaving the european union, but we're not leaving europe. that is why we think a new and equal partnership between an independent, self-governing, global britain and our friends and allies in the e.u. -- not partial membership with the european union, associate membership with the european union, or anything that leaves we dof in and half out -- not speak to a model enjoyed by other countries. the united kingdom is leaving the european union, and my job is to get the right deal for britain as we do. so today, i want to outline our objectives for the negotiations ahead. 12 objectives that amount to one
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big and constructive partnership between britain and the european union. and as we negotiate that partnership, we will be driven by some civil principles. we will provide as much certainty and clarity as we can at every stage. and we will take this opportunity to make britain stronger, and to build a more global britain. the first objective is crucial. we will provide certainty wherever we can. we are about to enter in negotiation. that means there will be given take. there will have to be compromises. it will require imagination on both sides. and not everybody will be able to know everything at every stage. but i recognize how important it is to provide business, the public sector, and

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