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EU's Harkin: EU Nations in Free-For-All Fight for UK Companies · Bloomberg Intelligence

• 0:04
  Speaker 1: Welcome to the Bloomberg pim L Podcast. I'm pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Abramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy and useful interviews for
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  Speaker 1: you and your money, whether at the grocery store or
• 0:16
  Speaker 1: the trading floor. Find the Bloomberg p L Podcast on iTunes,
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  Speaker 1: SoundCloud and at Bloomberg dot com. It is St Patrick's
• 0:31
  Speaker 1: Day on this Friday, and we are so honored to
• 0:34
  Speaker 1: have with us Marian Harkin, who is the European Union
• 0:37
  Speaker 1: parliament member representing Ireland. She also earlier served in Ireland's
• 0:41
  Speaker 1: Parliament UH and is a member, of course of the
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  Speaker 1: EU Parliament's Economic and Monetary Affairs Committee. We are so
• 0:48
  Speaker 1: glad to have you with us. Mary, Thank you so
• 0:49
  Speaker 1: much for joining us. UM. I want to start with
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  Speaker 1: the Brexit vote and the consequence that a lot of
• 0:57
  Speaker 1: UH financial institutions are talking about moving from and into
• 1:01
  Speaker 1: some other city that could be potentially give them passporting rights.
• 1:05
  Speaker 1: Dublin has emerged as a popular option. What is Dublin
• 1:09
  Speaker 1: doing to make sure they are the most popular option? Well,
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  Speaker 1: the passporting issue is going to be major for the
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  Speaker 1: city of London, and as you say, we are in
• 1:20
  Speaker 1: the market, and already a number of companies have said
• 1:24
  Speaker 1: that they're going to base as some of their operations
• 1:28
  Speaker 1: from Dublin. We're not getting them all. Some of them
• 1:30
  Speaker 1: are going to Luxembourg. And in fact, there was a
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  Speaker 1: bit of a splash recently between one of the Irish
• 1:35
  Speaker 1: ministers and the Luxembourg minister about the regulatory system. But
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  Speaker 1: AI g right about. It had to do with a
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  Speaker 1: i G. Insurance company moving their European headquarters to Luxembourg.
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  Speaker 1: That's it. It's really about supervisory you know, systems. Who
• 1:52
  Speaker 1: is going to supervise the regulation and at European level
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  Speaker 1: that is not harmonized yet, so it's every man, woman
• 2:01
  Speaker 1: or country for themselves to some extent. Well, I'm not
• 2:04
  Speaker 1: sure that I totally understand there's In other words, it
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  Speaker 1: means that the different regulatory bodies can offer lighter regulation
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  Speaker 1: of certain banking institutions if they come to provision. Yeah
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  Speaker 1: they are, they're not supposed to, but the supervision isn't
• 2:19
  Speaker 1: there to the extent that it needs to be to
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  Speaker 1: make sure that we have harmonized regulatory system. So, in
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  Speaker 1: other words, as banks are deciding where to move their headquarters,
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  Speaker 1: uh to remain in this sort of passporting system. That's
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  Speaker 1: a major consideration. Well it is, it has emerged, and
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  Speaker 1: the the European body who's in charge of this also
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  Speaker 1: writes concerns, not just the Irish minister. And it's where
• 2:47
  Speaker 1: we're at at the moment. So you know, we're setting
• 2:50
  Speaker 1: out our stroll. We've already got a number of companies
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  Speaker 1: who are coming to Ireland and you know, English speaking
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  Speaker 1: remain within the EU, etcetera. So's it's going to be
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  Speaker 1: interesting over the next couple of months. Obviously the British
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  Speaker 1: want to remain within a single market, but you can't
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  Speaker 1: do that unless you know you have the four freedoms,
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  Speaker 1: and they said they don't want it. So which are
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  Speaker 1: the firms that have already chosen Dublin for their passporting
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  Speaker 1: rights and which are the biggest firms that are up
• 3:19
  Speaker 1: for grabs. While I know Barclays is talking about coming
• 3:22
  Speaker 1: to Ireland, I think they have said they will. There
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  Speaker 1: are a number of other insurance companies. To be perfectly honest,
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  Speaker 1: I can't remember some of the names right now, but
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  Speaker 1: I know Barclays is and I think a lot of
• 3:32
  Speaker 1: companies are still making final decisions. But I think we
• 3:37
  Speaker 1: might be expecting within the next week or two from
• 3:40
  Speaker 1: one or two companies. Anyway, I wonder if we could
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  Speaker 1: just focus on the political uh sort of rumbling, the
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  Speaker 1: tremors after Brexit and when this article fifty gets triggered,
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  Speaker 1: because there's this thing it's called Northern Ireland and Scotland
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  Speaker 1: and they have said they don't want to leave the
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  Speaker 1: European Union shin Fein, the political party in Ireland, the
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  Speaker 1: Republic of Ireland, has made no uh allusions that it
• 4:15
  Speaker 1: would like to see the Island of Ireland united. Yes,
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  Speaker 1: will this push that to happen? That's an interesting question
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  Speaker 1: because there there are still some unknowns. But you're quite right,
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  Speaker 1: Northern Ireland voted to remain within the EU, as did Scotland.
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  Speaker 1: We have something called the Good Friday Agreement which guarantees
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  Speaker 1: if you are born on the island of Ireland that
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  Speaker 1: you can access Irish citizenship and by extension, EU citizenship.
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  Speaker 1: And so the Good Friday Agreement is for it's an
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  Speaker 1: international agreement and it is framed within the context of
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  Speaker 1: the European Union. And maybe they can do both. Well,
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  Speaker 1: we have to wait and see. I'm not sure. I
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  Speaker 1: don't think chin Fain has called for a border pole
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  Speaker 1: yet though it may um it's hard to know, but
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  Speaker 1: they've certainly been very successful in the recent elections there.
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  Speaker 1: But it's there's everything is up for grabs at one
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  Speaker 1: level and at another level. Really, if you're going to
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  Speaker 1: look to the United Ireland, in my opinion for what
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  Speaker 1: it's worth is you've got to um put in place.
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  Speaker 1: You know, if you like a program or a system
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  Speaker 1: whereby people want to be part of a United Ireland,
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  Speaker 1: you cannot drive people against their will. And there is
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  Speaker 1: no doubt that if we have a hard breakfast that
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  Speaker 1: to some extent you know, copper fastens the border or
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  Speaker 1: could and we do not want it under any circumstances.
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  Speaker 1: May and I want to turn to your role as
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  Speaker 1: a member of the European Union's Parliament, the Economic Monetary
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  Speaker 1: Affairs Committee, in particular the Euro. We've been hearing a
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  Speaker 1: lot about France's populist up surge and sort of the
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  Speaker 1: potential for their leaving the joint currency, but we've been
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  Speaker 1: talking recently about Italy and how they're probably a more
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  Speaker 1: likely candidate to try to ditch the Euro than any others.
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  Speaker 1: How much discussion do you have in the EU Parliament
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  Speaker 1: about this, well, I think that discussion is really beginning
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  Speaker 1: to open up. Now. You talk about Italy, the populist
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  Speaker 1: movement there as we call them's the Five Star movement,
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  Speaker 1: and they're talking, you know, about leaving the Euro. So
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  Speaker 1: I think, you know, countries now that perhaps would never
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  Speaker 1: have looked at the Euro pluses and minuses are beginning
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  Speaker 1: to do so. I believe the Netherlands recently commissioned study
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  Speaker 1: on the Euro and I think while I I see
• 6:48
  Speaker 1: the Euro remaining for the next number of years, I
• 6:52
  Speaker 1: think the future of the Euro will be determined to
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  Speaker 1: some extent by what happens the EU. Young recently came
• 7:02
  Speaker 1: up with his five options for the EU. In other words,
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  Speaker 1: do we integrate further? Do we have what do you
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  Speaker 1: call coalition of the willing where those who want to
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  Speaker 1: integrate further do so and the rest stand back. Do
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  Speaker 1: we pair back, give more power back to member states, etcetera.
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  Speaker 1: There's do we just remain as we are? So there
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  Speaker 1: are a lot of options there, and I think that
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  Speaker 1: the political option will determine what happens with the Europe.
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  Speaker 1: With this particular committee, do you talk about contingency plans?
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  Speaker 1: If there is a vote to except the joint currency. No,
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  Speaker 1: that hasn't been raised. But um, you know, we have
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  Speaker 1: to wait and see. In the Netherlands, the Center help
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  Speaker 1: we can see that. Will that happen In France it
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  Speaker 1: seems as if mccron, who's the Centrist candidates now might
• 7:54
  Speaker 1: even they say when the first round up to this
• 7:57
  Speaker 1: they thought Lepen might, but we haven't way to Oh yes,
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  Speaker 1: but if if it holds in France, I think that
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  Speaker 1: means things return to some kind of stability for a while.
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  Speaker 1: But you mentioned Italy. It's down the line. So it's
• 8:12
  Speaker 1: a time of change in Europe, and I think John
• 8:15
  Speaker 1: Claude Junker, who's the President of the Commission, is trying
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  Speaker 1: to shape that change politically before events overtake us. Well,
• 8:24
  Speaker 1: we look forward to having you guide us and give
• 8:27
  Speaker 1: us information about those events in the future. I want
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  Speaker 1: to thank you for being with us. Marian Harkin, a
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  Speaker 1: member of the European Union Parliament's Economic and Monetary Affairs Committee.
• 8:52
  Speaker 1: Joe Maisak, Editor Bloomberg Brief, Municipal Markets. You know, I'm
• 8:56
  Speaker 1: just I jumped the gun there, Joe, because I'm just
• 8:58
  Speaker 1: eager to get through a bunch of things with you.
• 9:00
  Speaker 1: I want you to start off by telling us about
• 9:02
  Speaker 1: President Donald Trump's budget proposal and what this would mean
• 9:07
  Speaker 1: for Amtrak and the Gateway Project. Tell us what it
• 9:11
  Speaker 1: is and what could happen. Well, the Gateway Project is
• 9:14
  Speaker 1: a big rebuilding of infrastructure in New York and New Jersey,
• 9:19
  Speaker 1: will include a new tube under the river. And the
• 9:27
  Speaker 1: price tag on this is about billion dollars in the
• 9:30
  Speaker 1: states of New York and New Jersey. After several years
• 9:33
  Speaker 1: of discussion and argumentation, UH finally decided, yes, this is
• 9:38
  Speaker 1: a good thing, will do this. The federal government is
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  Speaker 1: supposed to provide about half, so you know it's gonna
• 9:45
  Speaker 1: be billion, probably more as you know, and the federal
• 9:51
  Speaker 1: government tended twelve billion. But now, uh, the people at
• 9:55
  Speaker 1: Amtrak are saying, wait a minute, we you know, the
• 9:57
  Speaker 1: federal government maybe cutting back in this area. So uh
• 10:03
  Speaker 1: they are upset, and uh, you know, obviously they they
• 10:07
  Speaker 1: are lobbying heavily to make sure they get the money.
• 10:12
  Speaker 1: To put this into context, I believe that the US
• 10:15
  Speaker 1: Department of Transportation already provides about what to two point
• 10:20
  Speaker 1: three billion dollars each year for the commuter rail and
• 10:25
  Speaker 1: bus rapid transit program exactly. And and you know it's
• 10:28
  Speaker 1: funny in the in the Trump program, the Trump budget,
• 10:32
  Speaker 1: it looks like money for mass transit, especially UH is
• 10:37
  Speaker 1: being cut back. And that's you know, of concern to
• 10:42
  Speaker 1: so many states and municipalities. If you're just defining infrastructure
• 10:46
  Speaker 1: as highways and bridges, uh, you're really taking out a
• 10:50
  Speaker 1: big element. But you know, this has been a a
• 10:54
  Speaker 1: sort of conservative hobby horse. If you will to uh,
• 10:59
  Speaker 1: you know, move against mass transit wherever you can. And
• 11:02
  Speaker 1: of course, the the city is higher density, UH, you know,
• 11:07
  Speaker 1: believe in mass transit. They believe in busses and also
• 11:11
  Speaker 1: light rail and regular rail. Well. I mean, there's an
• 11:14
  Speaker 1: Amtrak study that's sited in the Bloomberg story that says
• 11:18
  Speaker 1: that the gateway project would generate four dollars for everyone
• 11:22
  Speaker 1: spent and also drive the regional economy because we got
• 11:26
  Speaker 1: international competitors in the region, in the in the world,
• 11:28
  Speaker 1: right London, Tokyo, Berlin, they're all modernizing their transport hubs.
• 11:33
  Speaker 1: If you don't get this new tunnel, what do you
• 11:36
  Speaker 1: think happens? I mean, this tunnel is really hit by
• 11:40
  Speaker 1: the Hurricane Sandy that was back in Long overdue. Uh,
• 11:45
  Speaker 1: you need the new tunnel to bring in all the
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  Speaker 1: commuters from New Jersey, and you know, business goes back
• 11:52
  Speaker 1: and forth, and this is really a it's almost astonishing.
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  Speaker 1: But you know the thing about infrastructure finance is that
• 12:02
  Speaker 1: the so much of what the federal government does is
• 12:04
  Speaker 1: make sure that uh, everyone gets something. So you know,
• 12:08
  Speaker 1: you have highways in the frontier. Right. Well, I guess
• 12:13
  Speaker 1: yet to you know, balance the interests because obviously you need,
• 12:15
  Speaker 1: you know, all the political help you can get in Washington.
• 12:19
  Speaker 1: Let's talk about New Jersey a little bit more specifically,
• 12:22
  Speaker 1: because I want to understand what is happening. I understand
• 12:26
  Speaker 1: that it's called structurally imbalanced. Is that a new term? No? No,
• 12:32
  Speaker 1: structurally imbalanced. It's when states or municipalities. Uh, how can
• 12:37
  Speaker 1: I put it gracefully? I was gonna say, when they
• 12:40
  Speaker 1: can't leave, when they can't leave her on the building
• 12:42
  Speaker 1: doesn't work that structurally imbalanced. One side is heavier than
• 12:45
  Speaker 1: the other and it falls. That's not good. No, it's
• 12:47
  Speaker 1: not good. No. You know, you're spending more than you're
• 12:50
  Speaker 1: taking in and you have budget items that have to
• 12:54
  Speaker 1: go out and the revenue is not there. So in
• 12:57
  Speaker 1: this case, what what New Jersey is doing, um is
• 13:01
  Speaker 1: they're sort of shortsheeting the bed. They're going to pay
• 13:04
  Speaker 1: two and a half billion dollars toward the pension fund
• 13:09
  Speaker 1: when in fact they should be paying five billion this year.
• 13:13
  Speaker 1: Uh where you know in the new budget year. So um,
• 13:16
  Speaker 1: structurally and balanced, they you know, they keep they keep
• 13:19
  Speaker 1: playing with the pension system. Is the problem here, and
• 13:22
  Speaker 1: this goes back to if you want am I am
• 13:25
  Speaker 1: I right? And reading is that it is a one
• 13:28
  Speaker 1: hundred and thirty six billion dollars shortfall. Yes, they have
• 13:33
  Speaker 1: the they have about thirty seven and a half percent
• 13:38
  Speaker 1: or around there of the money they need. So they
• 13:42
  Speaker 1: you know, they they the least funded pension system among
• 13:46
  Speaker 1: the fifty states, right, and they have about eighty one
• 13:49
  Speaker 1: and a half eighty two billion dollars in assets, but
• 13:52
  Speaker 1: what they need is about two hundred and fifteen. So
• 13:57
  Speaker 1: there you go. That's why you have that big gap
• 13:59
  Speaker 1: there and S and p SS structurally imbalanced because you
• 14:03
  Speaker 1: really have to make these payments every year because it
• 14:06
  Speaker 1: adds up. You've heard that, Yeah, I think that's it
• 14:09
  Speaker 1: happens for people with credit cards as well. It eventually
• 14:12
  Speaker 1: adds up, don't you keep pushing it off and pushing
• 14:15
  Speaker 1: it off and pushing it off. And you know, unless
• 14:18
  Speaker 1: you're really breaking in the money with all your investments,
• 14:23
  Speaker 1: you know you have to do this. And New Jersey
• 14:25
  Speaker 1: has been has been woeful in putting aside that money
• 14:29
  Speaker 1: on a regular basis. The politicians just uh, you know,
• 14:33
  Speaker 1: they find it almost impossible. And now, on the other hand,
• 14:36
  Speaker 1: when the pension funds are doing well, they always have
• 14:38
  Speaker 1: to try to tap them right somehow you use them
• 14:41
  Speaker 1: as collateral or by bonds that then support some other
• 14:44
  Speaker 1: government activity. They're obsessed in New Jersey. Really it's been
• 14:48
  Speaker 1: you know, as I say, back to when the States
• 14:52
  Speaker 1: sold uh, the largest pension obligation bond ever back then
• 14:57
  Speaker 1: even though they didn't need to. Well, we always need
• 14:59
  Speaker 1: you and your guidance. Thanks very much. Joe Maisak, editor
• 15:02
  Speaker 1: for Bloomberg Briefs Municipal Markets. You've got to read it.
• 15:05
  Speaker 1: Go to Briefs, go on the Bloomberg. While a Border
• 15:23
  Speaker 1: Adjustment tax, personal and corporate tax reform. Brian Reardon is
• 15:28
  Speaker 1: a senior advisor to Ven Strategies. Is also a former
• 15:31
  Speaker 1: Special assistant to President George W. Bush for Economic Policy,
• 15:35
  Speaker 1: and was principal tax aid at the President's National Economic Council.
• 15:39
  Speaker 1: Brian Udon, thank you very much for being with us.
• 15:42
  Speaker 1: Thank you for having me tell us about the border
• 15:44
  Speaker 1: adjustment tax. How do you believe it would work and
• 15:47
  Speaker 1: what would be some of its ramifications. Sure, so, I
• 15:50
  Speaker 1: think one of the challenges that we have is in
• 15:53
  Speaker 1: talking about the border adjustment, it's gotten all the attention
• 15:56
  Speaker 1: and what's lost as the broader plan. So it's not
• 15:58
  Speaker 1: actually a border adjustment tax. It's a border adjustment of
• 16:03
  Speaker 1: the new cash flow tax that's envisioned in the House blueprint.
• 16:07
  Speaker 1: So what they're gonna do is they're first going to
• 16:09
  Speaker 1: repeal the business income tax that everybody uses right now. Second,
• 16:13
  Speaker 1: they're going to impose a cash flow tax, which means
• 16:17
  Speaker 1: that you get full expensing. It means that we're moving
• 16:19
  Speaker 1: to territorial it means you get lower rates for corporations, pastors.
• 16:24
  Speaker 1: And then what they're gonna do is they're going to
• 16:26
  Speaker 1: border adjust it just the same way that all our
• 16:29
  Speaker 1: trading partners border adjust their value out of taxes. So
• 16:32
  Speaker 1: the bottom line is that you're gonna pay lower rates
• 16:36
  Speaker 1: and when you produce something here, you're no longer going
• 16:38
  Speaker 1: to pay a higher tax than say, something that's imported
• 16:41
  Speaker 1: from another country and brought here and sold here in
• 16:43
  Speaker 1: the United States. So it's gonna put US producers and
• 16:47
  Speaker 1: US workers on a level playing field with everybody else
• 16:50
  Speaker 1: in the world by doing the same border adjustment to
• 16:52
  Speaker 1: their tax codes that that they do, we're going to
• 16:55
  Speaker 1: do it here. And is there evidence that this will
• 16:58
  Speaker 1: have the desire to effect to increase manufacturing and production
• 17:02
  Speaker 1: in the United States. Well, and that's another thing that
• 17:05
  Speaker 1: you've got to be real careful about. So the pro growth,
• 17:09
  Speaker 1: pro worker, pro wage provisions and the plan are the
• 17:12
  Speaker 1: lower rates, the move to expensing. So if you build
• 17:15
  Speaker 1: a factory, you buy a piece of equipment, you've got
• 17:17
  Speaker 1: an inventory, you get to write it off immediately. You
• 17:19
  Speaker 1: don't have to depreciate it over in the case of buildings,
• 17:22
  Speaker 1: you know, almost forty years. So it's that's the part
• 17:26
  Speaker 1: that's going to make investment in the United States, production
• 17:29
  Speaker 1: in the United States more attractive, which means you get
• 17:32
  Speaker 1: more investment, which means higher wages for workers, more jobs.
• 17:35
  Speaker 1: That's where the workers are going to be better off.
• 17:38
  Speaker 1: Those are the provisions that do that. The border adjustment
• 17:40
  Speaker 1: just does three things One, it because we run trade surpluses,
• 17:45
  Speaker 1: it raises some revenue, so we can get the rates
• 17:47
  Speaker 1: down to more competitive levels. Two And moving to territorial
• 17:52
  Speaker 1: right where we're just going to look at business activity
• 17:54
  Speaker 1: in the unit the United States from now on, we're
• 17:56
  Speaker 1: no longer going to chase business income. When it turned
• 18:00
  Speaker 1: into overseas jurisdictions, You've got to figure out a way
• 18:03
  Speaker 1: to enforce that right so that businesses don't continue to
• 18:06
  Speaker 1: shift their income to lower tax jurisdictions like Ireland. The
• 18:09
  Speaker 1: border adjustment does that because what it does is effectively
• 18:12
  Speaker 1: say you move your income, you can move your IP,
• 18:14
  Speaker 1: you can move all that stuff wherever you want. But
• 18:17
  Speaker 1: as long as you're bringing product back to the United
• 18:19
  Speaker 1: States to sell it, we're going to make sure that
• 18:21
  Speaker 1: taxes are paid at the appropriate level on those products.
• 18:24
  Speaker 1: So it creates the enforcement to the territorial. And then
• 18:26
  Speaker 1: the certain thing it does is I said it balances
• 18:29
  Speaker 1: out the tax. So if you produce something here, you
• 18:32
  Speaker 1: produce something elsewhere, and you import it back here, the
• 18:34
  Speaker 1: tax is going to be the same, so American workers
• 18:37
  Speaker 1: will no longer be at a disadvantage. Mr. Ridden, What
• 18:40
  Speaker 1: if you could maybe spell out the likelihood that this
• 18:45
  Speaker 1: will get past in the form that you describe, because
• 18:48
  Speaker 1: it seems as though there are a lot of things
• 18:50
  Speaker 1: that hinge on each other. And uh, once you open
• 18:55
  Speaker 1: the negotiating process, is there any assurance or any view
• 18:59
  Speaker 1: that going to get what you describe? Well, there are
• 19:02
  Speaker 1: no guarantees in life. But one of the things that
• 19:05
  Speaker 1: we're blessed with here is strong leadership in the form
• 19:07
  Speaker 1: of Speaker Ryan, the chairman of the Ways It Means Committee,
• 19:10
  Speaker 1: Kevin Brady. They are determined to make this happen. And
• 19:13
  Speaker 1: as you imagine, this is a big lift. I mean,
• 19:15
  Speaker 1: what we're talking about here is a dramatic reform of
• 19:19
  Speaker 1: how we tax business income. It's taking our tax system
• 19:23
  Speaker 1: from one of the worst two in my mind, one
• 19:25
  Speaker 1: of the best in the world. It will immediately make
• 19:27
  Speaker 1: our tax system much more attractive for businesses than anybody
• 19:30
  Speaker 1: else in the world. And it's not going to be
• 19:32
  Speaker 1: easy to get across those finish lines. Washington doesn't do big,
• 19:36
  Speaker 1: dramatic reforms easily. But let me let me just stop
• 19:40
  Speaker 1: you that why why should it be that challenging when
• 19:43
  Speaker 1: you have a Republican majority in the House, a Republican
• 19:46
  Speaker 1: majority I'll be it a small one in the Senate
• 19:48
  Speaker 1: and a Republican in the White House. Well, i'll give
• 19:51
  Speaker 1: you an example. So you know, I work extensively with
• 19:54
  Speaker 1: private companies, smaller companies, pastors, etcetera. And when you talk
• 19:59
  Speaker 1: to folks like that and you're talking about a new
• 20:01
  Speaker 1: idea like this, it takes them time to get comfortable
• 20:05
  Speaker 1: with it, right. They have to understand what it means
• 20:08
  Speaker 1: in all its ramifications for their business in order to
• 20:11
  Speaker 1: be supportive. So they got to look at not just
• 20:13
  Speaker 1: the border adjustment, but the lower rates, the move to expensing,
• 20:16
  Speaker 1: the interest changes that they're doing, all that stuff. They've
• 20:18
  Speaker 1: got to figure all that out, and that just takes time.
• 20:21
  Speaker 1: The opposition just have to figure out that they don't
• 20:23
  Speaker 1: like one part of it, and then they get activated
• 20:26
  Speaker 1: to fight that one part. So getting the business community
• 20:30
  Speaker 1: behind something that's dramatic like this and new, frankly, it
• 20:34
  Speaker 1: takes a little bit of time. And as I mentioned,
• 20:37
  Speaker 1: we're fortunate that we've got strong leadership over the House
• 20:40
  Speaker 1: where we're going to have the time to get the
• 20:41
  Speaker 1: business community behind it. And I think you've seen that
• 20:44
  Speaker 1: over the last month. You know, there's been a dramatic
• 20:46
  Speaker 1: increase in the number of people in the business community
• 20:50
  Speaker 1: expressing support for what the House is trying to do,
• 20:53
  Speaker 1: because it really is a pro American It's not you know,
• 20:56
  Speaker 1: it's not tariffs, it's not protectionism. All it's doing is saying,
• 21:01
  Speaker 1: you know, the rest of the world for the last
• 21:03
  Speaker 1: thirty years has been improving their tax codes and making
• 21:05
  Speaker 1: it more attractive for businesses to invest there rather than here.
• 21:09
  Speaker 1: We've been kind of stuck in place, and all we're
• 21:11
  Speaker 1: doing is exactly what the rest of the world has
• 21:13
  Speaker 1: been doing. Improve our tax code, make it much more efficient,
• 21:17
  Speaker 1: make it much simpler, and make it much more attractive
• 21:19
  Speaker 1: for people to invest here rather than someplace else. Thanks
• 21:23
  Speaker 1: for we got leave it there. Brian Reared, a former
• 21:25
  Speaker 1: Special Assistant to President George W. Bush for Economic Policy,
• 21:29
  Speaker 1: principal tax aid at the President's National Economic Council. Imagine
• 21:46
  Speaker 1: a third generation family business that goes public and now
• 21:51
  Speaker 1: has a market cap of more than two billion dollars.
• 21:54
  Speaker 1: Here to tell us about it is our own David Scannon,
• 21:58
  Speaker 1: Managing editor for Canada, and he joins us from Toronto.
• 22:01
  Speaker 1: David a pleasure tell us about Danny Reese. Who is
• 22:06
  Speaker 1: he and tell us about his business. I'm saving you
• 22:09
  Speaker 1: to give us the secret. Very interesting story Canada. Goose
• 22:14
  Speaker 1: is slowly becoming a household name for its high end
• 22:18
  Speaker 1: Parker's and coats. And it really started off as creating
• 22:22
  Speaker 1: gear for northern explorers. There was very small company. Enter
• 22:26
  Speaker 1: Uh Danny Reese into the scene twenty years ago. He
• 22:29
  Speaker 1: just finished school. He was English and philosophy major, had
• 22:33
  Speaker 1: no interest in joining the family business. He decided he'd
• 22:36
  Speaker 1: help out for a few months to finance some travel
• 22:39
  Speaker 1: to Europe, like a lot of people do after they
• 22:41
  Speaker 1: leave school. But he decided to stick around, and twenty
• 22:45
  Speaker 1: years later, you have this company. As you say, it's
• 22:47
  Speaker 1: worth more than two billion dollars. And he's done very
• 22:50
  Speaker 1: well for himself given their pretty strong debut. Uh. Their
• 22:54
  Speaker 1: I p O rather on the New York in Toronto
• 22:56
  Speaker 1: exchanges yesterday. Yeah. Well, I was looking at the stats
• 23:00
  Speaker 1: and the first day of trading the stock was oftent.
• 23:03
  Speaker 1: It's continued. It's a cent up twenty six now up
• 23:09
  Speaker 1: seven percent. This will make a very happy group of investors,
• 23:12
  Speaker 1: including those from Banning Company. Tell us about their involvement. Yeah,
• 23:17
  Speaker 1: so they bought the They bought seventy percent of the firm.
• 23:20
  Speaker 1: Four years ago. At the time the company was valued
• 23:23
  Speaker 1: at about two hundred and fifty million, and now as
• 23:26
  Speaker 1: you say, it's over two billion. So in just a
• 23:28
  Speaker 1: couple of short years they've done very well, as has
• 23:31
  Speaker 1: UH Danny Reese. We spoke to him yesterday and you know,
• 23:34
  Speaker 1: he was able to talk at about seventy million Canadian
• 23:38
  Speaker 1: just from the I p O for cutting his stake
• 23:40
  Speaker 1: a little bit, but he still has a sizeable portion
• 23:44
  Speaker 1: of the company, about twenty four percent, which is worth
• 23:47
  Speaker 1: another five and fifty million dollars as a Canadian dollars,
• 23:50
  Speaker 1: So combined he's got almost a half a billion US dollars.
• 23:53
  Speaker 1: So he's done very well for a guy who was
• 23:55
  Speaker 1: the initial plan was just to write fiction, so he's
• 23:59
  Speaker 1: come along well. It's turned into a wonderful reality for him.
• 24:03
  Speaker 1: The products, the prices, and the popularity give us the detail.
• 24:09
  Speaker 1: So as I mentioned, they make these high end parkers
• 24:13
  Speaker 1: for sub zero temperatures, but what they've managed to do
• 24:17
  Speaker 1: is transition to sort of a three season UH clothing company,
• 24:22
  Speaker 1: if you will, So it's not just the expensive Parkers,
• 24:24
  Speaker 1: which do very well in the harsh Canadian winter what
• 24:27
  Speaker 1: is an expensive parko? How much are we talking about
• 24:29
  Speaker 1: a thousand dollars Canadian? Now about nine thousand US, so
• 24:33
  Speaker 1: they can run fifteen Canadian So they are not they
• 24:37
  Speaker 1: are not cheap. But what they're doing now is they're
• 24:39
  Speaker 1: branching into lighter coats which you might wear and you
• 24:43
  Speaker 1: know spring and fall in New York or Paris or Tokyo,
• 24:47
  Speaker 1: and that's where the growth is going to come from.
• 24:50
  Speaker 1: Their The market is getting a little bit saturated in Canada,
• 24:53
  Speaker 1: for example, but they think that they can go three season,
• 24:56
  Speaker 1: they can sell more coats and and do better, and
• 24:59
  Speaker 1: that's why it's it's trading as such a high multiple
• 25:02
  Speaker 1: right now. Following the I p O store locations, they
• 25:05
  Speaker 1: want to open more brick and mortar stores. They do.
• 25:09
  Speaker 1: They have two right now, one in Toronto and one
• 25:11
  Speaker 1: in New York if they plan to open a couple
• 25:13
  Speaker 1: more next year. When I spoke with Danny yesterday, he
• 25:16
  Speaker 1: was hinting Paris in Tokyo seemed like logical next steps.
• 25:20
  Speaker 1: But they may add another fifteen to twenty over the years.
• 25:23
  Speaker 1: There their approaches that you've got to be has some
• 25:26
  Speaker 1: bricks and mortar presents to show off your brand, especially
• 25:29
  Speaker 1: in areas where you are not known. At the same time,
• 25:32
  Speaker 1: you can augment that with some online sales. That's where
• 25:34
  Speaker 1: they're going. What did Baine bring to the company in
• 25:38
  Speaker 1: addition to the money, Yeah, I think they brought some
• 25:40
  Speaker 1: global expertise and they think they've helped them developed the brand.
• 25:45
  Speaker 1: And it really is a brand. It's it's retail, it's fashion.
• 25:48
  Speaker 1: You know, it can be fickle, but there is is
• 25:52
  Speaker 1: something about the sort of that rugged Canadian brand that
• 25:55
  Speaker 1: they are. They have captured and they're exporting it around
• 25:58
  Speaker 1: in the world and we'll see how they do well
• 26:00
  Speaker 1: maide in Canada, and that's something that Danny Reese said
• 26:03
  Speaker 1: he wants to continue to do. He does the idea
• 26:06
  Speaker 1: I asked him about, you know, the possible border tax
• 26:08
  Speaker 1: and you know Trump's pushed to get more manufacturing in
• 26:11
  Speaker 1: the United States, who say, no, part of our identity,
• 26:14
  Speaker 1: part of our culture is that we are made in
• 26:16
  Speaker 1: Canada and we want to stick with that. Montclair can
• 26:19
  Speaker 1: be viewed as a competitor the the French company. I
• 26:23
  Speaker 1: beg your pardon. Is there a conscious sort of look
• 26:27
  Speaker 1: over the shoulder at what has happened to Montclair as
• 26:30
  Speaker 1: an international brand. I think so they're very much in
• 26:34
  Speaker 1: the same in the same UH segments. They're doing very
• 26:38
  Speaker 1: well in Europe, but the Canada Goose seems very determined
• 26:41
  Speaker 1: to go right at them in their home market. They're
• 26:44
  Speaker 1: very interested in Germany, Scandinavia, UH, Italy, So it would
• 26:49
  Speaker 1: be very interesting competition, right, I beg your pardon, Milan based, Yes,
• 26:55
  Speaker 1: I beg your pardon. Stock there is up twenty one
• 26:58
  Speaker 1: so far this year. As the company grows, do they
• 27:03
  Speaker 1: have the management team in order to manage that growth?
• 27:08
  Speaker 1: You know, that's the challenge. You know, Danny has been
• 27:10
  Speaker 1: there for a long time, but it was a much
• 27:12
  Speaker 1: smaller company than he was. You know, sales of five
• 27:15
  Speaker 1: ten million back then. They're closer to four million now.
• 27:18
  Speaker 1: And so being they have brought in a lot of
• 27:20
  Speaker 1: new people with a lot of marketing expertise, a lot
• 27:24
  Speaker 1: of brand development, and and that's that's really their challenge now,
• 27:28
  Speaker 1: is trying to export this brand. Well, not only that,
• 27:30
  Speaker 1: but I noted from your piece taking a look at
• 27:35
  Speaker 1: their succession policy or decision making process for that. Danny
• 27:41
  Speaker 1: Rees spoke to that issue. Um, yes, well, he's certainly
• 27:47
  Speaker 1: aware that he you know, he needs he heeds help.
• 27:50
  Speaker 1: It's a very um, it's a new company. It's a
• 27:52
  Speaker 1: small board. Uh. He talked later to me about expanding that,
• 27:57
  Speaker 1: bringing in more expertise, bringing more are women interesting that interestingly,
• 28:02
  Speaker 1: there's not a single woman on the board right now,
• 28:04
  Speaker 1: and he's aware of that. He thinks diversity is important
• 28:07
  Speaker 1: to him. And you'd have to imagine. I don't have
• 28:10
  Speaker 1: the stats, but imagine a lot of those coats are
• 28:12
  Speaker 1: being bought by women, so that would make sense. Well,
• 28:15
  Speaker 1: I was just going to refer to the third generation
• 28:17
  Speaker 1: family business curse that many people right yet, and I
• 28:22
  Speaker 1: think he figures that he's he's going to be okay
• 28:25
  Speaker 1: because it was never preordained. You know, a lot of
• 28:27
  Speaker 1: times you get third generation sons and daughters who are
• 28:30
  Speaker 1: sort of forced into taking over the company when they
• 28:33
  Speaker 1: don't have much interest. In his case, it was the opposite.
• 28:36
  Speaker 1: He had no interest, but he sort of fell in
• 28:38
  Speaker 1: love with it and sort of developed passion for it.
• 28:41
  Speaker 1: All right, Well, just last point, David, do you have
• 28:43
  Speaker 1: a Canada goose? I do not. They must they mustn't
• 28:51
  Speaker 1: be for fashionists, because boy, you see them almost everywhere
• 28:54
  Speaker 1: and it's not that cold, you know, and everyone who
• 28:57
  Speaker 1: has them really raised about them? So next winter maybe, Pim. Alright,
• 29:01
  Speaker 1: well I can aspire as did Danny Reese aspiring to
• 29:04
  Speaker 1: be a writer, now a millionaire running Canada Goose. Thanks
• 29:08
  Speaker 1: very much. The shares of Canada Goose up about six
• 29:11
  Speaker 1: and a half percent right now. Thanks for listening to
• 29:19
  Speaker 1: the Bloomberg pien L podcast. You can subscribe and listen
• 29:22
  Speaker 1: to interviews at iTunes, SoundCloud, or whatever podcast platform you prefer.
• 29:28
  Speaker 1: I'm Pim Fox. I'm out there on Twitter at pim Fox.
• 29:32
  Speaker 1: I'm out there on Twitter at Lisa Abramo. It's one
• 29:35
  Speaker 1: before the podcast. You can always catch us worldwide on
• 29:37
  Speaker 1: Bloomberg Radio