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How the Home of America's Worst Inflation Got That Way · Trumponomics

• 0:03
  Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the
• 0:06
  Speaker 1: global economy to you. And yep, I'll admit it. I'm
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  Speaker 1: in Davos this week for a special early summer edition
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  Speaker 1: of the World Economic Forum. This is the place they
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  Speaker 1: say millionaires come to hear billionaires tell them what the
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  Speaker 1: middle class is thinking. From my experience, you very rarely
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  Speaker 1: come away from Davos feeling more optimistic. And the talk
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  Speaker 1: here was of Ukraine inflation the risk of a global
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  Speaker 1: food crisis. We have some of that rather gloomy talk
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  Speaker 1: coming up. The selected highlights from a session I moderated
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  Speaker 1: featuring Big Jesus like the European Trade Commissioner and the
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  Speaker 1: Director General of the World Trade Organization. We also have
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  Speaker 1: some very clear thinking on the future of global trade
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  Speaker 1: from the brilliant economist Richard Baldwin. But what you never
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  Speaker 1: get in Davos is a sense of what any of
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  Speaker 1: this feels like at ground level. So let me start
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  Speaker 1: this week's show with this report from Texas. While US
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  Speaker 1: Economy reporter Dmitrieva Midland, Texas is not the kind of
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  Speaker 1: place you'd expect high prices, but it's the city with
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  Speaker 1: the highest inflation in the United States. For the past
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  Speaker 1: six months, the consumer price Index from Midland, which tracts
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  Speaker 1: how much residents pay for everyday things, has hovered around
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  Speaker 1: ten percent. That's above even the national average. The city
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  Speaker 1: in West Texas is small, about a hundred and twenty
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  Speaker 1: thousand people, give or take. It's remote, surrounded by oil fields,
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  Speaker 1: and almost a five hour drive to the nearest major city.
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  Speaker 1: These two things, a limited labor pool and remote location,
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  Speaker 1: are sending prices skyrocketing here and in other smaller cities
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  Speaker 1: in the within Midwest. And that's on top of the
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  Speaker 1: supply chain disruptions plaguing every region of the US right now.
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  Speaker 1: Melinda Hernandez lives in South Midland. She's currently planning a
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  Speaker 1: high school graduation party for her son, usually a big
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  Speaker 1: event for her Hispanic family, this year it's going to
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  Speaker 1: be different thanks to inflation. Shopping for is food items,
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  Speaker 1: you know, just seeing that it's double from when I
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  Speaker 1: did the party for my first son, I would get
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  Speaker 1: less for more, so that makes sense. So it's just
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  Speaker 1: it's crazy to me. Hernando's lost her job at an
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  Speaker 1: energy services company in March. The industry hasn't picked back up,
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  Speaker 1: so demand remains low. For administrative workers. Like her, service
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  Speaker 1: sector wages also leg far behind other industries. While she's
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  Speaker 1: getting paid ten dollars an hour delivering pizzas at night,
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  Speaker 1: less than half her old wage, everything else is going
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  Speaker 1: up in price. Her electricity bill has doubled, food prices
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  Speaker 1: are so high she had to tap a local nonprofit
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  Speaker 1: and church for help. And gas prices have been skyrocketing.
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  Speaker 1: Make sure my elector bills paid and I have a
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  Speaker 1: roof over my head, and that's all that matters right now.
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  Speaker 1: Inflation was also in the mind of policymakers this week
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  Speaker 1: in Davo, Switzerland, gathered at the World Economic Forum for
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  Speaker 1: rounds of meetings, seminars, and unofficial holiday discussions. But if
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  Speaker 1: ready to Me comes down to inflation, we may see
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  Speaker 1: prices even going kaya being much more volatized. Raising interest
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  Speaker 1: rates is not going to solve the problem with inflation.
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  Speaker 1: Taming inflation is one of the top global challenges in
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  Speaker 1: the post pandemic economy, but there's a big gap between
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  Speaker 1: monetary policy and the realities on the ground in places
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  Speaker 1: like Midland, Well, it's the best tool the Federal Reserve has.
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  Speaker 1: Raising interest rates doesn't address the problems of high food
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  Speaker 1: and gas prices and the drivers of that the war
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  Speaker 1: Ukraine and supply chain disruptions. The West Texas Food Bank
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  Speaker 1: near Midland has more than four cars lined up each
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  Speaker 1: Wednesday for free food. The line grows each week. It's
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  Speaker 1: the longest since the darkest days of the pandemic. In
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  Speaker 1: Libby Campbell, the President says, food costs are increasing because
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  Speaker 1: of fertilizer prices and how hard it's getting to transport
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  Speaker 1: food into the region. Increased checks at the border with
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  Speaker 1: Mexico means lots of food is going to waste as
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  Speaker 1: it sits in line increasing prices in the region. It's
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  Speaker 1: just the cost of what things you know are to
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  Speaker 1: live every day, and it's truly causing us stress on
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  Speaker 1: our community. The Federal Reserve and other central banks are
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  Speaker 1: raising interest rates, but it remains to be seen how
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  Speaker 1: much that will help in Midland. MMM. So, there's lots
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  Speaker 1: of interesting people here a Davos with grand theories about
• 5:21
  Speaker 1: the world, But Professor Richard Baldwin is someone who actually
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  Speaker 1: has facts and experience to back up his theories. Professor
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  Speaker 1: of International economics at the Graduate Institute in Geneva and
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  Speaker 1: an author of several excellent books on different aspects of globalization,
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  Speaker 1: which we've discussed in the past on Stephanomics, Richard. This
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  Speaker 1: has been one of those forums where people are getting
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  Speaker 1: into all the conversations about the end of globalization. You're
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  Speaker 1: someone who's charted the future of globalization from a particular perspective.
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  Speaker 1: What do you think about everything that's been said this week?
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  Speaker 1: The basic narrative is globally say is dying. There was
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  Speaker 1: some recent op ed pieces in the Financial Times as
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  Speaker 1: not there's a whole session here because the dying or
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  Speaker 1: is the d global? I think it's just completely wrong.
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  Speaker 1: People are misthinking what globalization means because they're stuck in
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  Speaker 1: the sort of nineteenth century view that trade means goods
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  Speaker 1: crossing borders. Nowadays, if you write anything with trade, they
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  Speaker 1: stick a containership at the top of the article. And
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  Speaker 1: there are a lot of container ships queuing up around
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  Speaker 1: the world. There are, there are, But since about the
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  Speaker 1: mid two thousand's, the trade and goods to GDP ratio
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  Speaker 1: has peaked and is declining, but the trade of services
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  Speaker 1: to GDP is continuing to soar. So my idea is
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  Speaker 1: that fundamentally globalization is driven by arbitrage and there's arbitrage
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  Speaker 1: and goods that was what we've had in the past.
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  Speaker 1: There's arbor grammage of services, which is just starting right now,
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  Speaker 1: people taking advantage of differences in prices and then sort
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  Speaker 1: of trading those way. Exactly, it's an arbitrage on wages.
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  Speaker 1: So it's essentially working from home when homes abroad, but
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  Speaker 1: if home is Bogata, five dollars an hour is a
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  Speaker 1: middle class living. If you work two thousand hours a
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  Speaker 1: year for five dollars, that's ten thousand, and in most countries,
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  Speaker 1: ten thousand dollars a year is a middle class wage.
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  Speaker 1: So instead of having your receipts checked against expense claims
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  Speaker 1: in New York or London, you offshore to Bogata and
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  Speaker 1: have it done for much cheaper and you integrate that way.
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  Speaker 1: So that kind of service, and it's important to point
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  Speaker 1: out that this is what we call intermediate services, not
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  Speaker 1: final services, because final services are very regulated, but all
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  Speaker 1: the inputs, if you will, the service value chain, is
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  Speaker 1: not regulated. So what kind of thing just in terms
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  Speaker 1: of people can make the distinction in their heads. So
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  Speaker 1: for example, uh, if you're an architect, to do a
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  Speaker 1: building in Switzerland, you need a Swiss diploma. But to
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  Speaker 1: design the toilet blocks or decide how thick the windows
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  Speaker 1: will be, that all be outsourced to India or a Kenya,
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  Speaker 1: and it's the architect in Switzerland who's in charge of
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  Speaker 1: making sure that it's good. But there are no formal
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  Speaker 1: regulations and barriers there, so it's only a question of
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  Speaker 1: whether this architect can work together closely enough with people
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  Speaker 1: in low wage countries to make everything cheaper. So that's
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  Speaker 1: that's what the whole sometimes called business processing outsourcing is
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  Speaker 1: intermediate services KPO. Knowledge process outsourcing is also that way,
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  Speaker 1: and a lot of the big Balta nationals called to
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  Speaker 1: service sector h shared service centers to do it um.
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  Speaker 1: There's also these online freelance platforms which will give you
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  Speaker 1: very good idea what's going on. It's like eBay but
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  Speaker 1: for services. And that was something I remember you, you know,
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  Speaker 1: the big book that you wrote the last time that
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  Speaker 1: we speke was about that power of that of ai
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  Speaker 1: UM and even people who are people being able to
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  Speaker 1: do these jobs in the far flung country who don't
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  Speaker 1: have English as their second language. You know, as you've
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  Speaker 1: got as you have a machine trying lation get better
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  Speaker 1: in best of that itpens up that whole market country.
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  Speaker 1: It was low skage, low skilled workers walking into factories.
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  Speaker 1: Now it's going to be low wage workers working into
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  Speaker 1: our walking into our offices. So that I must say
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  Speaker 1: that was one of my better calls. I did not
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  Speaker 1: know COVID what's coming, but I was telling people about
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  Speaker 1: this telemigration opening up the door to globalization and offshoring.
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  Speaker 1: And I used to have to show videos of people
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  Speaker 1: working teleworking literally nobody like you, especially in Europe. They go,
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  Speaker 1: you can't do that from home, and now we all
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  Speaker 1: do so. Essentially we've had five to ten year advance
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  Speaker 1: and the ability to make remote teams in the service
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  Speaker 1: sector work together. So the ability to do this is exploding.
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  Speaker 1: But it was. The basic facts are that trading services
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  Speaker 1: has grown two or three times faster than trading goods.
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  Speaker 1: So it is a simple matter of calculation that trade
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  Speaker 1: and services is the future of trade. And I guess
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  Speaker 1: it's also the case that some of this, if it's
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  Speaker 1: if it's digital transfers of services, it won't it won't
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  Speaker 1: potentially show up in a lot of these traditional statistics,
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  Speaker 1: even the services trade, you might find that you're not
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  Speaker 1: capturing enough. I think that that is really going to
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  Speaker 1: be the wave. The other thing to to to say
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  Speaker 1: about the statistics is they're terrible. They are absolutely terrible.
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  Speaker 1: They were essentially designed to track financial transactions and they
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  Speaker 1: were held by the central bank, so they're called the
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  Speaker 1: extended balance of payment statistics. So the central bank would
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  Speaker 1: find an international financial transaction and if it didn't pass
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  Speaker 1: through customs, they would be pulling their hair out as
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  Speaker 1: to where to stick it. And the central banks, without
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  Speaker 1: thinking anything about statistical analysis, put together a whole bunch
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  Speaker 1: of stuff just to give you a very One of
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  Speaker 1: my favorite examples is one of the bigger slices that
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  Speaker 1: has been growing quite quickly. It is called Information and
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  Speaker 1: Communication UM services, and in there they stick the utility
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  Speaker 1: bits of payments for telephones and all the Indian I
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  Speaker 1: T offshore soft software, as if the utility had anything
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  Speaker 1: to do with the software if you wanted to do
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  Speaker 1: jobs or policy is in many countries don't separate them out,
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  Speaker 1: so it's really not fit for purpose, and it's one
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  Speaker 1: of the things we're just going to have to get
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  Speaker 1: done right because in the rich countries work in the
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  Speaker 1: service sector and will be affected by this. But we can't,
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  Speaker 1: and we don't even have the basic statistics to say
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  Speaker 1: how much. So that it is. The statistics are really
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  Speaker 1: really disappointing, but no matter what you do, you still
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  Speaker 1: see it climbing now. And another one I've been exploring
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  Speaker 1: is to see if we can think about the data
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  Speaker 1: flows for which there's a little bit better data as
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  Speaker 1: a proxy for services, because you can I mean, if
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  Speaker 1: you if you think about it, it's hard to imagine
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  Speaker 1: data crossing border that's not somehow related to somebody making
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  Speaker 1: money in a service, and so I don't think it's
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  Speaker 1: a terrible proxy. And although that we don't have very
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  Speaker 1: good data for that, at least you can see how
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  Speaker 1: steeply it's rising, and if you take that as an
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  Speaker 1: indication of some service being sold across some border, it's
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  Speaker 1: enormous that can I just do say parathetically, Um, there's
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  Speaker 1: nobody in charge of measuring data flows in the world.
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  Speaker 1: Believe that you should do another podcast on that. There's
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  Speaker 1: I was talking to people at the o c D
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  Speaker 1: and the International Telecommunication there's no international organization that keeps
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  Speaker 1: track of it, and there's a couple of private sector
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  Speaker 1: firms who trace the like the bandwidth not what actually
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  Speaker 1: goes through, but the bandwidth. But obviously there's a computer
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  Speaker 1: or a whole bunch of computers which having precise data
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  Speaker 1: on where it's going, when it goes, etcetera like that,
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  Speaker 1: but nobody in the world gathers it. And everybody says
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  Speaker 1: data as the world's future. Nobody's gathering data. A funny
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  Speaker 1: feeling that you could talk to the giggles of this
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  Speaker 1: world and you would find that they had quite a
• 13:00
  Speaker 1: lot of these days, so they might not find it
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  Speaker 1: useful to shap Let me just make a separate point.
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  Speaker 1: The first breakfast two days ago, I went to Microsoft
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  Speaker 1: cafe and Brad Smith was there, president of Microsoft, and
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  Speaker 1: the Ian Bremer, who's the famous international relations guys, and
• 13:15
  Speaker 1: we were talking of about Ukraine, of course, and the
• 13:20
  Speaker 1: presenter said, uh, you know, the attack was I was
• 13:24
  Speaker 1: hybrid to start with, and it started, you know, at
• 13:27
  Speaker 1: the same time as the ward and Brad raised hand said, no,
• 13:31
  Speaker 1: it started twelve hours before the war. Because Microsoft monitors
• 13:36
  Speaker 1: all the systems around the world, so they knew when
• 13:39
  Speaker 1: the attack was happening in real time. And right next
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  Speaker 1: to him was the woman who was ahead of the
• 13:45
  Speaker 1: cyber defense of the United States, and they cyber defense
• 13:50
  Speaker 1: looks to I T companies to tell them about the
• 13:53
  Speaker 1: cyber attacks that are happening. So you're absolutely right, it's
• 13:56
  Speaker 1: the Google's Amazon Microsoft Web service in Microsoft to have
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  Speaker 1: the data. Well, just going back on on Ukraine, because
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  Speaker 1: everything you said is very compelling, particularly from the standpoint
• 14:09
  Speaker 1: of businesses who are thinking about how to organize their
• 14:13
  Speaker 1: work across countries and just how to do it most efficiently.
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  Speaker 1: In the conversations that there have been endeavors, there's been
• 14:21
  Speaker 1: a big focus on new divisions between countries. You know,
• 14:24
  Speaker 1: if the world does seem increasingly divided between the sort
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  Speaker 1: of US and Europe on the one hand, and a
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  Speaker 1: few other democracies and potentially China, Russia and countries that
• 14:34
  Speaker 1: are at least not wanting to just to be separated
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  Speaker 1: from them, those kind of geopolitical forces, how likely is
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  Speaker 1: it do you think that that will affect the pattern
• 14:45
  Speaker 1: of business relationships and even the ability to do this
• 14:48
  Speaker 1: kind of integration well, potentially long run. But one of
• 14:52
  Speaker 1: the things I have been doing recently that that's beyond
• 14:55
  Speaker 1: my book, is trying to develop measures of foreign exposure
• 14:58
  Speaker 1: of supply chains to that with an economist at the
• 15:01
  Speaker 1: Bank of England, Rebecca Freeman, and uh so, we use
• 15:05
  Speaker 1: this these input world input output tables to try and
• 15:07
  Speaker 1: figure out how much you're actually buying from China. And
• 15:11
  Speaker 1: one of the amazing things we found is that you're
• 15:13
  Speaker 1: buying probably two or three times more than you thought
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  Speaker 1: you were because everything you're buying from anyone has China
• 15:20
  Speaker 1: puts into it. So we were on the US auto industry.
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  Speaker 1: It looks like they depend upon two percent of the
• 15:26
  Speaker 1: gross inputs come from China. If you do the whole calculation,
• 15:30
  Speaker 1: the leontif as they call it, the roundabout it's about
• 15:35
  Speaker 1: so they're going to have a hard time on scrambling
• 15:38
  Speaker 1: this onland. So they talk about disengaging with China and stuff,
• 15:43
  Speaker 1: but I think that's mostly talked. You know, there'll be
• 15:45
  Speaker 1: a few sectors where they semiconductors, maybe medical, uh supplies
• 15:50
  Speaker 1: and things like that, but the vast majority, the truth
• 15:54
  Speaker 1: is is that China is the opeque of industrial inputs
• 15:57
  Speaker 1: for the entire world. And you can't shut OPEC off,
• 16:00
  Speaker 1: at least not very very quickly. So that I and
• 16:03
  Speaker 1: who was it saying this morning, It was the UM
• 16:08
  Speaker 1: I think it was the head of the American input
• 16:10
  Speaker 1: at Export Bank, who was saying, there's all this jew
• 16:13
  Speaker 1: strategic tensions. But actually, the United States exports to China
• 16:17
  Speaker 1: this year are as high as they ever have been,
• 16:20
  Speaker 1: and US imports from China have been as high as
• 16:23
  Speaker 1: they ever have been. So it seems like the businesses
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  Speaker 1: have not got the memo that they're supposed to be
• 16:29
  Speaker 1: separating everybody and so and and just given how much
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  Speaker 1: of the world's manufacturing capacity is in China now and
• 16:37
  Speaker 1: how specialized they are. You know, let's basically, all socks
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  Speaker 1: are made in China unless there's some sort of you know,
• 16:43
  Speaker 1: your mother knit them or something. There's because there's a
• 16:45
  Speaker 1: whole village that makes socks, and nobody else in the
• 16:48
  Speaker 1: world will set up that village to make socks just
• 16:51
  Speaker 1: because Biden says, you know, we should separate. So that
• 16:55
  Speaker 1: that's I find I don't think that. I think that
• 16:58
  Speaker 1: disengagement's happening slowly, and there's a sort of in the
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  Speaker 1: digital world that's already happened, and we'll probably exaggerate, but
• 17:05
  Speaker 1: in the physical world, especially manufactured goods, I think it
• 17:08
  Speaker 1: will be very very hard to unscramble that armor. China's
• 17:11
  Speaker 1: global trade share had actually gone up quite significantly since
• 17:15
  Speaker 1: COVID and in this whole period that we've been talking about,
• 17:18
  Speaker 1: the accelerated deglobalization and even with all the supply chain
• 17:21
  Speaker 1: issues and everything else, they have increased their share of
• 17:23
  Speaker 1: global trade. Final question for you, Richard, I've got to
• 17:26
  Speaker 1: do a session with the head of the w t
• 17:28
  Speaker 1: O and I should probably get some questions from you,
• 17:30
  Speaker 1: the best questions to ask them. In the world that
• 17:32
  Speaker 1: you've described, it doesn't seem like there's much of a
• 17:34
  Speaker 1: role for this traditional World Trade organization and those kind
• 17:38
  Speaker 1: of trade agreements. Well, I think the days of traditional
• 17:41
  Speaker 1: trade agreements are over. But actually the W two has
• 17:45
  Speaker 1: moved beyond the old big rounds things where the old
• 17:48
  Speaker 1: days it was everything had to be agreed before anything
• 17:52
  Speaker 1: was agreed, and everybody had to agree with everything. But
• 17:56
  Speaker 1: my my song right now is that we really need
• 17:59
  Speaker 1: the w t O to get the cloud and the
• 18:02
  Speaker 1: attention of heads of state because the great challenges of
• 18:07
  Speaker 1: our time, climate change above all, will not happen unless
• 18:12
  Speaker 1: trade goes on. So let me break that down. Mitigation
• 18:16
  Speaker 1: will require technology to move from a handful of countries
• 18:20
  Speaker 1: to the entire rests of the world, and that technology
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  Speaker 1: is generally embedded in goods, services, investment, and intelectro property rights,
• 18:28
  Speaker 1: all of which need to cross borders. And if it's
• 18:31
  Speaker 1: going to get paid for, because it's not going to
• 18:33
  Speaker 1: all be done on charity, there has to be lots
• 18:35
  Speaker 1: more trade going back the other way, potentially trade and
• 18:38
  Speaker 1: services for example. So if we fall into the world
• 18:42
  Speaker 1: where this disc disagreements over commercial matters breaks down the
• 18:48
  Speaker 1: trading system, we will not get a climate rescue. So
• 18:52
  Speaker 1: I call it the w t O Rising Imperative. And
• 18:56
  Speaker 1: we absolutely need G seven G twenty leaders to say
• 19:01
  Speaker 1: we need this to solve humanities problems. Just to take
• 19:04
  Speaker 1: a very specific one food. If you look at the
• 19:08
  Speaker 1: I p c C report and the f A report
• 19:11
  Speaker 1: that we are going to have an extra billion people
• 19:15
  Speaker 1: in places which increasingly can't grow their staple crop because
• 19:18
  Speaker 1: there's not enough water heat. So you have three options.
• 19:22
  Speaker 1: Either we do more trade and food and the technology
• 19:26
  Speaker 1: to allow them to do it, or they die or
• 19:29
  Speaker 1: they move all. The only one of those that's acceptable
• 19:33
  Speaker 1: is more trade. And if we get into a world
• 19:35
  Speaker 1: where there's a sort of breakdown us China spills over
• 19:39
  Speaker 1: nobody's cooperating the rules aren't respected, that won't happen. So
• 19:43
  Speaker 1: it's I think it's it's time to start realizing that
• 19:46
  Speaker 1: fixing the world's problems means moving things from where they're
• 19:50
  Speaker 1: abundant to where they're scarce, and in particular technology, and
• 19:55
  Speaker 1: that though technology which is answered to basically all of
• 19:58
  Speaker 1: our challenges, in the future will require a well functioning system.
• 20:02
  Speaker 1: So I hope they'll start to think of the W
• 20:05
  Speaker 1: two like the w h O, which we actually needed
• 20:08
  Speaker 1: during the COVID. It has it has its own problems,
• 20:11
  Speaker 1: but nobody's thinking about the w h O, where you
• 20:14
  Speaker 1: send some ambassadors and trade ministers to haggle over commercial disputes.
• 20:19
  Speaker 1: We realize that these this organization was critical to saving
• 20:24
  Speaker 1: hundreds of millions of lives. Well, I'm going to be
• 20:27
  Speaker 1: talking to the head of the World Trade Organization. I
• 20:29
  Speaker 1: will make check in see whether she's ready for that, right,
• 20:32
  Speaker 1: Thank you very much, rich Reportman, Thank you. Now. Straight
• 20:43
  Speaker 1: after that chat with Richard Baldwin, I did have the
• 20:45
  Speaker 1: pleasure of leading a conversation about the future of global
• 20:48
  Speaker 1: trade with not only the Director General of the World
• 20:51
  Speaker 1: Trade Organization Dr. And Gorzia corn Joy Wheler, but also
• 20:55
  Speaker 1: the Indian Commerce Minister, Pios gal and Ryan Peterson, chief
• 20:59
  Speaker 1: executive of global logistics company Flexport. You'll hear all of
• 21:03
  Speaker 1: them in a minute. But I started the panel by
• 21:06
  Speaker 1: asking Valdis Dombrowski's the European Commissioner for Trade and Executive
• 21:11
  Speaker 1: Vice President for the Economy, about the European Union's response
• 21:15
  Speaker 1: to the invasion of Ukraine. Specifically, given the internal tensions
• 21:20
  Speaker 1: around further limiting energy imports from Russia, I asked him
• 21:25
  Speaker 1: whether the European Union was reaching the limit of what
• 21:28
  Speaker 1: it could do to punish Russia. Minister, well, you won't
• 21:36
  Speaker 1: be surprised that I will ask you a question on
• 21:38
  Speaker 1: this topic. India has made it very clear that it
• 21:41
  Speaker 1: needs to buy cheap oil from Russia. It's buying more
• 21:45
  Speaker 1: oil discounted Russian oil, and it buys more Russian weapons
• 21:49
  Speaker 1: than any country in the world. The US has been
• 21:53
  Speaker 1: understanding about India's position, has said they're sort of playing
• 21:58
  Speaker 1: the long game though, because they believe ultimately that the
• 22:01
  Speaker 1: US is the key strategic partner for India. So can
• 22:03
  Speaker 1: I just ask you what steps are you taking over
• 22:07
  Speaker 1: the longer term to reduce dependent on dependence on Russia?
• 22:11
  Speaker 1: Even as you buy more from Russia. Right now, I
• 22:16
  Speaker 1: think we've been very clear from the beginning that dialogue
• 22:23
  Speaker 1: is the way forward. We must sort out this dispute.
• 22:26
  Speaker 1: It's doing nobody any good and it's important that we
• 22:30
  Speaker 1: that all the concerned countries and the neighbors find a
• 22:36
  Speaker 1: solution to this very very unfortunate conflict. In terms of
• 22:41
  Speaker 1: India's own dependence on oil from Russia, we have never
• 22:46
  Speaker 1: traditionally been a very large importer of petroleum products from Russia.
• 22:52
  Speaker 1: In fact, on an earlier occasion, our Foreign Minister has
• 22:57
  Speaker 1: clarified that we buy le petroleum products from Russia in
• 23:03
  Speaker 1: a month than what is consumed or bought by the
• 23:06
  Speaker 1: European countries in an afternoon. So therefore, I think any
• 23:13
  Speaker 1: suggestion that India is increasing imports from Russia is any
• 23:18
  Speaker 1: way contributing to the situation suddenly doesn't stand scrutiny. Over
• 23:25
  Speaker 1: the years, there have been a friend of India, and
• 23:30
  Speaker 1: we believe that the right way would be to find
• 23:33
  Speaker 1: an amicable solution. In terms of the long term, India
• 23:39
  Speaker 1: has always looked at diversified sources for our petroleum requirements.
• 23:44
  Speaker 1: But in the current situation, when inflation is at an
• 23:49
  Speaker 1: all time high. It has caused severe stress to people
• 23:53
  Speaker 1: all over the world. The European Union and other countries
• 23:57
  Speaker 1: in Europe continue to buy far are more larger quantities
• 24:02
  Speaker 1: than India has ever even thought of buying or will
• 24:04
  Speaker 1: ever buy. So I don't think at all India at
• 24:08
  Speaker 1: this point of time is in any way responsible for
• 24:13
  Speaker 1: the petroleum exports of Russia. Having said that, I must
• 24:17
  Speaker 1: also placed on record that I was personally advised that
• 24:22
  Speaker 1: there is no sanction on petroleum production, petroleum goods or
• 24:27
  Speaker 1: food grain procurement from Russia and no sanctions have been
• 24:32
  Speaker 1: placed on that by senior leaders of the coalition which
• 24:37
  Speaker 1: has put in the sanctions. So I think India as
• 24:41
  Speaker 1: well within the current framework which has been designed by
• 24:48
  Speaker 1: the countries who have put put in the sanctions. Obviously,
• 24:55
  Speaker 1: one of the very worrying UH counter effects A side
• 24:59
  Speaker 1: of efects of the crisis in Ukraine is this growing
• 25:03
  Speaker 1: fear of a food crisis and food short global food shortages.
• 25:09
  Speaker 1: What what practically are you thinking about in your position
• 25:14
  Speaker 1: to help governments respond to this crisis. Is there anything
• 25:17
  Speaker 1: that the w t O can do well? Thank you? Certainly,
• 25:21
  Speaker 1: the food crisis is a real worry, and it's not
• 25:24
  Speaker 1: just about this year. I think it might be about
• 25:27
  Speaker 1: next year even beyond that UM. And the reason I'm
• 25:31
  Speaker 1: saying that is if countries are not able to get
• 25:34
  Speaker 1: fertilizer UM to to plant the next crop those that
• 25:40
  Speaker 1: need fertilizer, then yields are going to be lower. There
• 25:43
  Speaker 1: will be less supplying the world across the board of
• 25:46
  Speaker 1: all types of grains and food. UM. If we are
• 25:49
  Speaker 1: not able to evacuate the twenty five million tons or
• 25:52
  Speaker 1: thereabout of Ukrainian grain that is presently stored um and
• 25:57
  Speaker 1: the harvest is next month for another twenty five million terms,
• 26:02
  Speaker 1: then that's going to be really, really difficult for the world.
• 26:07
  Speaker 1: So I'm saying that this food crisis is real and
• 26:12
  Speaker 1: we must find solutions. Of course, if the war stopped,
• 26:16
  Speaker 1: that would be the quickest and best solution for everyone.
• 26:20
  Speaker 1: But have said that if we had corridors open on
• 26:24
  Speaker 1: the Black Seat to evacuate some of Ukrainian green, that
• 26:27
  Speaker 1: would help. If we don't find solutions, of course, the
• 26:31
  Speaker 1: ones countries that would suffer would be the countries, the
• 26:35
  Speaker 1: poorer countries of the world. Now at W two, what
• 26:40
  Speaker 1: are we trying to do? One is not to exacerbate
• 26:44
  Speaker 1: the problem by having export restrictions of prohibitions of members,
• 26:50
  Speaker 1: because that tends to take the prices, make for more
• 26:56
  Speaker 1: volatility and and and you know prices can spike if
• 26:59
  Speaker 1: we if we do that UM, So our members the
• 27:03
  Speaker 1: message to them is to try to restrain. Although it's
• 27:07
  Speaker 1: not against w T rules. UM. If you have that,
• 27:11
  Speaker 1: for there's a security clause that allows that to be done,
• 27:15
  Speaker 1: but it has to be temporary, proportionate and transparent and
• 27:19
  Speaker 1: reported to the w TU UM. But so far now
• 27:23
  Speaker 1: we we have about twenty two members who have export
• 27:27
  Speaker 1: restrictions and the idea is for that to be lower.
• 27:31
  Speaker 1: So we don't take us a bit the problem I
• 27:33
  Speaker 1: think are members have taken that on board. UM. The
• 27:37
  Speaker 1: second issue that we're looking at is of course auto
• 27:40
  Speaker 1: multiply the supply on the world market. So any country
• 27:44
  Speaker 1: that has additional grains that they can put on the
• 27:48
  Speaker 1: world market, we're encouraging that very much to be the case.
• 27:52
  Speaker 1: Can I come back to your commissioner very briefly just
• 27:55
  Speaker 1: to ask are you talking to Russia about creating solidarity
• 27:58
  Speaker 1: lanes in the Blacks to allow grain shipments from Ukraine? Well? Uh,
• 28:05
  Speaker 1: First of all UH in this conflict, they need to
• 28:09
  Speaker 1: be clear who is aggressor who is a victim, And
• 28:12
  Speaker 1: it's Russia's unprovoked and illegal aggression against Ukraine which is
• 28:19
  Speaker 1: creating the problem. So correspondingly, we are engaging with Ukraine,
• 28:25
  Speaker 1: trying to help Ukraine to deal with this situation. Obviously,
• 28:30
  Speaker 1: UH the discussions on different ways how the grain shipments
• 28:36
  Speaker 1: can be done, So already now we are ramping up
• 28:40
  Speaker 1: the capacity to do it, and the shipment is already
• 28:43
  Speaker 1: happening through the land corridors through UH Poland, through Romania
• 28:49
  Speaker 1: and from those ports, but clearly it's not replacement. Were
• 28:54
  Speaker 1: also assessing other land options to get to other ports,
• 28:58
  Speaker 1: but clearly UH it's not able to replace in a
• 29:03
  Speaker 1: short term the UH UH, the sea roots UH and
• 29:11
  Speaker 1: and the fact that currently Russia is blocking Ukrainian ports
• 29:17
  Speaker 1: and this export of grain is not possible. And in meanwhile,
• 29:21
  Speaker 1: of course, we're seeing seeing other tendencies that Russia is
• 29:24
  Speaker 1: looting Ukrainian grain from occupied territories, it's burning down Ukrainian
• 29:31
  Speaker 1: food storages in other territories, it's destroying other Ukrainian agricultural
• 29:37
  Speaker 1: infrastructure and equipment. So clearly there is a deliberate action
• 29:42
  Speaker 1: of Russia to create these globals food security issues. I
• 29:45
  Speaker 1: guess that's why I wonder why we think why it
• 29:49
  Speaker 1: seems possible that you might have those that safe passage
• 29:53
  Speaker 1: when the Russians have made clear that they are willing
• 29:55
  Speaker 1: to sustain an enormous amount of humanitarian collassal damage. Well,
• 30:00
  Speaker 1: that's why we're working on different directions. Of course, if
• 30:04
  Speaker 1: there is a way to open those UH corridors for
• 30:07
  Speaker 1: Ukraine and grain exports h through as the Black Sea
• 30:11
  Speaker 1: from Ukrainian imports excellent in parallels I said, they're working
• 30:15
  Speaker 1: on other land routes, beating up capacity, simplifying procedures, administrative procedures,
• 30:21
  Speaker 1: customs procedures BOSS for Ukrainian imports to the EU and
• 30:24
  Speaker 1: for transit to other countries. Ryan Peterson, what are you
• 30:29
  Speaker 1: seeing when you look at supply chains, when you look
• 30:31
  Speaker 1: at the collateral damage in the trading system that businesses
• 30:34
  Speaker 1: at dealing with every day from this crisis and from
• 30:38
  Speaker 1: the other snarl ups that we've seen. Well, we've seen
• 30:40
  Speaker 1: um the last seven or eight years that you've had
• 30:44
  Speaker 1: it almost every single year in increasing level of disruption
• 30:48
  Speaker 1: in global trade. Um. Starting you can go back to
• 30:50
  Speaker 1: Tift when we had a strike on the west coast
• 30:53
  Speaker 1: of the United States and you couldn't import anything into
• 30:55
  Speaker 1: into the United States. Uh. We may have another one
• 30:58
  Speaker 1: this summer. The tract is up for renegotiation in July. Um,
• 31:03
  Speaker 1: you've had we had the cheapest ocean freight of all time.
• 31:06
  Speaker 1: Everyone likes to talk about expensive ocean freight. Was the
• 31:09
  Speaker 1: cheapest ocean freight probably in the history of humankind. Uh.
• 31:12
  Speaker 1: Great for importers and exporters, terrible for the asset owners.
• 31:16
  Speaker 1: They almost went in fact, Huningen did go bankrupt Korean
• 31:18
  Speaker 1: Ocean carrier seventeen eighteen nineteen, we had trade wars, we
• 31:23
  Speaker 1: had a pandemic which caused a collapse in purchase orders,
• 31:27
  Speaker 1: and then the worst sport congestion that we've seen all
• 31:29
  Speaker 1: over the world. And trade has never been more difficult.
• 31:31
  Speaker 1: And I think it's an interesting moment to ask is
• 31:34
  Speaker 1: globalization going to continue? Are we going to be able
• 31:36
  Speaker 1: to continue to trade or is it going to fray?
• 31:39
  Speaker 1: And um our system depends on peace, rule of law. Um.
• 31:44
  Speaker 1: We've we've built like an incredible amount of prosperity off
• 31:47
  Speaker 1: of the global trading system that is at risk right
• 31:50
  Speaker 1: now and it's um terrible to see the human implications
• 31:53
  Speaker 1: of that, and it has me very very concerned because
• 31:56
  Speaker 1: it uh we look at what happened with the Arab
• 31:58
  Speaker 1: spring and all these government really anarchy almost in the
• 32:02
  Speaker 1: Middle least, and that was really the result of high
• 32:04
  Speaker 1: food prices. And I don't know how to make predictions
• 32:08
  Speaker 1: because my predictions have been wrong the last few years. Uh,
• 32:11
  Speaker 1: but I'm still willing to do it, and I predict
• 32:13
  Speaker 1: you're going to see similar levels of crisis across any
• 32:16
  Speaker 1: food importing nation, especially the poor ones that don't have
• 32:18
  Speaker 1: fossil fuels, and that has me very very concerned. Tots.
• 32:21
  Speaker 1: He actually mentioned the question about food security and potential
• 32:26
  Speaker 1: what might be considered food protection is um um. So
• 32:30
  Speaker 1: there is a question, how does India intend to prevent
• 32:33
  Speaker 1: its recent wheat export ban from negatively affecting food security
• 32:38
  Speaker 1: in developing countries? And I see you've also limited sugar export. Yeah,
• 32:42
  Speaker 1: I'm glad you asked that question because there's a lot
• 32:44
  Speaker 1: of misinformation going around the place. Until two years ago,
• 32:49
  Speaker 1: India had no exports of it at all. Two years ago,
• 32:54
  Speaker 1: we had a nominal surplus of two million tons, which
• 32:58
  Speaker 1: is barely one percent, only one percent of global weight
• 33:04
  Speaker 1: trade that we had as a surplus which we allowed
• 33:07
  Speaker 1: to be exported last year. This year, starting April, our
• 33:13
  Speaker 1: estimate was that we would produce hundred and eleven million tons,
• 33:16
  Speaker 1: against which our domestic requirement and consumption is about hundred
• 33:20
  Speaker 1: and five million tons, so we thought we would have
• 33:23
  Speaker 1: about six seven million tons again which we could export. Unfortunately,
• 33:28
  Speaker 1: there was a huge climate problem. We had a heat
• 33:32
  Speaker 1: wave in most parts of North India which is in
• 33:36
  Speaker 1: public domain. Most people, I'm sure know about it, due
• 33:39
  Speaker 1: to which the wheat got shriveled and our production fell significantly.
• 33:45
  Speaker 1: In fact, dtr andengs the fields. It has fallen even
• 33:47
  Speaker 1: more than what we estimate, due to which we would
• 33:51
  Speaker 1: actually have to draw from our food security reserves to
• 33:55
  Speaker 1: even ensure price stability and food security of the people
• 33:59
  Speaker 1: of India. In this situation, from first April to tenth
• 34:04
  Speaker 1: of May, in forty days, are we exports increased six
• 34:09
  Speaker 1: times six or what it had what had happened in
• 34:14
  Speaker 1: the forty days last year. So we saw two million
• 34:17
  Speaker 1: tons going only forty days, and the speed with which
• 34:20
  Speaker 1: it was going we would have had a crisis in
• 34:23
  Speaker 1: our own country for food stability, food security and pricing,
• 34:28
  Speaker 1: and therefore it was an imperative that we regulate what
• 34:33
  Speaker 1: is being exported. Even now, we have left the window
• 34:37
  Speaker 1: open for countries on a government to government basis to
• 34:41
  Speaker 1: take wheat from India, because we don't want the surplus
• 34:45
  Speaker 1: suet available, if any, to go into the hands of
• 34:48
  Speaker 1: speculators or holders who would then charge an arm in
• 34:51
  Speaker 1: a leg to the less developed countries, of the poorer
• 34:54
  Speaker 1: countries who would need that or the vulnerable countries who
• 34:58
  Speaker 1: would need that drain. Analyze the exports and we found
• 35:01
  Speaker 1: instead of Bangladesh or the less developed countries, it was
• 35:05
  Speaker 1: actually being exported to trading centers from where they would
• 35:09
  Speaker 1: have all the ability to manipulate prizes. And therefore we
• 35:13
  Speaker 1: regulated it. And therefore we believe this is a step
• 35:17
  Speaker 1: in the right direction to ensure equitable and social distribution
• 35:21
  Speaker 1: of any surfaces. That we have a lot of conversations
• 35:24
  Speaker 1: that people will have been in this week, and one
• 35:26
  Speaker 1: way or another ended up with um the fragmented fragmentation
• 35:31
  Speaker 1: of the global economy and the global institutions still function
• 35:35
  Speaker 1: that they still have as a role when major members
• 35:39
  Speaker 1: of those institutions no longer seem to be heading in
• 35:42
  Speaker 1: the right direction. How do you make the w t
• 35:44
  Speaker 1: O fit with the world in which people don't agree?
• 35:47
  Speaker 1: I must compliment the Director General, Miss h and go Z,
• 35:52
  Speaker 1: because it's a very tough job she has on our hands.
• 35:55
  Speaker 1: I I don't think any of us would end me
• 35:57
  Speaker 1: a job. Nobody would like to be that seat in
• 36:00
  Speaker 1: the current challenging times, particularly when she has to balance
• 36:04
  Speaker 1: the interests of the less developed of very poor countries,
• 36:07
  Speaker 1: the developing world which has the less the smaller income,
• 36:12
  Speaker 1: the middle income, the higher income, all within the developing world,
• 36:16
  Speaker 1: and then the very developed countries. By compliment her for
• 36:20
  Speaker 1: her patience, for her ability to bring so many different
• 36:24
  Speaker 1: interests on the table and persevere for a solution. All right, well,
• 36:27
  Speaker 1: I'm sure she's very glad to have that compliment, But
• 36:30
  Speaker 1: why don't you help her? How are you going to
• 36:32
  Speaker 1: Actually you're all helping. They're all helping, And I think
• 36:35
  Speaker 1: we've all agreed even today in an earlier session, to
• 36:38
  Speaker 1: look at how political consensus can be drawn trying to
• 36:42
  Speaker 1: bring equity with different interests on the table. Can I can? I? Well,
• 36:48
  Speaker 1: thank you Stephanie for eliciting so much love for me
• 36:53
  Speaker 1: it's wonderful. Um. I just want to say that, you know,
• 36:57
  Speaker 1: as a peuge mentioned is very difficult to agree things
• 37:01
  Speaker 1: multilaterally and that has been plague in the w T
• 37:05
  Speaker 1: and we shouldn't break light of it. And that's why
• 37:07
  Speaker 1: we need to find ways forward to agree some things
• 37:11
  Speaker 1: to show that the organization can confunction. Um. But what
• 37:15
  Speaker 1: I wanted to say is, let's not take the multilateral
• 37:18
  Speaker 1: trading system likely. You know, people are talking a lot
• 37:22
  Speaker 1: of fragmentation of moving away from multilateralism. In practical terms,
• 37:28
  Speaker 1: there's a lot of geopolitical tension. But the counter factual
• 37:32
  Speaker 1: to having a multilateral organization people need to look at
• 37:36
  Speaker 1: that is very costly um. And and you know, only
• 37:40
  Speaker 1: the poorer and weaker countries would suffer because if if
• 37:44
  Speaker 1: you don't have such an organization, imagine a poor country
• 37:48
  Speaker 1: in a developing part of the world trying to have
• 37:51
  Speaker 1: a bilateral agreement with a larger country. How do you
• 37:55
  Speaker 1: think that will look? If you had to do that
• 37:57
  Speaker 1: for almost everything, it would be very difficult. So we
• 38:01
  Speaker 1: need that multilateralism. Lastly, some problems we have now of
• 38:06
  Speaker 1: the global commons cannot be solved by any one country alone,
• 38:10
  Speaker 1: and we are facing these simultaneous crisis of the global commons,
• 38:14
  Speaker 1: which needs the kind of solidarity that a multilateral setting provides. Therefore,
• 38:21
  Speaker 1: you can't solve the pandemic on your own, you can't
• 38:24
  Speaker 1: solve climate change on your own. You can't even solve
• 38:29
  Speaker 1: food on your own, because we have net food importing
• 38:32
  Speaker 1: countries who don't have the ability to grow their own food.
• 38:36
  Speaker 1: So we are in it together, and therefore that's why
• 38:39
  Speaker 1: we need to strengthen organizations like the w T and
• 38:43
  Speaker 1: make sure we don't take it lightly about its breaking
• 38:47
  Speaker 1: of all in a part. Well, I've just noticed we've
• 38:50
  Speaker 1: probably run out of time, so but I did. There's
• 38:53
  Speaker 1: quite a few questions to run Pietres were various versions
• 38:56
  Speaker 1: of the same one, which is, can you tell us
• 38:58
  Speaker 1: how I t and help solve some of the trade
• 39:01
  Speaker 1: disruptions that we're seeing. Yeah, and so I run a
• 39:05
  Speaker 1: technology company. So you probably think I'm going to talk
• 39:07
  Speaker 1: about big data or machine learning satellites, but actually the
• 39:10
  Speaker 1: technology that take is going to be the most important
• 39:12
  Speaker 1: in the next year or two is an ancient one.
• 39:15
  Speaker 1: We've actually a two thousand years ago. Maritime insurance was
• 39:19
  Speaker 1: invented in Rome to provide security for people who are
• 39:23
  Speaker 1: going to Egypt to get grain and bring it back
• 39:26
  Speaker 1: to Rome. And we're gonna need to find insurance solutions
• 39:30
  Speaker 1: so that ships can go into the Black Sea in
• 39:32
  Speaker 1: a war zone, get grain and leave. Because I don't
• 39:35
  Speaker 1: know that the private sector alone is going to do that.
• 39:37
  Speaker 1: I think they'll end up uh not wanting to take
• 39:39
  Speaker 1: that risk. If I own the ship, I don't want
• 39:40
  Speaker 1: to lose my ship. It's too expensive. And this is
• 39:42
  Speaker 1: where a role for government perhaps can come in uh
• 39:45
  Speaker 1: and provide some kind of a backstop of insurance that
• 39:47
  Speaker 1: was we've seen in many other places. I think something
• 39:49
  Speaker 1: like that is probably the most important technology right now. Well,
• 39:52
  Speaker 1: like many conversations this week, it's begun and ended with
• 39:57
  Speaker 1: some aspect of the Ukraine crisis. But in the meantime,
• 40:00
  Speaker 1: I'm we've got a bit of help, certainly a lot
• 40:02
  Speaker 1: of love for Dr and gosi Um and some explanations
• 40:05
  Speaker 1: of of the other relevance of trade policy at the moment.
• 40:09
  Speaker 1: So thank you very much, speaker. Well that's it for
• 40:26
  Speaker 1: this bumper episode of Stephanomics from the World Economic Forum.
• 40:30
  Speaker 1: We'll be back next week, but in the meantime, do
• 40:32
  Speaker 1: please rate the show if you like it and check
• 40:35
  Speaker 1: out the Bloomberg News website for more economic news and
• 40:38
  Speaker 1: views on the global economy. You can also follow at
• 40:40
  Speaker 1: economics on Twitter. This episode was produced by Magnus Henrickson
• 40:44
  Speaker 1: with support from Summer Sadi. Special thanks to Katia Dmitrieva,
• 40:49
  Speaker 1: Professor Richard Baldwin, the World Economic Forum, dr Angrzio, Condroy Wheeler,
• 40:54
  Speaker 1: Minister Pure Brian Peterson, and Commissioner Valdis Dombrovskis. Mike Sasso
• 41:01
  Speaker 1: is executive producer of Stephanomics and the head of Bloomberg
• 41:04
  Speaker 1: Podcast is Francesco Needy.