Latest / Trumponomics / The Trade War Didn't Happen. Here's Why and What's Next

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The Trade War Didn't Happen. Here's Why and What's Next · Trumponomics

• 0:00
  Speaker 1: Whatever happened to the global trade war that was supposed
• 0:03
  Speaker 1: to threaten twenty seventeen, a conflict over global commerce was
• 0:07
  Speaker 1: near the top of most people's risk list following Donald
• 0:11
  Speaker 1: Trump's election. His America First inaugural address exacerbated those fears.
• 0:18
  Speaker 1: But far from drawbridges coming up, global trade volumes have
• 0:22
  Speaker 1: actually increased by quite a lot. The International Monetary Funders
• 0:28
  Speaker 1: projecting the volume of trade and goods and services will
• 0:31
  Speaker 1: have climbed four point two percent this year, almost twice
• 0:35
  Speaker 1: the rate of the previous year. What did the experts
• 0:38
  Speaker 1: miss and is it too soon to declare protectionism missing
• 0:42
  Speaker 1: in action? Welcome to Benchmark, a show about the global economy.
• 0:55
  Speaker 1: I'm Daniel Moss, economics writer at Bloomberg View in New York,
• 1:00
  Speaker 1: and I'm Scott Landman and economics editor with Bloomberg News
• 1:03
  Speaker 1: in Washington. In a year of surprises, a trade boom
• 1:06
  Speaker 1: is right up there. Here to explain what's driving the
• 1:10
  Speaker 1: surge is Andrew Maida, who reports on trade issues for
• 1:14
  Speaker 1: Bloomberg and Washington. In a few minutes, will be joined
• 1:17
  Speaker 1: by a ranch of Gonzalez, executive director of the International
• 1:21
  Speaker 1: Trade Center in Geneva. She'll give US some broader context.
• 1:25
  Speaker 1: Andrew You and Da Karen recently wrote about the unexpected
• 1:29
  Speaker 1: jump in trade. As he reported that story, what jumped
• 1:33
  Speaker 1: out at you? Well, the i m F is projecting
• 1:36
  Speaker 1: that trade volumes will grow globally by four point two
• 1:40
  Speaker 1: percent this year, and that's up from about two point
• 1:43
  Speaker 1: four percent last year, so almost double. And it's significant
• 1:47
  Speaker 1: because it's the first time since that trade growth has
• 1:51
  Speaker 1: actually outpaced global growth. And again that's significant because you're
• 1:56
  Speaker 1: now having trade actually lifting global growth as opposed to
• 2:01
  Speaker 1: be in a drag. So are you saying that protectionism
• 2:04
  Speaker 1: was this dog that was supposed to have a big
• 2:06
  Speaker 1: bark but didn't really have much of a bite. You know,
• 2:09
  Speaker 1: I think the jury is still out on that. I
• 2:11
  Speaker 1: think we'll have to see whether the protectionist threat truly fades.
• 2:17
  Speaker 1: You know, the Trump administration is still trying to renegotiate NAFTA.
• 2:22
  Speaker 1: They made a lot of noise about cracking down on
• 2:25
  Speaker 1: China in various ways. But it's certainly true that the
• 2:29
  Speaker 1: trade war that Dan referred to that everybody was worried
• 2:32
  Speaker 1: about when it was looking like Donald Trump would get
• 2:35
  Speaker 1: elected has not come to pass. The global training system
• 2:39
  Speaker 1: has not been dismantled, and uh, it looks, at least
• 2:43
  Speaker 1: for now, that we're returning to a period of that
• 2:47
  Speaker 1: virtual cycle we saw in the early two thousand's when
• 2:51
  Speaker 1: trade was reinforcing global growth. Now, how much of this
• 2:55
  Speaker 1: can be attributed to the global economic upswing? I mean,
• 2:59
  Speaker 1: is it protection ism hasn't happened at all? All that
• 3:03
  Speaker 1: the economy has accelerated, it's papered over those bumps. It's
• 3:08
  Speaker 1: probably more so the latter. If you look at the
• 3:11
  Speaker 1: w t o s analysis of the numbers, for example,
• 3:13
  Speaker 1: I mean, they point to some some pretty obvious engines
• 3:16
  Speaker 1: that are driving this. I mean, China grew uh faster
• 3:21
  Speaker 1: this year than than perhaps I'm expected. Growth in the
• 3:24
  Speaker 1: US was was fairly robust as well. Uh, so you
• 3:28
  Speaker 1: saw a rise in imports and that and that that
• 3:30
  Speaker 1: kind of lifted the trade boat. Uh. That said, the
• 3:33
  Speaker 1: w t O also recently put out a report where
• 3:36
  Speaker 1: they said that the amount of trade barriers that countries
• 3:40
  Speaker 1: are throwing up increased at a slower rate uh this
• 3:45
  Speaker 1: year than it had last year. So countries were throwing
• 3:47
  Speaker 1: up less trade barriers as well. It's really amazing to hear,
• 3:50
  Speaker 1: But is it, is it really correct? To call this
• 3:53
  Speaker 1: a trade boom when the amount of growth we're talking
• 3:56
  Speaker 1: about four percent kind of pales in comparison to it
• 4:00
  Speaker 1: we saw in true boom years ten or twenty years ago.
• 4:03
  Speaker 1: I mean, it's probably a fair point. I mean, there
• 4:05
  Speaker 1: were years where trade grew at at high single digits,
• 4:09
  Speaker 1: but I think it's fair at least to call it
• 4:12
  Speaker 1: a boom let. And if you look at how much
• 4:14
  Speaker 1: it increased this past year, and if you look at
• 4:16
  Speaker 1: what the expectations were in terms of the protectionist threat,
• 4:20
  Speaker 1: I mean, I think it's fair to say that the
• 4:22
  Speaker 1: trade growth exceeded expectations fairly significantly. Andrew, thanks for joining us.
• 4:27
  Speaker 1: Now let's bring in a ranch of Gonzales. She's executive
• 4:30
  Speaker 1: director of the International Trade Center in Geneva. The organization
• 4:35
  Speaker 1: has a joint mandate from the World Trade Organization, which
• 4:38
  Speaker 1: Andrew just mentioned, and the United Nations a ranch of
• 4:42
  Speaker 1: Thanks for joining us, fair pleasure. Now you're getting ready
• 4:46
  Speaker 1: to attend a w t O ministerial meeting in Argentina.
• 4:51
  Speaker 1: Is the jump in trade volumes, aside from good steak,
• 4:54
  Speaker 1: likely to be something that people take comfort in when
• 4:57
  Speaker 1: you meet them. Well, I think they will keep this
• 5:01
  Speaker 1: very high in their minds when they discussed cooperation in
• 5:05
  Speaker 1: international trade, because all of them are today benefiting from
• 5:10
  Speaker 1: the improvement in trade and the improvement in trade forecast
• 5:16
  Speaker 1: for next year, which which is looking good. And I'm
• 5:18
  Speaker 1: sure they will not want this trade growth engine to stall,
• 5:25
  Speaker 1: given the fact that they have to create millions of jobs,
• 5:28
  Speaker 1: they have to lift millions of people out of poverty,
• 5:32
  Speaker 1: and that trade is today providing them precisely this tool
• 5:36
  Speaker 1: that in the last years they had not been able
• 5:39
  Speaker 1: to use, which is also one of the reasons why
• 5:44
  Speaker 1: they had a motaf h we work in creating new jobs, Aroncha.
• 5:49
  Speaker 1: Of course they wouldn't want this trade engine to stall.
• 5:53
  Speaker 1: But is FO truly a sustainable pace that can be
• 5:58
  Speaker 1: matched in the coming year or is that something that's
• 6:01
  Speaker 1: too high or maybe even too low. We are still
• 6:04
  Speaker 1: below historical trends in the last compared to the last
• 6:08
  Speaker 1: and fifteen years, but it's a huge improvement over the
• 6:12
  Speaker 1: very meager one point six percent growth one point three
• 6:15
  Speaker 1: percent growth of last year, so it's a good signal.
• 6:19
  Speaker 1: It is certainly a tool that needs to be keep
• 6:21
  Speaker 1: alive and kicking. I don't think this very good news
• 6:26
  Speaker 1: that they are getting, which is a result of the
• 6:29
  Speaker 1: good news they are getting on overall economic growth, as
• 6:32
  Speaker 1: we just heard, is one that deserves to be killed
• 6:35
  Speaker 1: either by action or by inaction, which is precisely what
• 6:39
  Speaker 1: I hope Buenos Aires w TUM Steal meeting will look at.
• 6:44
  Speaker 1: So I think that gets to the nub of the
• 6:46
  Speaker 1: question we're discussing here. Did we dodge a protectionist bullet
• 6:50
  Speaker 1: or is it a bit like the torpedo five near
• 6:53
  Speaker 1: the end of the hunt for Red October, it's still
• 6:56
  Speaker 1: there searching for a target. Well certain the rhetoric the
• 7:01
  Speaker 1: protection is rhetoric is very high at the moment. And
• 7:04
  Speaker 1: next to this protection is rhetoric, what we also have
• 7:07
  Speaker 1: very highest geopolitical tensions and trade tensions. Now, maybe we
• 7:12
  Speaker 1: find a good way to channel these tensions, and I
• 7:14
  Speaker 1: think I do hope we find good ways, intelligent ways,
• 7:19
  Speaker 1: peaceful ways to channel these tensions and through that manage
• 7:23
  Speaker 1: the risks. But the risks are there. The w t
• 7:26
  Speaker 1: O has just issued a very important report in which
• 7:29
  Speaker 1: they give us the good news, but they also give
• 7:31
  Speaker 1: us a very clear warning signal that their risks to
• 7:35
  Speaker 1: protection is rhetoric. Granted, it's rhetoric for now it's the
• 7:39
  Speaker 1: dog that barks a lot but has not yet beaten Uh.
• 7:43
  Speaker 1: There is geopolitical tensions to straight tensions. There is trouble
• 7:47
  Speaker 1: on the natural disasters front. There is the risk of
• 7:50
  Speaker 1: tighter monetary policy. All these are serious risks that should
• 7:53
  Speaker 1: be taken seriously. So let's not declare victory. I think
• 7:57
  Speaker 1: let's just watch and let's encourage actors to behave in
• 8:01
  Speaker 1: a responsible manner over the next month. Ranch when it
• 8:07
  Speaker 1: comes to President Donald Trump, is the kind of rhetoric
• 8:12
  Speaker 1: and positions that his administration has taken that he advocated
• 8:16
  Speaker 1: during his campaign. Is that something that's going to be
• 8:19
  Speaker 1: you think, a permanent feature of the landscape for trade
• 8:24
  Speaker 1: policy or is this a passing phenomenon. I mean, I
• 8:27
  Speaker 1: think Donald Trump is right when he says that there
• 8:31
  Speaker 1: is a discontent in many parts of American society, and
• 8:34
  Speaker 1: I could probably argue that there is a lot of
• 8:36
  Speaker 1: discontent in many parts of other societies around the world,
• 8:40
  Speaker 1: in that the benefits of growth and the benefits of
• 8:43
  Speaker 1: trade are not equally shared and they are not going
• 8:47
  Speaker 1: to the They are accumulating on the one percent, whereas
• 8:52
  Speaker 1: is not seeing the same benefits. Now where I would
• 8:55
  Speaker 1: disagree with President Donald Trump is in what is the
• 8:58
  Speaker 1: good recipe to address this an equal distribution of the
• 9:01
  Speaker 1: wealth and the benefits of growth. I think what history
• 9:05
  Speaker 1: has proven is that investing in people, investing in making
• 9:11
  Speaker 1: individuals more resilient, investing in education, investing in healthcare, investing
• 9:16
  Speaker 1: in infrastructures, including today digital infrastructures, including investing in social
• 9:22
  Speaker 1: safety nets, is probably going to be more effective in
• 9:25
  Speaker 1: empowering every man and every woman in America or around
• 9:30
  Speaker 1: the world for that purpose, to withstand the huge changes
• 9:34
  Speaker 1: that we're seeing in our economies. That is probably better
• 9:37
  Speaker 1: manage through this empowerment of the individual than through trade
• 9:44
  Speaker 1: isolationism or trade conflict, which again may end up killing
• 9:50
  Speaker 1: the growth that can lift all these people out of poverty. Ranger.
• 9:56
  Speaker 1: There's tremendous disappointment in Asia that the United States was
• 10:00
  Speaker 1: from the Transpacific Partnership. Now there's a lot of caveats
• 10:03
  Speaker 1: to that, it still had to get through the hill.
• 10:07
  Speaker 1: But how are folks that you're talking to, the officials
• 10:10
  Speaker 1: that you have a mandate from, how are they looking
• 10:14
  Speaker 1: at NAFTA renegotiations right now? Do they have a sinking feeling? Well?
• 10:19
  Speaker 1: What they are. They are watching very identively what's happening
• 10:22
  Speaker 1: uh in the United States, because what they see as
• 10:25
  Speaker 1: lots of different forces pulling in different directions. Those forces
• 10:29
  Speaker 1: are pulling and pushing with equal force, which probably makes
• 10:33
  Speaker 1: many believe that at the center of gravity is not
• 10:36
  Speaker 1: very far away from what we have from the table today.
• 10:39
  Speaker 1: And what they are watching is essentially whether this will
• 10:43
  Speaker 1: lead to greater costs or whether this will lead to
• 10:49
  Speaker 1: greater benefits. And they are looking not just at the
• 10:54
  Speaker 1: overroad n after membership, but they are also looking very
• 10:57
  Speaker 1: attentively at how the US acts the business community, the
• 11:01
  Speaker 1: farmers and ranchers that are relying on the nafter markets
• 11:06
  Speaker 1: also for their experts and for their jobs and for
• 11:08
  Speaker 1: their future growth, how they play their cards, because the
• 11:14
  Speaker 1: sentiment that they have is that the agreement has been beneficial,
• 11:19
  Speaker 1: that the benefits have been greater than what the cost
• 11:24
  Speaker 1: would be of a non naught situation. But again, we
• 11:28
  Speaker 1: are all watching these We're watching in particular these forces
• 11:33
  Speaker 1: that are fighting in the US to find this right's
• 11:37
  Speaker 1: point of equilibrium because we we in that we see
• 11:43
  Speaker 1: probably we tried to read what the behavior would be
• 11:46
  Speaker 1: in the US towards future trade romans. I think this
• 11:50
  Speaker 1: is a good time to come back to Andrew because
• 11:53
  Speaker 1: he recently spent a whole week in Mexico City following
• 11:57
  Speaker 1: the NAFTA negotiations there. He's been covering a very closely
• 12:00
  Speaker 1: for a number of months. Now, be good to get
• 12:03
  Speaker 1: his thoughts, Andrew. Is the result of all this, when
• 12:08
  Speaker 1: when this is all said and done, is this going
• 12:10
  Speaker 1: to result in a net boost for trade or really
• 12:14
  Speaker 1: talking about you know, things kind of maybe moving around
• 12:18
  Speaker 1: but not really changing that much. Well, I think NAFTA
• 12:21
  Speaker 1: is a really important test case for the global economy,
• 12:25
  Speaker 1: and I think the reason that is is that this
• 12:29
  Speaker 1: is probably the first time in decades, perhaps the modern
• 12:36
  Speaker 1: history of global trade, that you have a major economy
• 12:40
  Speaker 1: in the United States of America trying to renegotiate a
• 12:44
  Speaker 1: trade deal with the goal of actually increasing the amount
• 12:48
  Speaker 1: of barriers. So I think it remains to be seen
• 12:52
  Speaker 1: whether that can actually lead to some type of new
• 12:56
  Speaker 1: consensus with Canada and Mexico, or if eventually that just
• 13:01
  Speaker 1: leads to the collapse of the negotiations. So, in other words,
• 13:05
  Speaker 1: is it possible through trade agreements for developed countries to
• 13:10
  Speaker 1: address the type of distributional issues that are Rancher raised.
• 13:15
  Speaker 1: You know, some people might say, actually that it's probably
• 13:18
  Speaker 1: not trade agreements that are the right instrument for doing this.
• 13:21
  Speaker 1: It's probably more of an issue for domestic policy. But
• 13:25
  Speaker 1: I that's how I see NAFTA as a major test
• 13:29
  Speaker 1: case for how trade can sort of be retrenched in
• 13:34
  Speaker 1: the global economy. Ranchi, you play a key role in
• 13:37
  Speaker 1: the World Economic Forums Global Leadership counsel on Trade and Investment,
• 13:42
  Speaker 1: and I appreciate you letting me spend some time with
• 13:45
  Speaker 1: the group last month. Were you in Davos when President
• 13:48
  Speaker 1: she made his speech about China and the world trading system? Absolutely? Yes,
• 13:54
  Speaker 1: And this was a very interesting moment when the kind
• 13:57
  Speaker 1: of so some sort of role reverse uh, when listening
• 14:01
  Speaker 1: to the speech of the U S President and then
• 14:04
  Speaker 1: listening to the speech of the Chinese president. Yes, very interesting, Runch.
• 14:09
  Speaker 1: I actually worked in China for three years when when
• 14:12
  Speaker 1: Dan was our boss, and just thinking about that, the
• 14:15
  Speaker 1: idea that China can be the savior of free trade
• 14:18
  Speaker 1: would strike many people, many China watchers as probably a
• 14:23
  Speaker 1: bit unlikely. How did it get to this point? Well, I,
• 14:27
  Speaker 1: at first I don't think the question is free trade.
• 14:30
  Speaker 1: The question is one of open markets and international cooperation,
• 14:34
  Speaker 1: and it goes beyond a simply free trade. And by
• 14:36
  Speaker 1: the way, I never speak about free trade. I like
• 14:38
  Speaker 1: to speak about open trade because free making the impression
• 14:42
  Speaker 1: to those that are listening that we are advocating trade
• 14:45
  Speaker 1: without any obstacles, which is not true. I don't want
• 14:49
  Speaker 1: trading toxic products, and I don't want trading weapons. On
• 14:52
  Speaker 1: the rest of it, it's open economies that is at
• 14:56
  Speaker 1: the heart of this discussion, and it's the value of
• 14:59
  Speaker 1: international operation to manage issues that have spillovers beyond our borders.
• 15:04
  Speaker 1: And what we're seeing is two different ways of looking
• 15:07
  Speaker 1: at these two dimensions. We are seeing some saying it's
• 15:11
  Speaker 1: better that we retrench beyond our borders, behind our borders,
• 15:15
  Speaker 1: that we look at boosting the prospects for our countries,
• 15:19
  Speaker 1: understanding that doing that requires disengagement from the rest of
• 15:23
  Speaker 1: the world. And there is another view out there that says,
• 15:27
  Speaker 1: the strength of my country can only happen if there
• 15:30
  Speaker 1: is a stronger world and a better managed world. So
• 15:34
  Speaker 1: these are the two confronting views that that I see
• 15:37
  Speaker 1: playing today the different characters around the world. The jury
• 15:41
  Speaker 1: is out, but what I certainly have observed in my
• 15:45
  Speaker 1: over thirty years of working on matters that spill beyond
• 15:49
  Speaker 1: the domestic borders, is that there is a huge value
• 15:53
  Speaker 1: in international cooperation to manage climate change, to manage spread
• 15:59
  Speaker 1: of the ceases, to manage war and conflict, to manage
• 16:02
  Speaker 1: reduction of poverty, and obviously to manage the insertion of
• 16:07
  Speaker 1: our economies in international trade. Have people's perceptions about China's
• 16:12
  Speaker 1: willingness to lead changed or is it simply that that
• 16:17
  Speaker 1: was a terrible week for United States pr Well, I
• 16:21
  Speaker 1: think the China, China's the style of leadership, and you
• 16:26
  Speaker 1: will maybe tell me because you've lived in China and
• 16:28
  Speaker 1: I haven't, But what I have observed is that Chinese
• 16:31
  Speaker 1: the style of leadership has always been very different from
• 16:36
  Speaker 1: say American or European style of leadership. Small discreets is small,
• 16:40
  Speaker 1: pushing and pulling behind the scenes is not necessarily shouting
• 16:45
  Speaker 1: is not a megaphone diplomacy. It's always been quieter. And
• 16:49
  Speaker 1: what I have observed, at least what I saw for
• 16:51
  Speaker 1: the first time in Divorced this year, is a bit
• 16:55
  Speaker 1: more allowed a voice and a bigger voice in China
• 17:01
  Speaker 1: and by China on the international stage, by the way
• 17:04
  Speaker 1: that the speech in divorce was sexceeded by another speech
• 17:10
  Speaker 1: that normally followed another speech by President Ji Jimping at
• 17:14
  Speaker 1: the United Nations in Geneva, also indicating very clearly that
• 17:20
  Speaker 1: China would engage more in supporting U N operations on
• 17:25
  Speaker 1: the ground on please keeping on support for development of
• 17:30
  Speaker 1: the poorer countries around the world. So and it sent
• 17:33
  Speaker 1: two signals in in Davors. It was about the open
• 17:36
  Speaker 1: economy in Geneva. It was about the value of international cooperation,
• 17:40
  Speaker 1: and it did so again in a different way than
• 17:43
  Speaker 1: it had done so in the past. A Rancher and Andrew,
• 17:47
  Speaker 1: thank you so much for your perspective. Benchmark will be
• 17:54
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