Latest / Stephanomics / Global Virus, Global Trade—Global Impact

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Global Virus, Global Trade—Global Impact · Stephanomics

• 0:04
  Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the
• 0:07
  Speaker 1: global economy to you, and this week we're giving you
• 0:14
  Speaker 1: a sneak preview of a day in the life of
• 0:16
  Speaker 1: global trade, an exceptional project we pulled together for a
• 0:20
  Speaker 1: special issue of Bloomberg Markets magazine devoted to trade. I
• 0:24
  Speaker 1: also discussed the long term future of globalization with the
• 0:27
  Speaker 1: economist and author Stephen King. But first we felt we
• 0:30
  Speaker 1: should spend a few minutes on the big story of
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  Speaker 1: the week, which is the global march of the coronavirus.
• 0:40
  Speaker 1: At times like this, markets get nervous, epidemiologists get a
• 0:43
  Speaker 1: lot of calls from the media, and economists attempt to
• 0:46
  Speaker 1: estimate what the impact on the global economy will be,
• 0:49
  Speaker 1: usually without very much to go on. Tyler Cowen is
• 0:52
  Speaker 1: a professor of economics at George Mason University and co
• 0:55
  Speaker 1: author of the very popular Marginal Revolution blog. He's also
• 0:59
  Speaker 1: a regular columnist for Bloomberg. I don't think he's an
• 1:02
  Speaker 1: epidemiologist in his spare time, but he has written some
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  Speaker 1: wise columns on the coronavirus since the outbreak first hit
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  Speaker 1: the news. He's on the line now, Tyler, thanks very
• 1:11
  Speaker 1: much for joining us. Thank you Now, you haven't been
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  Speaker 1: coming up with guestimates for the impact economic impact of
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  Speaker 1: the virus, but you've had something to say about the
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  Speaker 1: kinds of institutions and cooperation you need to respond to
• 1:23
  Speaker 1: these kind of outbreaks. I guess one question is do
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  Speaker 1: you think America's health system is up to the task
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  Speaker 1: of dealing with this if it continues to spread? Well,
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  Speaker 1: if any pandemic comes along, it's very important. How good
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  Speaker 1: is your local public health infrastructure? Do your emergency rooms
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  Speaker 1: have surge capacity? Two? People trust the messages they're receiving
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  Speaker 1: from public health authorities rather than overreacting. Do you have
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  Speaker 1: the ability over longer stretches of time to gear up
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  Speaker 1: vaccine production once you have a vaccine? So the best
• 1:56
  Speaker 1: way to approach remedying the costs of a pandemic it's
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  Speaker 1: not to quarantine everyone, which is usually not going to work,
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  Speaker 1: but to think about response and trust within your system
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  Speaker 1: and just the robust, decentralized properties of how you're going
• 2:10
  Speaker 1: to deal with all of the various small issues. And
• 2:13
  Speaker 1: if you just we're just thinking domestically here. I mean,
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  Speaker 1: there's obviously is a big international anguera, but within America,
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  Speaker 1: you know, we tend to think that faith in government institutions,
• 2:23
  Speaker 1: investment in um public infrastructure has got worse over the
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  Speaker 1: last few years. Is that something that will then sort
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  Speaker 1: of feel feel, particularly the impact of with the spread
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  Speaker 1: of this kind of virus, or do you think actually
• 2:36
  Speaker 1: was still in a fairly good shape. Well, we did
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  Speaker 1: some pandemic planning around two thousand six when there was
• 2:42
  Speaker 1: a possibility that a v and fluid spread, and it
• 2:45
  Speaker 1: turns out that was not a major emergency. But in
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  Speaker 1: some ways we're in a better position than we were
• 2:51
  Speaker 1: I say, twenty years ago. Keep in mind, a lot
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  Speaker 1: of the planning is not just public sector, it's also
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  Speaker 1: private employers. So say, for instance, at schools are shut
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  Speaker 1: down and children stay at home, a lot of parents
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  Speaker 1: can't get to work. Are there robust workforce plans in place?
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  Speaker 1: For instance? And you were asked before you know, how
• 3:10
  Speaker 1: ready are we for this? No one is ever quite
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  Speaker 1: ready for a major pandemic if that turns out to
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  Speaker 1: be the case. And again we still don't know, but
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  Speaker 1: I think there's a lot of improvisation along the way,
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  Speaker 1: and I'm cautiously optimistic that the United States at least
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  Speaker 1: is in a better position than many other countries. Well,
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  Speaker 1: it's interesting you to say that. I mean in China,
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  Speaker 1: obviously there is there's often been concerned, and we had
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  Speaker 1: we saw it with Stars that local officials don't have
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  Speaker 1: the right incentives to get ahead of crisis and certainly
• 3:41
  Speaker 1: to be open about something when it's first starting. It
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  Speaker 1: seems to have have been a bit more transparent in response
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  Speaker 1: to this virus, but the levels of social trust and
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  Speaker 1: the sort of local institutions and not is not necessarily
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  Speaker 1: as high as it is in the U S. Where
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  Speaker 1: do you think China stands on that. Well, they're doing
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  Speaker 1: some things quite effectively at the national level. They're trying
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  Speaker 1: to be transparent. You've probably read the stories about them
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  Speaker 1: trying to erect a hospital in six days in Wuhan,
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  Speaker 1: and that sounds good, but they don't have the doctors
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  Speaker 1: to staff the hospital. Health Care has been one of
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  Speaker 1: China's weakest points for a long time. So I think
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  Speaker 1: mostly they're very badly prepared compared to how well they
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  Speaker 1: do certain other things, like say putting up buildings quickly
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  Speaker 1: or doing high speed rail. If I think from an
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  Speaker 1: economic standpoint, you know, the state of international economic cooperation,
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  Speaker 1: it feels like it's worse than it was. I mean,
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  Speaker 1: the levels of kind of mutual trust between leaders as
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  Speaker 1: worse than it was a few years ago. How's the
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  Speaker 1: international health cooperation? I mean, is that something? Obviously it's
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  Speaker 1: very important at times like this for countries to work together.
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  Speaker 1: I think a lot of the recent international problems will
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  Speaker 1: go away in light of an emergency. If this turns
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  Speaker 1: out to be one. In some ways, it could bring
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  Speaker 1: the United States and China closer together again. So within
• 5:03
  Speaker 1: the United States, pandemics typically have been bipartisan issues. So
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  Speaker 1: there's so much talk about how we're polarized, but the
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  Speaker 1: response so far in this country has been quite transparent
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  Speaker 1: and not a political issue per se. I'm heartened by
• 5:16
  Speaker 1: your optimism. I mean, it's qualified arguments. Some chance, you know,
• 5:21
  Speaker 1: quite a few more people will die. We don't know
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  Speaker 1: what that chance is, and much of that we can't
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  Speaker 1: stop no matter what we do. And of course we
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  Speaker 1: should remember how many many people die of influenza every
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  Speaker 1: year um and become part of our system. I mean,
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  Speaker 1: I guess finally, just we when we again, when we
• 5:38
  Speaker 1: worry about maybe the changes that have happened in the
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  Speaker 1: US and other places in the last few years. You know,
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  Speaker 1: social media we now worry, you know, takes a particular
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  Speaker 1: political trend and then makes it worse, tends to magnify it.
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  Speaker 1: Could it also magnify the downsides of this epidemic, for
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  Speaker 1: by spreading fear misinformation? Is that something we can worry about.
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  Speaker 1: We should worry about it. But I am hopeful so
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  Speaker 1: far that social media will do more good than harm
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  Speaker 1: and does give people accurate information if you know where
• 6:10
  Speaker 1: to find it. I would just suggest to listeners not
• 6:14
  Speaker 1: to jump at scare stories, not to panic. Make sure
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  Speaker 1: anything you're reading or passing along actually is true. If
• 6:20
  Speaker 1: there's anything that makes a response to a public health
• 6:23
  Speaker 1: problem worse, it is false information and panic. And the
• 6:26
  Speaker 1: same thing applies to the many remedies that are already
• 6:30
  Speaker 1: coming online as well. Tyler Cohen, thank you very much
• 6:33
  Speaker 1: for joining us. Thank you m h. Now let's turn
• 6:41
  Speaker 1: to that special project I mentioned for once. We wanted
• 6:44
  Speaker 1: to get past those breathless headlines about trade wars and
• 6:47
  Speaker 1: trade flows to see the nuts and bolts of the
• 6:49
  Speaker 1: global trading system up close. So on a single day,
• 6:53
  Speaker 1: December fourth, last year, reporters around the world went to
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  Speaker 1: a particular place in the global trading system. Watch, listen
• 7:01
  Speaker 1: and learn who went to the banks of the Mississippi
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  Speaker 1: in a French vineyard in the Rhone Valley, the Nigeria
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  Speaker 1: Benin border, and the Panama Canal, the West Bank, a
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  Speaker 1: shopping mall in downtown Tokyo, and a favorite meeting point
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  Speaker 1: for Chinese tourists in Sydney Harbor, all on the same day.
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  Speaker 1: And we learned a lot more than I can describe
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  Speaker 1: right now. But here's a taste from our chief Asian
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  Speaker 1: Economy reporter and the current in Hong Kong. Oh, thank
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  Speaker 1: that noise you hear is the sound of global commerce
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  Speaker 1: in action. The Port of Hong Kong is one of
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  Speaker 1: the biggest shipping junctions in the world. On this morning
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  Speaker 1: in December, it's a buzz as hundreds of employees pour
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  Speaker 1: in for their shift, crane's load and unload containers onto
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  Speaker 1: trucks and chips. Overall, there are six thousand direct employees
• 8:02
  Speaker 1: at the port and in estimated one hundred and eighty
• 8:05
  Speaker 1: thousand in related roads. On this day, there are a
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  Speaker 1: few obvious signs of the trade war between the US
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  Speaker 1: and China. It might look like business as usual, but
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  Speaker 1: Hong Kong has been caught in the middle of trade
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  Speaker 1: and political tensions between the world's two largest economies. And
• 8:28
  Speaker 1: that is not all volumes in Hong Kong have been
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  Speaker 1: on the decline to the last several years, so it's
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  Speaker 1: hard to pinpoint everything on the trade war. There are
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  Speaker 1: other issues here. Peter Levesque is the CEO of Modern Terminals,
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  Speaker 1: one of the companies that runs Hong Kong's port. When
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  Speaker 1: I talked with him, he was about to return to
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  Speaker 1: the US in a different role, but as twenty five
• 8:48
  Speaker 1: years in Asia and makes his perspective valuable. Levesque was
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  Speaker 1: noting that not all of the decline and volumes reflects
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  Speaker 1: the barrage of higher turiffs. There's also stiffer rivalry from
• 9:00
  Speaker 1: person Asia slowing global demand, as well as their rise
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  Speaker 1: of Chinese and regional competition. The uncertainty pieces is something
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  Speaker 1: that businesses don't really like to deal with, and and
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  Speaker 1: you want to do a three and a five year
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  Speaker 1: strategic plan. We're trying to do, you know, plans that
• 9:15
  Speaker 1: last one or two weeks depending on you know, which
• 9:17
  Speaker 1: tweet comes out, and it's very difficult to try to
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  Speaker 1: get a handle on on you know, what to expect
• 9:24
  Speaker 1: and what we're trying to do is just deal with
• 9:28
  Speaker 1: what's in our control. While Hong Kong may no longer
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  Speaker 1: be the merchandise trade conjured for China that it once was,
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  Speaker 1: it remains a vital source of capital and know how,
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  Speaker 1: trading and logistics accounted for around twenty one of the
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  Speaker 1: territories economy in two thousand and eighteen. On the ports
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  Speaker 1: key side, I climbed a crane to watch the operators
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  Speaker 1: doing their jobs. Perched in their cockpits about twelve stories
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  Speaker 1: off the ground. They are pulling and prodding levers to
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  Speaker 1: maneuver containers onto and off of the ships. The guys
• 10:05
  Speaker 1: in the cranes they can see for themselves whether there's
• 10:08
  Speaker 1: a ship underneath or not. And the fewer ships, you know,
• 10:11
  Speaker 1: they certainly talk about that they know that the state
• 10:14
  Speaker 1: of the market is. Of course, Hong Kong's economic relationship
• 10:30
  Speaker 1: with China is about more than just a shipment of goods.
• 10:34
  Speaker 1: Months of political protests have raised questions about the degree
• 10:37
  Speaker 1: of autonomy that Hong Kong is supposed to have and
• 10:40
  Speaker 1: what the political relationship with Beijing will be like the
• 10:44
  Speaker 1: common US. Ben Bland is a research fellow with the
• 10:53
  Speaker 1: Lower Institute, a think tank in Australia. He's also a
• 10:57
  Speaker 1: former journalist in China. I asked him why Hong Kong
• 11:01
  Speaker 1: still retains a key economic role for China. Where it
• 11:05
  Speaker 1: is really important is as a connector for the financial
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  Speaker 1: markets between China and the rest of the world, and
• 11:10
  Speaker 1: particularly given that we've seen these efforts, initial efforts to
• 11:14
  Speaker 1: open up China's capital account to open up the R
• 11:16
  Speaker 1: and B kind of stall in the last five years.
• 11:19
  Speaker 1: R and B stands for M, M and B, the
• 11:20
  Speaker 1: name of China's currency. The nation has been trying to
• 11:23
  Speaker 1: promote the use of it globally, but the currency remains
• 11:27
  Speaker 1: under tighter control than the US dollar. Hong Kong really
• 11:31
  Speaker 1: retains its importance as that key valve, if you like,
• 11:34
  Speaker 1: for flows of capital both out of and into mainland China. Yeah.
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  Speaker 1: I also recently visited the Hong Kong Toy and Baby Fair,
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  Speaker 1: the world's second larger show of its kind. Hong Kong
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  Speaker 1: continues to be a vital cog in that industry. Even
• 11:57
  Speaker 1: though the territory has long ceased to be the world's
• 12:00
  Speaker 1: toy factory, much of the production has merely shifted next
• 12:05
  Speaker 1: door to the province of Gongong in mainland China, while
• 12:09
  Speaker 1: Hong Kong remains the region's banking captain. The message from
• 12:14
  Speaker 1: organizers was upbeat. Trade officials expect the recent Phase one
• 12:19
  Speaker 1: accord to boost export of toys from Hong Kong, and
• 12:23
  Speaker 1: they say the holiday shopping season was good, but you
• 12:26
  Speaker 1: can still sense the competition the port is facing. Chipping
• 12:29
  Speaker 1: cost from shan Jen is chipped in Hong Kong. Ken
• 12:32
  Speaker 1: Quok is the chief operating officer of three zero, a
• 12:36
  Speaker 1: Hong Kong based company that specializes in action figures from
• 12:40
  Speaker 1: popular shows such as Transformers and Game of Thrones. Like
• 12:45
  Speaker 1: so many it makes its goods in mainland China. Now
• 12:49
  Speaker 1: instead of Hong Kong. More of his customers are choosing
• 12:52
  Speaker 1: to have their goods shipped out of Shenzen, which is
• 12:55
  Speaker 1: just across the border in the mainland. Secondary is because
• 12:59
  Speaker 1: most of the our manufacturer shoot out their products in
• 13:03
  Speaker 1: China so that they they can consolidate the groods in
• 13:08
  Speaker 1: China's warehouse and China warehouse off cause there's lower price
• 13:12
  Speaker 1: than Hong Kong. In one way, the toymakers at the
• 13:20
  Speaker 1: trade show have dodged a bullet. The recent deal took
• 13:23
  Speaker 1: tarts from toys off the table, but the exhibitors are
• 13:27
  Speaker 1: still aware of their risk of tariffs may come back
• 13:29
  Speaker 1: later and they are planning accordingly. That means considering where
• 13:34
  Speaker 1: to move their supply chains. I dropped by the booth
• 13:37
  Speaker 1: of good Baby International, a maker of strollers, car seats
• 13:41
  Speaker 1: and other baby products. Amy Goo, the company's general manager
• 13:45
  Speaker 1: for Asia Pacific, says the company has manufacturing in both
• 13:49
  Speaker 1: China and the US, but she has been pitched by
• 13:52
  Speaker 1: officials from Saudi Arabia. The company has also looked at
• 13:55
  Speaker 1: manufacturing options in Southeast Asia light and we are consideringly
• 14:01
  Speaker 1: because it's not an easy move that the change the
• 14:03
  Speaker 1: manufacturing facility to another country, but we are investigating this
• 14:09
  Speaker 1: so it could be a potential area for the new
• 14:13
  Speaker 1: manufacturing base. That theme of the difficulty in shifting supply
• 14:18
  Speaker 1: chains is a recurring one. I actually met an international
• 14:22
  Speaker 1: yo yo superstar at the toy fair. His name is
• 14:25
  Speaker 1: Hans Van dan Elson, and he's also president of a
• 14:28
  Speaker 1: yo yo maker called yo Yo Factory. They're high end
• 14:32
  Speaker 1: yoyo's can fetch up to three dollars. I travel the world.
• 14:36
  Speaker 1: I teach children how to play yoyo. I'm a professional
• 14:38
  Speaker 1: Yoyo instructor. I've been in the Guinness Book three times.
• 14:41
  Speaker 1: Van dam Elson creates and designs his products in Arizona,
• 14:46
  Speaker 1: but the yo Yo factory itself is actually in Shenzhen.
• 14:50
  Speaker 1: I asked him if he's considering moving his manufacturing base
• 14:53
  Speaker 1: somewhere else. I want you to imagine a scenario where
• 14:56
  Speaker 1: you're making a product and you constantly have to you
• 15:00
  Speaker 1: oversee the production and make sure that everything is being
• 15:02
  Speaker 1: made correctly, and you're very concerned about that. But imagine
• 15:06
  Speaker 1: a scenario where the factory is actually selling the product
• 15:09
  Speaker 1: and helping you distribute it. And in my case, I
• 15:11
  Speaker 1: make yo yos. So if the children in China are
• 15:14
  Speaker 1: directly communicating back to the factory and they're complaining, hey,
• 15:18
  Speaker 1: there's a problem, the factory is already on top of
• 15:20
  Speaker 1: any problems that are happening, and so I get the
• 15:23
  Speaker 1: benefit of of that scenario where the quality control is
• 15:27
  Speaker 1: happening right there in China um and there the factory
• 15:30
  Speaker 1: is actually telling me when there's problems, rather than me
• 15:33
  Speaker 1: chasing the factory. And of course I couldn't help but
• 15:36
  Speaker 1: ask him to demo a yo yo. So this is
• 15:40
  Speaker 1: like a very professional Yelio sales for twenty five dollars
• 15:42
  Speaker 1: per hand. And when I say per hand, we actually
• 15:45
  Speaker 1: play with Yoyo's two yeos, you know, one in each hand.
• 15:48
  Speaker 1: Sometimes the yoos actually spin off the string. Okay, so
• 15:51
  Speaker 1: you can play on string a string, you can play
• 15:53
  Speaker 1: the two yalios. You could say that yo yo is
• 15:56
  Speaker 1: a metaphor for what these manufacturers have been through into
• 15:59
  Speaker 1: past two years, swinging repeatedly between the tower of threats
• 16:03
  Speaker 1: and hopes of trade peace. On top of that, the
• 16:06
  Speaker 1: protests in Hong Kong show a little sign of fading.
• 16:09
  Speaker 1: It all adds up to a less certain future for
• 16:12
  Speaker 1: Hong Kong's unique status as a critical economical link between
• 16:16
  Speaker 1: China and the rest of the world. Here's the lower
• 16:20
  Speaker 1: Institute spend bland again. People are less confident about investing
• 16:24
  Speaker 1: in the future because the political relationship is so important
• 16:27
  Speaker 1: to Hong Kong's future. Has long been this bridge, as
• 16:31
  Speaker 1: I was saying, between China and the outside world, and
• 16:33
  Speaker 1: in a different, happier time, that was a great advantage.
• 16:36
  Speaker 1: But now, partly because of the domestic tensions and partly
• 16:39
  Speaker 1: because of the outside environment, the US China tensions. Being
• 16:42
  Speaker 1: stuck between the US and China between the rest of
• 16:45
  Speaker 1: the world, and China doesn't necessarily look that advantageous for
• 16:51
  Speaker 1: Bloomberg News. I am end the current the economics of
• 17:05
  Speaker 1: the Yo Yo there from ender current. I wonder how
• 17:07
  Speaker 1: many of you saw that metaphor coming down the track
• 17:10
  Speaker 1: a mile off now. I mentioned at the start that
• 17:12
  Speaker 1: enders peace from the Hong Kong Docks was part of
• 17:15
  Speaker 1: a special project we did for Bloomberg Markets magazine, chronicling
• 17:19
  Speaker 1: a single day in the life of global trade, and
• 17:22
  Speaker 1: it's well worth a read, and so is the guest
• 17:25
  Speaker 1: essay we also have in that special issue on trade
• 17:28
  Speaker 1: by HSBC senior advisor and former Chief Global economist Stephen King.
• 17:33
  Speaker 1: Some of you might remember Stephen spoke on our panel
• 17:36
  Speaker 1: at the New Economy Forum in Beijing a few months ago.
• 17:39
  Speaker 1: I wanted to talk here in our last episode of
• 17:42
  Speaker 1: the series of Stephanomics about your essay, Stephen, because it
• 17:46
  Speaker 1: raises I think some some really profound questions about the
• 17:50
  Speaker 1: future of the global economy. Thanks for writing it for us,
• 17:53
  Speaker 1: Thanks for being here. We asked a lot of people
• 17:56
  Speaker 1: in the same issue whether they thought we were at
• 17:58
  Speaker 1: peak globalization and lots of important things You're not engaging
• 18:02
  Speaker 1: with that directly in this piece, But you do have
• 18:05
  Speaker 1: somber things to say about the direction that globalization might
• 18:10
  Speaker 1: be heading in. Do you want to give us a
• 18:11
  Speaker 1: very quick summary and then we can get into some
• 18:13
  Speaker 1: of the what lies underneath it. Yes, of course. So
• 18:17
  Speaker 1: globalization is something which I think ten fifteen years ago
• 18:20
  Speaker 1: people thought we're just naturally advanced. Through technological change of
• 18:24
  Speaker 1: one sort from another, we've become ever more integrated over
• 18:27
  Speaker 1: periods of time. But history suggests there are different kinds
• 18:30
  Speaker 1: of globalization. The kind we've been living through over the
• 18:33
  Speaker 1: last few decades is all about building global supply chains,
• 18:37
  Speaker 1: about connecting countries and industries more closely around the world.
• 18:42
  Speaker 1: That might have been the case in the past. If
• 18:44
  Speaker 1: you go back to the nineteenth century, you find a
• 18:46
  Speaker 1: very different version of globalization, which was really associated with
• 18:51
  Speaker 1: it's a horrible word to use, but the agglomeration of activity,
• 18:54
  Speaker 1: so factory has all been built in say the UK,
• 18:57
  Speaker 1: or in parts of Germany or France, and the economies
• 19:01
  Speaker 1: are scale that these factories gained was such that it
• 19:03
  Speaker 1: put industry out of business in countries like India and China.
• 19:07
  Speaker 1: So what you saw in the nineteenth century was a
• 19:09
  Speaker 1: story of some countries posting significant industrial advance and other
• 19:14
  Speaker 1: countries posting exactly the reverse. They became poorer and poorer,
• 19:18
  Speaker 1: they kind of de industrialized, they went back to rural
• 19:21
  Speaker 1: poverty in many cases. So in India had completely de
• 19:25
  Speaker 1: industrialized in this period. Absolutely. So you go back to
• 19:27
  Speaker 1: the eighteenth century, India was one of the dominant producers
• 19:32
  Speaker 1: of textiles around the world, and by around that nine
• 19:36
  Speaker 1: hundred had lost that position completely, largely because of the
• 19:39
  Speaker 1: impact of steam and factory technologies being used, particularly i
• 19:43
  Speaker 1: would say, in England. So the consequence was that even
• 19:46
  Speaker 1: as Europe industrialized, China and India de industrialized, and in fact,
• 19:51
  Speaker 1: you go back to the data, late eighteenth century, China
• 19:55
  Speaker 1: and India together accounted for almost sixty of global manufacturing output,
• 20:00
  Speaker 1: and by was down to about five percent or so.
• 20:04
  Speaker 1: And look, the key to this, I mean, I guess
• 20:06
  Speaker 1: now we want to know because as you point out,
• 20:08
  Speaker 1: there was that model of globalization which kind of increased
• 20:11
  Speaker 1: the gaps between the successful and the unsuccessful parts of
• 20:14
  Speaker 1: the world. And then the more recent period of globalization
• 20:17
  Speaker 1: where actually you had it was more more equalizing, it
• 20:21
  Speaker 1: was more you were dispersing income across across the world.
• 20:24
  Speaker 1: And of course, you know, people might think that sounds
• 20:26
  Speaker 1: odd because we always talk about rising inequality, But the
• 20:28
  Speaker 1: gap between rich and poor countries has got narrowed, has
• 20:32
  Speaker 1: got smaller, even the gap between the rich and poor
• 20:35
  Speaker 1: within countries has tended to get bigger. Yes, it's one
• 20:37
  Speaker 1: of the paradoxes of globalization that the gap between nations
• 20:41
  Speaker 1: has definitely narrowed. It's what happens when you've got China
• 20:43
  Speaker 1: growing it for a while per year, Indo growing at
• 20:49
  Speaker 1: maybe six or seven percent a year. When you've got
• 20:51
  Speaker 1: those kinds of growth rates coming through inevitable, you're going
• 20:53
  Speaker 1: to see some kind of convergence of economic activity. But
• 20:56
  Speaker 1: it equally is true that within countries you've seen this
• 20:59
  Speaker 1: big growth of inequality. And part of that within country
• 21:03
  Speaker 1: story I think might eventually apply across countries too. And
• 21:08
  Speaker 1: the reason for that is that within countries, it's not
• 21:10
  Speaker 1: just about the impact of globalization shutting down factories and so,
• 21:12
  Speaker 1: and it's also about the impact of technology. The technology
• 21:15
  Speaker 1: through robotics and artificial intelligence and sold has led to
• 21:19
  Speaker 1: a huge reduction the number of people employed in a
• 21:23
  Speaker 1: variety of different industries in manufacturing most obviously, but also
• 21:27
  Speaker 1: increasingly in clerical jobs and so on. Um and what
• 21:30
  Speaker 1: happens with these people lose their jobs in those particular
• 21:32
  Speaker 1: industries and then find new jobs, but often the lower
• 21:36
  Speaker 1: rate of pay. So you end up with maybe a
• 21:41
  Speaker 1: limited number of people who are you know, the Facebook
• 21:43
  Speaker 1: founders or the WhatsApp founders or whatever, who do incredibly well.
• 21:46
  Speaker 1: But at the same time there's large numbers of people
• 21:48
  Speaker 1: have been in Once it's left behind. I think what
• 21:51
  Speaker 1: is true within countries may begin to also apply across
• 21:55
  Speaker 1: countries too, because of the impact of robotics in reversing
• 21:59
  Speaker 1: global supplied So we might now go to a point
• 22:01
  Speaker 1: where there's more it's winners and losers across the global
• 22:04
  Speaker 1: economy rather than I mean, the great justification and the
• 22:08
  Speaker 1: case for globalization in the last twenty years has been
• 22:10
  Speaker 1: the kind of convergence we were talking about. The good story,
• 22:13
  Speaker 1: you know, the ex million people who've been lifted out
• 22:15
  Speaker 1: of poverty is always the sort of number one part
• 22:18
  Speaker 1: of the justification or that, yes, the pros of of
• 22:20
  Speaker 1: globalization if we are if if the technology we're seeing
• 22:25
  Speaker 1: now is going to shift us more back to that
• 22:28
  Speaker 1: nineteenth century pattern that you were talking about where that
• 22:31
  Speaker 1: success is sort of concentrated in different parts of the world,
• 22:33
  Speaker 1: because the winners, the winning places are not necessarily going
• 22:36
  Speaker 1: to be the same as they were in the nineteenth century.
• 22:40
  Speaker 1: Quite possibly not. I mean, you'd certainly argue perhaps that
• 22:43
  Speaker 1: parts of North America and Europe would still emerge as
• 22:46
  Speaker 1: winners in the story. It also adds I think countries
• 22:49
  Speaker 1: like China that would emerge as winners from the story.
• 22:52
  Speaker 1: But there are countries and regions around the world that
• 22:55
  Speaker 1: have not really properly engaged with global supply chains as
• 22:58
  Speaker 1: yet kind of ing up to get to be part
• 23:01
  Speaker 1: of that story. But arguably they're not going to get there,
• 23:05
  Speaker 1: because if you're a company thinking of investing internationally, might
• 23:10
  Speaker 1: choose to invest in the country that itself is quite risky.
• 23:13
  Speaker 1: We might instead decide that you can do the same
• 23:16
  Speaker 1: thing at home using robots and AI rather than cheap
• 23:19
  Speaker 1: workers abroad. And if you think about late twenties century
• 23:22
  Speaker 1: globalization was very much a story of capital going in
• 23:25
  Speaker 1: search of that nice combination of relatively cheap but productive workers,
• 23:30
  Speaker 1: and that kind of tied the world together more than
• 23:32
  Speaker 1: have been the case previously. But if it turns out
• 23:35
  Speaker 1: that there are even cheaper robots with nothing in the
• 23:38
  Speaker 1: way of political risk to employ them. Then under those circumstances,
• 23:42
  Speaker 1: it may be that the global supply chains go into reverse.
• 23:45
  Speaker 1: They shrink, they become narrower, and moreover, if countries begin
• 23:49
  Speaker 1: to believe that they can it, one says, break away
• 23:52
  Speaker 1: from globalization, it may be that the kind of rules
• 23:55
  Speaker 1: of the game that we've thought of as being so
• 23:57
  Speaker 1: important over the last few decades, the enthusiasm for those
• 24:01
  Speaker 1: rules begins to break down. Yeah, I was going to
• 24:02
  Speaker 1: ask you about that, because what does happen to the
• 24:05
  Speaker 1: flow of trade in the scenario? I mean, we're not
• 24:08
  Speaker 1: we started we were thinking about this kind of sense
• 24:11
  Speaker 1: of peak globalization. But I guess what you're describing is
• 24:14
  Speaker 1: it's sort of the endpoint of globalization. Has that we
• 24:16
  Speaker 1: all come home, or that we are a lot of
• 24:18
  Speaker 1: the production comes home. Does that make these you know,
• 24:22
  Speaker 1: we're we're handringing over the future of the World trade
• 24:26
  Speaker 1: organization and the weakening effect of things like the US
• 24:30
  Speaker 1: China trade war? Does does technology make those things less
• 24:34
  Speaker 1: important or more important? Well? I think technology potentially is
• 24:39
  Speaker 1: a way of hastening the reversal of globalization that if
• 24:42
  Speaker 1: you happen to be a rich country endowed with large
• 24:46
  Speaker 1: amounts of domestic savings that you can use to invest
• 24:49
  Speaker 1: in robots and AI at home, then those circumstances you
• 24:52
  Speaker 1: could do that without having to worry about building those
• 24:54
  Speaker 1: global supply chains. But I guess the flip side is
• 24:57
  Speaker 1: if you have and as I suppose also did happen
• 24:59
  Speaker 1: in the eighteen hundreds and early nineteen hundreds, if you
• 25:03
  Speaker 1: have a slower flow of goods and services in this environment,
• 25:08
  Speaker 1: you might once again have greater flows of labor. And
• 25:11
  Speaker 1: it is the subtitle of your essay is the Rise
• 25:15
  Speaker 1: of the Robot the March of the migrants. Do you
• 25:18
  Speaker 1: think that is the other side of this time? I
• 25:19
  Speaker 1: think it's quite possible. So one of the huge challenges
• 25:23
  Speaker 1: really for the global economy indefer global governance in the
• 25:26
  Speaker 1: next few decades is the extraordinary demographic change that are
• 25:29
  Speaker 1: taking place. Is not just about aging populations and shrinking
• 25:32
  Speaker 1: populations in parts of developed Asia and parts of Europe
• 25:36
  Speaker 1: and Song. It is also about the enormous growth through
• 25:40
  Speaker 1: baby boomer effects of populations in sub Saharan Africa and
• 25:43
  Speaker 1: also in the Middle East, Now if it turns out
• 25:45
  Speaker 1: that global supply chains go into reverse and people born
• 25:50
  Speaker 1: in these areas feel that somehow they just can't get
• 25:54
  Speaker 1: the economic opportunities within their own countries that they perhaps
• 25:58
  Speaker 1: would previously have hoped for, and I think they will
• 26:00
  Speaker 1: go marching. They will look for opportunities elsewhere. And why
• 26:03
  Speaker 1: shouldn't they, Because if life is tough in the particular
• 26:06
  Speaker 1: area they happened to be living in, they probably will
• 26:08
  Speaker 1: go on the march. And one interesting feature of gain
• 26:10
  Speaker 1: of the nineteenth century is that in the middle of
• 26:13
  Speaker 1: the nineteenth century you had huge flows of people from
• 26:16
  Speaker 1: particularly England and Germany to the US, often because they
• 26:20
  Speaker 1: had very high levels of skills in certain areas, much
• 26:24
  Speaker 1: much larger was a share of the population than what
• 26:27
  Speaker 1: we've seen reason absolutely um. And at the same time
• 26:30
  Speaker 1: that you had a huge number of people going from
• 26:32
  Speaker 1: Ireland to the US for totally different reasons than these
• 26:35
  Speaker 1: were effectively victims of the potato famine who went in
• 26:38
  Speaker 1: very desperate circumstances. And a little later with the nineteenth century,
• 26:41
  Speaker 1: as transportation costs came down dramatically, you had a lot
• 26:44
  Speaker 1: more migrants coming through from southern Europe, from Eastern Europe,
• 26:48
  Speaker 1: who typically were poorer than the people living at that
• 26:51
  Speaker 1: stage in the U S, who in many cases were
• 26:53
  Speaker 1: accused of undercutting the wages of those who who were
• 26:56
  Speaker 1: already there. And so like, the type of migrant changed
• 27:02
  Speaker 1: from being highly skilled in many ways to being people
• 27:04
  Speaker 1: who often came from poorer, less educated backgrounds. Um and
• 27:10
  Speaker 1: of course that created its own separate set of pressures
• 27:13
  Speaker 1: within the countries to which they were heading. UM So
• 27:15
  Speaker 1: when we look at what's happening currently in terms of
• 27:17
  Speaker 1: the flow of people, that's say, across the Mediterranean to Europe,
• 27:20
  Speaker 1: from Africa or from the Middle East, you begin to
• 27:23
  Speaker 1: think the same kind of theme might begin to emerge
• 27:26
  Speaker 1: in the much bigger way in decades to come. One
• 27:29
  Speaker 1: thing I've always liked about you, Stephen. In a world
• 27:31
  Speaker 1: of economists who are constantly being asked to look ahead
• 27:34
  Speaker 1: and make forecast, you are unapologetic and often looking backwards
• 27:38
  Speaker 1: and looking back into history for insight, which I think
• 27:41
  Speaker 1: is quite a good place to look. Stephen King, thank
• 27:44
  Speaker 1: you very much, Thank you, thanks for listening to Stephanomics.
• 27:56
  Speaker 1: This is the end of the current series. I'm sorry
• 27:59
  Speaker 1: to say, but promised we'll be back in early April,
• 28:02
  Speaker 1: and if I do anything really exciting, you may find
• 28:04
  Speaker 1: a few bonus episodes popping up on the Stephonomics feed.
• 28:07
  Speaker 1: Before there, you can always see the latest news and
• 28:10
  Speaker 1: analysis from Bloomberg Economics on the Bloomberg News website or
• 28:13
  Speaker 1: we're following at Economics on Twitter. You should especially check
• 28:17
  Speaker 1: out our stories for that special issue of Bloomberg Markets
• 28:20
  Speaker 1: Magazine on trade. The Hong Kong story in this episode
• 28:23
  Speaker 1: was reported and written by Ender Current. It was produced
• 28:26
  Speaker 1: by Magnus Hendrickson and edited by Lucy Meekin and Scott Lamman,
• 28:30
  Speaker 1: who is also the executive producer of Stephonomics Special Thanks
• 28:34
  Speaker 1: to Stephen King, Tyler Cowen, and Carter Woolley. Francesco Leady
• 28:39
  Speaker 1: is the head of Bloomberg Podcast