Latest / UK Column Radio / Davos 2025: The West Finally Admits The "Rules-Based Order" Was A Lie | Silk and Steel

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Davos 2025: The West Finally Admits The "Rules-Based Order" Was A Lie | Silk and Steel · UK Column Radio

0:01
Hello and welcome to another episode of the Silk and Steel
0:05
podcast. I'm your host Carl Zaa.
0:08
Well, everyone, we have back on our show Doctor Warwick Powell
0:12
from Australia, who is an expert in geopolitics and specialized
0:19
in China. And we have so many topics to
0:25
talk about. Doctor Powell, because as you
0:29
mentioned it, it seems like the first, the last time we talked
0:34
it was I think it was only two weeks into the first month of
0:38
2026. You already felt like half year
0:42
have passed and now it feels like a whole year have passed
0:45
and we're barely through January.
0:48
Is there anything you like to start because there's so many to
0:53
talk about. It, it look, it might be
0:55
worthwhile just doing a quick recap of the year that's been.
0:59
I mean, the, the, the, the four weeks that has been right and
1:04
and the probably the most significant events and we might
1:07
kick off from here from when we last caught up is Davos and what
1:13
happened around Davos. So prior to Davos, Mark Carney,
1:18
the Prime Minister of Canada, made a visit to China and in
1:22
some regards undertook what is a reorientation, a vault phase, a
1:28
strategic realignment or what have you.
1:31
But what was probably most important out of that was a
1:34
recognition by Carney that the environment for Canada had
1:40
changed so much and so permanently that a fundamental
1:45
strategic readjustment was needed.
1:48
So whatever was going on around Canada was no longer viewed as a
1:53
temporary issue. It was a an issue of structural
1:58
significance. And that's amazing because the
2:01
United States not only has a land border with Canada, a very
2:05
long land border and one that has been peaceful for a long
2:08
time, but is also the destination for about 70% of
2:14
Canadian exports. It's also integrated into
2:18
complex supply chains, right? So motor vehicles that are
2:23
assembled in America often have paths that go backwards and
2:27
forwards as they make their way through production systems in
2:32
the most efficient way to ultimately become a motor
2:35
vehicle that drives off the lot. And so untangling all of those
2:38
things and putting all of those issues on the table in a sense
2:41
at risk in a year when the Canadian American and Mexican
2:47
trade agreement originally inked by Trump version 1.0, that's up
2:53
for re re discussion six years on, right?
2:55
So all of this is is in flux. And for Mark Carney to take the
3:00
view and clearly it wasn't a rash decision.
3:03
It was a considered intervention to say, look, we can't go on the
3:10
way things have been going on. We need to recalibrate our
3:15
economic relationships. We need to diversify for the
3:18
long term interests of the Canadian economy.
3:21
We need to reduce our export dependency and risks on one
3:25
market alone. And China is going to be
3:29
important for that. And it's important because
3:32
Canada has agricultural products to sell.
3:37
Canada also has energy to sell, so Canadian oil has been growing
3:42
in terms of its export profile with China, and in the medium
3:46
term, Canadian LNG is likely to also become available for the
3:50
global market as the infrastructure is finalized.
3:54
On the other hand, Canada clearly is looking to transform
3:59
its economic foundations with new technologies, in particular
4:03
EV. So having played along with the
4:06
United States on tariffing Chinese EVs for a while, that
4:11
changed as well. Not in a huge, huge way.
4:14
You know, I mean, the, the, the, the quota levels were almost
4:16
50,000 vehicles, right? In a market that takes almost 2
4:20
million cars a year, right? So we're not talking big.
4:23
But what's important about this is the symbol or the signal that
4:29
Canada is now open for business and that it wants to talk
4:33
earnestly and seriously about collaboration, meaning some
4:38
trade. But in the end, Canada is
4:41
looking for opportunities to bring Chinese know how and
4:44
capital into the Canadian market to build the industries of the
4:48
future for for Canada. I think that that's pretty
4:51
interesting, right? And then off he trots to Davos.
4:54
So he goes from Beijing to to Switzerland and, and delivers,
5:00
you know, this speech now for people in the West, it was a
5:04
speech for the ages because it in some ways it, it, it said
5:10
what people in the global S have known for decades, right?
5:14
That the global international order, the liberal rules based
5:17
international order actually only worked in the interests of
5:20
a small number of countries and a minority of the world's
5:22
population. And that it was also over.
5:26
So it was an obituary firstly, but the second thing was that it
5:31
was also, it wasn't Amir culpa, but it was a recognition that
5:36
Canada had been a significant beneficiary of what was a lie.
5:40
OK, so Canada was a beneficiary of a system that hid behind the
5:45
facade. And the reason why his speech
5:47
was significant wasn't because suddenly somebody had a
5:51
revelation about something unknown.
5:53
It was because someone from inside the club belled the cat.
5:58
Could you imagine somebody who's who, who's been a beneficiary of
6:03
this set of arrangements for decades, suddenly breaches the
6:08
code of silence? The pretense that this club was
6:13
actually, you know, in the interests of everybody, that
6:16
this liberal international order was good for the world, when of
6:20
course, in fact it was good for some but not always good for
6:23
some. And eventually a breaking point
6:26
has appeared. So I think that that's
6:27
interesting that that Carney essentially broke ranks, but I
6:31
don't think he broke ranks by himself.
6:34
He didn't break ranks in a way that surprised anyone else.
6:38
He broke ranks in the context of pressures that had been building
6:42
not only economically but geopolitically around issues
6:46
like Greenland, right? So the Greenland issue I think
6:50
was almost like the geopolitical straw that broke the camel's
6:54
back that basically said, look, this alliance thing, it was OK
6:59
whilst everyone else was the target, right?
7:01
It was good to be in the club whilst we were extracting
7:04
resources and exploiting everyone else.
7:07
But my goodness, we've now become the target ourselves, and
7:11
that's not on. So Carney coordinated this with
7:16
Macron, with Mertz, with Starmer and others.
7:20
And within hours of his speech, the social media from all of
7:28
these Western capitals was pumping out the message.
7:32
So I think it was a coordinated response in a way to say to the
7:36
North Americans to to Washington, look, enough's
7:40
enough. This has just gone too far.
7:44
Now The thing is about that, Karl, is that I don't think this
7:48
is suddenly a, a road to Damascus type of conversion
7:53
amongst the, the, the global N, the secondary, the two ICS of
7:59
the global N. But what it is though, is a
8:04
recognition by the two ICS of the global N, the two ICS of the
8:09
American Imperium, that no matter how much loyalty they
8:14
display, no matter the fealty and the amount of daddying and
8:19
all of that, that daddy ultimately could treat them like
8:24
rubbish when and if daddy felt like it.
8:27
And that was a shock to the system.
8:30
And so they now talk about this idea of middle powers, right?
8:34
Notice it's not about global multipolarity and all those
8:38
things. It's literally the, the, the
8:41
global N sub imperial to IC saying we, we, we, we've got to
8:47
band together. We've got to hold our nerve now
8:50
because the, the, the country that we basically ran behind all
8:56
of these years has turned on us. And, and so whilst I think it is
9:02
revelatory that someone from inside the club build the cat,
9:06
it's not the Road to Damascus discovery that perhaps some
9:11
people would like to think it is.
9:14
So it's an interesting time, isn't it?
9:18
Yeah, indeed. And now, you know, following on,
9:22
we saw EU, you know, Wunderling went to India and EU signed a
9:29
actually a groundbreaking deal, trade deal with India.
9:32
Of course, this is everybody understood this is a response to
9:37
Trump and you know, India and EU that have agreed to broadly
9:42
lower tariffs going both directions.
9:46
And interestingly, EU never raised the issue of India's
9:51
purchasing Russian oil this time, you know, like they
9:54
because whenever they talk about their relationship with China,
9:58
they always talk about, you know, talking down to China.
10:02
It's like you, you, you are enabler of Russia, you are
10:07
enabler of war. And This is why this is a huge
10:12
impediment of, of progress between our bilateral
10:16
relationship, because you are enabling our enemy.
10:20
And and and this time they said nothing of the sort because, you
10:24
know, we to be understood, they both Russia, both EU and India
10:29
has been under enormous pressure under the new Trump terror.
10:35
And and this is so, so, yeah, in a way, you know, Trump is a
10:40
shaker and maker of this world. He's making a lot of things
10:44
happening. Look, I, I, I think Trump is
10:47
contributing to globalization 2.0 actually.
10:52
So rather than contributing to the destruction of
10:55
globalization, what he's doing is he's accelerating a new
10:59
chapter of deepening networks, which are actually multi polar
11:04
or multilateral and sometimes bilateral as well.
11:07
So, you know, the Canada, China reconfiguration.
11:11
Interestingly enough, Carney didn't talk about China and
11:15
being a great enabler either. And so suddenly all of these
11:18
things that were impediments one day are inconvenient the next
11:22
and are no longer ever mentioned.
11:24
It tells us something about the nature of politics.
11:26
But this EU India trade deal is very interesting because it's
11:32
been 2 decades in the making. It's a serious trade deal in
11:36
that it didn't just happen over the back of a napkin.
11:40
It wasn't the von der Leyen Trump meeting in Scotland which
11:46
announced big numbers but actually had nothing to back it
11:49
up. It was a substantial set of
11:52
agreements that have been negotiated for a long time at an
11:56
official level, bureaucratic level.
11:58
The fact that it had come to pass now is obviously catalysed
12:02
by what's going on in terms of transatlantic relationships and
12:07
disruptions of global trade generally.
12:09
The second thing that's interesting about it is that it
12:12
comes on the back of an agreement that the EU entered
12:15
into with the South or the Latin American countries only a week
12:19
or two earlier or just before Christmas.
12:21
So in the space of a month, as you say, what feels like a year,
12:25
but in the space of a month, the EU has executed free trade
12:28
agreements with Latin America and India.
12:33
And so that's that case. The other thing about this is
12:37
that India itself has been incredibly reluctant to enter
12:41
into free trade agreements because of domestic political
12:45
concerns, mainly in the agricultural space, but also in
12:48
terms of protecting other industries.
12:50
So the politics of the effects of trade opening has always
12:55
weighed heavily on Indian administrations over the course
12:59
of the last so many decades. So much so that, as you'll
13:02
recall, you know, sitting there in Southeast Asia, that six
13:06
years ago when ASEAN pulled together after many years of
13:10
negotiations, this Regional Comprehensive Economic
13:14
Partnership, the free trade agreement for the ASEAN member
13:18
states, plus China, plus Japan, Republic of Korea, New Zealand
13:22
and Australia to become what was the world's largest free trade
13:26
agreement. India was actually involved in
13:29
all of those discussions until the day the signatures were due
13:34
and India backed out. It was concerned about the
13:37
effects of these agreements on Indian agriculture, on Indian
13:41
farmers, etcetera, etcetera. I get the politics of all of
13:45
this. Handling all of this stuff is
13:47
difficult. So India's always had a
13:49
protectionist strike. But there's India signing up,
13:52
right? India also quietly, about two
13:55
weeks ago, 3 weeks ago, dropped restrictions on Chinese
13:59
companies bidding for Indian government projects very
14:02
quietly, no big deal. Now those restrictions have been
14:05
in place for five years, but they got dropped because they
14:09
needed the capabilities and the know how of major Chinese
14:13
engineering firms basically to come and build infrastructure
14:18
that India actually needs for its own economic development.
14:21
So India itself is starting to under some pressure, both
14:25
domestic and also internationally to have to find
14:29
new pathways and to and, and what I think is interesting
14:32
about what's been going on is how countries that had resisted
14:39
some of these decisions for quite some time, I think people
14:42
like you and I might have said, you know, some time ago, they're
14:46
going to have to deal with this. This is unavoidable.
14:49
These issues are just going to keep pressuring them.
14:51
And of course, they ignored it. They didn't want to deal with
14:54
it. Make the big choices, but force
14:58
of circumstance is so powerful that in the end they have to do
15:03
something, you know, and I guess some people will criticize them
15:07
for being slow to the party. But at the end of the day,
15:10
reality is a very powerful force.
15:12
And, and it is remarkable that the European Union, you know,
15:17
the Brussels leadership and, you know, the coterie of national
15:21
leaders that backs them up, forgot to talk about India
15:25
buying Russian oil that Mark Carney didn't mention.
15:30
You, you know, China's supposed role as the great enabler.
15:34
And they're all now having to get on with reconfiguring their,
15:38
their own positions with themselves.
15:41
Because this partly goes to the issue of who on earth are we,
15:43
doesn't it? So suddenly, you know, we, we
15:47
were the, the, the two IC of the American imperium.
15:51
We've now realized that the American Imperium is going to
15:53
treat us like dirt whenever it feels like it.
15:56
It was OK when we treated everyone else like that whenever
15:58
we felt like it. But now that it's turned on us,
16:01
you know, we don't like it. And they're having to
16:03
reconfigure themselves. This is a very, very fluid
16:06
moment, potentially dangerous, but nonetheless one in which the
16:12
the seeds, I guess, of accelerated multipolarity
16:16
globalization 2.0 as I sometimes call it, a well and truly in
16:20
place. I think you actually have raised
16:25
the issue that for Europe to achieve true independence they
16:30
need to achieve energy independence.
16:32
And right now, since they have been cut off from cheap Russian
16:36
energy, they have been increasingly reliant on the very
16:40
expensive LNG import from United States.
16:44
And so they are, there's a urgent need for Europe to find
16:49
alternative source of energies. They, if there were, if they're
16:52
serious about reducing their dependency on the United States,
16:55
You know, you can't, you can't be, you know, claim that you're
16:58
going to be independent of US when you depend on US for
17:02
energy. You know, like with the basis of
17:04
your civilization. Go ahead.
17:06
Sorry. Well, no, look it it.
17:08
And this goes to the heart of it because you know what, three
17:12
years ago, well, firstly there was the the sanctions, right?
17:16
We're going to, you know, cut off Russian gas, etcetera,
17:18
etcetera. And that's been a slow unfolding
17:22
process. Then of course Nord Stream got
17:24
blown up, you know, and it, it really forced the hand of
17:28
European in industry to find alternative sources.
17:34
And you know, surprise, surprise, one of the major
17:37
alternatives to Russian gas was American LNG.
17:40
Now, LNG shipped across the oceans is not cheap.
17:44
It's a hell of a lot more expensive than LNG shipped via
17:47
pipe. So it's a more expensive product
17:49
landed. And that of course has flow on
17:52
effects on industry, on households, etcetera.
17:54
And we know what they are, all right.
17:56
But we're now reading reports, you know, in, in, in, in, of all
18:00
places, the Financial Times and other mainstream Western media
18:04
publications where European leaders are saying, I think
18:08
we've become a little bit too dependent and exposed to
18:12
American LNG and we're going to need to do something about this.
18:16
I mean, I don't know whether to laugh or to cry sometimes when
18:19
you read this sort of stuff because it's not as if it wasn't
18:22
predictable. But in any case, there, there we
18:26
are. The European leadership is now
18:30
coming to grips with a reality that they themselves made in the
18:34
name of, you know, that the Ukraine, Russia and all those
18:38
sorts of things, you know, they cut themselves off.
18:42
They bragged about how they were weaning themselves off Russian
18:45
gas. You know, you know, that's the
18:47
politics and sudden and, and how they're going to be, you know,
18:50
we're going to be independent of that.
18:52
You know, the the Russians who despite the fact that they've
18:54
never cut our gas off, you know, hold us over a barrel.
18:58
You know, we're now, we're now free of that, aren't we?
19:00
Good. Three years later, the reality
19:03
of being held the ransom by American LNG is dawning on them.
19:07
Now, what do they need to do? Well, they ultimately need to
19:11
have a as quick and as low cost a pathway to energy sovereignty
19:17
as possible. Now that's going to involve a
19:21
diverse range of energy sources. I don't need to buy into the
19:25
debate about renewables versus hydrocarbons and all of that.
19:31
I don't really care, right? Bottom line is, is that whatever
19:34
is engineeringly feasible and financially viable basically is
19:41
what they need to do. And in part, not entirely, but
19:45
in part that's going to require fast tracking a massive amount
19:50
of sovereign energy capability by way of buying renewable
19:57
energy technologies from China. Surprisingly not.
20:02
We now have a number of European states, including the UK,
20:05
talking about massive wind projects, you know, ironically,
20:10
coming off the back of President Trump's speech at Davos, which
20:14
talked about how the Chinese do nothing but sell wind turbines.
20:17
But he's never seen one in China anyway.
20:20
Actually, I can imagine in, in April, when he visits China,
20:25
You, you, you'll remember that when President Macron visited
20:29
China a few weeks ago, President Xi took him to Sichuan and
20:36
showed him the major irrigation projects, right?
20:39
As an example of Chinese historical interactions with
20:42
nature. It wouldn't surprise me if a
20:46
part of President Trump's trip will see some meetings set
20:51
against the backdrop of of of wind have turbines, you know,
20:57
just, you know, for, for a bit of atmosphere.
21:01
And because I think that that that folk in Beijing will be
21:07
concerned that President Trump is is under the misapprehension
21:13
that China only sells wind turbines but doesn't use them
21:16
themselves. And I'm sure they would like to
21:18
ensure that President Trump is not misled by others and their
21:22
misinformation. So this would be a great way of,
21:25
of making sure that that was the case.
21:28
So they're going to need to do that.
21:30
But Doctor Powell, how how would you respond to the US Commerce
21:34
Secretary? Let Nick's claim that why would
21:39
we even need to invest in, you know, so-called sustainable
21:44
energy when united here in United States?
21:47
We have plenty of hydrocarbons, we have gas, we have oil, we
21:51
have everything we need. Why do we need to invest in
21:54
solar and wind when we already have oil?
21:58
Well, if I was the Europeans, the first question I would be
22:01
asking now is the extent to which I can maximize my
22:05
sovereignty, my energy sovereignty, right?
22:08
That's actually the big question, not whether or not
22:11
Russia's got lots of gas or the United States has lots of gas,
22:16
they both do. But what pathway do I need to
22:19
forge to ensure that I am in the strongest energy sovereign
22:24
position I possibly can be? It doesn't matter what Lutnick
22:29
says. Lutnick's proposition is
22:33
contrary to advancing the interests of energy sovereignty
22:37
in Europe. So they conflict.
22:40
So yeah, look, Lutnick's got plenty of LNG.
22:42
They want to sell lots of it, I get that.
22:46
But it's inconsistent with a priority around energy
22:49
sovereignty. So at some point, you know, the
22:53
oil and the water don't mix, right?
22:54
So the Europeans, if they want to reduce their dependency on
22:59
the United States, and they clearly do, right?
23:01
They clearly have come to the recognition and the realization
23:05
that that exposure that they now have is far greater than they
23:10
really want, right? It actually creates risks they
23:14
need to shift. Now they can get LNG from other
23:16
places. Of course, Australia is one of
23:19
the countries that could sell them some LNG as well, so that's
23:22
a plug for the Australian LNG industry.
23:25
But but in the end, they also need to invest in other kinds of
23:30
technologies. As I said, I don't need to buy
23:32
into the argument about renewables versus hydrocarbons
23:37
and all of that. The European engineers and
23:39
others can make their own decisions on it, but it seems
23:42
like that one of the critical issues is not any engineering
23:46
feasibility and financial feasibility, but whether or not
23:49
it contributes to energy sovereignty.
23:52
And if it doesn't contribute to energy sovereignty, you need to
23:55
have a very, very good reason why you're doing something.
23:59
And, and so I think we're going to see, you know, obviously lots
24:03
of wind, some solar. We'll probably also start to see
24:07
in Europe again, the the hasting or the acceleration of projects
24:13
around some new nuclear capabilities.
24:17
They would be well advised to speak to folk in China about
24:20
that as well, given that they're not going to speak to the
24:23
Russians about anything, right? Take that as as a precondition.
24:28
So they'll speak to the Chinese and you know who are developing
24:33
some very interesting modularized or small format of
24:36
solar nuclear capabilities. And in the longer term, I think
24:42
the Europeans are also starting to look at the a more pragmatic
24:46
attitude to bringing Chinese know how and capabilities to be
24:51
operational in Europe itself. And so we have Mertz, for
24:56
instance, talking about needing or or Macron talking about more
25:00
Chinese investment in Europe, right?
25:02
So again, reality begins to assert itself.
25:05
Europeans ultimately, you know, need to have resources and
25:09
capabilities in their own arena. Some of those knowledges and
25:13
technologies have to come from elsewhere.
25:16
Work with the people who've got them.
25:18
Build your own capabilities and your sovereign infrastructure
25:24
and give yourself the best shot. The other interesting one, by
25:26
the way, Carl, again going to this question of sovereignty is
25:31
shifts in the information architecture environment, right?
25:34
So one of the very interesting things about the AI space is
25:38
that there's been a massive amount of downloads of Chinese
25:42
open source AI models in Europe, right?
25:44
So very significant number. So if you go to Hugging Face and
25:49
look at their their data, you'll see that a very large number of
25:53
downloads have been made from Europe.
25:55
In other words, European entrepreneurs and others are
25:57
experimenting a lot using Chinese open source AI, but
26:02
they're not commercializing them because at the moment the
26:06
regulatory arrangements in Europe favour private models,
26:13
proprietary models, because someone can be held to account
26:15
for them. Whereas open source models, you
26:17
can't be right. So the corporations want to be
26:21
able to essentially push off responsibility to the
26:25
proprietary model provider. And that at the moment is
26:28
actually holding the Europeans back from really taking
26:31
advantage of the downstream potential of downloading and
26:36
running Chinese developed AI models.
26:40
So it's an example of the struggles that that the European
26:43
Union faces as it seeks to become an A, a, a power in and
26:49
of itself, as opposed to being an appendage of a transatlantic
26:54
power structure. Wow, how the table have turned
26:59
because the the flow of technology and capital used to
27:03
be the other way, you know, from the West to the east.
27:06
I remember the first nuclear reactor in China was actually
27:10
set up as a joint venture between France and China in, in
27:15
the Pearl River Delta. And, and now, as you mentioned,
27:19
China has leapfrog ahead. They, they, they have done some
27:25
great research on the thorium nuclear reactor, which which
27:30
offer great potentials. And, and same, same goes for AI.
27:34
Of course. You know, you, you right now the
27:36
only game in town in terms of AI is really Chinese and American.
27:41
And by Chinese and American, you know, you have to keep in mind
27:45
in the United States, most of the top AI talent are Chinese.
27:50
There are also ethnic Chinese, you know that the most of the
27:53
world's top AI talents are, you know, they're not even Chinese
27:58
who are born and raised in America, but Chinese who
28:00
graduated from Chinese universities straight out of
28:05
mainland China. Yeah.
28:07
And and speak of energy, EU and and India.
28:13
I remember there's a viral polls that going around on X someone
28:19
was talking about how India has leapfrog ahead on
28:22
electrification of the country. But what it omits to mention is
28:27
that it was possible only because the, the Chinese, the
28:33
affordable Chinese solar panels have made it possible for, for
28:38
India to, to gain rapid adopt adaptation.
28:41
And, and, and, and it's also because India has a really weak
28:47
energy infrastructure to begin with.
28:49
So they they now can just more easily switch to, to, to to
28:54
embrace the solar base energy grids.
28:59
I saw that report, Carl, and it, it was very interesting because
29:02
it, it tried to do 2 things and look at a certain level.
29:06
I think that there's some merit in, in, in the story in that it
29:09
talked about the electrification of India and the electrification
29:13
of India by way of clean energy. And it then and, and that's
29:18
happening. It then compared India's current
29:23
process and rate of clean energy electrification with China 2012.
29:28
And it did that on some methodological argument to say,
29:32
well, that's roughly the comparable economic development
29:34
levels. But of course it's the wrong
29:36
baseline because the because in 2012, the cost of, you know,
29:41
clean energy systems was considerably higher than they
29:43
are today. But be that as it may, it also
29:45
tells us something about the dynamics of again, you know, of,
29:49
of how Indian domestic politics in a sense plays its way out
29:56
through these sorts of processes because it would actually be
30:00
much easier in a certain sense for India.
30:03
As I say, look, you know, we actually did again, because
30:06
we've got issues in our own electricity network.
30:10
Our most effective pathway to electrifying the country is
30:14
rapid scale micro grids, right? Not big poles and wires, but
30:19
lots of micro grids, you know, tackling user base of 20 to
30:23
50,000 people or big industrial estates or what have you.
30:29
And the best way to do that is turn these solutions out of
30:31
China. And that's what we're going to
30:33
do because the end outcome, right, right.
30:36
The end outcome is, again, a distributed energy network,
30:40
which is very resilient and enhanced energy sovereignty for
30:45
a country. So but the politics of India
30:50
means that it kind of just has to do these things on the quiet,
30:53
you know, I guess that's what it is.
30:56
But look, if the end result, Carl, is that a place like India
31:01
is able to successfully electrify and deliver stable
31:06
electricity across vast waves of the country, that's great for
31:10
people and it's great for industry as well.
31:12
And if India can accomplish that, it will, you know, help
31:18
consolidate the processes of global multinodal development or
31:24
multi polarization. And, and I think when you're
31:29
dealing with a country of, you know, 1.4 billion people, now
31:34
the largest country in the world, many of whom continue to
31:38
live in poverty, I think we should all be cheering on those
31:44
efforts. And because those efforts will
31:47
also spill over into the economic development of
31:51
Southeast Asia, Central Asia. And as that process unfolds, it
31:59
also lays the groundwork for reduction of, of economic
32:04
stresses, which contributes to cross-border tensions and
32:08
hopefully creates the, the, the economic base for a more
32:13
functional set of security architectures, right?
32:19
So we start to intertwine energy security and prosperity, a bit
32:29
like what the SCO is starting to do, by the way, right.
32:31
So the SCO, the Shanghai Cooperation Organization was
32:35
essentially a security network sharing information, dealing
32:38
with terrorism, extremism, etcetera.
32:42
And at its last meeting late last year, you know, the famous
32:45
meeting in, in what, 10s in, they actually announced a whole
32:50
bunch of collaborations on energy and transport, right?
32:55
So, you know, because there's an understanding that you paste
33:00
these things together and it actually creates a fabric and a
33:05
fabric really does tie, you know, the participants together
33:09
in ways where their interests are Co constituted.
33:13
And it reduces the reasons for there to be conflicts and
33:18
reduces the amount of space in which third parties can try to
33:22
niggle away and and create tensions and conflict as well.
33:26
So, I mean, I certainly hope that India is able to fast track
33:30
its electrification and because that is the foundations of its
33:34
own development. But why would Trump, you know,
33:41
like a lot of these changes we saw in the first month of the
33:45
January, January is essentially being pushed by Trump policies.
33:50
But why would Trump sabotage some of these most most
33:54
important relationship for United States?
33:56
You know, for example, US Canadian relationship which has
34:00
always been very close and mutually beneficial.
34:04
USA, lot of U.S. companies that move production to Canada
34:08
precisely to take advantage of the cheap Canadian energy.
34:12
You know, China, Canada has a lot of cheap hydro hydropower
34:17
and they had not that they also have the tar sand.
34:21
And why why why is why, why did Trump throw a wrench into that
34:28
relationship? I mean, like, I can't understand
34:31
Trump's move toward countries like Venezuela, right?
34:34
Trump, Trump, Trump, Trump's move toward Venezuela.
34:37
And now he's pressuring Mexico to also cut oil shipment to
34:41
Cuba. It's basically he's true trying
34:43
to starve out Cuba to you know, like this is the energy.
34:49
You know, he's he's using energy like hostage, you know, he's
34:53
taking Cuba hostage by cutting off the two most important
34:58
source of energy for for Cuba. One is Venezuela, one is Mexico.
35:04
He's trying to starve out Cuba, maybe causing regime change,
35:08
which has always been a political of United States
35:12
government for a long time. Oh, why Canada?
35:15
Why is he going after Canada? Look there, there is something
35:20
very unusual about this in that it it defies conventional
35:27
rational explanation, but it goes back.
35:30
Also remember at the beginning of this second term, President
35:33
Trump talked very explicitly about absorbing Canada into the
35:38
United States as the 51st state. He then, of course, has extended
35:43
his territorial ambitions N to Greenland.
35:46
And there is ongoing discussions about American what is if
35:51
essentially de facto territorial control over parts of the Latin
35:56
American continent, particularly those towards the north.
36:01
So the So the Trump administration does have a sense
36:05
of territory as part of its immediate jurisdiction of, of
36:13
direct authority. So that's the first thing.
36:17
It, it, you know, I often say it reminds me of a dog marking its
36:20
territory, right? And, and, and I get the sense
36:24
that there is a little bit of that in, in all of this.
36:28
The second thing is that I think President Trump actually has a
36:32
very clearview about what he believes are the fundamental
36:39
causes of the problems that America faces today.
36:44
We can put aside what he thinks the problems are for the time
36:47
being, but the principal causes are essentially twofold. 1 is
36:52
that third party countries have been taking advantage of
36:55
America. They've been free riders,
36:59
whether it's Europe in relation to defence, whether it's China
37:03
in relation to trade, and whether or not it was Canada and
37:07
Mexico also in relation to trade, right?
37:10
All these American companies took good American jobs and
37:13
things and took them over the borders.
37:15
So there's a sense of America being a victim to these
37:20
countries and American benevolence has been taken
37:22
advantage of and Trump's going to put them into that as well.
37:26
Then of course, there are the domestic enemies, whether it's
37:30
cultural Marxism, whether it's workism, whether it's this or
37:33
that, right? But there's, but there's
37:34
whatever it is domestically that aligns with a particular sense
37:38
of what it is to be genuinely American.
37:42
And and so you know what, what's the policy response?
37:46
Well, the policy response is largely a violent lashing out
37:52
and an attempt through the imposition of force or the
37:55
threat of the imposition of force, to get your way when so
37:59
many of these things could easily, I think, have been
38:01
accomplished without any public displays of of force in
38:09
potential. There wasn't a need to bloviate
38:13
about anything for America to massively increase its presence
38:17
and de facto control over Greenland, for example.
38:21
I suspect it could have been accomplished with about two or
38:24
three phone calls, right? That would have happened very
38:27
quietly and, and, and all that people would know is that
38:31
there's just a few more planes flying troops and and equipment
38:37
into Greenland and that's about it.
38:40
In other words, United States could have accomplished all of
38:43
its so-called strategic objectives really without any of
38:46
the, the soft power, you know, expenditure that, that he's had
38:53
to go through. But I, I look, I, I tend to
38:56
think that by and large, President Trump is a, a
39:01
reflection of a, a, a, a body politic, a, a, a, a, an elite
39:08
structure that is experiencing A chronic case of displacement
39:14
anxiety. And that the only tools that
39:18
they no, 'cause let's not forget, 35 years of American
39:22
primacy institutionally strips you of the tools that you need
39:28
to navigate a more complex environment where bullying your
39:32
way around is, is not possible, right.
39:34
So there, there isn't anybody institutionally that actually
39:38
works at a senior level that was raised professionally in an
39:43
environment where diplomacy was needed.
39:46
None, right. I mean, when, when the Berlin
39:51
Wall came down and then when the Soviet Union dissolved in 1991,
39:55
we're talking 35 years ago now. So if you're 65 today, you were
40:01
30 at that moment. Beginning of a career, what
40:08
skills did you develop from the age of 30 to 65?
40:12
Or if you're not quite retirement, you're 60.
40:15
You were 25 when all this happened.
40:18
You are you are an intern at the State Department.
40:21
What skills and knowledges and frameworks that you develop in
40:25
the intervening 35 years? Well, what you developed was a
40:28
clear sense of American primacy and an ability to boss people
40:32
around and from time to time, a belief that your benevolence was
40:37
being taken advantage of. You didn't learn anything about
40:42
how to deal with people who weren't your friends, but
40:45
nonetheless, you had to deal with them.
40:48
How do you, you know, frame interactions with others that
40:52
you may consider to actually not have interests entirely aligned
40:56
with yours? None of those skills exist
40:59
anymore, and so all that they're left with is belligerence.
41:09
Can't hear you? That does not bode well for, you
41:15
know, for America's intermediate future.
41:18
I mean, in, in the long term, you know, might, might be, there
41:22
might be some process where America can sort itself out, but
41:27
you know, in the next three years at least.
41:30
Look, it's a human capacity issue, Carl, isn't it right?
41:32
Because if you think about the transformation in industry at
41:35
the same time and the consequences of what's happened
41:39
in the American education system, again, I'm not even
41:43
going to go near why different people have their own theories.
41:46
But one thing we do know is that literacy and numeracy levels
41:50
today are lower than they were 40 years ago, right?
41:53
We know that that American institutions do not graduate
41:57
anywhere near the number of people in all sorts of knowledge
42:01
and skills areas that places like China do.
42:04
Now China, of course, is 4 times larger than the United States,
42:07
but it's, it's graduating not four times more graduates since
42:11
then, but about 8 times more, 9 times more, right, on a per
42:14
annual, maybe even more than that now, right.
42:17
So there's something that has come that that's lost its, its,
42:22
its bearings in, in the human cultivation system.
42:27
And so we see a response to that by way of enabling highly
42:32
skilled people to migrate. You touched on that earlier, you
42:34
know, all the, all the Chinese born and educated graduates now
42:37
working in American AI. And of course, you know, the,
42:41
the, the, the many people from India with skills who have come
42:45
to take on, you know, many job roles, which of course creates
42:48
its own political problems, right, which we've seen and,
42:52
and, but you don't turn around a population skills and knowledge
42:57
and literacy deficit within three years.
43:02
This is a 30 year problem now. So we've got a 30 year hollowing
43:07
out of the diplomatic corps. There is no culture of
43:11
diplomacy. There is no competency in terms
43:14
of what it means to be a diplomat as opposed to being
43:18
essentially A belligerent, you know, defender of the realm.
43:22
There's insufficient number of people with the right levels of
43:26
technical know how to really take on the opportunities and
43:31
the needs in robotics, AI, biopharmaceutical research,
43:35
etcetera, etcetera. That's just not enough.
43:39
And and this will mean that America either has to import
43:44
more people again. And for that to successfully
43:47
happen, it's going to need to become a more attractive place
43:51
again for people from other parts of the world.
43:54
And at the moment, it's not that attractive.
43:57
It's a little bit ugly, right? So, you know, people are a
44:01
little bit shy of going to the United States for pretty obvious
44:06
reasons. So you got to deal with that in
44:08
the short term, but the long term is the structural question
44:11
of, well, how do we turn this slide of foundational literacy
44:17
and numeracy around? And, and you're not going to do
44:20
that in six months, right? This.
44:24
And you don't do that by abolishing the Education
44:26
Department at a federal level either, right?
44:28
It's a complex problem because education is very distributed in
44:31
the United States. And that's a big place, lots of
44:33
states, lots of counties. And, and so education is a is a
44:38
big challenge. But, you know, rather than being
44:42
the peace president who bombs 10 countries, President Trump, you
44:47
know, could have left an incredible mark on North America
44:50
if he became the education president.
44:56
I'm sorry, I have to laugh. But well, Trump is often being
45:02
mentioned as a transactional president, you know, like he's,
45:08
he's described by seeing everything as transactional.
45:11
He is scheduled to head over to China in April.
45:15
Do you think he's possibly looking to work out some sort of
45:20
a grand deal with the President, Xi Jinping?
45:24
He'd like to sell the idea of a grand deal.
45:28
Whether or not it's grand and whether or not it's a deal that
45:31
sticks is going to be a different question, right?
45:34
But you can be sure that whatever it is, from a an
45:39
announcement's point of view, it will be the biggest and the best
45:42
thing that's ever happened. But the issues are are not
45:47
insubstantial, right? There's obviously trade issues,
45:51
but I think trade's actually a symptom of something else.
45:53
Trade is often the one that's held out as, as you know, the
45:58
big bogeyman. You know, we've been taken
46:00
advantage of etcetera, etcetera. But trade's really just a
46:03
function of the distribution of productive capabilities.
46:07
And if the United States doesn't sort out its own productive
46:09
capacity issues, some of which relate to it's pool of human
46:14
capability and know how, then rather than trade, yeah, sure,
46:19
you can get your trade balance down substantially by trading
46:22
less, right? That's just a a function of
46:25
math. But that doesn't necessarily
46:27
mean you're improving the quality of living of your
46:30
citizens or expanding your capacity domestically.
46:34
America can't enhance its manufacturing industry, which
46:38
incidentally has seen declining employment over the course of
46:41
the last 10 months, continuing to and reduced output and
46:46
without importing raw materials, intermediate goods and capital
46:49
equipment from China. It needs to do that.
46:52
The fact that the US dollars dropped 910% in the last 12
46:55
months actually makes that all more expensive, right?
46:57
So whilst that theoretically boosts exports and dampens
47:01
imports, by dampening imports it's actually making it more
47:04
expensive for American industry to modernize.
47:07
You want robotics, a lot of that's going to come from China.
47:10
And if it's not from China, because you don't want to deal
47:12
with China, you're going to need to buy it from Japan, Korea or
47:15
Germany, right? So if the US dollar's falling,
47:18
all of that's going to cost you more.
47:22
You know, you, you want smart stuff going on in your
47:25
industrial reorganization. You actually need a strong
47:28
dollar to make that cheaper. So there are some contradictions
47:33
now in terms of how US monetary policy and foreign exchange
47:37
policy is working in the name of all sorts of objectives that
47:41
don't align the objectives of closing the trade balance
47:44
question, the objective of reindustrializing America.
47:49
People think just by reducing imports you're going to help
47:52
reindustrialize America. Well, you're not, because you
47:55
need all these imports to do that.
47:58
So you know what, what, what, what does the grand bargain look
48:02
like? I know people talk about, you
48:05
know, particularly some recent materials from the National
48:09
Defence Strategy released by the Department of War and comments
48:13
made in the last day or two from Elbridge Colby.
48:18
I'm an assistant secretary in the in the, in the Department of
48:22
War, which doesn't explicitly talk about Taiwan.
48:27
So there's a lot of excitement about that.
48:30
You know, is this America throwing Taiwan under the bus?
48:34
You know, the fact that TSMC has agreed to spend more money
48:39
building more fabs in America opens the question of, you know,
48:43
Taiwan's silicon shield being slowly but surely taken away and
48:47
reducing the economic imperatives for America to be
48:51
there for Taiwan. But people forget that from
48:57
mainland China's point of view, Taiwan's not a bargaining chip.
49:01
It's not a transactional peace. Taiwan's an intrinsic part of
49:06
the nation. It's not to be bargained with.
49:11
It is to be reunified with, and it will be reunified, hopefully
49:16
peacefully, but in ways that are not compromised by the idea that
49:23
it got traded. You don't trade sovereign
49:25
territories, certainly not if you're Beijing.
49:29
So the idea that there'll be a grand bargain around Taiwan, I
49:33
think is deeply misunderstands how Beijing itself would view
49:40
that. That proposition would see that
49:42
really as a very insulting idea anyway.
49:45
So what? What's what's left?
49:48
Well, you know, does does President Trump secure Beijing's
49:51
commitments to get some of its its EV companies, for example,
49:55
to set up factories in America? So he's talked a bit about this,
49:59
right? You know, when he was in Detroit
50:02
during the campaign, he talked about the bloodbath if we just
50:06
let Chinese EVs enter America. And therefore, you know, let's
50:10
get them to set up factories here employing Americans.
50:13
Well, theoretically that that's not a crazy idea, right?
50:19
The Europeans are doing that right.
50:21
Canada's doing it. So the idea of doing this isn't,
50:26
isn't mad, but there's so much that that President Trump would
50:32
need to do to give comfort to Chinese investors that they're
50:39
going to be safe, not just economically, right, but but
50:43
that the assets are physically safe, that the people will be
50:47
safe, that Chinese workers who go to help set up the factories
50:52
will be safe, that that there'll be an environment that will be
50:55
welcoming. Right now, all of this is
50:59
actually very difficult at the moment to deliver.
51:02
And so I think there's a huge amount of work that needs to be
51:05
done. So if there is a grand bargain,
51:09
and this isn't really a prediction, I'm actually
51:10
hopeless of predictions right about done.
51:12
But if there's a grand bargain, it may look something like a
51:16
grand framework. OK.
51:22
Yeah. Please elucidate.
51:24
Well, and the framework is that these are things that we'll work
51:28
on and we're going to have processes by which we build
51:31
confidence around things. So yes, in principle, there is
51:37
an agreement in principle to facilitate more Chinese direct
51:41
investment in North America. But to make that happen, we
51:44
can't just have a handkerchief deal, right?
51:47
We're going to need to set up working groups.
51:49
We're going to need to set up high level working groups.
51:52
That involves Congress, right? Because Congress has so many
51:57
Hawks there that it's always a risk, right?
52:01
People talk about transactions around reducing the barriers for
52:04
American technology exports and all of that.
52:07
Look, China's reached a point where it doesn't see that as a
52:09
necessity, but it sees it as a matter of principle as well.
52:12
Now, which is, look, there shouldn't be these sorts of
52:16
barriers to trade, right? No, that's not what should
52:20
happen. You know, you complain about our
52:24
our companies not buying enough from you, and yet the things
52:27
that we would love to buy from you, you've made it impossible
52:29
for the last six years to a point where we actually make our
52:32
own now. So we don't need it.
52:34
But there should be no barriers there, just as you know, we can
52:38
look at removing non tariff barriers on Chinese exports to
52:45
North America. You know, they're the sorts of
52:47
things that you can do that appear a little bit
52:49
transactional. But what that starts to look
52:51
like is a free trade agreement, right?
52:55
And and and that starts to push Washington back towards this
52:59
idea of participating in free trade environments.
53:06
If it if it does that bilateral and that's difficult to do
53:09
right. But China's committed to open
53:11
trade. So is there is there is that a
53:13
deal structure difficult right people to people, I think is
53:18
always easy. And there are things around
53:21
research and development collaboration where part of the
53:24
grand framework can deal with, right?
53:27
There's so much stuff going on in, in agricultural research, in
53:32
science research, in health research, in bio, in, in
53:35
nanotechnologies that should be shared, that should be built
53:42
collaboratively. But we're going to need better
53:44
frameworks, again, given the treatment of Chinese researchers
53:48
on the back of the, the Department of Justice campaigns
53:51
over the years. So what are those reassurances,
53:54
right? How do, how do we make those
53:55
concrete? So a grand framework creates a
53:58
pathway, creates intent, and then it needs to have micro
54:02
steps in the right direction. The trade negotiations over the
54:05
course of the last eight months, I think tells us something about
54:08
a style and a method, right? Step by step, incremental, do
54:14
something to prove your sincerity, make sure you lock
54:19
that in, then we revisit things, etcetera, etcetera.
54:23
And I think that that's probably not a bad outcome if that could
54:29
be achieved, whether or not. And by the way, I think that
54:32
could be sold as a grand deal, but it will in but but a cynic
54:36
would say, well, yeah, look, it's not really quite the grand
54:39
deal. But nonetheless, it's it's a
54:41
framework that actually stabilizes things again.
54:45
But that's still a tall order. They've got a few months to pull
54:47
it off. Look, I'm not sure, for
54:49
instance, that threatening to to block Iranian oil is necessarily
54:56
going to help in getting towards the the grand bargain.
55:00
I know there are people who say, well, that'll, that'll bring
55:03
leverage. I think what President Trump
55:06
should probably realize by now is that that approach to
55:09
leverage tends not to work with Beijing.
55:14
And people in Beijing don't respond well.
55:18
They kind of Arc up. So other styles of approaches
55:24
are going to be necessary. So let's let's fingers crossed.
55:27
I mean, I do hope that we can get a little bit of calm around
55:30
all of this. I'm I'm not convinced we will,
55:34
but let's say. Let's let's, let's focus on
55:38
China for a moment. You know, China has broken other
55:42
trade record. It recorded $1.2 trillion of
55:46
trade surplus. It feels like you just yesterday
55:49
we were talking about China breaking over the $1 trillion
55:53
trade surplus. And then the Chinese Prime
55:55
Minister went to Davos and said China didn't go out to creates
56:02
these trade surpluses. China's goal is actually aimed
56:06
to be the world's largest market.
56:09
Now, how do you think China could do that to become the
56:13
world's largest market? Well, it can become the world's
56:17
largest market by continuing to raise real incomes, and it
56:22
continues to raise real incomes by having the most productive
56:26
and efficient industrial sectors in the world, because that's the
56:32
basis upon which you can justify real increases in in wages.
56:36
And when it does that, it will naturally become the world's
56:39
largest consumer market by virtue of sheer numbers.
56:44
But you can't be the biggest buyer of staff if you don't have
56:49
the income. And to get the income, you need
56:53
to have industry, because it's from working in industry that
56:56
you create the productivity that sustains wages.
57:00
So when and, and you'll notice, and we touched on this I think
57:02
last time around on the time before, there's a whole bunch of
57:06
commentary in the West that focuses solely on this issue of
57:09
consumption and China's approach.
57:13
And when and you read this, whether it's in XI Jinping's
57:16
documents or other documents and comments made by senior
57:22
government ministers, that this issue of consumption is
57:26
intimately intertwined with the issue of productivity and
57:29
production. You can't have one without the
57:32
other. You can't have a consumption
57:35
economy if you don't make things to satisfy the consumption
57:37
economy, and you can't have a production economy if you don't
57:40
have the consumption, right. So these things are intimately
57:43
integrated. So when he goes to Davos and
57:47
says we want to be the world's biggest market, that's actually
57:50
a natural consequence of the economic development model by
57:53
virtue of the fact that China has 1.4 billion people.
57:56
So as real wages rise, the sums will lead to a reality that
58:02
China is the world's largest market.
58:04
The question then is, is how does the world take advantage of
58:09
that market? And and, and that's going to
58:13
require some work because market access into foreign markets is a
58:19
complex problem. You know, macro economists sort
58:25
of at a certain level of visibility, very far from the
58:30
ground, only see how the big numbers move.
58:33
But to make that happen, you've got to have products sitting on
58:37
a shelf that people want at the price point that people want.
58:41
They've got to be attractive. They've got to be interesting
58:44
and to get them onto the shelf, you've got to have a transport
58:47
system, you've got to be able to get them through customs.
58:49
You can't have them sitting on the on the Wharf for three days,
58:52
four days. You've got to move through
58:53
customs quickly for that to happen.
58:55
They've got to be properly labeled and the paperwork's got
58:58
to be in order. Increasingly, for that to happen
59:01
with China, you've got to digitalise your supply chain
59:03
systems because China's moving down that path.
59:07
Who's got that in place? So we're going to need to get
59:09
that in place. Then you're going to need to
59:11
make sure the ships can move and that everything in a container
59:14
is almost pre approved before it leaves the originating port.
59:18
That means sharing data across boundaries.
59:22
That means having to consider issues of commercial
59:24
sensitivity, data sovereignty, data privacy.
59:27
How does that sharing actually work?
59:29
So suddenly we go from the high level of saying, Yep, we've got
59:34
a lot of people who want to spend money on stuff to how do
59:37
we make that all happen? The upside is that Chinese,
59:42
being the sort of engineering minded folk that they are, have
59:46
also been working tirelessly on the ground across the world
59:50
building that kind of infrastructure.
59:54
Things to be able to put containers on ships and move
59:57
them easily. Things to be able to label
1:00:00
things properly. Data infrastructure that can
1:00:02
begin to share data incredible ways.
1:00:05
Digital financial infrastructure to enable payments to happen
1:00:08
quickly, smoothly, safely and cheaply.
1:00:12
So slowly but surely, through the Belt and Rd. initiative and
1:00:16
other things, this entire ecosystem is emerging that
1:00:19
enables China to actually fulfill the promise of being the
1:00:23
world's biggest consumer market. When what?
1:00:26
About the, the, the criticism from, you know, mostly angle
1:00:31
media that OK, well, you, you, you, you say you want to be the
1:00:36
world's largest market, but you have 1.2 trillion trade
1:00:39
surpluses and you aim to make everything yourself.
1:00:43
So how, where does that leave room for the rest of us?
1:00:46
You know, we, there's nothing that we, you know, you, you
1:00:50
don't buy anything from us. You only, you only expect us to
1:00:53
be a consumer of Chinese goods. How is it sustainable?
1:00:58
Well, there's a couple of points.
1:00:59
Firstly, China does import stuff, right?
1:01:02
So people often forget that China actually is a big importer
1:01:05
of things. Second point is, is that this
1:01:09
explosion of the trade surplus in large part coincides with
1:01:14
expansion of trade with the developing world.
1:01:17
And much of that relates to China's exports of plant and
1:01:22
machinery, semiconductors, renewable energy technologies,
1:01:26
solar PV's, sodium and not sodium batteries, lithium ion
1:01:36
batteries and EV's, pretty high value stuff.
1:01:40
But interestingly, when you look at all of that stuff that's
1:01:43
being exported, it is technically enabling
1:01:48
capabilities, right? If you don't export plant and
1:01:51
equipment, if the recipient isn't planning to make things.
1:01:56
So over time, as the productive capacity of companies in these
1:02:02
other countries enhances, they will actually start to make
1:02:05
things themselves. So that, by nature, will
1:02:07
actually reduce some of the things that they already import
1:02:10
from China. The second thing that is
1:02:12
happening now is that Chinese companies are setting up
1:02:16
factories in other places, and that is likely to accelerate.
1:02:20
In part, it's going to accelerate because the RMB
1:02:23
valuation is rising, which, of course, is what, you know, some
1:02:27
of the critics always want. You know, they literally say
1:02:30
that Chinese exports are competitive because the RMB has
1:02:33
been undervalued. Well, the US dollar's coming
1:02:35
down. The RMB is going up, but the
1:02:38
flip side of the R&B going up is actually two things.
1:02:42
One is, is that the things that it does import will become
1:02:45
cheaper, which will feed into its supply chain systems anyway.
1:02:48
And secondly, it makes it more cost effective for Chinese
1:02:52
companies to invest in things overseas.
1:02:55
I personally think that that's a good thing, by and large, for
1:02:58
that to happen because it takes expertise and capacity into
1:03:01
other parts of the world. But I can imagine that the same
1:03:05
critics who complained about China exporting things will
1:03:08
eventually complain about Chinese companies investing in
1:03:11
mines and building factories and all those things because they
1:03:14
won't employ enough locals. They will ignore environmental
1:03:19
or local labour laws. I say this because these are the
1:03:22
sort of things that you hear already and somehow stealing
1:03:27
local jobs or what what have you.
1:03:28
But there'll be a complaint, you know.
1:03:31
So in that sense, China that can't win anyway, but we're
1:03:34
going to see an expansion of domestic productive capacity in
1:03:38
all of these places as a result. So over the next 10 to 15 years,
1:03:45
those dynamics will change again.
1:03:47
Now, that's the first thing. The second thing, though, is
1:03:50
that there's a bunch of stuff that countries across the world
1:03:54
do and make available that are actually incredibly attractive
1:03:59
to Chinese consumers in China, but also to Chinese consumers
1:04:03
who travel, right, You know? So, you know, the, the idea of
1:04:09
increasing tourism visitations, for example, from a growing
1:04:15
Chinese middle class is a great way for countries to effectively
1:04:21
earn export revenues. That's an export.
1:04:25
Education services is another one.
1:04:27
It's been a huge part of American exports to China.
1:04:31
Tourism, you know, this is prior to the last 12 months.
1:04:34
Education software, films, television, music, there's a
1:04:41
whole bunch of stuff, right? So the world's a fluid place.
1:04:45
Economic systems are fluid. If people sit there today and
1:04:47
say China doesn't buy anything, it's not true anyway.
1:04:50
But secondly, the challenge always is on those who create
1:04:55
things. How do I make that attractive to
1:04:59
whoever it is that I would like to sell, whatever it is I'm
1:05:02
selling things to, right? You know, can I enhance my
1:05:07
attractiveness to say, Chinese travellers by having visa free
1:05:13
arrangements, by building up a capacity in my tourism and
1:05:19
services sector to support and service a group of people who
1:05:23
generally won't speak your local language kind of helps, right?
1:05:28
So these are the kinds of things that I think we will start to
1:05:31
see unfold and expand over the next 10 to 15 years.
1:05:35
I mean, you're in Southeast Asia.
1:05:39
I know when you look at the data that Chinese visitations across
1:05:43
Southeast Asia for all sorts of stuff, right, including, you
1:05:47
know, whether it's surfing, nature and things like that,
1:05:51
that 20 years ago would never have been on a Chinese
1:05:54
traveler's itinerary, right? So your parents and my parents,
1:05:59
you know, the idea that that's why you travelled as opposed to
1:06:02
just taking a, a photograph in front of a, an important
1:06:05
monument, right, That you travel for experiences, right?
1:06:09
You know that that's not what they did, but the contemporary
1:06:14
Chinese traveler is travelling for those sorts of things.
1:06:18
Now the world is replete with incredible experiences for
1:06:23
Chinese travelers to experience and, and, and there's great
1:06:27
experiments in that. So look, I'm, I'm not so
1:06:30
stressed out or worried about the fact that as Chinese
1:06:34
citizens get wealthier and wealthier that they're not going
1:06:37
to be spending more and more money on all sorts of things.
1:06:39
I saw it in Australia, Carl, where up until the pandemic
1:06:44
Australia began to receive, it just tipped over 1,000,000
1:06:47
Chinese travellers for the year. And Chinese travellers spent
1:06:51
somewhere in the order of about 6000 U.S. dollars per person on
1:06:54
average, which was substantially more than any other inbound
1:07:00
tourist per capita. So.
1:07:05
Well, that has definitely been a very enlightening conversation,
1:07:09
as always. So with you, Professor Powell,
1:07:13
if people my follower wants to find your work, where would they
1:07:18
go? OK, two places I'm getting
1:07:21
better at this Substack, Warwick powell.substack.com and my own
1:07:27
little channel, which is quite particular.
1:07:30
I tend to speak to other scholars.
1:07:33
TIO talks with Warwick Powell and and that's as I said, it's
1:07:39
very focused on talking to mainly other academics, but
1:07:42
hopefully in not too academic a way.
1:07:45
So they're the two places. Well, thank you very much Doctor
1:07:51
Paul for taking the time to speak to us and thanks everyone
1:07:55
for tuning in. Until next time, bye bye.