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Speaker 1: Right at midnight, President Trump imposed new tariffs on two

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Speaker 1: hundred billion dollars worth of Chinese imports to the US.

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Speaker 1: China is imposing new tariffs on US goods.

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Speaker 2: Today.

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Speaker 1: We're hearing louder calls coming from Republican lawmakers who completely

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Speaker 1: banned Huawei and Smi.

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Speaker 3: C Eijing wants more business with Europe, but there's growing

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Speaker 3: skepticism in the EU. Tensions between China and the West,

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Speaker 3: specifically Europe and the United States, continued to grow, and

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Speaker 3: as international world events add uncertainty to the mix. Israel

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Speaker 3: has formally declared war after that unprecedented multi pronged terror

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Speaker 3: attack from Hamas a.

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Speaker 1: Long awaited Ukrainian counteroffensive is stretching into its fifth.

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Speaker 2: Month, Mister Peyton said that peace would only be possible

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Speaker 2: after what he called Kiev's demilitarization.

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Speaker 3: Bloomberg Economics and Bloomberg BusinessWeek took a dive into trade

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Speaker 3: and investment data and identified five nations that are coming

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Speaker 3: out as winners of these new geopolitical fault lines. To

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Speaker 3: find out which countries these are and what's happening there.

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Speaker 3: Works may have a cousin in Zurich and Sean Donnan

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Speaker 3: in Washington. Take us through the results of these data

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Speaker 3: and their implications. I'm your host Scarlett Foo today on

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Speaker 3: the Big Take. Which countries are benefiting from the reshuffling

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Speaker 3: of global supply chains. Guys, it's so great to have

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Speaker 3: you on. Thank you, Thanks so much for having us.

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Speaker 3: So let's get started. Bloomberg identified five countries emerging as

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Speaker 3: important links in the global economy. These are not economic powerhouses,

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Speaker 3: they're not even budding powerhouses. Instead, you call them connectors.

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Speaker 3: What do you mean by that?

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Speaker 1: So, I think one of the things we think about

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Speaker 1: when you think about the global economy is often the

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Speaker 1: relationship between the largest economies. Right if when we talk

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Speaker 1: about globalization, when we talk about how people are getting

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Speaker 1: along in the global economy, we often think of the

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Speaker 1: US in China, or the US and EU, or the

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Speaker 1: EU and China, And the reality is actually that increasingly

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Speaker 1: we're starting to see these smaller economies that are kind

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Speaker 1: of setting themselves up. As you could call them pit stops,

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Speaker 1: you could call them extra links in the supply chain.

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Speaker 1: We tend to call them connectors because that's where we

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Speaker 1: are seeing an increasing amount of globalization take place. It's

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Speaker 1: no longer in many cases a bilateral relationship between big economies.

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Speaker 1: As a result of all sorts of things, from tariffs

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Speaker 1: to geopolitics, we're seeing a lot of trade, a lot

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Speaker 1: of investment, take a diversion on the way between big

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Speaker 1: economies through these connector economies.

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Speaker 3: I like the way you describe that. If you think

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Speaker 3: of global trade like an aeroplane flight. Political and economic

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Speaker 3: tensions have resulted in there no longer being any direct

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Speaker 3: flights between the US and China, or the US and

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Speaker 3: Russia or other countries. You now need to change planes

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Speaker 3: somewhere first. These are kind of four stopovers. Is that

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Speaker 3: one way of thinking about this, Neva.

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Speaker 2: Yeah, it's when we're thinking about it, I would say

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Speaker 2: that there is still quite a lot of direct flights

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Speaker 2: between the US and China in terms of trade of goods.

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Speaker 2: When we've looked at the numbers, it is clear that

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Speaker 2: on the products that have been targeted by the trade

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Speaker 2: war since twenty nineteen, there has been a big drop

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Speaker 2: in Chinese exports to the US and US imports from China,

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Speaker 2: but they still get a lot of goods directly from China.

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Speaker 2: So the US is still important a lot those connectors,

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Speaker 2: those hubs in between the big makers, the big producers,

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Speaker 2: and the big bayers are taking an increasing role in

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Speaker 2: the global supply chain. So we are seeing some lengthening

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Speaker 2: of the global supply chains with an extra stop in

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Speaker 2: some cases.

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Speaker 1: Another way of thinking about it, if you're talking about flights,

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Speaker 1: is that those direct flights have just gotten more expensive,

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Speaker 1: so more people are taking indirect lights through hubs. So

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Speaker 1: you know, if we're talking about places like Vietnam and

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Speaker 1: Mexico and you're thinking about the US kind of domestic

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Speaker 1: airline network, they're kind of the Atlantas and Chicago's of

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Speaker 1: the world.

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Speaker 3: When you talk about countries like Mexico, like Vietnam, how

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Speaker 3: did they become so critical in the current global economy.

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Speaker 3: Is it because they are a clear member of Team

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Speaker 3: China or Team USA or Team Europe? Or is that

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Speaker 3: too simplistic.

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Speaker 1: I think it depends on the individual economies. A lot

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Speaker 1: of it has to do with free trade relationship and

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Speaker 1: free trade agreements. For example, Mexico, it being part of

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Speaker 1: what used to be called NAFTA, has made a huge

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Speaker 1: difference in its economic relationship with the United States and Canada.

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Speaker 1: It is a key part of a North American supply chain,

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Speaker 1: but one of the things we've seen in recent years,

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Speaker 1: for example, is a lot of Chinese companies start to

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Speaker 1: invest in Mexico, where they are producing for the US market.

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Speaker 1: They still want to ex bort to the US, they're

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Speaker 1: just doing it from factories in Mexico. It's the same

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Speaker 1: thing with Vietnam. Vietnam for years has been building its

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Speaker 1: trade relationship. Since the nineteen nineties, it's been building its

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Speaker 1: economic relationships with both the US and China. I don't

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Speaker 1: think you'd put them in either Team China or Team USA.

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Speaker 1: Both teams are trying to make sure they have a

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Speaker 1: good relationship with Vietnam.

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Speaker 2: And I think some of those relationships actually predated the

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Speaker 2: tensions and building of tensions in geopolitics globally. I think

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Speaker 2: if you think of Mexico or Vietnam, these are countries

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Speaker 2: that have started Mexico in particular, emerging as very important

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Speaker 2: manufacturing hubs. One Vietnam because it was very close to China,

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Speaker 2: the factory of the world, and the other one because

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Speaker 2: it was very close to the US, which is the

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Speaker 2: market of the world. In addition, you have polland of course,

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Speaker 2: which benefits from the two aspects. It's very close to

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Speaker 2: Germany a very large manufacturers and it's also part of

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Speaker 2: the EU Single Market, so a very large consumer market.

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Speaker 2: I think those are the sort of benefits from those economies,

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Speaker 2: and now they are I think in a more polarized

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Speaker 2: global world, those advantages are becoming even more important. And

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Speaker 2: I think, as you said, Sean, they are neither Team

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Speaker 2: China or tiam Us, and in a way they are

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Speaker 2: trying to stay as neutral as possible because that's in

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Speaker 2: their own advantage to a large extent, it's also in

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Speaker 2: the advantage of the US and China themselves as it

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Speaker 2: sort of smoothed the relationship and the shocks between them.

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Speaker 3: And I'm so glad you brought up Poland. So right

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Speaker 3: now we have Vietnam, Mexico, Poland. There's also Indonesia and Morocco.

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Speaker 3: Maybe like you crunch the numbers, you took a look

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Speaker 3: at the combined economic output and input of these countries,

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Speaker 3: what do they look like?

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Speaker 2: So they are about four percent of global GDP together,

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Speaker 2: So that's probably the size of Germany. It's for tradio

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Speaker 2: on USD in twenty twenty two, so it's not a

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Speaker 2: very large economic block, but it's starting to make some

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Speaker 2: size but at the same time they have clearly punched

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Speaker 2: above their weights when it comes to investment. And if

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Speaker 2: you look at the number of green field investments so

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Speaker 2: very quickly, green field investment is those foreign direct investment

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Speaker 2: projects into a new project, a new factory. So it's

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Speaker 2: really the sort of trend of production in the future.

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Speaker 2: So that's a very good indicator where feelings like the

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Speaker 2: big factories of the future. Basically, in twenty twenty two,

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Speaker 2: I think those countries got almost ten percent of green

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Speaker 2: field investment together, so four percent of GDP, ten percent

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Speaker 2: of green field investment, and they're also probably represented about

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Speaker 2: twelve percent of the world exports of goods, so you

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Speaker 2: can see that these are very foreign investment trade oriented economies.

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Speaker 3: So in terms of what these countries have in common,

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Speaker 3: you mentioned proximity, you mentioned manufacturing hub. You also mentioned

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Speaker 3: this ability to draw investment from foreign companies that are

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Speaker 3: looking to expand their footprint, maybe diversify their supply chain.

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Speaker 3: Is there anything else that we should think about in

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Speaker 3: terms of what these countries share in common.

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Speaker 1: Yeah, Look, trade deals are a big part of the story,

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Speaker 1: and I think in the case of Morocco, for example,

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Speaker 1: it has a trade agreement with the United States, and

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Speaker 1: as a result of that trade agreement, companies that invest

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Speaker 1: there are able to take advantage of the benefits of

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Speaker 1: the Inflation Reduction Act and all the subsidies and incentives

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Speaker 1: that are in that when it comes to things like

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Speaker 1: electric vehicle production and so on. So Morocco sits at

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Speaker 1: the top of Africa, has free trade relationships with the US,

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Speaker 1: also with the EU, and that means that it becomes

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Speaker 1: the kind of like Mexico, a hub for investment, a

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Speaker 1: hub for production, and it really is looking forward and

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Speaker 1: they really are trying very hard to position themselves in

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Speaker 1: terms of this kind of electrification. This is the other

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Speaker 1: context for all of this is we have this enormous

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Speaker 1: transition happening in the global economy from fossil fuels to

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Speaker 1: green energy, and a lot of these countries are finding

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Speaker 1: a way to take advantage of that.

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Speaker 2: There's been many studies actually looking at what are the

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Speaker 2: drivers that can explain how a country can raise its

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Speaker 2: stakes in the global value chains, and there are lots

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Speaker 2: of things. Proximity trade deeds. Language can help as well,

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Speaker 2: having a common language with one of the big importers

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Speaker 2: or exporters. The quality of infrastructure and institutional quality generally

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Speaker 2: HELPSODOT cheaper labor cousts, of course, and that probably sort

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Speaker 2: of thing you think about when you think about Mexico

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Speaker 2: versus the US, or Vietnam versus China. So there are

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Speaker 2: lots of drivers of potential success in global value chains

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Speaker 2: that have clearly benefited those five economies.

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Speaker 3: After the break, which countries in Asia and Africa are

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Speaker 3: benefiting from tensions between China and the West. We've talked

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Speaker 3: a little bit broadly about these countries, but I want

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Speaker 3: to take a deeper dive into Vietnam because Vietnam's positioning

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Speaker 3: is really interesting. It's role as connector, it's always in there,

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Speaker 3: but it's been super charged since Donald Trump, the former president,

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Speaker 3: launched his trade war against China. Can you talk a

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Speaker 3: little bit about how Vietnam's role has evolved.

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Speaker 1: Vietnam's economic rebirth really started happening in the nineteen nineties

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Speaker 1: when it normalized relations with the United States. Remember, they

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Speaker 1: had been for decades after the Vietnam War, had been

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Speaker 1: kind of frozen out. The US and Vietnam did not

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Speaker 1: have diplomatic relations. And what we saw when that happened

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Speaker 1: in the early nineteen nineties is very quickly an initial

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Speaker 1: surgeon investment and people looking at producing in Vietnam. It's

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Speaker 1: a big economy in its own right, or a big

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Speaker 1: population center in its own right. But what we saw

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Speaker 1: during the Trump administration was another acceleration in that as

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Speaker 1: we had the Trump administration put these tariffs on goods

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Speaker 1: from China, and so a lot of people started shifting

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Speaker 1: production and that is happening to this day. It's still

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Speaker 1: playing out. One of the places that our reporters visited

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Speaker 1: as part of this project is, you know, literally these

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Speaker 1: rice fields in northern Vietnam that are being turned into

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Speaker 1: factories for fox Con that will make MacBooks. You know,

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Speaker 1: there's other companies that will make AirPods, all of your

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Speaker 1: eye devices. We think of them often as coming from China.

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Speaker 1: A growing number of them are going to come from

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Speaker 1: other countries like Vietnam. So Vietnam is very much focused

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Speaker 1: around the kind of tech supply chain consumer tech supply chain.

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Speaker 1: One of the important things to point out, and I

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Speaker 1: think this is really where the connector label comes in,

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Speaker 1: is that a lot of these factories are being run

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Speaker 1: by the same suppliers who have factories in China. Now

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Speaker 1: like fox Con and that in fact, in some cases

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Speaker 1: these are Chinese suppliers who are setting up in Vietnam,

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Speaker 1: so China doesn't get taken out of the equation just

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Speaker 1: because production shifts to Vietnam.

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Speaker 3: So Mava, can you talk us through some of the numbers.

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Speaker 3: When you look at export numbers, important was what do

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Speaker 3: they reveal in terms of Vietnam's role.

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Speaker 2: Vietnam is one of the smallest of those five connectors.

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Speaker 2: That's actually think the only smallest one would be moreco

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Speaker 2: So it's quite a small economy in terms of size,

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Speaker 2: but it's been growing extremely rapidly and their trade numbers

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Speaker 2: have been on the rise for quite a few years already.

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Speaker 2: What we did for the analysis is that we looked

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Speaker 2: at how much of the global trade they had in

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Speaker 2: all the different products in twenty seventeen, and then we

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Speaker 2: compared how much they got like how much they had

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Speaker 2: increase their market shares in different products by twenty twenty two,

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Speaker 2: and Khalif Vietnam was one where we had seen near

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Speaker 2: sixty over performance in exports. That means their trade has

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Speaker 2: been growing much faster than that of the rest of

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Speaker 2: the world, and in the meantime they had been receiving,

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Speaker 2: and that has been the case for the last ten years.

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Speaker 2: A lot more confid investments. So what we're seeing in

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Speaker 2: Vietnam is that a lot of investments arrived in the

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Speaker 2: early twenty tens and is now at maturity. So it's

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Speaker 2: really boostings are export numbers and supporting the manufacturing capacity.

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Speaker 1: Vietnam's experts to the United States have almost tripled in

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Speaker 1: the last five years. Their imports from China have almost

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Speaker 1: doubled in the last five years.

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Speaker 3: Let's talk about another Asian country, not so much a neighbor,

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Speaker 3: but in the same region in Southeast Asia, and this

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Speaker 3: would be Indonesia, which of course has a large population

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Speaker 3: and a lot of natural resources, and I think that's

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Speaker 3: a critical component here. Sean, you mentioned earlier about the

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Speaker 3: greenification of the global economy. What role does Indonesia play

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Speaker 3: in that greenification.

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Speaker 1: Indonesia has a lot of the things that the world

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Speaker 1: needs to make electric vehicles. We're talking about things like nickel.

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Speaker 1: What they've done is they've positioned themselves studiously as a

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Speaker 1: kind of neutral party. If you remember, going back in history,

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Speaker 1: Indonesia was a founding member of the Non Aligned movement

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Speaker 1: during the Cold War, which refused to take sides. So

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Speaker 1: we see the really interesting kind of corporate marriages taking

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Speaker 1: place in places like Indonesia. Earlier this year, Ford signed

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Speaker 1: a deal with a Chinese cobalt producer in Brazil's Valet,

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Speaker 1: which is an enormous miner, to develop and process nickel

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Speaker 1: via a mine in Indonesia, and that was very much

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Speaker 1: something that was broken by the Indonesian government. They're trying

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Speaker 1: very hard to make themselves a kind of essential stop

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Speaker 1: or an essential source for the electric vehicle supply chain,

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Speaker 1: for the green energy supply chain.

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Speaker 3: To be clear, they're not actively choosing between the US

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Speaker 3: or China, are they. They're kind of actively courting both

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Speaker 3: countries absolutely.

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Speaker 1: I mean President Joko Widodo, who's really behind this, was

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Speaker 1: in the US earlier this year and his message was

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Speaker 1: very clearly, we want more US investment in Indonesia, and

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Speaker 1: at the same time they are getting lots of Chinese

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Speaker 1: investment there. And the US is not the only Western

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Speaker 1: or G seven economy that they're courting. They want investment

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Speaker 1: from everywhere, and if anything, their complaint is that, you know,

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Speaker 1: on the US or on the Western side, some investors

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Speaker 1: have been slowed to come to Indonesia and aren't quite

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Speaker 1: balancing out the investment that they're seeing from China. MA.

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Speaker 3: But you mentioned earlier Morocco being the smallest of the

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Speaker 3: five connector countries that Bloomberg has identified, yet when it

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Speaker 3: comes to the car industry and the ev industry, it's

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Speaker 3: playing an increasingly important role. Can you tell us a

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Speaker 3: little bit about the basics of Morocco's economy and how

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Speaker 3: therefore that puts it in a very advantageous position given

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Speaker 3: the current state of the fragmented global economy.

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Speaker 2: It's really the car industry and the shift to the

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Speaker 2: electric vehicles mean that actually car manufacturers from Europe in

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Speaker 2: particular honor so some of the German ones have to

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Speaker 2: make big investments, they have to renew their equipment stock,

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Speaker 2: and that's a very good opportunity for those countries that

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Speaker 2: can benefit from these new investments. The benefits the manufacturers

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Speaker 2: are looking for, those lower labor costs in some cases.

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Speaker 2: In the case of Morocco, you have also a better

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Speaker 2: access to some of the natural resources, so that makes

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Speaker 2: them a very good destination for new investments. And that's

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Speaker 2: what we're seeing currently in Morocco and Sean. The Free

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Speaker 2: trade agreements that you mentioned earlier. This really comes into

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Speaker 2: play when it comes to Morocco, and it's something that

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Speaker 2: maybe was not planned but has worked out pretty well.

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Speaker 1: Absolutely, so, the US and Morocco have quietly had a

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Speaker 1: free trade agreement in place for many years. It didn't

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Speaker 1: quite matter as much as it does today in the past.

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Speaker 1: And the reason it matters today is because we're talking

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Speaker 1: about billions of dollars in investment that is going into

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Speaker 1: Morocco in battery plants and other kind of parts of

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Speaker 1: the electric vehicle supply chain. And one of the big

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Speaker 1: reasons for that is that free trade agreement and the

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Speaker 1: fact that that free trade agreement makes things that are

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Speaker 1: produced in Morocco eligible for the tax rebates and the

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Speaker 1: other incentives that you have under the Inflation Reduction Act,

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Speaker 1: which is a big part of the Biden administration's effort

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Speaker 1: to encourage the development of the green economy.

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Speaker 3: Not to mention the fact that Morocco is home to

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Speaker 3: the world's largest reserves of phosphate, which is a key

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Speaker 3: ingredient in rechargeable cells used in evs. I struggle to

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Speaker 3: keep track of all the different ingredients in these ev

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Speaker 3: vehicles because there's so many different components and you have

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Speaker 3: to go all over the world to get them.

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Speaker 1: One of the things that we are seeing today in

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Speaker 1: the world of electric vehicles and particularly in terms of batteries,

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Speaker 1: is a huge amount of innovation, which means that some

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Speaker 1: of the key ingredients for today's batteries may not be

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Speaker 1: the key ingredients for the next generation of batteries. That

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Speaker 1: is a potential vulnerability for some of these connector economies.

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Speaker 3: Coming up a closer look at the fruits of foreign

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Speaker 3: investment for Poland and Mexico. Let's focus in on what's

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Speaker 3: happening in Poland because there are several countries here where

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Speaker 3: we talk about their wealth of natural resources, whether it's Morocco,

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Speaker 3: whether it's Indonesia. In Poland, are there natural resources to

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Speaker 3: speak of here? Or is Poland critical because of its

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Speaker 3: geographic position positioned in eastern Europe between the West and Russia,

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Speaker 3: but also a low cost center.

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Speaker 1: The fact is is that since the end of the

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Speaker 1: Cold War, Poland has positioned itself as a manufacturing hub

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Speaker 1: within Europe and has become a really important part of

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Speaker 1: the production process for German and other European automakers. And

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Speaker 1: now that we have this transition happening in the auto industry.

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Speaker 1: It is again trying to take advantage of that. And again,

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Speaker 1: you know, like other countries, it's trying to make sure

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Speaker 1: that it's not just producing parts, but that it's actually

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Speaker 1: taking full advantage. And so there's even an effort underway

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Speaker 1: to produce their own national vehicle with help from Ainese company,

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Speaker 1: it should be said, and move up the value chain.

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Speaker 1: We have seen in the last five years the value

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Speaker 1: of China's exports to Poland double. We also in that

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Speaker 1: same period have seen Poland's exports to other EU countries

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Speaker 1: go up by fifty six percent. In other words, it's

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Speaker 1: again that connector relationship. We're seeing significant growth in trade

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Speaker 1: coming in and trade going out.

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Speaker 3: Let's cross the Atlantic and go over to Mexico, which

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Speaker 3: is the US's southern neighbors. So geography is certainly a

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Speaker 3: benefit for Mexico. Also the fact that it's got such

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Speaker 3: a close trade relationship with the US for decades now

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Speaker 3: through NAFTA and then the successor to NAFTA. But also

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Speaker 3: it is a source of natural resources as well, with

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Speaker 3: the oil of the industry very well developed in Mexico.

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Speaker 3: Tell us a little bit about how the relationship between

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Speaker 3: Mexico and the US has changed. Just over the past

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Speaker 3: couple of years.

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Speaker 1: Since the Trump administration started putting in tariffs. We saw

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Speaker 1: a similar phenomenon in Meca that we saw in Vietnam,

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Speaker 1: and that is that companies in the US who were

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Speaker 1: reliant on parts coming from China and it's often a

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Speaker 1: case of parts rather than finished goods, shifted production to Mexico.

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Speaker 1: And what we've seen happened since is the Chinese suppliers

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Speaker 1: that used to benefit from that relationship move their investment

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Speaker 1: and invest heavily in Mexico. Tesla is building a gigafactory

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Speaker 1: in Mexico, and alongside it, we're seeing Chinese companies that

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Speaker 1: hope to supply that company build their own factories. We

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Speaker 1: also are seeing Chinese workers move to Mexico to train

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Speaker 1: Mexican workers and Chinese managers there. We think of the

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Speaker 1: US Mexico relationship, which goes back and forth and is

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Speaker 1: often difficult, whether it's because of the drug trade or

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Speaker 1: because of what is happening with immigration in the southern border.

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Speaker 1: But the fact is is that there are other players

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Speaker 1: in that relationship that make Mexico much more of a

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Speaker 1: connector economy rather than simply a kind of outpost of

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Speaker 1: the United States and corporate America.

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Speaker 3: With all these Chinese companies setting up shop in Mexico

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Speaker 3: in the official numbers, does that count as a Mexican

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Speaker 3: company or a Chinese company? Does it even matter?

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Speaker 1: This is where you know, how we count these things

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Speaker 1: gets very complicated. So you know, there are ownership structures

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Speaker 1: a lot of the countries around the world, and we

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Speaker 1: see this in Mexico as well. You know, set up

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Speaker 1: joint ventures with local partners, and so you know it's

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Speaker 1: a part Chinese, part Mexican company. In many cases there

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Speaker 1: are some full subsidiaries in Mexico of Chinese companies. But

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Speaker 1: when those goods hit the border, those imports from Mexico,

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Speaker 1: whether they are produced by a Chinese company, a European company,

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Speaker 1: or an American company, they all count as imports from Mexico.

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Speaker 1: And that's where sometimes the data can be misleading. And sometimes,

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Speaker 1: you know, when we're thinking about globalization and what is happening,

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Speaker 1: we focus on that headline data and we miss what

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Speaker 1: is happening below.

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Speaker 2: And that's why we are very grateful to institutions like

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Speaker 2: the OECD who try to actually join the dots between

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Speaker 2: those different exports and imports and see exactly where the

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Speaker 2: value added is coming from. And when you think in

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Speaker 2: terms of the impact of the economies of becoming connectors,

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Speaker 2: it means they don't capture the full value of those

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Speaker 2: new exports because they have to import more to be

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Speaker 2: able to construct them, assemble them in some cases, and

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Speaker 2: then export them. It's not just re export. There is

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Speaker 2: some assembling or some transformation going on. So it's still

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Speaker 2: quite a big benefit for those economies in terms of activity,

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Speaker 2: of jobs, of taxis connection and things like that.

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Speaker 3: So looking ahead, how secure are we in thinking of

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Speaker 3: these countries as connector countries that are so essential or

403
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Speaker 3: are they more vulnerable than we realize because as technology changes,

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Speaker 3: they're not in a position to keep taking advantage of

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Speaker 3: their position in the global economy.

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Speaker 1: So a lot of this is going to depend on

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Speaker 1: the individual economies and how much they rely on certain

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Speaker 1: natural resources, whether it's phosphate in Morocco or nickel in Indonesia.

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Speaker 1: But I think you know, one of the common phenomenons

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Speaker 1: that we see across these economies is a desire to

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Speaker 1: get into the manufacturing game to move up the value chain,

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Speaker 1: and that kind of bodes well for the future. There's

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Speaker 1: absolutely a vulnerability in terms of innovation and disruption and

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Speaker 1: what changes in the future in terms of our needs

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Speaker 1: for minerals and so on. But there's also another reality,

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Speaker 1: which is, you know, we looked at these five economies,

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Speaker 1: they were kind of the top of our list, but

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Speaker 1: they're not the only ones trying to be connectors in

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Speaker 1: this new global economy, and so we're going to see

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Speaker 1: more competition to be these connectors in the global economy

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Speaker 1: from other countries and governments work very hard to attract

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Speaker 1: investment from both the US and China, from the European Union,

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Speaker 1: from Japan, from big companies all over the world. We're

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Speaker 1: also going to see big companies all over the world

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Speaker 1: kind of leverage the power that they have to get

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Speaker 1: more incentives and benefits, and you know, there is a

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Speaker 1: risk that we will see a bit of a race

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Speaker 1: to the bottom in terms of taxation or industrial subsidies

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Speaker 1: to get all of this investment flowing around the world.

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Speaker 1: The big takeaway going forward about all this is, for

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Speaker 1: a decade or more, people have been writing about the

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Speaker 1: end of globalization, or been talking about deglobalization or slobalization

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Speaker 1: and so on. What we see with these economies is

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Speaker 1: evidence that kind of globalization has been pretty durable and

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Speaker 1: that actually it always finds a way and companies always

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Speaker 1: find a way to get around even barriers like tariffs

437
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Speaker 1: countries put up and to deal with things like geopolitics.

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Speaker 2: One of the vulnerabilities for this country is still that

439
00:24:55,440 --> 00:24:59,120
Speaker 2: so far, I think they have managed to stay new

440
00:24:59,200 --> 00:25:03,439
Speaker 2: hard to be aligned with either the US or China,

441
00:25:03,520 --> 00:25:06,640
Speaker 2: and of course for them, if the tensions retchet up,

442
00:25:07,040 --> 00:25:10,520
Speaker 2: we have more of a decopling between two blocks. If

443
00:25:10,520 --> 00:25:14,200
Speaker 2: they're forced to choose side, or if investors choose side

444
00:25:14,200 --> 00:25:17,640
Speaker 2: for them because they go for the safest place, then

445
00:25:17,800 --> 00:25:20,720
Speaker 2: it's going to be more challenging for some of these economy.

446
00:25:20,800 --> 00:25:23,240
Speaker 2: So the country like Poland, for example, at the heart

447
00:25:23,280 --> 00:25:25,680
Speaker 2: of the European Union is probably quite a safe bet

448
00:25:25,720 --> 00:25:30,199
Speaker 2: for investors. Country like Vietnam, sitting so close from China

449
00:25:30,600 --> 00:25:34,200
Speaker 2: geographically angiopolitically when you look at UN votes for example,

450
00:25:34,600 --> 00:25:37,160
Speaker 2: could be more at risk of a flight to safety

451
00:25:37,240 --> 00:25:39,800
Speaker 2: from some of the investors looking to go to proper

452
00:25:39,840 --> 00:25:40,520
Speaker 2: friend shoring.

453
00:25:42,359 --> 00:25:44,960
Speaker 3: I like what Sean said about how companies always find

454
00:25:45,040 --> 00:25:47,679
Speaker 3: a way to get around whatever barriers or restrictions are

455
00:25:47,680 --> 00:25:51,160
Speaker 3: put up, and in many cases they're using these connector

456
00:25:51,240 --> 00:25:54,720
Speaker 3: countries to do so, does that actually add to the

457
00:25:54,840 --> 00:25:58,080
Speaker 3: economic value overall? When you tell it all up, I mean,

458
00:25:58,119 --> 00:26:00,960
Speaker 3: it makes everything look like there's more trade, there's more investment,

459
00:26:01,280 --> 00:26:03,359
Speaker 3: even if you're doing it in a more roundabout way.

460
00:26:04,080 --> 00:26:06,320
Speaker 1: There's another way of looking at it. There's the kind

461
00:26:06,320 --> 00:26:10,320
Speaker 1: of consumer end of that, which is when stuff takes

462
00:26:10,720 --> 00:26:14,000
Speaker 1: more stops on the way to getting to you, the consumer,

463
00:26:14,400 --> 00:26:18,679
Speaker 1: that inevitably means higher costs for the consumer and higher

464
00:26:18,720 --> 00:26:21,560
Speaker 1: costs for companies and so on, and it's a less

465
00:26:21,560 --> 00:26:27,600
Speaker 1: efficient way of producing. And so these connector economies, absolutely

466
00:26:27,640 --> 00:26:30,480
Speaker 1: we're going to see them adding to global growth. We're

467
00:26:30,520 --> 00:26:34,600
Speaker 1: going to see adding to flows of trade. But you know,

468
00:26:34,680 --> 00:26:37,800
Speaker 1: there's also this kind of negative impact of all that,

469
00:26:38,040 --> 00:26:41,399
Speaker 1: which is all of this is going to cost us more.

470
00:26:41,840 --> 00:26:45,320
Speaker 1: It means that that television, that iPhone, those AirPods, that

471
00:26:45,600 --> 00:26:48,280
Speaker 1: electric vehicle all may end up costing us a little

472
00:26:48,280 --> 00:26:49,960
Speaker 1: bit more than it would otherwise.

473
00:26:50,720 --> 00:26:53,440
Speaker 2: Maybe is that you take tredeo second best. It's quite

474
00:26:53,520 --> 00:26:56,640
Speaker 2: good that we can have those step hubs in between

475
00:26:56,880 --> 00:27:00,359
Speaker 2: the main economies. When they stopped imposing very large trade

476
00:27:00,359 --> 00:27:03,440
Speaker 2: war tariffs or things like that. For example, you look

477
00:27:03,480 --> 00:27:06,280
Speaker 2: at some very large model of the global economies, you

478
00:27:06,359 --> 00:27:10,680
Speaker 2: realize that you can split the word into two economic blocks.

479
00:27:10,720 --> 00:27:13,480
Speaker 2: As long as you keep a neutral block in between,

480
00:27:13,800 --> 00:27:17,879
Speaker 2: the global costs are manageable or contain in terms of

481
00:27:17,960 --> 00:27:22,120
Speaker 2: GDP because these neutral countries play a cushioning role between.

482
00:27:22,440 --> 00:27:24,679
Speaker 2: You have losses because in a way you have this

483
00:27:24,840 --> 00:27:28,600
Speaker 2: extra stop that doesn't really add any value, but it's

484
00:27:28,760 --> 00:27:31,680
Speaker 2: just the sort of second base to importing and exporting

485
00:27:31,720 --> 00:27:35,160
Speaker 2: directly between countries. But the costs are contain as soon

486
00:27:35,320 --> 00:27:38,480
Speaker 2: as you split the word without neutral countries in between,

487
00:27:38,680 --> 00:27:42,000
Speaker 2: so you really have the word split between two economic blocks.

488
00:27:42,280 --> 00:27:45,800
Speaker 2: The global models start to find much higher shocks to

489
00:27:45,880 --> 00:27:49,320
Speaker 2: the global economy, much higher costs, because then you have

490
00:27:49,320 --> 00:27:52,320
Speaker 2: a lot of inefficiencies whereby you have too much investment

491
00:27:52,359 --> 00:27:55,600
Speaker 2: in China relative to demand in Chinese block, and you

492
00:27:55,640 --> 00:27:57,720
Speaker 2: have to invest a lot in the rest of the world,

493
00:27:57,800 --> 00:27:59,359
Speaker 2: and you have to invest in things where you're not

494
00:27:59,400 --> 00:28:02,960
Speaker 2: actually so good doing instead of investing in things where

495
00:28:02,960 --> 00:28:05,960
Speaker 2: you're a bitter at So you don't exploit your comparative

496
00:28:06,000 --> 00:28:08,520
Speaker 2: advantage as much as you used to, so he's our

497
00:28:08,600 --> 00:28:10,200
Speaker 2: big gross Sean.

498
00:28:10,280 --> 00:28:12,959
Speaker 3: Thank you so much for joining us from Washington. Fantastic story.

499
00:28:13,359 --> 00:28:14,400
Speaker 1: It's wonderful to be here.

500
00:28:14,440 --> 00:28:17,480
Speaker 3: Thank you, Mava. Really appreciate your giving us insight, and

501
00:28:17,480 --> 00:28:19,280
Speaker 3: thank you for staying up late to speak with us.

502
00:28:19,520 --> 00:28:20,560
Speaker 2: Thanks for having me.

503
00:28:21,280 --> 00:28:23,200
Speaker 3: Thanks for listening to us here at the Big Take.

504
00:28:23,359 --> 00:28:26,960
Speaker 3: It's a daily podcast from Bloomberg and iHeartRadio. For more

505
00:28:27,000 --> 00:28:31,720
Speaker 3: shows from iHeartRadio, visit the iHeartRadio app, Apple Podcasts, Bloombergarplate,

506
00:28:31,880 --> 00:28:34,199
Speaker 3: or wherever you listen. And of course we'd love to

507
00:28:34,200 --> 00:28:37,120
Speaker 3: hear from you. Email us questions or comments to Big

508
00:28:37,160 --> 00:28:40,920
Speaker 3: Take at Bloomberg dot net. This episode was produced by

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00:28:40,960 --> 00:28:45,760
Speaker 3: Federica Romaniello, with production support from Sam Gobauer. Raphael I'm

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00:28:45,800 --> 00:28:49,640
Speaker 3: Silly is our engineer. Original music by Leo Sidron I'm

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00:28:49,680 --> 00:28:52,560
Speaker 3: Scarlett Fou. We'll be back tomorrow with another Big Take