Speaker 1: Right at midnight, President Trump imposed new tariffs on two
Speaker 1: hundred billion dollars worth of Chinese imports to the US.
Speaker 1: China is imposing new tariffs on US goods.
Speaker 2: Today.
Speaker 1: We're hearing louder calls coming from Republican lawmakers who completely
Speaker 1: banned Huawei and Smi.
Speaker 3: C Eijing wants more business with Europe, but there's growing
Speaker 3: skepticism in the EU. Tensions between China and the West,
Speaker 3: specifically Europe and the United States, continued to grow, and
Speaker 3: as international world events add uncertainty to the mix. Israel
Speaker 3: has formally declared war after that unprecedented multi pronged terror
Speaker 3: attack from Hamas a.
Speaker 1: Long awaited Ukrainian counteroffensive is stretching into its fifth.
Speaker 2: Month, Mister Peyton said that peace would only be possible
Speaker 2: after what he called Kiev's demilitarization.
Speaker 3: Bloomberg Economics and Bloomberg BusinessWeek took a dive into trade
Speaker 3: and investment data and identified five nations that are coming
Speaker 3: out as winners of these new geopolitical fault lines. To
Speaker 3: find out which countries these are and what's happening there.
Speaker 3: Works may have a cousin in Zurich and Sean Donnan
Speaker 3: in Washington. Take us through the results of these data
Speaker 3: and their implications. I'm your host Scarlett Foo today on
Speaker 3: the Big Take. Which countries are benefiting from the reshuffling
Speaker 3: of global supply chains. Guys, it's so great to have
Speaker 3: you on. Thank you, Thanks so much for having us.
Speaker 3: So let's get started. Bloomberg identified five countries emerging as
Speaker 3: important links in the global economy. These are not economic powerhouses,
Speaker 3: they're not even budding powerhouses. Instead, you call them connectors.
Speaker 3: What do you mean by that?
Speaker 1: So, I think one of the things we think about
Speaker 1: when you think about the global economy is often the
Speaker 1: relationship between the largest economies. Right if when we talk
Speaker 1: about globalization, when we talk about how people are getting
Speaker 1: along in the global economy, we often think of the
Speaker 1: US in China, or the US and EU, or the
Speaker 1: EU and China, And the reality is actually that increasingly
Speaker 1: we're starting to see these smaller economies that are kind
Speaker 1: of setting themselves up. As you could call them pit stops,
Speaker 1: you could call them extra links in the supply chain.
Speaker 1: We tend to call them connectors because that's where we
Speaker 1: are seeing an increasing amount of globalization take place. It's
Speaker 1: no longer in many cases a bilateral relationship between big economies.
Speaker 1: As a result of all sorts of things, from tariffs
Speaker 1: to geopolitics, we're seeing a lot of trade, a lot
Speaker 1: of investment, take a diversion on the way between big
Speaker 1: economies through these connector economies.
Speaker 3: I like the way you describe that. If you think
Speaker 3: of global trade like an aeroplane flight. Political and economic
Speaker 3: tensions have resulted in there no longer being any direct
Speaker 3: flights between the US and China, or the US and
Speaker 3: Russia or other countries. You now need to change planes
Speaker 3: somewhere first. These are kind of four stopovers. Is that
Speaker 3: one way of thinking about this, Neva.
Speaker 2: Yeah, it's when we're thinking about it, I would say
Speaker 2: that there is still quite a lot of direct flights
Speaker 2: between the US and China in terms of trade of goods.
Speaker 2: When we've looked at the numbers, it is clear that
Speaker 2: on the products that have been targeted by the trade
Speaker 2: war since twenty nineteen, there has been a big drop
Speaker 2: in Chinese exports to the US and US imports from China,
Speaker 2: but they still get a lot of goods directly from China.
Speaker 2: So the US is still important a lot those connectors,
Speaker 2: those hubs in between the big makers, the big producers,
Speaker 2: and the big bayers are taking an increasing role in
Speaker 2: the global supply chain. So we are seeing some lengthening
Speaker 2: of the global supply chains with an extra stop in
Speaker 2: some cases.
Speaker 1: Another way of thinking about it, if you're talking about flights,
Speaker 1: is that those direct flights have just gotten more expensive,
Speaker 1: so more people are taking indirect lights through hubs. So
Speaker 1: you know, if we're talking about places like Vietnam and
Speaker 1: Mexico and you're thinking about the US kind of domestic
Speaker 1: airline network, they're kind of the Atlantas and Chicago's of
Speaker 1: the world.
Speaker 3: When you talk about countries like Mexico, like Vietnam, how
Speaker 3: did they become so critical in the current global economy.
Speaker 3: Is it because they are a clear member of Team
Speaker 3: China or Team USA or Team Europe? Or is that
Speaker 3: too simplistic.
Speaker 1: I think it depends on the individual economies. A lot
Speaker 1: of it has to do with free trade relationship and
Speaker 1: free trade agreements. For example, Mexico, it being part of
Speaker 1: what used to be called NAFTA, has made a huge
Speaker 1: difference in its economic relationship with the United States and Canada.
Speaker 1: It is a key part of a North American supply chain,
Speaker 1: but one of the things we've seen in recent years,
Speaker 1: for example, is a lot of Chinese companies start to
Speaker 1: invest in Mexico, where they are producing for the US market.
Speaker 1: They still want to ex bort to the US, they're
Speaker 1: just doing it from factories in Mexico. It's the same
Speaker 1: thing with Vietnam. Vietnam for years has been building its
Speaker 1: trade relationship. Since the nineteen nineties, it's been building its
Speaker 1: economic relationships with both the US and China. I don't
Speaker 1: think you'd put them in either Team China or Team USA.
Speaker 1: Both teams are trying to make sure they have a
Speaker 1: good relationship with Vietnam.
Speaker 2: And I think some of those relationships actually predated the
Speaker 2: tensions and building of tensions in geopolitics globally. I think
Speaker 2: if you think of Mexico or Vietnam, these are countries
Speaker 2: that have started Mexico in particular, emerging as very important
Speaker 2: manufacturing hubs. One Vietnam because it was very close to China,
Speaker 2: the factory of the world, and the other one because
Speaker 2: it was very close to the US, which is the
Speaker 2: market of the world. In addition, you have polland of course,
Speaker 2: which benefits from the two aspects. It's very close to
Speaker 2: Germany a very large manufacturers and it's also part of
Speaker 2: the EU Single Market, so a very large consumer market.
Speaker 2: I think those are the sort of benefits from those economies,
Speaker 2: and now they are I think in a more polarized
Speaker 2: global world, those advantages are becoming even more important. And
Speaker 2: I think, as you said, Sean, they are neither Team
Speaker 2: China or tiam Us, and in a way they are
Speaker 2: trying to stay as neutral as possible because that's in
Speaker 2: their own advantage to a large extent, it's also in
Speaker 2: the advantage of the US and China themselves as it
Speaker 2: sort of smoothed the relationship and the shocks between them.
Speaker 3: And I'm so glad you brought up Poland. So right
Speaker 3: now we have Vietnam, Mexico, Poland. There's also Indonesia and Morocco.
Speaker 3: Maybe like you crunch the numbers, you took a look
Speaker 3: at the combined economic output and input of these countries,
Speaker 3: what do they look like?
Speaker 2: So they are about four percent of global GDP together,
Speaker 2: So that's probably the size of Germany. It's for tradio
Speaker 2: on USD in twenty twenty two, so it's not a
Speaker 2: very large economic block, but it's starting to make some
Speaker 2: size but at the same time they have clearly punched
Speaker 2: above their weights when it comes to investment. And if
Speaker 2: you look at the number of green field investments so
Speaker 2: very quickly, green field investment is those foreign direct investment
Speaker 2: projects into a new project, a new factory. So it's
Speaker 2: really the sort of trend of production in the future.
Speaker 2: So that's a very good indicator where feelings like the
Speaker 2: big factories of the future. Basically, in twenty twenty two,
Speaker 2: I think those countries got almost ten percent of green
Speaker 2: field investment together, so four percent of GDP, ten percent
Speaker 2: of green field investment, and they're also probably represented about
Speaker 2: twelve percent of the world exports of goods, so you
Speaker 2: can see that these are very foreign investment trade oriented economies.
Speaker 3: So in terms of what these countries have in common,
Speaker 3: you mentioned proximity, you mentioned manufacturing hub. You also mentioned
Speaker 3: this ability to draw investment from foreign companies that are
Speaker 3: looking to expand their footprint, maybe diversify their supply chain.
Speaker 3: Is there anything else that we should think about in
Speaker 3: terms of what these countries share in common.
Speaker 1: Yeah, Look, trade deals are a big part of the story,
Speaker 1: and I think in the case of Morocco, for example,
Speaker 1: it has a trade agreement with the United States, and
Speaker 1: as a result of that trade agreement, companies that invest
Speaker 1: there are able to take advantage of the benefits of
Speaker 1: the Inflation Reduction Act and all the subsidies and incentives
Speaker 1: that are in that when it comes to things like
Speaker 1: electric vehicle production and so on. So Morocco sits at
Speaker 1: the top of Africa, has free trade relationships with the US,
Speaker 1: also with the EU, and that means that it becomes
Speaker 1: the kind of like Mexico, a hub for investment, a
Speaker 1: hub for production, and it really is looking forward and
Speaker 1: they really are trying very hard to position themselves in
Speaker 1: terms of this kind of electrification. This is the other
Speaker 1: context for all of this is we have this enormous
Speaker 1: transition happening in the global economy from fossil fuels to
Speaker 1: green energy, and a lot of these countries are finding
Speaker 1: a way to take advantage of that.
Speaker 2: There's been many studies actually looking at what are the
Speaker 2: drivers that can explain how a country can raise its
Speaker 2: stakes in the global value chains, and there are lots
Speaker 2: of things. Proximity trade deeds. Language can help as well,
Speaker 2: having a common language with one of the big importers
Speaker 2: or exporters. The quality of infrastructure and institutional quality generally
Speaker 2: HELPSODOT cheaper labor cousts, of course, and that probably sort
Speaker 2: of thing you think about when you think about Mexico
Speaker 2: versus the US, or Vietnam versus China. So there are
Speaker 2: lots of drivers of potential success in global value chains
Speaker 2: that have clearly benefited those five economies.
Speaker 3: After the break, which countries in Asia and Africa are
Speaker 3: benefiting from tensions between China and the West. We've talked
Speaker 3: a little bit broadly about these countries, but I want
Speaker 3: to take a deeper dive into Vietnam because Vietnam's positioning
Speaker 3: is really interesting. It's role as connector, it's always in there,
Speaker 3: but it's been super charged since Donald Trump, the former president,
Speaker 3: launched his trade war against China. Can you talk a
Speaker 3: little bit about how Vietnam's role has evolved.
Speaker 1: Vietnam's economic rebirth really started happening in the nineteen nineties
Speaker 1: when it normalized relations with the United States. Remember, they
Speaker 1: had been for decades after the Vietnam War, had been
Speaker 1: kind of frozen out. The US and Vietnam did not
Speaker 1: have diplomatic relations. And what we saw when that happened
Speaker 1: in the early nineteen nineties is very quickly an initial
Speaker 1: surgeon investment and people looking at producing in Vietnam. It's
Speaker 1: a big economy in its own right, or a big
Speaker 1: population center in its own right. But what we saw
Speaker 1: during the Trump administration was another acceleration in that as
Speaker 1: we had the Trump administration put these tariffs on goods
Speaker 1: from China, and so a lot of people started shifting
Speaker 1: production and that is happening to this day. It's still
Speaker 1: playing out. One of the places that our reporters visited
Speaker 1: as part of this project is, you know, literally these
Speaker 1: rice fields in northern Vietnam that are being turned into
Speaker 1: factories for fox Con that will make MacBooks. You know,
Speaker 1: there's other companies that will make AirPods, all of your
Speaker 1: eye devices. We think of them often as coming from China.
Speaker 1: A growing number of them are going to come from
Speaker 1: other countries like Vietnam. So Vietnam is very much focused
Speaker 1: around the kind of tech supply chain consumer tech supply chain.
Speaker 1: One of the important things to point out, and I
Speaker 1: think this is really where the connector label comes in,
Speaker 1: is that a lot of these factories are being run
Speaker 1: by the same suppliers who have factories in China. Now
Speaker 1: like fox Con and that in fact, in some cases
Speaker 1: these are Chinese suppliers who are setting up in Vietnam,
Speaker 1: so China doesn't get taken out of the equation just
Speaker 1: because production shifts to Vietnam.
Speaker 3: So Mava, can you talk us through some of the numbers.
Speaker 3: When you look at export numbers, important was what do
Speaker 3: they reveal in terms of Vietnam's role.
Speaker 2: Vietnam is one of the smallest of those five connectors.
Speaker 2: That's actually think the only smallest one would be moreco
Speaker 2: So it's quite a small economy in terms of size,
Speaker 2: but it's been growing extremely rapidly and their trade numbers
Speaker 2: have been on the rise for quite a few years already.
Speaker 2: What we did for the analysis is that we looked
Speaker 2: at how much of the global trade they had in
Speaker 2: all the different products in twenty seventeen, and then we
Speaker 2: compared how much they got like how much they had
Speaker 2: increase their market shares in different products by twenty twenty two,
Speaker 2: and Khalif Vietnam was one where we had seen near
Speaker 2: sixty over performance in exports. That means their trade has
Speaker 2: been growing much faster than that of the rest of
Speaker 2: the world, and in the meantime they had been receiving,
Speaker 2: and that has been the case for the last ten years.
Speaker 2: A lot more confid investments. So what we're seeing in
Speaker 2: Vietnam is that a lot of investments arrived in the
Speaker 2: early twenty tens and is now at maturity. So it's
Speaker 2: really boostings are export numbers and supporting the manufacturing capacity.
Speaker 1: Vietnam's experts to the United States have almost tripled in
Speaker 1: the last five years. Their imports from China have almost
Speaker 1: doubled in the last five years.
Speaker 3: Let's talk about another Asian country, not so much a neighbor,
Speaker 3: but in the same region in Southeast Asia, and this
Speaker 3: would be Indonesia, which of course has a large population
Speaker 3: and a lot of natural resources, and I think that's
Speaker 3: a critical component here. Sean, you mentioned earlier about the
Speaker 3: greenification of the global economy. What role does Indonesia play
Speaker 3: in that greenification.
Speaker 1: Indonesia has a lot of the things that the world
Speaker 1: needs to make electric vehicles. We're talking about things like nickel.
Speaker 1: What they've done is they've positioned themselves studiously as a
Speaker 1: kind of neutral party. If you remember, going back in history,
Speaker 1: Indonesia was a founding member of the Non Aligned movement
Speaker 1: during the Cold War, which refused to take sides. So
Speaker 1: we see the really interesting kind of corporate marriages taking
Speaker 1: place in places like Indonesia. Earlier this year, Ford signed
Speaker 1: a deal with a Chinese cobalt producer in Brazil's Valet,
Speaker 1: which is an enormous miner, to develop and process nickel
Speaker 1: via a mine in Indonesia, and that was very much
Speaker 1: something that was broken by the Indonesian government. They're trying
Speaker 1: very hard to make themselves a kind of essential stop
Speaker 1: or an essential source for the electric vehicle supply chain,
Speaker 1: for the green energy supply chain.
Speaker 3: To be clear, they're not actively choosing between the US
Speaker 3: or China, are they. They're kind of actively courting both
Speaker 3: countries absolutely.
Speaker 1: I mean President Joko Widodo, who's really behind this, was
Speaker 1: in the US earlier this year and his message was
Speaker 1: very clearly, we want more US investment in Indonesia, and
Speaker 1: at the same time they are getting lots of Chinese
Speaker 1: investment there. And the US is not the only Western
Speaker 1: or G seven economy that they're courting. They want investment
Speaker 1: from everywhere, and if anything, their complaint is that, you know,
Speaker 1: on the US or on the Western side, some investors
Speaker 1: have been slowed to come to Indonesia and aren't quite
Speaker 1: balancing out the investment that they're seeing from China. MA.
Speaker 3: But you mentioned earlier Morocco being the smallest of the
Speaker 3: five connector countries that Bloomberg has identified, yet when it
Speaker 3: comes to the car industry and the ev industry, it's
Speaker 3: playing an increasingly important role. Can you tell us a
Speaker 3: little bit about the basics of Morocco's economy and how
Speaker 3: therefore that puts it in a very advantageous position given
Speaker 3: the current state of the fragmented global economy.
Speaker 2: It's really the car industry and the shift to the
Speaker 2: electric vehicles mean that actually car manufacturers from Europe in
Speaker 2: particular honor so some of the German ones have to
Speaker 2: make big investments, they have to renew their equipment stock,
Speaker 2: and that's a very good opportunity for those countries that
Speaker 2: can benefit from these new investments. The benefits the manufacturers
Speaker 2: are looking for, those lower labor costs in some cases.
Speaker 2: In the case of Morocco, you have also a better
Speaker 2: access to some of the natural resources, so that makes
Speaker 2: them a very good destination for new investments. And that's
Speaker 2: what we're seeing currently in Morocco and Sean. The Free
Speaker 2: trade agreements that you mentioned earlier. This really comes into
Speaker 2: play when it comes to Morocco, and it's something that
Speaker 2: maybe was not planned but has worked out pretty well.
Speaker 1: Absolutely, so, the US and Morocco have quietly had a
Speaker 1: free trade agreement in place for many years. It didn't
Speaker 1: quite matter as much as it does today in the past.
Speaker 1: And the reason it matters today is because we're talking
Speaker 1: about billions of dollars in investment that is going into
Speaker 1: Morocco in battery plants and other kind of parts of
Speaker 1: the electric vehicle supply chain. And one of the big
Speaker 1: reasons for that is that free trade agreement and the
Speaker 1: fact that that free trade agreement makes things that are
Speaker 1: produced in Morocco eligible for the tax rebates and the
Speaker 1: other incentives that you have under the Inflation Reduction Act,
Speaker 1: which is a big part of the Biden administration's effort
Speaker 1: to encourage the development of the green economy.
Speaker 3: Not to mention the fact that Morocco is home to
Speaker 3: the world's largest reserves of phosphate, which is a key
Speaker 3: ingredient in rechargeable cells used in evs. I struggle to
Speaker 3: keep track of all the different ingredients in these ev
Speaker 3: vehicles because there's so many different components and you have
Speaker 3: to go all over the world to get them.
Speaker 1: One of the things that we are seeing today in
Speaker 1: the world of electric vehicles and particularly in terms of batteries,
Speaker 1: is a huge amount of innovation, which means that some
Speaker 1: of the key ingredients for today's batteries may not be
Speaker 1: the key ingredients for the next generation of batteries. That
Speaker 1: is a potential vulnerability for some of these connector economies.
Speaker 3: Coming up a closer look at the fruits of foreign
Speaker 3: investment for Poland and Mexico. Let's focus in on what's
Speaker 3: happening in Poland because there are several countries here where
Speaker 3: we talk about their wealth of natural resources, whether it's Morocco,
Speaker 3: whether it's Indonesia. In Poland, are there natural resources to
Speaker 3: speak of here? Or is Poland critical because of its
Speaker 3: geographic position positioned in eastern Europe between the West and Russia,
Speaker 3: but also a low cost center.
Speaker 1: The fact is is that since the end of the
Speaker 1: Cold War, Poland has positioned itself as a manufacturing hub
Speaker 1: within Europe and has become a really important part of
Speaker 1: the production process for German and other European automakers. And
Speaker 1: now that we have this transition happening in the auto industry.
Speaker 1: It is again trying to take advantage of that. And again,
Speaker 1: you know, like other countries, it's trying to make sure
Speaker 1: that it's not just producing parts, but that it's actually
Speaker 1: taking full advantage. And so there's even an effort underway
Speaker 1: to produce their own national vehicle with help from Ainese company,
Speaker 1: it should be said, and move up the value chain.
Speaker 1: We have seen in the last five years the value
Speaker 1: of China's exports to Poland double. We also in that
Speaker 1: same period have seen Poland's exports to other EU countries
Speaker 1: go up by fifty six percent. In other words, it's
Speaker 1: again that connector relationship. We're seeing significant growth in trade
Speaker 1: coming in and trade going out.
Speaker 3: Let's cross the Atlantic and go over to Mexico, which
Speaker 3: is the US's southern neighbors. So geography is certainly a
Speaker 3: benefit for Mexico. Also the fact that it's got such
Speaker 3: a close trade relationship with the US for decades now
Speaker 3: through NAFTA and then the successor to NAFTA. But also
Speaker 3: it is a source of natural resources as well, with
Speaker 3: the oil of the industry very well developed in Mexico.
Speaker 3: Tell us a little bit about how the relationship between
Speaker 3: Mexico and the US has changed. Just over the past
Speaker 3: couple of years.
Speaker 1: Since the Trump administration started putting in tariffs. We saw
Speaker 1: a similar phenomenon in Meca that we saw in Vietnam,
Speaker 1: and that is that companies in the US who were
Speaker 1: reliant on parts coming from China and it's often a
Speaker 1: case of parts rather than finished goods, shifted production to Mexico.
Speaker 1: And what we've seen happened since is the Chinese suppliers
Speaker 1: that used to benefit from that relationship move their investment
Speaker 1: and invest heavily in Mexico. Tesla is building a gigafactory
Speaker 1: in Mexico, and alongside it, we're seeing Chinese companies that
Speaker 1: hope to supply that company build their own factories. We
Speaker 1: also are seeing Chinese workers move to Mexico to train
Speaker 1: Mexican workers and Chinese managers there. We think of the
Speaker 1: US Mexico relationship, which goes back and forth and is
Speaker 1: often difficult, whether it's because of the drug trade or
Speaker 1: because of what is happening with immigration in the southern border.
Speaker 1: But the fact is is that there are other players
Speaker 1: in that relationship that make Mexico much more of a
Speaker 1: connector economy rather than simply a kind of outpost of
Speaker 1: the United States and corporate America.
Speaker 3: With all these Chinese companies setting up shop in Mexico
Speaker 3: in the official numbers, does that count as a Mexican
Speaker 3: company or a Chinese company? Does it even matter?
Speaker 1: This is where you know, how we count these things
Speaker 1: gets very complicated. So you know, there are ownership structures
Speaker 1: a lot of the countries around the world, and we
Speaker 1: see this in Mexico as well. You know, set up
Speaker 1: joint ventures with local partners, and so you know it's
Speaker 1: a part Chinese, part Mexican company. In many cases there
Speaker 1: are some full subsidiaries in Mexico of Chinese companies. But
Speaker 1: when those goods hit the border, those imports from Mexico,
Speaker 1: whether they are produced by a Chinese company, a European company,
Speaker 1: or an American company, they all count as imports from Mexico.
Speaker 1: And that's where sometimes the data can be misleading. And sometimes,
Speaker 1: you know, when we're thinking about globalization and what is happening,
Speaker 1: we focus on that headline data and we miss what
Speaker 1: is happening below.
Speaker 2: And that's why we are very grateful to institutions like
Speaker 2: the OECD who try to actually join the dots between
Speaker 2: those different exports and imports and see exactly where the
Speaker 2: value added is coming from. And when you think in
Speaker 2: terms of the impact of the economies of becoming connectors,
Speaker 2: it means they don't capture the full value of those
Speaker 2: new exports because they have to import more to be
Speaker 2: able to construct them, assemble them in some cases, and
Speaker 2: then export them. It's not just re export. There is
Speaker 2: some assembling or some transformation going on. So it's still
Speaker 2: quite a big benefit for those economies in terms of activity,
Speaker 2: of jobs, of taxis connection and things like that.
Speaker 3: So looking ahead, how secure are we in thinking of
Speaker 3: these countries as connector countries that are so essential or
Speaker 3: are they more vulnerable than we realize because as technology changes,
Speaker 3: they're not in a position to keep taking advantage of
Speaker 3: their position in the global economy.
Speaker 1: So a lot of this is going to depend on
Speaker 1: the individual economies and how much they rely on certain
Speaker 1: natural resources, whether it's phosphate in Morocco or nickel in Indonesia.
Speaker 1: But I think you know, one of the common phenomenons
Speaker 1: that we see across these economies is a desire to
Speaker 1: get into the manufacturing game to move up the value chain,
Speaker 1: and that kind of bodes well for the future. There's
Speaker 1: absolutely a vulnerability in terms of innovation and disruption and
Speaker 1: what changes in the future in terms of our needs
Speaker 1: for minerals and so on. But there's also another reality,
Speaker 1: which is, you know, we looked at these five economies,
Speaker 1: they were kind of the top of our list, but
Speaker 1: they're not the only ones trying to be connectors in
Speaker 1: this new global economy, and so we're going to see
Speaker 1: more competition to be these connectors in the global economy
Speaker 1: from other countries and governments work very hard to attract
Speaker 1: investment from both the US and China, from the European Union,
Speaker 1: from Japan, from big companies all over the world. We're
Speaker 1: also going to see big companies all over the world
Speaker 1: kind of leverage the power that they have to get
Speaker 1: more incentives and benefits, and you know, there is a
Speaker 1: risk that we will see a bit of a race
Speaker 1: to the bottom in terms of taxation or industrial subsidies
Speaker 1: to get all of this investment flowing around the world.
Speaker 1: The big takeaway going forward about all this is, for
Speaker 1: a decade or more, people have been writing about the
Speaker 1: end of globalization, or been talking about deglobalization or slobalization
Speaker 1: and so on. What we see with these economies is
Speaker 1: evidence that kind of globalization has been pretty durable and
Speaker 1: that actually it always finds a way and companies always
Speaker 1: find a way to get around even barriers like tariffs
Speaker 1: countries put up and to deal with things like geopolitics.
Speaker 2: One of the vulnerabilities for this country is still that
Speaker 2: so far, I think they have managed to stay new
Speaker 2: hard to be aligned with either the US or China,
Speaker 2: and of course for them, if the tensions retchet up,
Speaker 2: we have more of a decopling between two blocks. If
Speaker 2: they're forced to choose side, or if investors choose side
Speaker 2: for them because they go for the safest place, then
Speaker 2: it's going to be more challenging for some of these economy.
Speaker 2: So the country like Poland, for example, at the heart
Speaker 2: of the European Union is probably quite a safe bet
Speaker 2: for investors. Country like Vietnam, sitting so close from China
Speaker 2: geographically angiopolitically when you look at UN votes for example,
Speaker 2: could be more at risk of a flight to safety
Speaker 2: from some of the investors looking to go to proper
Speaker 2: friend shoring.
Speaker 3: I like what Sean said about how companies always find
Speaker 3: a way to get around whatever barriers or restrictions are
Speaker 3: put up, and in many cases they're using these connector
Speaker 3: countries to do so, does that actually add to the
Speaker 3: economic value overall? When you tell it all up, I mean,
Speaker 3: it makes everything look like there's more trade, there's more investment,
Speaker 3: even if you're doing it in a more roundabout way.
Speaker 1: There's another way of looking at it. There's the kind
Speaker 1: of consumer end of that, which is when stuff takes
Speaker 1: more stops on the way to getting to you, the consumer,
Speaker 1: that inevitably means higher costs for the consumer and higher
Speaker 1: costs for companies and so on, and it's a less
Speaker 1: efficient way of producing. And so these connector economies, absolutely
Speaker 1: we're going to see them adding to global growth. We're
Speaker 1: going to see adding to flows of trade. But you know,
Speaker 1: there's also this kind of negative impact of all that,
Speaker 1: which is all of this is going to cost us more.
Speaker 1: It means that that television, that iPhone, those AirPods, that
Speaker 1: electric vehicle all may end up costing us a little
Speaker 1: bit more than it would otherwise.
Speaker 2: Maybe is that you take tredeo second best. It's quite
Speaker 2: good that we can have those step hubs in between
Speaker 2: the main economies. When they stopped imposing very large trade
Speaker 2: war tariffs or things like that. For example, you look
Speaker 2: at some very large model of the global economies, you
Speaker 2: realize that you can split the word into two economic blocks.
Speaker 2: As long as you keep a neutral block in between,
Speaker 2: the global costs are manageable or contain in terms of
Speaker 2: GDP because these neutral countries play a cushioning role between.
Speaker 2: You have losses because in a way you have this
Speaker 2: extra stop that doesn't really add any value, but it's
Speaker 2: just the sort of second base to importing and exporting
Speaker 2: directly between countries. But the costs are contain as soon
Speaker 2: as you split the word without neutral countries in between,
Speaker 2: so you really have the word split between two economic blocks.
Speaker 2: The global models start to find much higher shocks to
Speaker 2: the global economy, much higher costs, because then you have
Speaker 2: a lot of inefficiencies whereby you have too much investment
Speaker 2: in China relative to demand in Chinese block, and you
Speaker 2: have to invest a lot in the rest of the world,
Speaker 2: and you have to invest in things where you're not
Speaker 2: actually so good doing instead of investing in things where
Speaker 2: you're a bitter at So you don't exploit your comparative
Speaker 2: advantage as much as you used to, so he's our
Speaker 2: big gross Sean.
Speaker 3: Thank you so much for joining us from Washington. Fantastic story.
Speaker 1: It's wonderful to be here.
Speaker 3: Thank you, Mava. Really appreciate your giving us insight, and
Speaker 3: thank you for staying up late to speak with us.
Speaker 2: Thanks for having me.
Speaker 3: Thanks for listening to us here at the Big Take.
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Speaker 3: Take at Bloomberg dot net. This episode was produced by
Speaker 3: Federica Romaniello, with production support from Sam Gobauer. Raphael I'm
Speaker 3: Silly is our engineer. Original music by Leo Sidron I'm
Speaker 3: Scarlett Fou. We'll be back tomorrow with another Big Take