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Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. Daily

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Speaker 1: we bring you insight from the best in economics, finance,

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Speaker 1: investment and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com and of course on the Bloomberg. We

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Speaker 1: are approached to have with us this morning someone with

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Speaker 1: a substantial understanding and reading on our international economics and

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Speaker 1: politics with City Group, their chief global political analyst, Tina

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Speaker 1: Fordham in our London studios. An extraordinary day and history

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Speaker 1: being made. Your evil task is you have to sort

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Speaker 1: it out and write a memo. Get out front of

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Speaker 1: Katherine Mann and Villain Bowder. Give us a on how

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Speaker 1: you will write this up today for City Group London. Well,

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Speaker 1: it wouldn't surprise you for me to say that I'll

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Speaker 1: refer back to what I've been saying all along. Trump

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Speaker 1: wants to change the international order. And even before he

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Speaker 1: took office, of course, we were talking about pressures on

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Speaker 1: the postwar international system. Trump has accelerated that. Um, perhaps

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Speaker 1: you know the obituary for for NATO has been written

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Speaker 1: many times before, by the way, and NATO comes out

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Speaker 1: of this with a more robust budget. But One of

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Speaker 1: the most striking things about this for me is is

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Speaker 1: how much President Trump was telegraphing certain headlines back to

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Speaker 1: the domestic audience ahead of mid terms. And that was

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Speaker 1: I shook down everybody in that room. Everybody ended up

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Speaker 1: happy and and and the US is no longer paying

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Speaker 1: the freight for what we used to call um the

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Speaker 1: peace dividend here in Europe. Part of this is his

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Speaker 1: own style, and there's people that agree with his style.

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Speaker 1: He is really his ratings have been extremely good across America,

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Speaker 1: and part of it is his huge nostalgia for another

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Speaker 1: time and place, and yet his disdain for the sequential

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Speaker 1: presidents that we've had over the last number of years.

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Speaker 1: Is his nostalgia doable or is it just impossible to

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Speaker 1: go back to what he perceives as another time and place.

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Speaker 1: Political nostalgia is is something that's present everywhere, and of

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Speaker 1: course it also was manifested in the in the Brexit debate.

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Speaker 1: And and part of what I think it harkens back

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Speaker 1: to is actually a desire for much more simple times.

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Speaker 1: And when you heard the president's press conference today at

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Speaker 1: NATO in Brussels, he spoke in big, clear themes not

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Speaker 1: about the detail when he was asked about specifics. Um.

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Speaker 1: But he doesn't have nostalgia for the soul superpower moment,

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Speaker 1: that's quite clear. And he's been very consistent about saying

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Speaker 1: he thought that that that wasn't fair, wasn't fair burden sharing,

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Speaker 1: And a lot of Americans agree with him. The City

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Speaker 1: Group cares about Brexit obviously with the city and with

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Speaker 1: the financial commitment that Mr Corbatt and others have made.

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Speaker 1: Interpret for us this silly white paper that's coming out.

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Speaker 1: Will anyone read it, I guess is the first question?

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Speaker 1: But what's it mean for the city in the financial

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Speaker 1: sector in Are you a London optimist? Well, um, that's

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Speaker 1: a that's a mixed bag. I'm not sure a lot

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Speaker 1: of people will read the white paper, including members of

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Speaker 1: the cabinet. We we have, of course moving away from

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Speaker 1: expertise and fact based analysis. Um. I think we can

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Speaker 1: observe here in London though, that the so called hard

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Speaker 1: bregsit tears are really running against a brick wall in

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Speaker 1: terms of their optimism about realizing their vision and of

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Speaker 1: course hard bregsit means no access to the Custom Union

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Speaker 1: and everything else in terms of the City of London

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Speaker 1: and of course the companies that I talked to. I

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Speaker 1: spend a lot of time going and talking to CEOs

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Speaker 1: all around Europe, in particular. Um companies have been making

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Speaker 1: their plans for some time now. They're not going to

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Speaker 1: wait until a white paper is out, and we saw

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Speaker 1: an announcement from Arabis for example, with that end point.

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Speaker 1: Please tell us tomorrow when we interview you. You'll be

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Speaker 1: at Blenhem tonight for dinner. Absolutely, it's just a question

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Speaker 1: of which which diamonds time which. Thank you so much.

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Speaker 1: You've been a trooper today to be with us. The

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Speaker 1: extended comments of the President of the United States and

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Speaker 1: Brussels was Fortum is of course with City Group, their

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Speaker 1: chief global political analysts. Let's focus on what's going on

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Speaker 1: in the world economy. And what's great about is Mickey

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Speaker 1: Levy's seen every episode of Downton Nabby, so it works well.

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Speaker 1: And he's probably visited Jerome Avenue at one point. To

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Speaker 1: Mickey Levy is the chief market economist, is the chief

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Speaker 1: economist rather for the United States, America's and Asia for

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Speaker 1: Barrenburg Capital, and he joins us here in our eleven

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Speaker 1: three O studios. Mickey, thank you very much for being

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Speaker 1: with US UM. Now you know, I should just also

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Speaker 1: mention that you served as at Blenheim Capital Management, so

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Speaker 1: there's a kind of relationship there. What do you make

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Speaker 1: of what's happening in the world's economy. Do you think

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Speaker 1: that the United States is out of sync with what

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Speaker 1: is happening globally? Or is the United States leading? Uh

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Speaker 1: the trend in in economic performance. Last year, there was

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Speaker 1: extraordinary synchronization in global growth, particularly Europe, Japan, the US,

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Speaker 1: all of them were growing way faster than potential, and

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Speaker 1: emerging nations were doing well. This year, UH, Europe has

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Speaker 1: slowed down a bit but is still healthy on average.

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Speaker 1: Japan is still has slowed down but on average, and

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Speaker 1: the US has a lot of momentum okay, and emerging

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Speaker 1: nations are still doing well. So the global economies are

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Speaker 1: doing well. UM. But what's so extraordinary? I just watched

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Speaker 1: the President Trump at NATO and his questions and answers.

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Speaker 1: Is the dynamics going on in the world, both in economics, politics,

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Speaker 1: UM and and trade negotiations and NATO negotia. It's just extraordinary.

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Speaker 1: And when we when we think about what's what's going on? Yes,

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Speaker 1: the US is speaking from a position of strength um

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Speaker 1: within Europe. Despite everything okay on average, we all know

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Speaker 1: that that there are major problems in in Italy, we

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Speaker 1: know there's Brexit issues, we know Germany is very fragile politically,

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Speaker 1: UM one point I I and and and amid all this,

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Speaker 1: China continues to grow rapidly in China just wants to

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Speaker 1: keep everything, including all their trade and investment policies, just

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Speaker 1: the way they are and and so won't make it

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Speaker 1: happen that that's correct. So one of the insights I

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Speaker 1: get out of this, it confirms my view is that

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Speaker 1: President Trump is this very erratic, um and chaotic, but

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Speaker 1: very tough negotiator that likes to poke the eye of

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Speaker 1: the establishment. And you have all the NATO members just

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Speaker 1: basically saying, you know, everything's been okay, um, let's keep

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Speaker 1: things the way they are and and be nice to yea.

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Speaker 1: But Trump comes in and basically says, wait a second,

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Speaker 1: I'm gonna ruffle every everybody's feathers. And so one insight

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Speaker 1: from this is in Trump's mind, he does he thinks

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Speaker 1: about trade negotiations in the same breadth this thinking about Russia,

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Speaker 1: the pipeline, China, UH, NATO it's all intermingled and and

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Speaker 1: he but wouldn't that confirm the idea that that that

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Speaker 1: we are in some kind of global world where things

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Speaker 1: are interconnected and that one thing does affect another thing. Oh? Absolutely.

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Speaker 1: And another thing to keep in mind is that when

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Speaker 1: you look at the world from Europe's perspective, or Japan's,

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Speaker 1: or China's perspective, or the US, every country desperately needs

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Speaker 1: each other for trading. And so Trump is pushing the envelope,

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Speaker 1: but ultimately every country will ultimately be willing to negotiate.

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Speaker 1: And and so one insight I got from today is

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Speaker 1: just you know, Trump is going to um push China,

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Speaker 1: and China will eventually give in on some of their

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Speaker 1: unfair trade practices. And and there were several comments today

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Speaker 1: in the in the in the press conference about UM

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Speaker 1: Russia and Putin. Well, he's headed to and and I

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Speaker 1: think Putin has more He wants to meet with with

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Speaker 1: Trump more than Trump wants to meet with Putin, be

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Speaker 1: as they desperately need something. You know, the natural gas

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Speaker 1: issues critically important. Thank you very much. Mickey Levy is

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Speaker 1: chief economist for Barrenburg Capital for the United States, America's

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Speaker 1: and Asia Pim, why don't you bring in Dr Paraculis

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Speaker 1: with some really interesting perspective not only on the president

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Speaker 1: and an extensive press conference, but that European response as well. Well.

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Speaker 1: I just want to bring him in as the assistant

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Speaker 1: project director for the US Project at the Chatham House. UH.

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Speaker 1: Previously he worked for Action on Armed Violence, and he

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Speaker 1: is a native of Lewiston, Maine, so he's got the

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Speaker 1: perspective from both sides of the pond. Jacob, thank you

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Speaker 1: very much for being with us. What did you make

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Speaker 1: of the president's news conference today? It's been a fairly

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Speaker 1: chaotic twenty four hours. Um. It's hard to have one

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Speaker 1: sort of singular takeaway unless you look back and remember

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Speaker 1: that actually the President has been um critical of multilateral

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Speaker 1: institutions and of NATO and of NATO allies for well,

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Speaker 1: going back through his campaign and even before that. He

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Speaker 1: looks at what he sees as the balance sheet, and

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Speaker 1: it's important to draw the distinction before what he sees

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Speaker 1: of the balance sheet and what other American political observers

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Speaker 1: or the rest of US might see as the balance sheet. Um,

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Speaker 1: and just he's debt. So he comes into the the

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Speaker 1: NATO summit and demands that Europe pay more, and then

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Speaker 1: and then demands that they your pay even more than

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Speaker 1: anyone has really considered in the past. The target is

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Speaker 1: two percent of annual GDP, and that's a target for UM.

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Speaker 1: He then makes the claim that Europe should aim for

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Speaker 1: four percent, which not even the US bends. It's an

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Speaker 1: extraordinary increase and essentially an unmetable demand. UM. There were

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Speaker 1: then a storm of headlines this morning that he had

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Speaker 1: threatened to quote go his own way, which is an implicit,

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Speaker 1: if not explicit, threat to the US participation in NATO,

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Speaker 1: and then has a press conference where he more or

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Speaker 1: less walked back and says, well, now I think more

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Speaker 1: money has been coming in. UM. I deserve credit for this. UM.

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Speaker 1: So it's it's it's this, this incredible storm of confusion,

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Speaker 1: which I think has drowned out any prospect of any

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Speaker 1: other foreign progress. The summit. Well, I'm just wondering, why

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Speaker 1: do you believe that it is an unmidable demand. I mean,

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Speaker 1: the United States the defense budget nearly you know, seven

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Speaker 1: billion dollars. The next largest spender in dollar terms is

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Speaker 1: the United Kingdom at fifty five billion, France at forty five,

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Speaker 1: Germany at forty five and based on fiscal year twenty nine,

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Speaker 1: forty billion is what we just spend on the Marine Corps. Well,

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Speaker 1: it's important to remember that the US has a completely

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Speaker 1: different conception and a completely different and vastly larger set

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Speaker 1: of global roles for its military than any European country.

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Speaker 1: What we're talking about NATO defense. Actually most of the

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Speaker 1: U s military is not engaged in the European theater.

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Speaker 1: It's a relatively small portion, so it's a little bit

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Speaker 1: I mean, you know, measuring military strength and military spending

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Speaker 1: is incredibly tricky. The two percent goal, I think is

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Speaker 1: not a particularly effective one. It's it's agreed upon because

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Speaker 1: it's a nice, easy sort of tagline. It. It goes

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Speaker 1: some way towards demonstrating commitment, but some capabilities are very expensive.

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Speaker 1: Others are perhaps more niche but incredibly effective and come

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Speaker 1: much more cheaply. Um, I think there needs to be

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Speaker 1: a better way of measuring it. But you have to

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Speaker 1: remember that the the US is a global military actor,

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Speaker 1: and no European country is or aspires to be. So

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Speaker 1: there's not really a political appetite in any European country

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Speaker 1: to have the kind even at a sort of the

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Speaker 1: same population based scale, the same kind of global role

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Speaker 1: of the U stuff. Did you hear the president's press conference,

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Speaker 1: Dr Parr, I I heard, I heard some of it.

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Speaker 1: I wasn't able to listen to the entire thing. But

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Speaker 1: I think the American media, whatever their persuasion, conservative, liberal, whatever,

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Speaker 1: well fact check this thing to death. For you. As

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Speaker 1: a grizzled military slash internet sational politics pro does that

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Speaker 1: press conference need fact checking? I think to some degree

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Speaker 1: the fact checking kind of misses the point because at

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Speaker 1: this point is pretty well established that the president plays

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Speaker 1: fast and loose with numbers. He talks about numbers which

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Speaker 1: are either exaggerated or not really the mass that anybody

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Speaker 1: else is using. Um, that's that's kind of established at

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Speaker 1: this point. Um. He didn't really say anything in that

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Speaker 1: press conference that we haven't heard him say many times before.

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Speaker 1: NATO was not meeting its obligations. They're beginning to meet

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Speaker 1: their obligations now thanks to me. Uh. They need to

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Speaker 1: do more. They need to do even more in the future. Uh.

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Speaker 1: Europe has been unfair to the US on trade. It's

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Speaker 1: sort of the greatest hits parade of Trump's complaints about

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Speaker 1: American allies in Europe um So in the sense that

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Speaker 1: a lot of that's either misleading or untrue. Yes, it

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Speaker 1: needs fact checking. But in terms of you know, did

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Speaker 1: he say, are there new claims that need fact checking,

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Speaker 1: they're not not, particularly Jacob. As far as defense spending

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Speaker 1: goes in Europe, do you believe that there will see

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Speaker 1: more defense contracts for US arms from European partners. Well,

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Speaker 1: here's the problem with Trump's negotiating strategy. I think it's

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Speaker 1: not unreasonable to expect that European companies on your European

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Speaker 1: countries rather are looking at areas where they could procure

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Speaker 1: from American companies by way of demonstrating commitment in the

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Speaker 1: way that Trump likes to see. The problem with making

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Speaker 1: a an unprecedented ask like a four percent defense spend

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Speaker 1: is it's going to convince those coun countries that there's

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Speaker 1: no point in trying to play at him, that no

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Speaker 1: amount of buying Rocky planes or uh Cult rifles or

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Speaker 1: any other American product is going to fundamentally change the

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Speaker 1: nature of the President's belief and essentially, either an alternative

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Speaker 1: arrangement has to be made or they have to figure

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Speaker 1: out of back up plans. Um So I think if

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Speaker 1: you'd made if he touched his demands a little bit

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Speaker 1: more reasonable, there might be more uh more there there.

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Speaker 1: But I think there's a sense in which he's kind

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Speaker 1: of pushed too far and actually harmed the negotiating position. Well,

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Speaker 1: we have run out of time, but we will do

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Speaker 1: this again. Thank you so much. Jacob Pericles is with

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Speaker 1: Chadow Mouse out of the London School of Economics and

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Speaker 1: wonderful to speak to him today on these many issues. Um,

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Speaker 1: let's pay attention now to Brexit, and I want to

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Speaker 1: bring in Victoria Houston, who is International Senior Council for

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Speaker 1: International Trade in the Competition Unit for the Institute of

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Speaker 1: Economic Affairs. Victoria, I'm just wondering, based on what you

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Speaker 1: know about the plan for Brexit, what exactly do you

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Speaker 1: believe Britain is prepared to do right now other than

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Speaker 1: put out a white paper? Are they prepared to leave

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Speaker 1: the European Union. Well, this has been one of the

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Speaker 1: great bones of contention that the Brexit supporting members of

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Speaker 1: the government have had, which is that effectively there's been

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Speaker 1: very little to no preparation for leaving the Customs Union

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Speaker 1: and the Single Market actually done in operational terms and

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Speaker 1: the concern is that that had left us in a

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Speaker 1: very weak position in terms of negotiations with the European Union,

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Speaker 1: because they know that we're not really in a position

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Speaker 1: to be able to walk away with no deal. Therefore

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Speaker 1: we will have to accept whatever it is they're willing

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Speaker 1: to give us. That's a UM certainly not something that

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Speaker 1: UM the Prime Minister and the Treasury would accept. That.

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Speaker 1: They would probably argue that there's been a lot of

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Speaker 1: preparation going on behind the scenes. It's not all visible.

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Speaker 1: But unfortunately that seems to be the perception that UM,

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Speaker 1: that a lot of people have in this country. Well, Victoria,

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Speaker 1: I wonder if you could just offer one example of

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Speaker 1: let's say the ferry business, you know, the shipping companies,

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Speaker 1: and what steps they are taking, if any, in order

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Speaker 1: to prepare for what might happen after March that's the

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Speaker 1: Brexit deadline. Yeah, that's a great example actually, because there's

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Speaker 1: there's a bit of a split here between the ferry

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Speaker 1: operators and ports who operate on the short crossing between

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Speaker 1: England and France, the DOVIDs Calais route, and that's actually

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Speaker 1: where the vast majority of UK to EU trade routes

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Speaker 1: through and that's really a very friction list. Lori's drive

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Speaker 1: onto the ferry at Dover, or drive onto the Eurotunnel

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Speaker 1: and then drive off the other side, and and that's

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Speaker 1: the that's the transit. It's finished now. For them, it's

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Speaker 1: a very it's a very big deal if you're introducing

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Speaker 1: new frictions to that process, so they're very worried. On

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Speaker 1: the other hand, the other ports, for example on the

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Speaker 1: east coast of England Um, which are much bigger ports

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Speaker 1: that deal with containerized shipping, they're quite excited about this

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Speaker 1: because this is a huge opportunity for them to win

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Speaker 1: back some of that business from the short crossing. However,

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Speaker 1: both sets of businesses need to know what exactly it

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Speaker 1: is they're preparing for in order to be able to

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Speaker 1: make the investments, to to really make the most of

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Speaker 1: it in the one case, or to to mistigate the

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Speaker 1: difficulties on the other hand. Victoria's you brilliantly describe just

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Speaker 1: one example of the micro analysis of how logistics and

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Speaker 1: all will work. I'm sorry it reeks. Richard Neville, sixteenth

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Speaker 1: Earl of war Work Warwick rather and the Wars of

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Speaker 1: the Roses. I mean, it's like history is just still there.

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Speaker 1: There's this island, there's a channel, and there's Europe and

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Speaker 1: they have these there's tensions that are always out there

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Speaker 1: in the modern age. Bring you know the Earl of Work,

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Speaker 1: the Earl of Salisbury over the Heathrow. How does Heathrow operate?

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Speaker 1: Is you see the new Brexit? So again the realities

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Speaker 1: of international trade in in in the modern era um

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Speaker 1: fast forwarding a little bit from the from the Wars

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Speaker 1: of the Roses um is that as long as you

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Speaker 1: have the systems and processes in place, it can be

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Speaker 1: very low friction. So the vast majority of trade coming

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Speaker 1: into the United Kingdom from outside the Customers Union is

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Speaker 1: cleared within minutes or hours wrong win days, and it's

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Speaker 1: all then the vast vast majority isn't subject to any

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Speaker 1: physical inspection at all. It's all then by means of

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Speaker 1: electronic pre clearance and risk assessment. So as long as

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Speaker 1: you have the systems and protos in place to do it,

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Speaker 1: you can actually have very fact effective blue friction trade

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Speaker 1: from outside Customs Union. In fact, I think you can

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Speaker 1: probably recognize that in the case of the acting Canada,

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Speaker 1: you have a very effective fast border where automotive pie

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Speaker 1: chains on the side of that border. But even Victoria,

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Speaker 1: we've got to leave it there. We're out of time.

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Speaker 1: Victoria Houston, thank you so much, Senior Council UH International

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Speaker 1: Trading Competition Unit for i EA. This was really really

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Speaker 1: if my love how, thank you so much. Victoria here,

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Speaker 1: my love how we try once in a while to

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Speaker 1: talk to people that are like worried about Okay, when

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Speaker 1: this is all done, can the cows go from point

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Speaker 1: A to point be in Ireland? Thanks for listening to

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Speaker 1: the Bloomberg Surveillance podcast. Subscribe and listen to interviews on

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Speaker 1: on Twitter at Tom Keane before the podcast. You can

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Speaker 1: always catch us worldwide. I'm Bloomberg Radio.