1
00:00:00,160 --> 00:00:04,040
Speaker 1: America is imposing tariffs on steel and aluminum in the

2
00:00:04,160 --> 00:00:08,600
Speaker 1: name of national security. Allies and opponents alike are crying foul,

3
00:00:09,000 --> 00:00:12,200
Speaker 1: talk of retaliation. Even a trade war is in the

4
00:00:12,280 --> 00:00:15,880
Speaker 1: air by some reckonings, a trade conflict is already here.

5
00:00:16,360 --> 00:00:19,439
Speaker 1: But if war has broken out, how will we know

6
00:00:19,680 --> 00:00:23,159
Speaker 1: who's winning. If it hasn't broken out, how will we

7
00:00:23,239 --> 00:00:36,000
Speaker 1: know when it does, if at all? Welcome to Benchmark,

8
00:00:36,159 --> 00:00:39,360
Speaker 1: a show about the global economy. This week, we step

9
00:00:39,440 --> 00:00:42,360
Speaker 1: back from the daily skirmishes to try to figure out

10
00:00:42,440 --> 00:00:45,800
Speaker 1: what's really going on here and just as importantly, where

11
00:00:45,840 --> 00:00:49,159
Speaker 1: we are headed. I'm Scott Landman, an economics editor with

12
00:00:49,240 --> 00:00:53,480
Speaker 1: Bloomberg News in Washington, and I'm Daniel Moss, economics writer

13
00:00:53,680 --> 00:00:57,920
Speaker 1: and editor at Bloomberg View in New York. Guiding us

14
00:00:57,960 --> 00:01:01,360
Speaker 1: through thee she was Shannon O'Neil, a Latin American trade

15
00:01:01,400 --> 00:01:04,880
Speaker 1: ex but at the Council on Foreign Relations who's also

16
00:01:05,040 --> 00:01:08,679
Speaker 1: working on a book about the global supply chains. Riveting

17
00:01:08,720 --> 00:01:13,040
Speaker 1: stuff and perfectly timed, Shannon, Welcome back to Benchmark. Thanks

18
00:01:13,040 --> 00:01:16,400
Speaker 1: for having me so, Shannon. We'll get to steal an

19
00:01:16,440 --> 00:01:20,280
Speaker 1: aluminum shortly, but first let's try to define the terrain

20
00:01:20,880 --> 00:01:25,480
Speaker 1: what actually is a trade war other than a campaign slogan. Well,

21
00:01:25,480 --> 00:01:28,280
Speaker 1: it definitely is that a campaign slogan. But I would

22
00:01:28,280 --> 00:01:31,039
Speaker 1: say if we think about a trade war, UM, not

23
00:01:31,120 --> 00:01:33,160
Speaker 1: to stretch this metaphor too far, but right now we're

24
00:01:33,160 --> 00:01:39,400
Speaker 1: having skirmishes. We're having the Trump administration upset about particular products,

25
00:01:39,440 --> 00:01:43,760
Speaker 1: about steel, about aluminum, and launching out not just at China,

26
00:01:43,800 --> 00:01:45,640
Speaker 1: which is really the source of their ire, but at

27
00:01:45,640 --> 00:01:49,280
Speaker 1: the overall world. UM. But that really is one particular skirmish,

28
00:01:49,280 --> 00:01:51,520
Speaker 1: and we've seen these in the past, particularly over steel

29
00:01:51,560 --> 00:01:54,160
Speaker 1: as well as other issues. If we would get to

30
00:01:54,200 --> 00:01:55,880
Speaker 1: a trade war, which I don't see yet but we're

31
00:01:55,920 --> 00:01:58,760
Speaker 1: getting closer to that is where you start seeing a

32
00:01:58,800 --> 00:02:01,880
Speaker 1: tip for tattery, t allation from countries that may have

33
00:02:02,000 --> 00:02:05,920
Speaker 1: nothing to do with the underlying original grievance. And see

34
00:02:05,960 --> 00:02:09,440
Speaker 1: see other sectors, say agriculture, other sectors in the economy

35
00:02:09,760 --> 00:02:12,679
Speaker 1: hit with retaliatory tariffs and then this back and forth.

36
00:02:12,720 --> 00:02:14,320
Speaker 1: So that to me would be what we would see

37
00:02:14,320 --> 00:02:16,480
Speaker 1: as a full grown trade war. So we'll get back

38
00:02:16,480 --> 00:02:19,160
Speaker 1: to China a second. But when was the last time

39
00:02:19,200 --> 00:02:23,520
Speaker 1: we were in a war? What happened? Who won? A

40
00:02:23,520 --> 00:02:25,240
Speaker 1: lot of this is very fuzzy. The one that everybody

41
00:02:25,280 --> 00:02:27,880
Speaker 1: goes back to is is back in the nineteen late twenties,

42
00:02:27,919 --> 00:02:30,240
Speaker 1: early thirties with a Smoot Holly Act, And there we

43
00:02:30,280 --> 00:02:33,280
Speaker 1: really did see a trade where we saw dozens of

44
00:02:33,320 --> 00:02:36,480
Speaker 1: countries react to each other, throw up their trade barriers,

45
00:02:36,520 --> 00:02:39,440
Speaker 1: tariffs and others, and the overall global economy take a

46
00:02:39,560 --> 00:02:42,880
Speaker 1: sizeable hit because of it. That is the classic trade war.

47
00:02:43,200 --> 00:02:45,320
Speaker 1: But we've seen skirmishes before. We've seen them in the

48
00:02:45,400 --> 00:02:47,959
Speaker 1: nineteen eighties with the U S and the Japanese and others.

49
00:02:48,120 --> 00:02:50,560
Speaker 1: We've seen them along the way. And what it does,

50
00:02:50,639 --> 00:02:52,960
Speaker 1: what history seems to tell us, is that in the end,

51
00:02:53,000 --> 00:02:57,359
Speaker 1: no one really wins. So when we're talking about today,

52
00:02:57,560 --> 00:03:00,440
Speaker 1: you said we're still in kind of skirmish is at

53
00:03:00,440 --> 00:03:03,560
Speaker 1: the moment? How will we know if we're in a

54
00:03:03,639 --> 00:03:07,160
Speaker 1: full blown trade war as opposed to say just sponsoring

55
00:03:07,360 --> 00:03:12,160
Speaker 1: some rebels with cash and some spare M sixteens. So

56
00:03:12,200 --> 00:03:13,639
Speaker 1: one of the things I would say is I look

57
00:03:13,639 --> 00:03:16,240
Speaker 1: back at the last seventy plus years, as we've actually

58
00:03:16,280 --> 00:03:19,040
Speaker 1: had in this particular area in the trade arena, we've

59
00:03:19,040 --> 00:03:21,400
Speaker 1: actually had some rules of the road. Um, we had

60
00:03:21,440 --> 00:03:23,160
Speaker 1: it through gap than through the w t O, the

61
00:03:23,200 --> 00:03:27,440
Speaker 1: World Trade Association organization. We have seen more and more

62
00:03:27,480 --> 00:03:30,600
Speaker 1: countries join in and actually allow sort of a multilateral

63
00:03:30,600 --> 00:03:33,680
Speaker 1: system to develop, also including free trade agreements among many

64
00:03:33,720 --> 00:03:37,840
Speaker 1: different countries. So there has been many countries this idea

65
00:03:37,920 --> 00:03:42,160
Speaker 1: that it is better to follow these overall rules multilateral rules.

66
00:03:42,200 --> 00:03:44,760
Speaker 1: Sometimes you win, sometimes you lose in particular sectors, but

67
00:03:45,080 --> 00:03:48,160
Speaker 1: the rules and the stability that provides has is beneficial

68
00:03:48,240 --> 00:03:50,800
Speaker 1: overall to your economy as well as others. And so

69
00:03:51,520 --> 00:03:54,920
Speaker 1: the issue today is do those rules stand. And we

70
00:03:55,080 --> 00:03:57,680
Speaker 1: have had countries along the way who that have defected

71
00:03:57,680 --> 00:04:00,200
Speaker 1: from these rules, that have not followed the rules, Ida

72
00:04:00,280 --> 00:04:03,080
Speaker 1: being one of the the you know perpetrators here where

73
00:04:03,080 --> 00:04:05,760
Speaker 1: they don't tend to follow those rules even as they've

74
00:04:05,760 --> 00:04:08,120
Speaker 1: tried to join the World Trade Organization, the w t

75
00:04:08,240 --> 00:04:10,600
Speaker 1: O and the like. And so the question here, I

76
00:04:10,640 --> 00:04:14,440
Speaker 1: think is do those overall rules falter. That's when you

77
00:04:14,440 --> 00:04:17,360
Speaker 1: get into a real trade war. And what I would

78
00:04:17,360 --> 00:04:20,520
Speaker 1: be looking for is, as these steel and aluminum tariffs

79
00:04:20,520 --> 00:04:23,400
Speaker 1: go forward, do the Europeans retaliate the way they have

80
00:04:23,440 --> 00:04:25,919
Speaker 1: said that they'll go after agricultural products are products in

81
00:04:25,960 --> 00:04:29,120
Speaker 1: particular districts of Mitch McConnell and Paul Ryan and others.

82
00:04:29,480 --> 00:04:32,200
Speaker 1: And then does the Trump administration retaliate that he's threatened

83
00:04:32,200 --> 00:04:34,000
Speaker 1: back that he'll put a tariff on cars. If you

84
00:04:34,040 --> 00:04:36,360
Speaker 1: start seeing this tip for tap back and forth, I

85
00:04:36,400 --> 00:04:38,520
Speaker 1: think that's where we really will see see a full

86
00:04:38,520 --> 00:04:42,200
Speaker 1: blown escalation. So you mentioned Japan. It didn't seem like

87
00:04:42,240 --> 00:04:44,800
Speaker 1: it at the time when people were smashing Toshiba's on

88
00:04:44,839 --> 00:04:48,279
Speaker 1: the steps of Congress, but Japan relied on the US

89
00:04:48,400 --> 00:04:52,800
Speaker 1: for its defense. The two countries were treaty allies. The

90
00:04:52,880 --> 00:04:58,240
Speaker 1: post nineteen political system is a product of US in position.

91
00:04:58,720 --> 00:05:00,599
Speaker 1: I mean, what did we miss then and now we

92
00:05:00,640 --> 00:05:04,920
Speaker 1: at risk of missing it now. We did see incredible tensions.

93
00:05:04,960 --> 00:05:10,080
Speaker 1: The Reagan administration put on several types of protectionist measures, tariffs,

94
00:05:10,080 --> 00:05:13,560
Speaker 1: but more voluntary controls the Japanese agreed to. There's a

95
00:05:13,560 --> 00:05:15,880
Speaker 1: lot of back and forth there, and partly because of

96
00:05:15,880 --> 00:05:19,520
Speaker 1: the things you mentioned, there was this underlying defense alliance.

97
00:05:19,600 --> 00:05:22,039
Speaker 1: There was an underlying agreement on a lot of other

98
00:05:22,120 --> 00:05:26,880
Speaker 1: issues there that they were able to disagree strongly, vehemently

99
00:05:27,000 --> 00:05:29,400
Speaker 1: about the trade issues, but come to some sort of agreement.

100
00:05:29,560 --> 00:05:32,880
Speaker 1: And what's different today is that that doesn't seem to

101
00:05:32,920 --> 00:05:35,440
Speaker 1: be the case with China. We don't have as many

102
00:05:35,480 --> 00:05:37,719
Speaker 1: areas of agreement, we don't have as many partnerships. We

103
00:05:37,760 --> 00:05:40,600
Speaker 1: certainly don't have the security alliance that we had with

104
00:05:40,720 --> 00:05:42,880
Speaker 1: Japan or that we've had with Europe and other places.

105
00:05:42,880 --> 00:05:46,360
Speaker 1: So I think there are less easy areas of cooperation

106
00:05:46,440 --> 00:05:48,640
Speaker 1: to turn to to try to take down the temperature

107
00:05:48,720 --> 00:05:51,560
Speaker 1: on on these areas of conflict, which are definitely in

108
00:05:51,560 --> 00:05:54,159
Speaker 1: the commercial area along with others. But was that type

109
00:05:54,160 --> 00:05:57,800
Speaker 1: of context actually available at the time. If you go

110
00:05:57,839 --> 00:06:02,000
Speaker 1: back to just iconic cult trull symbols of that era,

111
00:06:02,120 --> 00:06:04,800
Speaker 1: the classics got to be the Michael Crichton book Rising

112
00:06:04,839 --> 00:06:07,400
Speaker 1: Sun and the movie that came of it, you would

113
00:06:07,520 --> 00:06:10,279
Speaker 1: never know that the U. S And Japan were close

114
00:06:10,360 --> 00:06:13,360
Speaker 1: military allies. I mean that was depicted as a war,

115
00:06:14,480 --> 00:06:16,760
Speaker 1: It's true, right, and that was It was an incredibly

116
00:06:16,839 --> 00:06:19,240
Speaker 1: tense time. And so perhaps we come out of where

117
00:06:19,279 --> 00:06:21,120
Speaker 1: we are today and we come out the other end,

118
00:06:21,120 --> 00:06:23,400
Speaker 1: and you say, oh, we forgot about all these other

119
00:06:23,440 --> 00:06:25,960
Speaker 1: things that that bound the United States and China, or

120
00:06:26,000 --> 00:06:28,640
Speaker 1: bound the United States and Europe together. But I do

121
00:06:28,800 --> 00:06:32,680
Speaker 1: think that Chinese US relationship is a very different one. Today,

122
00:06:32,720 --> 00:06:35,680
Speaker 1: there's no military alliance. There's no military alliance, and there's

123
00:06:35,720 --> 00:06:38,520
Speaker 1: there's a distance over over time. There you don't have

124
00:06:38,600 --> 00:06:41,840
Speaker 1: this long history of cooperation where you have other areas

125
00:06:41,839 --> 00:06:44,680
Speaker 1: of the government, if not in the popular perception, but

126
00:06:44,839 --> 00:06:47,919
Speaker 1: other areas of the government that had long standing partnerships

127
00:06:47,920 --> 00:06:51,760
Speaker 1: and communications and day to day working back and forth

128
00:06:51,880 --> 00:06:54,680
Speaker 1: that could calm down or at least bring in those

129
00:06:54,680 --> 00:06:58,360
Speaker 1: securities concerns, those defense concerns to the overall relationship. And today,

130
00:06:58,680 --> 00:07:01,360
Speaker 1: I would say, as we look at that s Chinese relationship,

131
00:07:01,640 --> 00:07:04,160
Speaker 1: it's not just the commercial side that worries the United States,

132
00:07:04,240 --> 00:07:06,600
Speaker 1: but it's the defense side that worries as well. Right

133
00:07:06,880 --> 00:07:09,840
Speaker 1: General Madison others on Defense Department are very worried about

134
00:07:09,880 --> 00:07:12,960
Speaker 1: where China is going on the defense side. On the

135
00:07:12,960 --> 00:07:16,280
Speaker 1: security side, it's positions in South China, sea, in the

136
00:07:16,360 --> 00:07:18,840
Speaker 1: in the like. So that isn't an area today of cooperation.

137
00:07:18,840 --> 00:07:23,400
Speaker 1: In fact, is one of potential conflict or worry as well. Shannon,

138
00:07:23,440 --> 00:07:25,800
Speaker 1: we mentioned earlier that you're working on a book about

139
00:07:25,880 --> 00:07:31,200
Speaker 1: global supply chains. The tariffs imposed by President Donald Trump

140
00:07:31,200 --> 00:07:35,160
Speaker 1: were on imported steel and aluminum. Before that, uh, there

141
00:07:35,160 --> 00:07:40,360
Speaker 1: were solar panels washing machines. Is there a pattern here

142
00:07:40,520 --> 00:07:44,320
Speaker 1: and how with this figure into these kinds of global

143
00:07:44,360 --> 00:07:47,120
Speaker 1: supply chains. Are they going to get gumped up by

144
00:07:47,200 --> 00:07:51,240
Speaker 1: these tariffs or is everything just going to keep functioning smoothly.

145
00:07:51,640 --> 00:07:54,440
Speaker 1: This is something that I do think is threatened by

146
00:07:54,480 --> 00:07:56,960
Speaker 1: this back and forth on on tariffs. And what we

147
00:07:57,040 --> 00:07:59,080
Speaker 1: have seen around the world is yes, there are global

148
00:07:59,120 --> 00:08:02,720
Speaker 1: supply chains, but there are really regional hubs that have developed.

149
00:08:02,720 --> 00:08:05,080
Speaker 1: So we have one in Asia, we have one in Europe,

150
00:08:05,080 --> 00:08:06,840
Speaker 1: and we have one here in the United States in

151
00:08:06,880 --> 00:08:10,400
Speaker 1: North America. And so anything that would put tariffs to

152
00:08:11,600 --> 00:08:14,920
Speaker 1: limit protect the movement of goods between the three nations

153
00:08:14,960 --> 00:08:17,800
Speaker 1: here in North America, the United States, Canada, and Mexico

154
00:08:18,160 --> 00:08:20,880
Speaker 1: could come up, as you say, these supply chains and

155
00:08:20,960 --> 00:08:24,040
Speaker 1: so these tears. Right now, the Trump administration has said

156
00:08:24,080 --> 00:08:26,800
Speaker 1: that steel and aluminum will be that our neighbors will

157
00:08:26,800 --> 00:08:29,320
Speaker 1: be exempt at least until we see whether or not

158
00:08:29,320 --> 00:08:31,480
Speaker 1: not to as solved. So it hasn't happened yet, but

159
00:08:31,520 --> 00:08:35,120
Speaker 1: if we saw steel tariffs aluminum tearrists put on Canadian

160
00:08:35,160 --> 00:08:39,320
Speaker 1: and Mexican products, this would particularly hit these very integrated

161
00:08:39,360 --> 00:08:42,440
Speaker 1: supply chains and the worst off those hit hardest would

162
00:08:42,440 --> 00:08:45,040
Speaker 1: be the auto industry. These are big inputs into the

163
00:08:45,080 --> 00:08:48,400
Speaker 1: auto industry. Much of that steel aluminum comes from Canada,

164
00:08:48,559 --> 00:08:51,880
Speaker 1: comes from Mexico, goes into US cars is put together

165
00:08:51,880 --> 00:08:54,680
Speaker 1: in US factories, and so those are the ones that

166
00:08:54,720 --> 00:08:57,400
Speaker 1: would lose out. And in fact, one of my colleagues

167
00:08:57,400 --> 00:08:59,720
Speaker 1: at the Council Foreign Relations did is that calculation and

168
00:08:59,760 --> 00:09:03,000
Speaker 1: said that if we applied all these tariffs, that yes,

169
00:09:03,120 --> 00:09:07,239
Speaker 1: you would see maybe upwards of thirty thousand steel jobs recovered,

170
00:09:07,440 --> 00:09:10,440
Speaker 1: but you would see at least that much in just

171
00:09:10,559 --> 00:09:12,280
Speaker 1: the auto industry, that you would see a decline of

172
00:09:12,320 --> 00:09:15,040
Speaker 1: forty plus thousand jobs in the first couple of years,

173
00:09:15,240 --> 00:09:17,400
Speaker 1: because you would see people cut back on buying cars.

174
00:09:17,440 --> 00:09:19,839
Speaker 1: Just that little increase in price in the overall car

175
00:09:19,920 --> 00:09:23,560
Speaker 1: would lead to really ripple effects through the supply chains. Now,

176
00:09:23,600 --> 00:09:26,880
Speaker 1: the President sign to national security in the steel and

177
00:09:26,920 --> 00:09:30,840
Speaker 1: aluminum decisions and then went on to say that national

178
00:09:30,960 --> 00:09:37,120
Speaker 1: security allies would have opted outs. Reconcile that for US, well,

179
00:09:37,240 --> 00:09:40,560
Speaker 1: consistency doesn't seem to be part of this overall plan here,

180
00:09:40,600 --> 00:09:42,960
Speaker 1: and and that is the real question. And pulling out

181
00:09:43,000 --> 00:09:47,600
Speaker 1: the national security banner as the reason to put these

182
00:09:47,760 --> 00:09:50,920
Speaker 1: these tariffs in place, you're saying that all these countries

183
00:09:50,960 --> 00:09:55,080
Speaker 1: are gonna apply to are threatening national security. But then

184
00:09:55,520 --> 00:09:58,800
Speaker 1: this is the question. But then the question is if

185
00:09:58,880 --> 00:10:01,600
Speaker 1: you allow people to be exempted, and in for instance,

186
00:10:01,600 --> 00:10:03,720
Speaker 1: what they're saying is you're allowed to be exempted Mexico

187
00:10:03,760 --> 00:10:07,559
Speaker 1: and Canada as long as they renegotiate NAFTA, then you're

188
00:10:07,600 --> 00:10:10,840
Speaker 1: saying that actually, this isn't for national security reasons, this

189
00:10:10,960 --> 00:10:13,680
Speaker 1: is for some other sort of reason, which is a

190
00:10:13,720 --> 00:10:17,880
Speaker 1: real question. And then this also, if we allow any

191
00:10:17,960 --> 00:10:20,360
Speaker 1: issue to be put forward for national security and it's

192
00:10:20,400 --> 00:10:22,880
Speaker 1: a broad blanket that affects every country. I mean, we're

193
00:10:22,880 --> 00:10:25,800
Speaker 1: saying Brazil and Germany and other European countries, all of

194
00:10:25,840 --> 00:10:28,920
Speaker 1: these are national security challenges to the United States. Then

195
00:10:28,960 --> 00:10:32,400
Speaker 1: you're inviting back from those countries their ability to say

196
00:10:32,440 --> 00:10:34,240
Speaker 1: that things that they want to protect in their economy

197
00:10:34,280 --> 00:10:37,280
Speaker 1: are asta national security interests. So you know, French farmers

198
00:10:37,360 --> 00:10:40,240
Speaker 1: can say that it's a national security interest to to

199
00:10:40,480 --> 00:10:43,240
Speaker 1: keep out US grains or other products. We could see

200
00:10:43,280 --> 00:10:45,680
Speaker 1: this reverberate through the system and and a lot of

201
00:10:45,679 --> 00:10:48,920
Speaker 1: the careful work that's gone to build the World Trade Organization,

202
00:10:48,960 --> 00:10:53,080
Speaker 1: these these global rules could begin to fall apart. Well,

203
00:10:53,120 --> 00:10:54,959
Speaker 1: I was just going to follow up on that, these

204
00:10:54,960 --> 00:10:58,280
Speaker 1: global rules you're talking about, even though you know some actors,

205
00:10:58,400 --> 00:11:00,920
Speaker 1: some states are going a little bit out side, it

206
00:11:00,960 --> 00:11:06,440
Speaker 1: seems like talking about national security and the possibility of

207
00:11:06,600 --> 00:11:10,760
Speaker 1: other countries using other kinds of justifications that might not

208
00:11:11,120 --> 00:11:15,600
Speaker 1: be on their face totally justified. Is its own way

209
00:11:15,640 --> 00:11:19,679
Speaker 1: of sort of scrapping the rules and in a way

210
00:11:19,720 --> 00:11:24,360
Speaker 1: that nobody would agree on them anymore and could lead

211
00:11:24,400 --> 00:11:27,320
Speaker 1: to a lot of unforeseen consequences. Is that a fear

212
00:11:27,360 --> 00:11:29,240
Speaker 1: that you might have. It is a fear that I have.

213
00:11:29,320 --> 00:11:30,960
Speaker 1: I mean, it's a fear that we return, not to

214
00:11:30,960 --> 00:11:33,400
Speaker 1: go back to your your philosophy courses in college. But

215
00:11:33,679 --> 00:11:36,199
Speaker 1: are we moving back to this hobbsy in world where

216
00:11:36,400 --> 00:11:39,720
Speaker 1: might makes right and everything's nasty, British and short. Or

217
00:11:39,760 --> 00:11:42,360
Speaker 1: do we have a set of rules that people abide by,

218
00:11:42,480 --> 00:11:46,079
Speaker 1: and when one actor, one player doesn't abide by the rules,

219
00:11:46,080 --> 00:11:49,760
Speaker 1: do the others come together and punish that individual or

220
00:11:49,760 --> 00:11:53,400
Speaker 1: that actor or that country for violating the rules. Or

221
00:11:53,440 --> 00:11:55,720
Speaker 1: do you just throw the whole table over and say, okay, no,

222
00:11:56,320 --> 00:11:58,200
Speaker 1: this person broke the rules. We won't have any rules

223
00:11:58,200 --> 00:12:00,160
Speaker 1: at all and we'll just see what we could the

224
00:12:00,160 --> 00:12:02,640
Speaker 1: most we can gain for our own country. And what

225
00:12:02,679 --> 00:12:07,520
Speaker 1: we've seen in history is that that doesn't benefit everyone

226
00:12:07,559 --> 00:12:09,960
Speaker 1: loses in that. In that case, yes, you might gain

227
00:12:10,000 --> 00:12:14,120
Speaker 1: a bit more relatively than the others, but the pie shrinks. Now,

228
00:12:14,160 --> 00:12:19,120
Speaker 1: when China positions itself in contrast to the US as

229
00:12:19,360 --> 00:12:23,960
Speaker 1: supporters of the rules based system, what do they really mean.

230
00:12:25,880 --> 00:12:29,760
Speaker 1: China has benefited tremendously from this rules based system. There's

231
00:12:29,800 --> 00:12:33,000
Speaker 1: no doubt about that. They have grown if you think

232
00:12:33,040 --> 00:12:36,280
Speaker 1: back to the late eighties, from a very small part

233
00:12:36,320 --> 00:12:39,040
Speaker 1: of the world economy and the world exports to now

234
00:12:39,120 --> 00:12:42,679
Speaker 1: one of the heavyweights. So this is something. This openness

235
00:12:42,679 --> 00:12:45,040
Speaker 1: of markets, the ability to trade back and forth, the

236
00:12:45,080 --> 00:12:48,240
Speaker 1: real consistency and rules has been a huge benefit to China.

237
00:12:48,320 --> 00:12:50,760
Speaker 1: So of course they want the system to continue. Now,

238
00:12:50,800 --> 00:12:52,960
Speaker 1: what the United States and many other countries want, and

239
00:12:53,000 --> 00:12:55,199
Speaker 1: it's not just the United States but Europe and in

240
00:12:55,280 --> 00:12:57,640
Speaker 1: Latin American countries all over the world, they want China

241
00:12:57,720 --> 00:12:59,480
Speaker 1: to play by some of the same rules that they're

242
00:12:59,480 --> 00:13:03,280
Speaker 1: playing by. And there is in many industries there's significant

243
00:13:03,320 --> 00:13:08,080
Speaker 1: evidence that China forces the transfer of intellectual property and

244
00:13:08,080 --> 00:13:11,840
Speaker 1: technology there's significant evidence of that. China in many ways

245
00:13:11,880 --> 00:13:16,160
Speaker 1: unfairly props up staten't enterprises, gives them cheap credit, free land,

246
00:13:16,240 --> 00:13:19,040
Speaker 1: removed from taxes, all sorts of things that create an

247
00:13:19,120 --> 00:13:21,599
Speaker 1: unlevel playing field for for the private sector in the

248
00:13:21,679 --> 00:13:24,320
Speaker 1: United States or Europe other places. So the Bosking and

249
00:13:24,520 --> 00:13:27,800
Speaker 1: Great tripr right now, this is true, but you know,

250
00:13:27,920 --> 00:13:30,200
Speaker 1: don't let the facts get in front of a good story,

251
00:13:30,320 --> 00:13:32,680
Speaker 1: right and they're playing this to the hills. Um. But

252
00:13:32,720 --> 00:13:35,760
Speaker 1: if the United States wants to step forward and enforce

253
00:13:35,800 --> 00:13:38,319
Speaker 1: the rules, they're gonna need all these other countries that

254
00:13:38,440 --> 00:13:42,079
Speaker 1: also want to enforce the rules together, So like the EU,

255
00:13:42,400 --> 00:13:45,000
Speaker 1: like the countries in Latin America, Brazil, like Canada and

256
00:13:45,040 --> 00:13:48,280
Speaker 1: Mexico together, that would be a much starter strategy in

257
00:13:48,360 --> 00:13:51,600
Speaker 1: my view, to take on what may have been unfair practices,

258
00:13:51,600 --> 00:13:55,480
Speaker 1: which I have been unfair practices and stealing aluminum for instance. Shannon,

259
00:13:55,600 --> 00:13:58,640
Speaker 1: now that we're going down this path of skirmishes with

260
00:13:58,800 --> 00:14:02,040
Speaker 1: an eye toward potential a war, rules being thrown out

261
00:14:02,080 --> 00:14:06,440
Speaker 1: the window. New rules are picture early being written. Can

262
00:14:06,480 --> 00:14:10,760
Speaker 1: we ever go back to a more rules based system

263
00:14:10,920 --> 00:14:13,960
Speaker 1: or are we not going to get back there unless

264
00:14:14,000 --> 00:14:17,480
Speaker 1: there's a whole war that forces everybody to start back

265
00:14:17,520 --> 00:14:19,880
Speaker 1: over again. Well, I don't think we've entered the battlefield

266
00:14:19,920 --> 00:14:22,600
Speaker 1: here yet. I think we're still before the war. But

267
00:14:22,680 --> 00:14:25,080
Speaker 1: if we enter this, it will be hard to walk

268
00:14:25,120 --> 00:14:28,000
Speaker 1: it back. And I think one of the telling aspects

269
00:14:28,080 --> 00:14:31,440
Speaker 1: here is do we see in the coming months and years,

270
00:14:31,480 --> 00:14:36,040
Speaker 1: do we see nations rally around a somewhat fragile World

271
00:14:36,040 --> 00:14:39,120
Speaker 1: Trade Organization, the w t O and support it. We

272
00:14:39,160 --> 00:14:41,000
Speaker 1: may need to reform it to make it stronger, to

273
00:14:41,040 --> 00:14:43,120
Speaker 1: make it actually do the things that it needs to do,

274
00:14:43,800 --> 00:14:46,240
Speaker 1: or do we see it blown up? And that really

275
00:14:46,320 --> 00:14:48,440
Speaker 1: is is going to be a crucial moment. If we

276
00:14:48,520 --> 00:14:50,800
Speaker 1: blow the World Trade Organization up, I think it will

277
00:14:50,800 --> 00:14:53,720
Speaker 1: take many years, if not a decade or more, to

278
00:14:54,120 --> 00:14:57,720
Speaker 1: rebuild that system. But it's still there. It's not gone yet.

279
00:14:57,760 --> 00:15:00,960
Speaker 1: It's just in jeopardy. Shannon, you and I were both

280
00:15:01,080 --> 00:15:05,840
Speaker 1: guests at the twenties seventeen Annual Mexican Business Summit, and

281
00:15:05,880 --> 00:15:07,880
Speaker 1: there was a lot of angst, a lot of gnashing

282
00:15:07,920 --> 00:15:11,200
Speaker 1: of teeth. Executives there thought, well, look, if we just

283
00:15:11,240 --> 00:15:15,040
Speaker 1: set up these global supply chains, corporate interest will take

284
00:15:15,080 --> 00:15:17,720
Speaker 1: care of itself, and we don't really have to worry

285
00:15:17,760 --> 00:15:22,200
Speaker 1: about government at all. And the shock of the election,

286
00:15:22,240 --> 00:15:24,800
Speaker 1: it's fair to say, was still sinking in. People were

287
00:15:24,800 --> 00:15:29,080
Speaker 1: walking around stunt. What did they And by extension, we

288
00:15:29,200 --> 00:15:34,160
Speaker 1: in the economic mainstream mess. I think what economists and

289
00:15:34,200 --> 00:15:38,720
Speaker 1: investors and others sometimes miss is the rationality of the investment.

290
00:15:38,720 --> 00:15:43,160
Speaker 1: The rationality decisions often belies the politics. And for many

291
00:15:43,240 --> 00:15:47,920
Speaker 1: years we've forgotten the politics and politics are emotional. Politics

292
00:15:47,920 --> 00:15:52,360
Speaker 1: are about people and ideas and aspirations, and some of

293
00:15:52,400 --> 00:15:55,840
Speaker 1: that is not necessarily rational, or some of that only sees,

294
00:15:56,280 --> 00:15:58,920
Speaker 1: you know, part of the proverbial elephant that's in the room.

295
00:15:59,000 --> 00:16:01,600
Speaker 1: And so this is the challenge. I do think the

296
00:16:01,640 --> 00:16:04,120
Speaker 1: United States, the world trading system, we were coming back

297
00:16:04,160 --> 00:16:07,280
Speaker 1: from a global recession. We thought, okay, the economics has

298
00:16:07,320 --> 00:16:09,720
Speaker 1: worked itself out, We're we're moving forward. This is all

299
00:16:09,760 --> 00:16:13,120
Speaker 1: going to be fine. But those people, whether in Mexico

300
00:16:13,200 --> 00:16:15,080
Speaker 1: or in the United States, around the world, that got

301
00:16:15,160 --> 00:16:17,360
Speaker 1: hit by the recession, they were left behind. And it's

302
00:16:17,400 --> 00:16:21,120
Speaker 1: not just that recession, it is the transformations that are

303
00:16:21,120 --> 00:16:23,520
Speaker 1: happening around the world. Trade is a small part of this,

304
00:16:23,760 --> 00:16:25,880
Speaker 1: a part of it um, but other things are happening.

305
00:16:25,920 --> 00:16:29,480
Speaker 1: So I think the politics will be a guiding force

306
00:16:29,560 --> 00:16:31,360
Speaker 1: as we look forward for the next couple of years

307
00:16:31,440 --> 00:16:34,320
Speaker 1: and in decade, and that is something that frankly, I

308
00:16:34,360 --> 00:16:37,120
Speaker 1: think a lot of those that talk about these issues

309
00:16:37,200 --> 00:16:41,480
Speaker 1: were missing Shannon. Given these trends in politics one year

310
00:16:41,520 --> 00:16:43,920
Speaker 1: from now, will we be in a global trade war?

311
00:16:45,440 --> 00:16:48,640
Speaker 1: I'd like to stick with my optimistic nature and say no,

312
00:16:48,960 --> 00:16:52,440
Speaker 1: but I do think these recent steps have been worrying.

313
00:16:53,080 --> 00:16:57,040
Speaker 1: The one thing that I do see is that many

314
00:16:57,160 --> 00:17:03,280
Speaker 1: countries around the world are moderating their behavior. Yes they're upset,

315
00:17:03,480 --> 00:17:06,480
Speaker 1: yes they think it's unfair, but we haven't seen the

316
00:17:06,720 --> 00:17:09,760
Speaker 1: quick reaction in many of these places that one might

317
00:17:09,760 --> 00:17:12,840
Speaker 1: expect to what many will consider an affront. And so

318
00:17:13,400 --> 00:17:15,760
Speaker 1: as we look forward, in particularly, I think about Latin America,

319
00:17:15,760 --> 00:17:18,280
Speaker 1: where I spent a lot of time and look, right now,

320
00:17:18,320 --> 00:17:21,359
Speaker 1: we probably have over the last few decades, we probably

321
00:17:21,359 --> 00:17:25,240
Speaker 1: had the most free trade, friendly, pro market set of

322
00:17:25,280 --> 00:17:28,399
Speaker 1: governments that we've had in many, many years. That may

323
00:17:28,480 --> 00:17:30,200
Speaker 1: change this year because there's a lot of elections, a

324
00:17:30,280 --> 00:17:31,560
Speaker 1: lot of people are going to come up, and we

325
00:17:31,600 --> 00:17:34,119
Speaker 1: may see things turn over. But but that tells me

326
00:17:34,160 --> 00:17:36,399
Speaker 1: as you look at this hemisphere, as you look at Europe,

327
00:17:36,440 --> 00:17:38,960
Speaker 1: as you look at other places, there's a lot of leadership,

328
00:17:39,000 --> 00:17:40,359
Speaker 1: and there are a lot of voters who have voted

329
00:17:40,400 --> 00:17:43,520
Speaker 1: for those leaders in democracies, who still believe in these

330
00:17:43,520 --> 00:17:46,720
Speaker 1: fundamental rules of the game, who still see trade as

331
00:17:46,800 --> 00:17:49,239
Speaker 1: the way to prosperity and to growth. So I think

332
00:17:49,320 --> 00:17:53,240
Speaker 1: we need to temper our pessimism um about some of

333
00:17:53,280 --> 00:17:55,080
Speaker 1: the rhetoric that's going back and forth that can be

334
00:17:55,160 --> 00:17:57,919
Speaker 1: quite hostile or acrimonious. And do remember that there is

335
00:17:57,960 --> 00:18:01,000
Speaker 1: a large segment of the world that has benefited from

336
00:18:01,000 --> 00:18:03,919
Speaker 1: this opening, that have seen their incomes rise, um, And

337
00:18:03,960 --> 00:18:06,200
Speaker 1: so can we find a way for this net benefit

338
00:18:06,840 --> 00:18:10,280
Speaker 1: to be more inclusive? That is the challenge of these politicians.

339
00:18:10,800 --> 00:18:15,960
Speaker 1: Does that optimistic view about governments in the America's hinge

340
00:18:16,160 --> 00:18:20,600
Speaker 1: on the outcome of Mexico's presidential election? What does the

341
00:18:20,800 --> 00:18:26,320
Speaker 1: candidacy of Andreas Manuel Lopez Albert or Maine. This is

342
00:18:26,359 --> 00:18:29,280
Speaker 1: really I think a bell weather for this optimistic versus

343
00:18:29,280 --> 00:18:32,680
Speaker 1: pessimistic view and the front runner right now um and

344
00:18:33,560 --> 00:18:37,480
Speaker 1: they call AMLO, that's his hackronym. He is an old

345
00:18:37,520 --> 00:18:42,360
Speaker 1: school state development protectionist type. He was raised or came

346
00:18:42,440 --> 00:18:44,720
Speaker 1: of age politically of age in the nineteen seventies and

347
00:18:44,720 --> 00:18:47,960
Speaker 1: he's still there economically, that's how he sees the world.

348
00:18:48,000 --> 00:18:50,520
Speaker 1: And this is really to me from Mexico, this is

349
00:18:50,520 --> 00:18:53,919
Speaker 1: a bell weather election on the economic model of the

350
00:18:53,960 --> 00:18:57,639
Speaker 1: last thirty years. This is an election about NAFTA. Is

351
00:18:57,720 --> 00:19:01,680
Speaker 1: Mexico's path to prosperity, to grow the one that engages

352
00:19:01,720 --> 00:19:04,800
Speaker 1: the world, that's market friendly, that's US friendly, that looks

353
00:19:04,840 --> 00:19:07,520
Speaker 1: more openly, or do you go back to a very

354
00:19:07,560 --> 00:19:10,959
Speaker 1: closed economy, one that's self sufficient as he would say,

355
00:19:11,000 --> 00:19:14,200
Speaker 1: that's turned inwards. Now we can talk as economists about

356
00:19:14,200 --> 00:19:16,399
Speaker 1: why that doesn't really work and why that won't happen,

357
00:19:16,480 --> 00:19:19,679
Speaker 1: But but that vision is his vision. So I do

358
00:19:19,800 --> 00:19:22,920
Speaker 1: think what happens July one, which is when this election happened,

359
00:19:23,200 --> 00:19:26,240
Speaker 1: has huge ramifications not just for Mexico but for for

360
00:19:26,320 --> 00:19:29,800
Speaker 1: this direction. Do you get one of the NAFTA partners,

361
00:19:29,840 --> 00:19:33,400
Speaker 1: who in many ways matches Trump's temperament on trade, would

362
00:19:33,400 --> 00:19:35,880
Speaker 1: turn back to a protectionism And I think that has

363
00:19:35,880 --> 00:19:37,960
Speaker 1: a lot to say what would happen to NAFTA, But

364
00:19:38,040 --> 00:19:40,240
Speaker 1: in general, what would happen with this tip for tat

365
00:19:40,240 --> 00:19:42,800
Speaker 1: the potential back and forth you might see that would

366
00:19:42,880 --> 00:19:45,040
Speaker 1: lead to a trade war. Now, it can seem like

367
00:19:45,080 --> 00:19:49,800
Speaker 1: a fairly arcane thing to have an entire presidential campaign

368
00:19:50,200 --> 00:19:52,679
Speaker 1: of a country of more than a hundred million people

369
00:19:53,560 --> 00:19:57,399
Speaker 1: john NAFTA. But it's a central organizing principle of the

370
00:19:57,560 --> 00:20:02,000
Speaker 1: entire Mexican country, is it not. Everything has been geared

371
00:20:02,359 --> 00:20:07,040
Speaker 1: towards its economic relationship with United States, like everything it is,

372
00:20:07,320 --> 00:20:10,960
Speaker 1: And NAFTA has really become the rule of law, the

373
00:20:11,080 --> 00:20:16,080
Speaker 1: underlying rules for foreign investment for companies operating international companies

374
00:20:16,080 --> 00:20:19,560
Speaker 1: operating in Mexico. So if you pull that away, you're

375
00:20:19,640 --> 00:20:23,400
Speaker 1: left with Mexican rule of law, Mexican domestic courts, which

376
00:20:23,440 --> 00:20:26,680
Speaker 1: are much more fragile and at times much more likely

377
00:20:26,720 --> 00:20:30,040
Speaker 1: to be swayed, to be more arbitrary, uh than to

378
00:20:30,200 --> 00:20:33,120
Speaker 1: uphold a much more balanced rule of law. So this

379
00:20:33,320 --> 00:20:35,680
Speaker 1: is a huge fear of those that are down there,

380
00:20:35,840 --> 00:20:37,959
Speaker 1: and frankly, it's a fear not just for international companies,

381
00:20:38,000 --> 00:20:40,800
Speaker 1: for domestic companies, for the Mexican companies that want to

382
00:20:40,840 --> 00:20:45,040
Speaker 1: operate in a place that's quite open to new ideas entrepreneurship.

383
00:20:45,160 --> 00:20:47,959
Speaker 1: Mexico has been moving in that direction. And the worry

384
00:20:48,080 --> 00:20:51,080
Speaker 1: is if you pull away NAFTA, if you turn back

385
00:20:51,080 --> 00:20:53,800
Speaker 1: in if the state takes a much greater role in

386
00:20:53,880 --> 00:20:56,639
Speaker 1: the economy, choosing champions and the like, back in that

387
00:20:56,680 --> 00:20:59,480
Speaker 1: way of the nineteen seventies, that you will stifle a

388
00:20:59,520 --> 00:21:02,040
Speaker 1: lot of the pretnership, the productivity, and the growth that

389
00:21:02,119 --> 00:21:05,560
Speaker 1: has allowed Mexico to prosper over the last thirty years.

390
00:21:05,800 --> 00:21:07,960
Speaker 1: All right, Shannon, Well, maybe we can have you back

391
00:21:08,000 --> 00:21:10,919
Speaker 1: after the Mexican election or if there's a full blown

392
00:21:10,960 --> 00:21:14,160
Speaker 1: trade war. Either way, I would love to thank you.

393
00:21:14,280 --> 00:21:18,120
Speaker 1: Let's hope that doesn't mean next week exactly. Shannon, thanks

394
00:21:18,119 --> 00:21:24,200
Speaker 1: so much for being on Benchmark. Will be back next week.

395
00:21:24,400 --> 00:21:26,600
Speaker 1: Until then, you can find us on the Bloomberg terminal,

396
00:21:26,640 --> 00:21:30,600
Speaker 1: Bloomberg dot com, our Bloomberg app, and podcast destinations such

397
00:21:30,600 --> 00:21:34,520
Speaker 1: as Apple Podcasts, Spotify or wherever you listen. Please take

398
00:21:34,520 --> 00:21:36,760
Speaker 1: the time to rate and review the show, and you

399
00:21:36,800 --> 00:21:39,159
Speaker 1: can also find us on Twitter. You can follow me

400
00:21:39,359 --> 00:21:44,719
Speaker 1: at at Scott Landman Dan You're at Moss Underscore Echo,

401
00:21:45,240 --> 00:21:49,080
Speaker 1: and our guest Shannon O'Neil is at Shannon Kay O'Neil.

402
00:21:49,600 --> 00:21:53,120
Speaker 1: Benchmark is produced by Toper Foreheads the head of Bloomberg Podcasts,

403
00:21:53,320 --> 00:22:01,960
Speaker 1: Francesca Levy. Thanks for listening. See you next time. The tent,

404
00:22:02,720 --> 00:22:09,320
Speaker 1: the super Barer and my fingers the bod