WEBVTT - Why Europe Finds It Hard to Break Chinese Supply Chains

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<v Speaker 1>A normal country facing a rival like China would be

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<v Speaker 1>building alliances to the rest of the world, not imposing

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<v Speaker 1>tariffs on them. And I think that's what will likely

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<v Speaker 1>come from the change of president in November um and

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<v Speaker 1>I think that's probably the most bullish news for emerging

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<v Speaker 1>markets of all that's going to come out of this,

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<v Speaker 1>this unexpected virus and the impact on the global economy. Hello,

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<v Speaker 1>and welcome to Stephanomics, the podcast that brings the COVID

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<v Speaker 1>global economy to you. And that's what the chief economy

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<v Speaker 1>is for renaissance Capital. Charlie Robertson thinks will be the

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<v Speaker 1>most important effect of COVID nineteen for emerging market economies.

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<v Speaker 1>Developing countries will come out of the crisis faster than

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<v Speaker 1>many people expect, in his view, and the lasting effect

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<v Speaker 1>will come not from the disease itself or the direct

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<v Speaker 1>impact on the global economy, but from President Donald Trump

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<v Speaker 1>not getting form or years to put up trade barriers

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<v Speaker 1>and discourage global investment. I was speaking to Mr Robertson

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<v Speaker 1>and the chief economist of the World Trade Organization, Robert Koopman,

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<v Speaker 1>this week in a panel for City Week, an event

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<v Speaker 1>organized by City and Financial Global More on that in

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<v Speaker 1>a few minutes, but first I wanted to give you

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<v Speaker 1>some on the ground perspective on the future of global trade.

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<v Speaker 1>You might remember, in the early months of the COVID crisis,

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<v Speaker 1>a lot of commentators declared the end of globalization. Governments,

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<v Speaker 1>especially in Europe, started talking about the need for strategic autonomy.

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<v Speaker 1>Never again would companies or countries want to get caught

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<v Speaker 1>short in key medical supplies or discover that key inputs

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<v Speaker 1>to major industries or came from a single factory in Wuhan.

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<v Speaker 1>Production will be brought back home. They said, supply chains

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<v Speaker 1>would shrink, ties with China would be cut. Well, that

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<v Speaker 1>was the theory. Life has turned out to be more complicated,

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<v Speaker 1>and those ties with China in particular have turned out

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<v Speaker 1>to be quite hard to sever A group of Bloomberg

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<v Speaker 1>reporters from across Europe have been looking for firms who

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<v Speaker 1>are rethinking their supply chains as a result of COVID nineteen.

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<v Speaker 1>Their story was published this week, and I'm glad to

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<v Speaker 1>say that one of those reporters, Pyota Skolimowski, is with

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<v Speaker 1>me now. He's in Frankfurt and also spends a lot

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<v Speaker 1>of time covering the European Central Bank, Pyotta. Welcome to Stephanomics.

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<v Speaker 1>So what did you find out in this story? So

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<v Speaker 1>it's not so easy for these firms to cut their

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<v Speaker 1>ties with China high Stephaniely. Indeed, it's it's a tough

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<v Speaker 1>one despite the fact that Europe is really trying to

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<v Speaker 1>wean its economies off from the dependence on China and

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<v Speaker 1>other Asian companies are Asian suppliers. We talked to a

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<v Speaker 1>few companies, one in Italy, for example, producer of shoes,

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<v Speaker 1>where the chairman of the company basically said, well, Chinese

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<v Speaker 1>workers are are just better at doing what he called

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<v Speaker 1>jim shoes. But but the fact here is is actually costs,

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<v Speaker 1>so he has production costs in China are still sevent

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<v Speaker 1>seventy five percent lower than in Italy. So that's a

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<v Speaker 1>big factor of why he's not really eager to move

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<v Speaker 1>everything to Italy. So as as long as there are

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<v Speaker 1>no subsidies from the government or support in one form

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<v Speaker 1>or another of lower taxes for example, and he's not

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<v Speaker 1>going to move production closer to home. And it also

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<v Speaker 1>applies to other sectors where as a matter of fact,

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<v Speaker 1>they are key to to to the strategy of of

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<v Speaker 1>shortening supply chains in Europe, for example, pharmaceutical companies. We

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<v Speaker 1>talked to one of the executives who said, well, actually

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<v Speaker 1>China dominates one of the market for ingredients to what

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<v Speaker 1>he called active ingredients for for drugs that his company

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<v Speaker 1>is producing. So it's really difficult to suddenly move away

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<v Speaker 1>from that and just go and and mind suppliers somewhere else.

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<v Speaker 1>And finally, there's also another factor that simply companies in

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<v Speaker 1>Europe reli very heavily on exports, so China is not

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<v Speaker 1>really only just a supplier of components, supplier of elements

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<v Speaker 1>to their cars. It's a big booming market, so they

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<v Speaker 1>cannot really afford to not to be there, and they're

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<v Speaker 1>already building a big supply chain around China. They as

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<v Speaker 1>an example, they volks Wagon actually bought two companies or

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<v Speaker 1>shares in two companies that have to do with battery

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<v Speaker 1>cells and another with electric cars in China just at

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<v Speaker 1>the at the peak of the of the COVID pandemic

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<v Speaker 1>in April. It sort of tells you that obviously there

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<v Speaker 1>is a push to to shorten supply chains, but there

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<v Speaker 1>are factors that that are kind of pushing into the

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<v Speaker 1>opposite direction, which will make it harder for companies to

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<v Speaker 1>make it a big change in the strategy. Yeah, and

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<v Speaker 1>I have to say that is something that we have

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<v Speaker 1>heard coming out of Asia as well, and our reporters

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<v Speaker 1>and analysts who are involved in the tech industry as

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<v Speaker 1>a similar message that the likes of Apple have invested

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<v Speaker 1>so much in these quite sophisticated supply chains and it's

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<v Speaker 1>much easier said than done to start disentangling from China

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<v Speaker 1>in particular, there's just a sunk costs involved apart from

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<v Speaker 1>apart from anything else. But let's hear I think we

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<v Speaker 1>we do have a bit of that interview that you

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<v Speaker 1>did with the German pharmaceutical executive Peter Goldschmidt, who is

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<v Speaker 1>chief executive of the generic pharmaceutical maker Status, So let's

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<v Speaker 1>hear from him. Now, why you really start thinking about

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<v Speaker 1>moving victory doing test transfer into higher cross areas where

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<v Speaker 1>no one knows who is able to pay it, and

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<v Speaker 1>before before this creates an additional risk because of tech

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<v Speaker 1>transfer is also a risk we should really think about

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<v Speaker 1>relatively in my view, easier fast fixes. I mean, are

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<v Speaker 1>you also trying to say that actually there is because

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<v Speaker 1>you mentioned forty percent of all active parmaceutical ingredients are Chinese.

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<v Speaker 1>I mean, there is really no alternative to China as

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<v Speaker 1>a supplier of a key ingredient in what you're producing. No.

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<v Speaker 1>I look, the point is there are of us a

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<v Speaker 1>lot of alternatives. I could start and buying an API

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<v Speaker 1>company and start producing this also in Germany. The only

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<v Speaker 1>problem I have is unanormous circumstances. No one will buy

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<v Speaker 1>it from me because I'm too expensive. The reason why

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<v Speaker 1>it is in China is that the quality China has delivered,

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<v Speaker 1>most organizations obviously in Europe couldn't compete on a price letter.

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<v Speaker 1>That's why we have this situation. And of course if

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<v Speaker 1>people would think, hey, that's an attractive business I should

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<v Speaker 1>go to, then more people would do it. But obviously

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<v Speaker 1>the business is not so attractive. So if the governments

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<v Speaker 1>are building uh the substitutes in order that you have

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<v Speaker 1>prices that you can have a company, and API is

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<v Speaker 1>a is a worldwide business, you can produced just API

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<v Speaker 1>for Ostia. You could do it. It's the question who

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<v Speaker 1>pays the price. Everything is technically absolutely possible, absolutely no doubt.

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<v Speaker 1>It's just a question of time and money. So in

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<v Speaker 1>that sense, you think that government in its hopes or

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<v Speaker 1>actually Europe hide. If you look at the whole strategy

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<v Speaker 1>these days, there's going to build of a disappointment that

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<v Speaker 1>this is not going to be first of all a

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<v Speaker 1>quick process and secondly there will have to be a

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<v Speaker 1>lot of steps before we even even even go there

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<v Speaker 1>in terms of and maybe there are after a quick

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<v Speaker 1>fixed solutions like the storage of API, for example in

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<v Speaker 1>a gift country, and then you have an assigned producer

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<v Speaker 1>in a crisis time who has then to make sure

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<v Speaker 1>that they can produce the volume based on this API

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<v Speaker 1>right before you do like this big picture. I mean,

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<v Speaker 1>my problem in the discussion is not that this could

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<v Speaker 1>be a possible solution that you bring more whatever kind

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<v Speaker 1>of reduction pharmacy in production back to Germany. It's a

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<v Speaker 1>political decision which costs money and has implications on our

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<v Speaker 1>direct crisis in Germany. The Otho Skolomowski, thank you very much.

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<v Speaker 1>Thank you well. As it happens, I put exactly this

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<v Speaker 1>question about the future of global supply chains to the

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<v Speaker 1>chief economist of the World Trade Organization, Robert Kopman in

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<v Speaker 1>my city Wheek panel that I mentioned at the start,

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<v Speaker 1>and we also had Charlie Robertson, chief economist for Renaissance Capital.

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<v Speaker 1>On that panel, he was much more outbeat about the

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<v Speaker 1>future of emerging market economies than others I've talked to

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<v Speaker 1>on Stephanomics in recent weeks. I guess when you listen

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<v Speaker 1>to him, you do need to remember that his firm

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<v Speaker 1>specializes in investing in emerging market economies, so you can

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<v Speaker 1>judge for yourself whether his story stacks up. But I

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<v Speaker 1>started by asking Robert Koopman about his forecast for and beyond.

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<v Speaker 1>We hear the projection for a global trade for declining

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<v Speaker 1>in an optimistic scenario of about thirteen percent, anywhere up

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<v Speaker 1>to thirty two percent in a pessimistic scenario. The latest

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<v Speaker 1>data suggests we're more on track for the optimistic scenario,

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<v Speaker 1>a trade decline of around twelve thirteen maybe four percent,

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<v Speaker 1>with a slow recovery. Though for one and into two.

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<v Speaker 1>I think the drivers of the slow recovery or weakness

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<v Speaker 1>expected weakness and consumption, and particularly expected weakness and investment.

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<v Speaker 1>We don't think that firms are gonna have a very

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<v Speaker 1>confident view of the future of the global economy, and

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<v Speaker 1>I think that UH investment is going to be relatively weak.

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<v Speaker 1>Investment is a significant driver of global trade going forward.

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<v Speaker 1>I think the likely recovery for trade is a trade

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<v Speaker 1>will probably get back to close to its long term

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<v Speaker 1>average growth rate of about one and a half times

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<v Speaker 1>global GDP growth. But I think it's going to be

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<v Speaker 1>a regal globalization. It's going to be a reorganization of

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<v Speaker 1>globalization that we've seen in the past twenty or thirty years,

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<v Speaker 1>probably more regional supply chains, a lot more digital trade

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<v Speaker 1>than we've seen in the past that's been growing fast.

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<v Speaker 1>I think it's gonna it's growing faster now and continue

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<v Speaker 1>to grow fast. And I think you'll see more flexible

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<v Speaker 1>production processes, maybe regional agreements to help to respond to

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<v Speaker 1>spikes in demand as a result of either health prices

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<v Speaker 1>or climate crisis. So we'll see. I think this reorganization

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<v Speaker 1>of globalization maybe um with slower growth, and the long

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<v Speaker 1>term implications of slower trade growth usually means slower productivity

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<v Speaker 1>growth in the future, so we have significant concerns around that.

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<v Speaker 1>There's been a lot of conversation about what happens to

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<v Speaker 1>global supply chains as a result of this crisis and

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<v Speaker 1>the immediate After all the immediate stages of the crisis,

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<v Speaker 1>a lot of talk about bringing production home or at

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<v Speaker 1>least diversifying supply chains, not just in response to COVID

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<v Speaker 1>but also worries around around China. But we've had some

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<v Speaker 1>of our reporting this week. In fact, in Europe we're

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<v Speaker 1>looking at companies who have been trying to shorten the

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<v Speaker 1>supply chains and struggling and realizing that it's going to

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<v Speaker 1>be just too costly to do that. They've got too

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<v Speaker 1>much wedded to the very sophisticated approach they had before.

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<v Speaker 1>So what is your view when you talk about reorganization

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<v Speaker 1>of globalization, is that diversification of supply chains? What is it?

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<v Speaker 1>Do you think it's mainly diversification. Most global supply chains

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<v Speaker 1>are regional. You think about automobiles. Of automobile supply chains

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<v Speaker 1>are regional, but there can be that one part, that

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<v Speaker 1>one critical part that is from outside the region that

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<v Speaker 1>could be difficult to procure domestically but called up the

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<v Speaker 1>entire product. I think they'll find ways to diversify those

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<v Speaker 1>supply chains, not bring that want to obscure but very

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<v Speaker 1>important product to some local production facility. I do think

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<v Speaker 1>they'll use inventories, will night see, particularly for those kinds

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<v Speaker 1>of products. Firms will change their just in time inventory

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<v Speaker 1>approach to something that's a little more balanced. They'll still

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<v Speaker 1>use just in time for those things that they don't

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<v Speaker 1>think are that disruptive or that they can easily diversify

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<v Speaker 1>UM and have multiple suppliers, but for those things, those products,

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<v Speaker 1>those components that they can't my my suspicion is they'll

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<v Speaker 1>carry more inventory of that. And keep in mind, you know,

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<v Speaker 1>the started as a supply shock in China, but you

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<v Speaker 1>know you can have a fire or a hurricane in

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<v Speaker 1>the Gulf of Mexico that knocks out your domestic supply

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<v Speaker 1>chain just as badly. UM. So you know, I don't

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<v Speaker 1>think that the strategy you're reshoring really holds up in

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<v Speaker 1>the long term, but weaker growth, weaker investment that does

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<v Speaker 1>undermine their integration and globalization. Charlie Robertson, I know that

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<v Speaker 1>you're looking at strategy from a global perspective of renaissance,

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<v Speaker 1>and I wonder how do you think about the recovery

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<v Speaker 1>and particularly the fact that we now are in this

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<v Speaker 1>what you might call a messier stage where some countries

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<v Speaker 1>are coming in and out of lockdown. We're potentially having

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<v Speaker 1>second waves. We're not sure about the consumer. How the

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<v Speaker 1>consumer is going to behave in these first few months

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<v Speaker 1>of recovery. How are you seeing things? Yeah, I'm chief

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<v Speaker 1>economists of an emerging market Frontier Bank, Renaissance Capital, so

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<v Speaker 1>I'm gonna have to focus mostly on that. But what

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<v Speaker 1>what's been striking to us is the success that emerging

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<v Speaker 1>markets have had in fighting the disease, at least in

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<v Speaker 1>East Asia. Um, and it's worth remembering the two thirds

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<v Speaker 1>of emerging markets equities are don't have the virus anymore.

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<v Speaker 1>That's China, Career, Taiwan, Thailand, they make up of M

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<v Speaker 1>S c I emerging markets. They have no virus, so

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<v Speaker 1>it's not even an issue of a V shape or

0:14:08.800 --> 0:14:11.320
<v Speaker 1>a W shape or anything else. Everyone can go back

0:14:11.320 --> 0:14:15.640
<v Speaker 1>to restaurants, everyone can go back onto planes, travel, etcetera.

0:14:15.880 --> 0:14:19.560
<v Speaker 1>At least internally is back to normal. So it looks

0:14:19.600 --> 0:14:22.760
<v Speaker 1>pretty v shaped in in what is two thirds of

0:14:22.800 --> 0:14:26.760
<v Speaker 1>emerging markets, either they've beaten the virus or they said

0:14:26.800 --> 0:14:29.640
<v Speaker 1>there's nothing we can do to stop the virus. Either way,

0:14:29.680 --> 0:14:42.480
<v Speaker 1>I think their economic recoveries are going to look somewhat better. Charlie,

0:14:42.480 --> 0:14:47.000
<v Speaker 1>I'm struck by, um what you were saying about em

0:14:47.120 --> 0:14:50.960
<v Speaker 1>because when I talked to our emerging market economists, it's

0:14:51.040 --> 0:14:53.080
<v Speaker 1>quite a bleak picture that comes out of it. Not

0:14:53.120 --> 0:14:55.000
<v Speaker 1>for some of the countries that you were talking about,

0:14:55.200 --> 0:14:59.040
<v Speaker 1>but when you talk about India or so that, large

0:14:59.040 --> 0:15:03.000
<v Speaker 1>parts of Africa, a big some parts of Latin America.

0:15:03.160 --> 0:15:07.600
<v Speaker 1>It feels like the risk is that this crisis is

0:15:07.680 --> 0:15:11.280
<v Speaker 1>going to shut the door on a lot of countries

0:15:11.320 --> 0:15:14.400
<v Speaker 1>who were on their way into the emerging market and

0:15:14.480 --> 0:15:19.440
<v Speaker 1>potentially beyond little make it much harder for them to

0:15:19.520 --> 0:15:22.200
<v Speaker 1>continue to progress, and actually they could lose ten or

0:15:22.280 --> 0:15:25.720
<v Speaker 1>fifteen years of progress as a result of this. Is

0:15:25.760 --> 0:15:28.080
<v Speaker 1>that fair? I mean, you talked about the countries that

0:15:28.120 --> 0:15:31.040
<v Speaker 1>have already emerged to some extent, and they are well

0:15:31.080 --> 0:15:34.480
<v Speaker 1>represented in the MSc I index and everything else. But

0:15:34.640 --> 0:15:38.720
<v Speaker 1>those that hadn't built their capacity by the risk is

0:15:38.720 --> 0:15:40.520
<v Speaker 1>they're not going to be able to now in the

0:15:40.520 --> 0:15:42.280
<v Speaker 1>conditions of the next piece because they're going to be

0:15:42.320 --> 0:15:46.520
<v Speaker 1>so hit by this crisis. Isn't that a concern? I mean,

0:15:46.520 --> 0:15:50.520
<v Speaker 1>the numbers I've been talking about in places like sub Sahara,

0:15:50.640 --> 0:15:53.320
<v Speaker 1>and what I've been struck by is that the average

0:15:53.320 --> 0:15:56.160
<v Speaker 1>age of those dying in the UK is about eighty

0:15:56.240 --> 0:16:00.280
<v Speaker 1>years old, and the percentage of Nigerians aged two or

0:16:00.320 --> 0:16:05.360
<v Speaker 1>more is zero. The number of Kenyans aged eighty or

0:16:05.360 --> 0:16:08.400
<v Speaker 1>more is also zero, and that they're just not going

0:16:08.440 --> 0:16:12.200
<v Speaker 1>to be hit in that way. UM. What I think

0:16:12.200 --> 0:16:15.840
<v Speaker 1>has actually been much more damaging than the virus for

0:16:16.080 --> 0:16:18.960
<v Speaker 1>sub Sahara or lower income countries has been this trend

0:16:19.000 --> 0:16:24.120
<v Speaker 1>towards protectionism, the lack of trade, the discouragement of foreign

0:16:24.160 --> 0:16:29.120
<v Speaker 1>direct investment globally in recent years. And I think perhaps

0:16:29.120 --> 0:16:32.280
<v Speaker 1>the most important change that's going to come upout as

0:16:32.280 --> 0:16:35.400
<v Speaker 1>a result of this virus is the political change. In

0:16:35.440 --> 0:16:38.360
<v Speaker 1>November in the States, we put out a piece a

0:16:38.400 --> 0:16:41.480
<v Speaker 1>month or two ago saying that no US president is

0:16:41.520 --> 0:16:47.200
<v Speaker 1>ever re elected after a recession in his first term.

0:16:47.240 --> 0:16:50.280
<v Speaker 1>And I've been saying that and upsetting my Democrat friends

0:16:50.280 --> 0:16:52.560
<v Speaker 1>in New York for some years about Trump and saying

0:16:52.600 --> 0:16:54.720
<v Speaker 1>that he was going to win this election because there

0:16:54.800 --> 0:16:57.560
<v Speaker 1>was no recession in the States. Um, And they were

0:16:57.640 --> 0:17:00.600
<v Speaker 1>very unhappy with me saying that. Of course, that's change now,

0:17:00.880 --> 0:17:04.560
<v Speaker 1>and he has symbolized protectionism more than anybody else in

0:17:04.600 --> 0:17:07.640
<v Speaker 1>the global economy. But actually he's really made a difference.

0:17:08.680 --> 0:17:12.440
<v Speaker 1>You've seen FDI foreign direct investment flow into America and

0:17:12.520 --> 0:17:17.040
<v Speaker 1>not flow out of America. You've had negative FDI or

0:17:17.080 --> 0:17:20.320
<v Speaker 1>in fact, if you like, FDI flows net into the

0:17:20.359 --> 0:17:23.720
<v Speaker 1>States for the last two years, and that has meant

0:17:23.760 --> 0:17:27.080
<v Speaker 1>no FDI into emerging markets. Who wants to set up

0:17:27.119 --> 0:17:29.520
<v Speaker 1>a factory in emerging markets when there could be a

0:17:29.520 --> 0:17:32.920
<v Speaker 1>big tariff war set against you, um, and it's it's

0:17:32.960 --> 0:17:36.520
<v Speaker 1>really hurt growth. Um. So I think there's political change

0:17:36.560 --> 0:17:40.119
<v Speaker 1>that now I think inevitable in November. It is going

0:17:40.200 --> 0:17:43.520
<v Speaker 1>to be very important. Not that America and Chinese relations

0:17:43.520 --> 0:17:46.160
<v Speaker 1>are going to be perfect. They were not, and that's

0:17:46.160 --> 0:17:49.080
<v Speaker 1>going to be a rivalry that will continue for years.

0:17:49.119 --> 0:17:54.040
<v Speaker 1>But a normal country facing a rival like China would

0:17:54.040 --> 0:17:56.560
<v Speaker 1>be building alliances to the rest of the world, not

0:17:56.680 --> 0:18:01.399
<v Speaker 1>imposing tariffs on them. Vietnam should be America's best friend

0:18:01.520 --> 0:18:04.280
<v Speaker 1>right now. India should be America's best friend right now.

0:18:04.640 --> 0:18:07.280
<v Speaker 1>And I think that's what will likely come from the

0:18:07.400 --> 0:18:11.600
<v Speaker 1>change of president in November. One I don't think is

0:18:11.600 --> 0:18:14.520
<v Speaker 1>gonna We're not gonna see big FDI in there's a

0:18:14.520 --> 0:18:17.600
<v Speaker 1>global recession. No one's gonna be putting money into anywhere,

0:18:17.600 --> 0:18:21.040
<v Speaker 1>including emerging markets. It's not going to be great from

0:18:21.040 --> 0:18:24.440
<v Speaker 1>that perspective. But I think this protections theme which has

0:18:24.440 --> 0:18:28.199
<v Speaker 1>been so painful and has supported the stronger dollar. Of

0:18:28.240 --> 0:18:32.879
<v Speaker 1>course as well, that protectionist theme that's turning at the

0:18:33.000 --> 0:18:35.560
<v Speaker 1>end of this year, and I think that's probably the

0:18:35.560 --> 0:18:38.560
<v Speaker 1>most bullish US for emerging markets of all m that's

0:18:38.560 --> 0:18:43.480
<v Speaker 1>going to come out of this this unexpected virus and

0:18:43.760 --> 0:18:48.359
<v Speaker 1>the impact on the global economy and Robert Coopman, you know,

0:18:48.440 --> 0:18:51.359
<v Speaker 1>if you're sitting in a TV economist of the w

0:18:51.480 --> 0:18:58.240
<v Speaker 1>d O, do you share Charlie's view that if you

0:18:58.359 --> 0:19:04.440
<v Speaker 1>see Trump defeated in the election, that one could continue

0:19:04.480 --> 0:19:08.840
<v Speaker 1>to have challenging relations between the US and China, but

0:19:08.920 --> 0:19:14.640
<v Speaker 1>it wouldn't necessarily in fit the global trading system, because

0:19:14.680 --> 0:19:16.800
<v Speaker 1>I think that's that's an interesting point Charlie made that.

0:19:16.840 --> 0:19:19.760
<v Speaker 1>I think I hadn't heard other people tend to say

0:19:19.760 --> 0:19:24.120
<v Speaker 1>that the US China battle will infect everything else and

0:19:24.160 --> 0:19:26.720
<v Speaker 1>make the global trading system a much more protection is

0:19:26.840 --> 0:19:32.040
<v Speaker 1>much more fractured place. But how do you see it? Um,

0:19:32.080 --> 0:19:38.280
<v Speaker 1>I don't think that the election is going to necessarily

0:19:38.280 --> 0:19:43.240
<v Speaker 1>bring about big positive effects in the trade area. There

0:19:43.240 --> 0:19:46.480
<v Speaker 1>are scarring effects. I think, just like we're talking about

0:19:46.520 --> 0:19:51.320
<v Speaker 1>the COVID crisis. The political scarring effects from the the

0:19:52.560 --> 0:19:58.520
<v Speaker 1>Trump policies are likely to remain. Um. I think there

0:19:58.520 --> 0:20:02.320
<v Speaker 1>will be somewhat mitigated and perhaps and I do hope

0:20:02.359 --> 0:20:07.640
<v Speaker 1>I'm wrong, significantly mitigated. But the debate around trade started

0:20:07.680 --> 0:20:13.320
<v Speaker 1>to change, um you know, in the mid um and

0:20:13.680 --> 0:20:17.960
<v Speaker 1>Trump has certainly taken that rather aggressively forward. There's this

0:20:18.119 --> 0:20:21.240
<v Speaker 1>focus on US China, do not forget about US du

0:20:22.320 --> 0:20:25.879
<v Speaker 1>Those stresses are pretty significant, and they've been there for

0:20:25.920 --> 0:20:31.760
<v Speaker 1>a long time and normally the two regions countries have

0:20:31.920 --> 0:20:37.040
<v Speaker 1>worked well together to keep those sort of um channeled

0:20:37.080 --> 0:20:40.639
<v Speaker 1>into something like the w t O Dispute Body or

0:20:40.840 --> 0:20:45.800
<v Speaker 1>competing regional trade agreements, you know, so they've been somewhat

0:20:46.240 --> 0:20:50.840
<v Speaker 1>productively managed. But I think that's gonna be something that

0:20:50.920 --> 0:20:54.600
<v Speaker 1>remains to be seen how that works out. There will

0:20:54.600 --> 0:20:58.600
<v Speaker 1>be a change in administrations in in the fall, actually

0:20:58.800 --> 0:21:01.480
<v Speaker 1>change an administration. When happened until the beginning of the

0:21:01.480 --> 0:21:06.080
<v Speaker 1>new year, a couple of things, the trade war, tariffs

0:21:06.520 --> 0:21:10.040
<v Speaker 1>and the uncertainty around that. So the terrorists on China

0:21:10.320 --> 0:21:14.520
<v Speaker 1>costly to the US, somewhat costly to China caused a

0:21:14.560 --> 0:21:19.439
<v Speaker 1>lot of trade diversion, contributed to uncertainty, But the bigger

0:21:19.480 --> 0:21:24.440
<v Speaker 1>contributor to uncertainty was auto teriffs on the EU, general

0:21:24.520 --> 0:21:29.720
<v Speaker 1>trade policy from the United States, the sort of weakening

0:21:29.840 --> 0:21:32.520
<v Speaker 1>of the centrality of the w t O in the

0:21:32.680 --> 0:21:35.400
<v Speaker 1>in the trading system, which was largely pushed by US

0:21:35.480 --> 0:21:38.680
<v Speaker 1>positions in the G twenty. But all of those effects

0:21:39.080 --> 0:21:42.640
<v Speaker 1>were relatively small. The COVID effects are huge. I mean,

0:21:42.680 --> 0:21:47.199
<v Speaker 1>they're just massive compared to the trade war tariffs, but

0:21:47.400 --> 0:21:51.919
<v Speaker 1>both have potential long term implications for growth UM. A

0:21:51.920 --> 0:21:55.320
<v Speaker 1>big concern from COVID for me is automation. I think

0:21:55.359 --> 0:22:00.280
<v Speaker 1>firms are gonna try to find ways to substitute for

0:22:00.400 --> 0:22:03.680
<v Speaker 1>human workers as much as possible. On the service side,

0:22:03.720 --> 0:22:07.040
<v Speaker 1>we can easily distribute those workers, perhaps through remote work.

0:22:07.480 --> 0:22:09.920
<v Speaker 1>That's a bit harder. In manufacturing, I think we'll see

0:22:09.960 --> 0:22:15.760
<v Speaker 1>significant investments in manufacturing that could undermine than UM a

0:22:15.800 --> 0:22:19.320
<v Speaker 1>lot of workers and their ability to find good work,

0:22:19.400 --> 0:22:27.399
<v Speaker 1>good paying jobs. Thanks for listening to Stephanomics. We'll be

0:22:27.440 --> 0:22:30.399
<v Speaker 1>back next week with more on how COVID nineteen is

0:22:30.440 --> 0:22:34.040
<v Speaker 1>transforming the global economy. Remember you can always find us

0:22:34.040 --> 0:22:36.600
<v Speaker 1>on the Bloomberg Terminal website, app or wherever you get

0:22:36.640 --> 0:22:40.440
<v Speaker 1>your podcasts and For more news and analysis from Bloomberg Economics,

0:22:40.480 --> 0:22:44.240
<v Speaker 1>you should follow as Economics on Twitter. This episode was

0:22:44.280 --> 0:22:47.200
<v Speaker 1>produced by Magnus Hendrickson and the story we spoke about

0:22:47.200 --> 0:22:50.240
<v Speaker 1>at the start of the program was written by Flavia Rotundee,

0:22:50.440 --> 0:22:55.560
<v Speaker 1>Jeanette Newman, Joo Lima, and Pyota Skolimowski. Was also edited

0:22:55.560 --> 0:23:00.600
<v Speaker 1>by Alas Shaheen. Special thanks to Charlie Robertson, Pyotas Olimowski,

0:23:00.800 --> 0:23:04.680
<v Speaker 1>Robert Kopman, and City and Financial Global. Lucy Meekin is

0:23:04.720 --> 0:23:07.440
<v Speaker 1>the acting executive producer of Stephanomics and the head of

0:23:07.480 --> 0:23:15.879
<v Speaker 1>Bloomberg Podcast is Francesca Levy. M