Speaker 1: If it's like getting a concert ticket, but you cannot
Speaker 1: book it, you cannot purchase in online. What happens is
Speaker 1: they have you have no idea when when it is
Speaker 1: going to be on sale, So once it's available, there's
Speaker 1: suddenly be a price and either you take it or
Speaker 1: the container will be gone. Um, it's creating a lot
Speaker 1: of pressure for US. Hello and welcome to Stephanomics, the
Speaker 1: podcast that brings the global economy to you. You heard
Speaker 1: there was a Hong Kong based exporter discovering his corner
Speaker 1: of the global economy. Overbooked from Singapore to Rotterdam, ships
Speaker 1: are queuing to get into port and exporters are struggling
Speaker 1: to book space for their freight. Satellite photos show there
Speaker 1: are currently around three dozen container ships anchored outside the
Speaker 1: twin ports near l A, the busiest gateway for US
Speaker 1: goods trade, still waiting for births. A major car manufact
Speaker 1: was like Volkswagen and Honda are cutting production in the
Speaker 1: US and Europe because of a struggle to get part
Speaker 1: We thought it was a short term mismatch between demand
Speaker 1: and supply caused by the pandemic, but there are fears
Speaker 1: that these supply chain issues could now stop the global
Speaker 1: recovery in its tracks. Our senior Asia Economy correspondent and
Speaker 1: the Current gives us his take down at the docks
Speaker 1: in Hong Kong in a few minutes. But first, some
Speaker 1: breaking news from the US. We have a new president
Speaker 1: sitting in the Oval Office, Joe Biden. Almost as important
Speaker 1: for at least some listeners to this podcast. We have
Speaker 1: a new Treasury Secretary to sitting across the road at
Speaker 1: fift hundred Pennsylvania Avenue, Janet Yellen. Now she's not exactly
Speaker 1: a new face. She was head of the US Central
Speaker 1: Bank until Trump decided to replace her with j Powe.
Speaker 1: She was on the Stephanomics talking to me at the
Speaker 1: New Economy Forum a few months ago, and we've got
Speaker 1: a sneak preview of what her reign at the Treasury
Speaker 1: Department might be like. Earlier this week in her confirmation
Speaker 1: hearing before the Senate Finance Committee, and Bloomberg reported Chris
Speaker 1: Condon listened to every word of it. Chris, thanks for
Speaker 1: joining you. You know, Janet Yellen evolved from covering the
Speaker 1: Federal Reserve. You're now moving from being a Fed reporter
Speaker 1: to being a Treasury We're going to send you there
Speaker 1: to cover Janet Yellen and tell us about the hearings.
Speaker 1: I mean, I guess you didn't get as much from
Speaker 1: them as you would a normal hearing because a lot
Speaker 1: of it was remote. Hi, there's definitely yeah, you're you're
Speaker 1: absolutely right. Like much of these things these days, it
Speaker 1: was largely a virtual hearing. Some of the lawmakers were
Speaker 1: there in the room in the hearing room, some of
Speaker 1: the lawmakers were doing it remotely from their officers, and
Speaker 1: Janet Yellen did it remotely from her home. So that's
Speaker 1: the first reason why it wasn't really your normal can't
Speaker 1: from mean hearing. The second, interestingly, I think, is that
Speaker 1: there's no question that Jenne Yellen is going to be
Speaker 1: confirmed by the U. S. Senate. She has very broad
Speaker 1: support on both sides of the political aisland. In fact,
Speaker 1: many of the Republicans who had a lot of critical
Speaker 1: things to say about the Biden administration welcomed her and
Speaker 1: said they look forward to working with her when she
Speaker 1: was at the Treasure So there's no question. Uh So,
Speaker 1: without that sort of vetting process to to go on
Speaker 1: in the hearing, it turned largely into a discussion and
Speaker 1: debate over the merits of Biden's stimulus package, and Yellen
Speaker 1: began doing her first job, which is to sell that
Speaker 1: two lawmakers, both to the Republicans and to some of
Speaker 1: the somewhat more conservative Democrats in the Senate whose support
Speaker 1: is going to be needed. So and she seemed to
Speaker 1: get off on a pretty good start there. She's she's
Speaker 1: no strangers to these types of things. She's very well
Speaker 1: prepared and very well spoken, and uh, I think she
Speaker 1: had a pretty good first day. Yeah, so we're going
Speaker 1: to hear actually a couple of things that she said
Speaker 1: on the on those topics. I mean, she has to obviously,
Speaker 1: there's a there's a balance that someone who has to
Speaker 1: make sure that US carries on paying back all this
Speaker 1: debt has to strike between sounding suitably concerned about this
Speaker 1: mountain of federal debt that's been run up just in
Speaker 1: the last twelve months, but also talking about the need
Speaker 1: for stimulus. And actually, when she did talk for the
Speaker 1: Bloomberg New Economy for him a few months ago, when
Speaker 1: she was just being talked about as a Treasury secretary,
Speaker 1: she talked about the FED pleading for fiscal relief, wanting
Speaker 1: to get more stimulus for the economy. So so let's
Speaker 1: hear what she said first about worrying about the debt,
Speaker 1: but also on the need for stimulus. It's essential that
Speaker 1: we put the UM federal budget on a path that's sustainable.
Speaker 1: But the most important thing, in my view, that we
Speaker 1: can do today to put us on a path of
Speaker 1: fiscal sustainability is to defeat the pandemic, to provide relief
Speaker 1: to American people, and then to make long term investments
Speaker 1: that will help the economy grow and benefit future generations. UM.
Speaker 1: To avoid doing what we need to do now to
Speaker 1: address the pandemic and the economic damage that it's causing
Speaker 1: UM would likely leave us on in a worse place
Speaker 1: fiscally and with respect to long our our debt situation.
Speaker 1: UH then taking the steps that are necessary and doing
Speaker 1: that through deficit finance. So so we heard that the
Speaker 1: quiet a full throated call for more stimulus, even as
Speaker 1: she was concerned about the long term path of the debt.
Speaker 1: But I gathered the Republicans did score some points in
Speaker 1: pointing out some of the weaknesses in Joe Biden's plan.
Speaker 1: I mean, how does she do that? A bit mixed?
Speaker 1: I would say, first of all, she tries to present
Speaker 1: herself as you heard as someone who will still be
Speaker 1: a voice of reason inside the Biden administration. She is
Speaker 1: very conscious of the long term need too, as she said,
Speaker 1: keep the budget on a sustainable path, but now is
Speaker 1: not the time to worry about that too much. In fact,
Speaker 1: if you don't do the things you need, if you
Speaker 1: don't spend aggressively now to contain the virus to help
Speaker 1: Americans who are suffering because of it, you're going to
Speaker 1: be in a worse place in the longer run. And
Speaker 1: and there she's got a lot of backing. Um, A
Speaker 1: lot of economists would agree with her, Um that that
Speaker 1: is a very good case to make now where I
Speaker 1: think the Biden plan has greater weakness and yelling in
Speaker 1: her heart of hearts really must recognize this is when
Speaker 1: we talk about these additional checks that will go out
Speaker 1: to so many American households. Um. An economist just yesterday
Speaker 1: told me that he estimated about eight of those households
Speaker 1: don't have any employment issues. So you're gonna be sending
Speaker 1: a lot of money to a lot of Americans who
Speaker 1: really aren't being directly damaged by the by the pandemic.
Speaker 1: Is that really the wisest thing to do? So this
Speaker 1: idea of how well targeted are some of these measures
Speaker 1: was the strongest point that some Republicans made, and they
Speaker 1: made it very strongly and repeatedly. She did not have
Speaker 1: a great answer for that. Of course, she's not, you know,
Speaker 1: a nonpartisan economist anymore. She can't say, well, you have
Speaker 1: a point here, you have a point there. No, no,
Speaker 1: she has to be a good soldier and stick with
Speaker 1: what the boss is proposing. So she kind of had
Speaker 1: to dodge that a bit um. It didn't come across
Speaker 1: very badly for her, but clearly she did not have
Speaker 1: a fully prepared comeback for that question of how well
Speaker 1: targeted the aid is in some cases. So one area
Speaker 1: where the economics and the politics maybe go together, at
Speaker 1: least in terms of the merits, is the increase in
Speaker 1: the minimum wage, which arguably also would be a bit
Speaker 1: better target to the people who have suffered most in
Speaker 1: this pandemic. The Democrats, many of the Democrats and Joe
Speaker 1: Biden focused on increasing the minimum wage significantly, up to
Speaker 1: fifteen dollars an hour. Let's see what she said about that.
Speaker 1: Right now, we have millions of American workers who are
Speaker 1: putting our lives on the line. Uh to keep their
Speaker 1: communities functioning, and sometimes even working multiple jobs aren't turning
Speaker 1: enough to put food on the table, and raising the
Speaker 1: minimum wage would really help many of those workers. That's
Speaker 1: the reason for doing it now. In terms of potential
Speaker 1: job laws, there's now a large economics literature on this,
Speaker 1: and the findings are that the job lass is very minimal,
Speaker 1: if if anything. So, what do you think, Chris is
Speaker 1: is there a chance we're going to double the federal
Speaker 1: minimum wage to fifteen dollars an hour under the Biden administration?
Speaker 1: I think there certainly is a chance. UM. A couple
Speaker 1: of things to note about this, About almost thirty states
Speaker 1: plus the District of Columbia already have minimum wage levels
Speaker 1: that are well above the federal minimum UM. And there
Speaker 1: are big employers like Amazon and Walmart that has set
Speaker 1: minimum pay above the federal minimum. So it's not like
Speaker 1: the entire country is going to see this sweeping doubling
Speaker 1: of the minimum level of pay available. It's not quite
Speaker 1: that dramatic, um, And there is quite a bit of evidence,
Speaker 1: as Yelling pointed out, supporting the idea that there won't
Speaker 1: be a lot of job destruction because of it. Now,
Speaker 1: can it pass the Senate. Uh. One interesting thing to
Speaker 1: note is how many votes do you need to get
Speaker 1: it through? If they can go through the budget reconciliation process,
Speaker 1: you just need fifty plus one, but it has to
Speaker 1: pass the test of affecting spending or revenue raising. And
Speaker 1: now you can make the argument that by raising the
Speaker 1: minimum wage, you're going to raise tax revenue because people
Speaker 1: at that end are going to be paid more and
Speaker 1: thus be their employment taxes are going to be more
Speaker 1: um But the last time a legislator piece of legislation
Speaker 1: tried to do this in two thousand nineteen, the Congressional
Speaker 1: Budget Office scored it as neutral on the budget and
Speaker 1: did not allow it to go through the budget reconciliation process.
Speaker 1: So they have a test there. If they need to
Speaker 1: get sixty votes to to the outside the reconciliation process
Speaker 1: to stop, you know, to to to bring a debate
Speaker 1: to an end, that will be a much more serious test,
Speaker 1: and they may seriously struggle to get ten Republican senators
Speaker 1: on board. We're going to hear about this again and again.
Speaker 1: It sounds like an arcane point, this point about the
Speaker 1: reconciliation process, but it is. It's if you've got at
Speaker 1: It is absolutely fundamental that you can that. Really the
Speaker 1: administration is only going to be confident of being able
Speaker 1: to get through things that can go in that process.
Speaker 1: And as you say, there are rules that limit what
Speaker 1: kind of thing can be in there. Well, bit of
Speaker 1: wages before or against is definitely a main Street issue.
Speaker 1: I guess what you might call more of an interest
Speaker 1: to Wall Street is what she said about the dollar.
Speaker 1: And I think here we we did have a big
Speaker 1: contrast with with Donald Trump. Let's let's hear what she
Speaker 1: said and then unpack the differences between her and her predecessor.
Speaker 1: I believe in market determined exchange rates. The value of
Speaker 1: the US dollar and other currencies should be determined by
Speaker 1: markets markets ad just to reflect variations in economic performance
Speaker 1: and generally facilitate adjustments in the global economy. The United
Speaker 1: States does not seek a weaker currency to gain competitive advantage,
Speaker 1: and we should oppose attempts by other countries to do so. So, Chris,
Speaker 1: what was the big difference in what she said about
Speaker 1: the dollar? Well, the Trump administration really kind of flipped
Speaker 1: all around on this issue, didn't they. Trump loved the
Speaker 1: idea of a strong dollar. It sounded good to him.
Speaker 1: But then, of course he realized that a weaker dollar
Speaker 1: would help American exporters, and I think they tried to
Speaker 1: jaw bone the dollar in some instances. Um, you're not
Speaker 1: going to get that from Janet Yell. And she knows
Speaker 1: that the market in the long term sets exchange rates anyways,
Speaker 1: And I think she fell into the classic Treasury secretary
Speaker 1: speak on this. Uh. American officials, when they, you know,
Speaker 1: when they know what they're talking about, always accept a
Speaker 1: stronger dollar as a consequence of good, positive things that
Speaker 1: are happening. It means that the economy is probably growing
Speaker 1: faster than the economies of other major trading part partners,
Speaker 1: and it's acting investment, it's attracting purchases of your goods.
Speaker 1: But you don't seek it um as a policy that
Speaker 1: can backfire on you, of course, and nor she knows
Speaker 1: as well that seeking a weaker dollar to help exporters
Speaker 1: can really backfire if they're looking to keep an eye
Speaker 1: on other countries and prevent them from from weakening their
Speaker 1: own currencies. And not to mention that it can backfire
Speaker 1: in the sense that other countries may accuse the Federal
Speaker 1: Reserve of seeking to weaken the US dollar through massive
Speaker 1: quantitative easing. So best in all worlds is to step
Speaker 1: back and say, look, the market determines these things, will
Speaker 1: be quite happy. If the economy does well, the currency
Speaker 1: will probably strengthen as a natural result. But we'll let
Speaker 1: the market do its thing. It's back to the old
Speaker 1: It's back to my old days at the U. S.
Speaker 1: Treasury under Robert Reuben. I don't know how many times
Speaker 1: I heard him say a strong dollars in the national interest,
Speaker 1: and then the key thing was that that was all
Speaker 1: he would say. But I suspect Yellen will be moving
Speaker 1: in that direction as well well. Finally, I guess we
Speaker 1: should talk about the one area where perhaps there was
Speaker 1: least change from Treasury sectary minution and the Trump administration,
Speaker 1: and that was on China. Quite tough talk from Janet
Speaker 1: Yellen on that subject. Let's see what she said. We
Speaker 1: need to take on China's abusive, unfair and illegal practices.
Speaker 1: China's undercutting American companies by dumping products, erecting trade barriers,
Speaker 1: and giving illegal subsidies to corporations. It's been stealing intellectual
Speaker 1: property and engaging in practices that give it an unfair
Speaker 1: technological advantage, including force technology transfers, and these practices, including
Speaker 1: China's low labor and environmental standards, are practices that we're
Speaker 1: prepared to use the polar ray of tools to address.
Speaker 1: Very of course, it is important OVID time to work
Speaker 1: with our autifies. So Chris, obviously there's going to be
Speaker 1: other members of the administration whose main job it is
Speaker 1: to think about US China relations, not least the Secretary
Speaker 1: of State Tony B. Lincoln. But but what did you
Speaker 1: take from that quite harsh language from Janet Yellen. I
Speaker 1: think that's an area where she is taking direction directly
Speaker 1: from the President elect and his close advisors. That's what
Speaker 1: they want, That's is the policy they want to implement.
Speaker 1: It's politically driven. I think it's practically speaking, there are
Speaker 1: also some obviously very serious issues to address with China,
Speaker 1: but the politics wrapped up into it are are really pressing.
Speaker 1: So there's no room for Jenney Yellen to do anything.
Speaker 1: But even if she wanted to tow the line and
Speaker 1: give a very strong message about all of the different
Speaker 1: fronts in which the Biden administration wants to confront China,
Speaker 1: I think underneath, of course, the manner in which they
Speaker 1: do it, and the tone of the language they use
Speaker 1: will be quite different from the Trump administration, But as
Speaker 1: a a signpost that they want to put out on
Speaker 1: day one, they are just as you say, We're putting
Speaker 1: up very strong language to signal how they want to
Speaker 1: stand on this and if anything on the national security
Speaker 1: issues actually a bit tougher than Donald Trump was, well
Speaker 1: we'll have We'll have plenty more to say about Jenneyellen
Speaker 1: and others in the new administration over the next few
Speaker 1: weeks and months. But in the meantime, Chris Condin, thank
Speaker 1: you very much, very happy to be here, Thanks very much. Now,
Speaker 1: it hasn't been a good start of the year for
Speaker 1: people in the business of transporting goods from country A
Speaker 1: to country B. In our first episode of one we
Speaker 1: heard about the trouble at the UK port of Dover,
Speaker 1: even before Britain fully departed the European Union. Brexit related
Speaker 1: red tape has caused a lot more trouble since January one,
Speaker 1: with Scottish fishermen being forced to throw away millions of
Speaker 1: pounds worth of fish and new barriers to trade, causing
Speaker 1: shortages in supermarkets in Northern Ireland. But it isn't just Brexit,
Speaker 1: the global shipping industry is struggling to deliver what the
Speaker 1: world wants to buy, and exporters and importers everywhere are
Speaker 1: feeling the pain. Are Hong Kong based Senior Asia Economy
Speaker 1: of correspondent and the current went down to the docks
Speaker 1: to see for himself. That's the sound of ships being
Speaker 1: loaded and unloaded here at Hong Kong Port, as huge
Speaker 1: crane stack twenty foot containers like lego bricks onto vessels
Speaker 1: that will deliver goods around the world. While it appears
Speaker 1: to be business as usual here, a shortage of shipping
Speaker 1: containers around the world is choking an exports boom that
Speaker 1: has helped to drag the global economy from its pandemic
Speaker 1: into slump. Manufacturers complained they're unable to ship goods or
Speaker 1: take new orders. That's because of surging prices for containers,
Speaker 1: as global restrictions to stem the coronavirus tie knots and
Speaker 1: supply chains. The crunch around the world has been building
Speaker 1: for months. It's now being compounded by a race by
Speaker 1: Chinese factories to get goods shipped ahead of the nation's
Speaker 1: annual New Year's holidays. So when this UH issue starts
Speaker 1: to kicks in it. We really starts to panic quite
Speaker 1: a bit. Kenway. Lamb runs a firm that makes packaging
Speaker 1: machinery used for everything from cookies to granola. He depends
Speaker 1: on ocean freight to the liver his bulky equipment to
Speaker 1: clients around the world. Last month, he was all set
Speaker 1: to load the shipment banned for a customer who had
Speaker 1: agreed the deal and the shipping costs months earlier. What
Speaker 1: should have been a home drew routine of farying goods
Speaker 1: from factory to port became a logistical nightmare. When Lamb
Speaker 1: was told there were no containers available, we are like,
Speaker 1: what really, what's happening? If we're already freaking out. Lamb,
Speaker 1: who is managing director of Hong Kong based Kazoo Packaging Machinery,
Speaker 1: whose manufacturing is completed in Guangdong and Taiwan, has had
Speaker 1: to watch as prices for containers surge on a weekly basis.
Speaker 1: It's like getting a concert ticket, but you cannot book it,
Speaker 1: you cannot purchase it online. What happens is they have
Speaker 1: you have no idea when when it is going to
Speaker 1: be on sale, so once it's available, there suddenly be
Speaker 1: a price and either you take it or the container
Speaker 1: will be gone. Um. It's creating a lot of pressure
Speaker 1: for US. Factory owners say containers that once would have
Speaker 1: cost two thousand dollars to send are now being quoted
Speaker 1: at anything up to ten thousand dollars or more. The
Speaker 1: shortage is ricocheting through supply chains as manufacturers are left
Speaker 1: holding goods they haven't been paid for. Inventory is piling
Speaker 1: up and cash flows are taking a hit. Some factories
Speaker 1: complain they can't consider new orders. Sydney News firm Prime
Speaker 1: Success Enterprises Limited makes educational and recreational products such as
Speaker 1: tents for children and tps and bats for pets. After
Speaker 1: booking two containers from Europe for a ship in the
Speaker 1: last month from the antientins then he was later told
Speaker 1: he could only get one. When we go to the
Speaker 1: container terminal to collect the container, they said, sorry, there's
Speaker 1: not nothing available either for you, so you have to
Speaker 1: wait for the nix nix wipment or until for a test.
Speaker 1: That's a big, big progress. In another instance, you had
Speaker 1: secured a container for shipping, only to be told there
Speaker 1: was no room left on the ship. When we arrive
Speaker 1: at the terminal, they said Oh sorry, there's nothing available
Speaker 1: for you, you know. So we try our our trying
Speaker 1: to accompany. Try the next day. Still sorry, no more,
Speaker 1: you know so so so you have to wait for
Speaker 1: the next next week vessel and see what we can do.
Speaker 1: So it's been a terrible situation. The pandemic put a
Speaker 1: rocket on their exports. From Asia's manufacturing powerhouses, China, South
Speaker 1: Korea and Taiwan also urgent demand for work from home
Speaker 1: technology and healthcare kit the boom health China wind market
Speaker 1: share of world trade and to become the world's only
Speaker 1: major economy to grow last year, while Taiwan and South
Speaker 1: Korea's experts are also gaining. Jackie Im runs Life in Motion,
Speaker 1: a hunk On based lighting company. It makes portable ultraviolet
Speaker 1: lights that kind of eliminate bacteria and viruses. This year,
Speaker 1: we're still seeing a quite huge demand for our products
Speaker 1: and of a lot of people send us a request
Speaker 1: for distribution of our products around the world. Like other manufacturers,
Speaker 1: Jim is doing what he can to keep costs down
Speaker 1: and to look for workaround solutions. So that's why we
Speaker 1: have to negotiate and see how we can share the
Speaker 1: increase of the cost right now, So there are lots
Speaker 1: of we have to be constantly talking to getting get
Speaker 1: in touch based with our customers in overseas as well.
Speaker 1: So um, well, hopefully you know, after the Chinese New Year, uh,
Speaker 1: we will see the that the situation will hopefully east
Speaker 1: down a little bit. There's a lot of riding on
Speaker 1: manufacturing to continue powering the global economic recovery, as services
Speaker 1: sector industries such as tourism and will remain in the Belgiums.
Speaker 1: The World Bank this month warned that their rebound from
Speaker 1: the deepest recession since World War Two would be slightly
Speaker 1: slower than previously expected as virus cases surge across advanced economies.
Speaker 1: The Washington based Lander also trimmed its global trade volume
Speaker 1: growth forecast to five percent this year, following a nine
Speaker 1: point five percent contraction last year. As Jackie And mentioned,
Speaker 1: the big hope for exporters is that the bottleneck eases
Speaker 1: once the annual Chinese New York Holiday is over, the
Speaker 1: biggest annual holiday in the world's second largest economy, and
Speaker 1: as vaccines stained the virus roll out on a larger scale.
Speaker 1: Bloomberg Economics Chief Asia economist Chiang Chu expects conditions to
Speaker 1: improve after the first quarter. I expect the impact is
Speaker 1: relatively limited. They might not be a huge impatch on
Speaker 1: the production side and on the good price site. I
Speaker 1: think the disruption will be relatively temporary and over time
Speaker 1: well ease as vaccines allow countries to open up the economy.
Speaker 1: Not that you would notice any of these issues here
Speaker 1: at the Hong Kong Port, one of the world's busiest
Speaker 1: shipping hubs that can handle around twenty million containers a
Speaker 1: year onliners that are heading to over four destinations. For exporters,
Speaker 1: a return to normality can't come soon enough. I've been
Speaker 1: in this business for sixteen around sixteen years. This is
Speaker 1: something that I have never since in my career running
Speaker 1: export for all these years. M thanks for listening to Stephanomics.
Speaker 1: We'll be back next week with more on all things economic,
Speaker 1: and remember you can always find us on the Bloomberg Terminal, website,
Speaker 1: app or wherever you get your podcasts. And for more
Speaker 1: news and analysis from Bloomberg Economics, you just have to
Speaker 1: follow at Economics on Twitter. This episode was produced by
Speaker 1: Magnus Hendrickson, with special thanks to Christopher Condon Ender Current
Speaker 1: and Yang Yang. Lucy Meekin is the executive producer of
Speaker 1: Stephonomics and the head of Bloomberg Podcast is Francesca Levy.