WEBVTT - This Country Is Winning the Trade War 0:00:03.920 --> 0:00:07.000 Hello, and welcome to Stephanomics, the podcast that brings the 0:00:07.000 --> 0:00:14.960 global economy to you. Trade wars are good and easy 0:00:15.000 --> 0:00:18.239 to win. That was President Trump's famous tweet just over 0:00:18.320 --> 0:00:20.800 a year ago when he announced tariff's on steel and 0:00:20.840 --> 0:00:24.200 aluminum from China and other countries. There have been plenty 0:00:24.239 --> 0:00:26.239 of twists and turns in the trade wars since then, 0:00:26.360 --> 0:00:31.440 But who's winning well, Trade lawyers definitely, and yes, trade 0:00:31.480 --> 0:00:34.560 reporters are. World Trade team here at Bloomberg has doubled 0:00:34.600 --> 0:00:37.400 in the past year. But when it comes to countries, 0:00:37.479 --> 0:00:40.680 economic theory says no one really wins a trade war. 0:00:41.080 --> 0:00:42.640 And if you look at the way the trade battles 0:00:42.640 --> 0:00:46.479 have hurt exports in China and raised costs and uncertainty 0:00:46.560 --> 0:00:50.279 for US businesses, you'd be inclined to agree, but we 0:00:50.360 --> 0:00:53.440 might be looking in the wrong place. In a minute, 0:00:53.560 --> 0:00:56.640 I'm going to talk to Bloomberg's Asian Economy columnist Dan 0:00:56.720 --> 0:00:59.920 Moss about the impact of trade wars and tougher global 0:01:00.000 --> 0:01:04.840 competition on Asia. But first, our Southeast Asian Economies reporter 0:01:04.959 --> 0:01:08.360 Michelle jam Riscoe has been to one country that does 0:01:08.440 --> 0:01:29.520 seem to be winning Donald Trump's trade war. This is Vietnam, 0:01:29.520 --> 0:01:32.320 where motorbikes raced through the streets of the capital Hanoi. 0:01:32.920 --> 0:01:36.039 Forty years after the war with America, the Vietnamese have 0:01:36.120 --> 0:01:38.360 the most favorable opinion of the US out of any 0:01:38.400 --> 0:01:42.080 foreign populace, according to the Pew Research Center, and Donald 0:01:42.080 --> 0:01:44.160 Trump may just have given them another reason to like 0:01:44.240 --> 0:01:46.800 America in the form of his trade war with China. 0:01:47.480 --> 0:01:49.440 That's because the tariff battle is giving a boost to 0:01:49.520 --> 0:01:52.560 Vietnam's economy, which was already one of the world's fastest 0:01:52.600 --> 0:01:55.080 growing thanks in part to foreign business is looking for 0:01:55.160 --> 0:02:02.000 cheaper factories my college when you in and I visited Shenwa, 0:02:02.200 --> 0:02:04.880 a furniture maker in Hanoi, to get a firsthand look 0:02:04.880 --> 0:02:08.640 at how Vietnamese business is reaping the benefits. Shenwa started 0:02:08.639 --> 0:02:11.560 as a bicycle company in and in the decades since 0:02:11.720 --> 0:02:14.720 has evolved into a big brand within Vietnam for home 0:02:14.919 --> 0:02:17.799 office and even the seats in parliament. But it also 0:02:17.880 --> 0:02:20.760 has a solid portfolio of long time international partners like 0:02:20.800 --> 0:02:24.160 Aikia and Toyota. A family that's growing in part thanks 0:02:24.160 --> 0:02:33.000 to those tariffs. Here's CEO Laid Wei Ang. We expect 0:02:33.000 --> 0:02:35.600 new orders to increase a lot due to the trade war, 0:02:36.040 --> 0:02:38.560 but it's hard to quantify it. Right now, there are 0:02:38.600 --> 0:02:41.160 more companies getting in touch with us to switch from 0:02:41.240 --> 0:02:44.160 China to our products, but in order to turn them 0:02:44.160 --> 0:02:46.560 into real contracts, we still have a lot to do 0:02:47.000 --> 0:02:49.960 and many things to change. It's quite difficult to compete 0:02:50.000 --> 0:03:02.120 with China in terms of quantity and cost. Here on 0:03:02.200 --> 0:03:04.600 Ang's factory floor is where that struggle to compete with 0:03:04.720 --> 0:03:08.320 China is playing out, and already with some success. You 0:03:08.320 --> 0:03:11.079 can tell Ang really wants to prioritize not just quantity 0:03:11.120 --> 0:03:18.720 but quality. He aims to compete with Japanese craftsmanship very much. 0:03:18.720 --> 0:03:21.120 In each of these buildings, you can smell the burnt 0:03:21.160 --> 0:03:26.800 metal and creative sparks flying work. Here's still gently at 0:03:26.840 --> 0:03:30.680 each of their stations in different zones, organized as Mr 0:03:30.680 --> 0:03:39.040 Ain said in a system that they took from Ng. 0:03:39.320 --> 0:03:42.160 An average size, boyish looking man with a big smile 0:03:42.680 --> 0:03:45.640 proudly escorts us around his village of factory buildings about 0:03:45.640 --> 0:03:49.640 an hour outside downtown Hannoi. We're just the latest onlookers. 0:03:49.960 --> 0:03:52.040 In the past three months, he's been visited by about 0:03:52.080 --> 0:03:54.960 ten potential new clients who are considering moving orders from 0:03:55.040 --> 0:03:58.400 China to Shenhwa. They've come from all over both the 0:03:58.480 --> 0:04:01.000 U s and China, as well as South Korea and Japan, 0:04:01.160 --> 0:04:04.720 and also from much further away like Romania. He's almost 0:04:04.720 --> 0:04:07.800 sure the fresh business will help him smash a growth target. 0:04:07.840 --> 0:04:11.360 For his point is driven home during our tour as 0:04:11.400 --> 0:04:13.800 a South Korean businessman walks by in a hard hat 0:04:14.200 --> 0:04:16.280 browsing products he'd like to sell to the U. S 0:04:17.279 --> 0:04:20.440 Ang pauses his tutorial about how NA has boosted productivity 0:04:20.480 --> 0:04:23.279 by shaving seconds off the process of bending the initial medal. 0:04:23.839 --> 0:04:27.160 He points out the latest visitor strolling the floors excitedly 0:04:27.200 --> 0:04:36.400 interjecting in English, a prongfolio, and I thought to me 0:04:39.200 --> 0:04:42.200 right now, Ang seems most focused on a new Canadian client, 0:04:42.600 --> 0:04:46.880 manufacturer distributor Conglam, whose executives are scrapping their Chinese sourcing 0:04:46.920 --> 0:04:49.919 and looking instead to order from NA, including cabinets they 0:04:50.000 --> 0:04:53.159 ship to US customers. Ang says this is exactly the 0:04:53.200 --> 0:04:55.280 type of order that his business has been working toward, 0:04:55.320 --> 0:04:57.640 as they buy new machinery and become more efficient on 0:04:57.680 --> 0:05:02.080 the factory floor. The most difficult things now is increasing 0:05:02.200 --> 0:05:06.080 quality and ensuring good quality of our products while trying 0:05:06.120 --> 0:05:09.320 to reduce costs to meet clients requirements and to be 0:05:09.400 --> 0:05:14.640 more competitive. The gains in productivity have allowed aim to 0:05:14.720 --> 0:05:17.679 raise salaries about eight percent each year for the past 0:05:17.720 --> 0:05:20.839 three years, he says, more than double the rate of inflation. 0:05:21.640 --> 0:05:25.039 One of his workers, forty six year old Havantan, has 0:05:25.040 --> 0:05:27.360 been at China for twenty two years, and both that 0:05:27.480 --> 0:05:29.720 the recent bumping business allowed him to buy a new 0:05:29.760 --> 0:05:39.200 motorbike for his family last year. My wife is much 0:05:39.240 --> 0:05:42.560 happier since I got higher income from the company, so 0:05:42.600 --> 0:05:45.320 we have a better life now. I also have better 0:05:45.360 --> 0:05:48.560 health as the working environment here has become better than 0:05:48.600 --> 0:05:56.840 it was previously. Ain showed off the cabinets and test 0:05:56.880 --> 0:05:59.240 phase that China was perfecting to close the deal with 0:05:59.320 --> 0:06:02.720 Conglong later, he offers up a more concrete example of 0:06:02.720 --> 0:06:05.080 where his company has already gained from the trade war. 0:06:05.839 --> 0:06:08.880 Akia has done business with Shenois for more than seventeen years. 0:06:09.560 --> 0:06:12.400 Last year, the Swedish furniture giant gave Shenwis some more 0:06:12.480 --> 0:06:15.000 business by switching from a Chinese vendor that could hike 0:06:15.040 --> 0:06:18.719 prices due to tariffs. Achia began buying these twenty cent 0:06:18.839 --> 0:06:22.240 metal parts from Shenois, which Ain pulled off a newer machine. 0:06:22.279 --> 0:06:32.799 On our tour, I met Sebastian Eckert, the World Bank's 0:06:32.839 --> 0:06:35.760 lead Vietnam economist, in an eighth floor meeting room that 0:06:35.800 --> 0:06:40.000 overlooks an especially buzzy intersection with tourists and teens snapping 0:06:40.040 --> 0:06:42.920 photos in front of Hannoi's historic opera house across the way. 0:06:43.760 --> 0:06:49.520 Eckert put things into perspective. Vietnam, of course, um, you know, 0:06:49.680 --> 0:06:57.160 even before the recent tensions, in many ways, has picked 0:06:57.240 --> 0:07:05.359 up activities where China basically move. We've moved on ind right, 0:07:05.440 --> 0:07:08.960 So a lot of the the FDI that VS actually 0:07:09.080 --> 0:07:14.040 is is relocation from China, and I think this the 0:07:14.120 --> 0:07:19.200 recent chansions they probably accelerate that for some instant, that's 0:07:19.200 --> 0:07:22.880 a keyword. I've been hearing a lot accelerate. The penalties 0:07:22.920 --> 0:07:25.720 targeted at China and the broader demand slow down there 0:07:26.040 --> 0:07:29.480 have given an extra nudge in Vietnam's favor. Not only 0:07:29.560 --> 0:07:32.520 that the government is loosing its grip on commerce. At 0:07:32.520 --> 0:07:36.200 the start of Sunwa, then a state owned company was 0:07:36.240 --> 0:07:40.960 fully privatized, and now an owns a stake in the firm. 0:07:41.000 --> 0:07:45.320 Eckert sees Vietnamese agencies cleaning up regulations brainstorming on tough 0:07:45.360 --> 0:07:48.640 reforms like intellectual property rights and adding more free trade 0:07:48.680 --> 0:07:51.800 agreements to their impressive lineup. It's all earned them better 0:07:51.840 --> 0:07:54.440 spots and international rankings like the World Banks Ease of 0:07:54.480 --> 0:07:58.120 Doing Business Index and the World Economic Forums Competitiveness Index. 0:07:59.200 --> 0:08:02.040 That's really come back. And I think that's very healthy, 0:08:02.080 --> 0:08:04.560 and it's something that is structural, that reflects a rising 0:08:05.080 --> 0:08:11.760 middle class, increasingly urbanized country, healthy wage girls, more disposable income, 0:08:12.680 --> 0:08:15.240 not only in a small fraction of households, but very 0:08:15.280 --> 0:08:18.240 broad based, very inclusive girls, of course, and and I 0:08:18.280 --> 0:08:21.280 think that's fueling a healthy domestic economy. And I think 0:08:21.320 --> 0:08:24.120 that's that's important. Ing himself as an example of the 0:08:24.200 --> 0:08:27.960 Vietnamese affection for America, in a country where lingering hustle 0:08:28.000 --> 0:08:31.600 sentiment from the war is largely confined to museums, a 0:08:31.840 --> 0:08:34.560 son is studying marketing in Indiana, part of a growing 0:08:34.600 --> 0:08:37.160 pattern as Vietnam ranks number seven in the world and 0:08:37.240 --> 0:08:40.959 sending students to the States. The Vietnamese hold a much 0:08:40.960 --> 0:08:44.000 different perspective on China. They talk about a lack of 0:08:44.000 --> 0:08:46.440 trust etched in a thousand years of history with their 0:08:46.480 --> 0:08:49.840 communist neighbor, and almost nine and ten have an unfavorable 0:08:49.920 --> 0:08:53.640 view of China, according to the same Pew survey. But 0:08:53.720 --> 0:08:56.439 for all the positive signs, businesses aren't getting too excited 0:08:56.440 --> 0:08:59.000 about the opportunities that might flow from the trade war. 0:08:59.720 --> 0:09:02.040 For one thing, companies know they can't cut out the 0:09:02.040 --> 0:09:05.120 second biggest market in the world. In fact, Ang says 0:09:05.160 --> 0:09:08.480 Shea still needs to source some materials, including steel, from 0:09:08.559 --> 0:09:12.239 China in order to continue producing according to customer preferences. 0:09:13.120 --> 0:09:17.560 Corruption also remains an issue. Infrastructure still lags in some ways, 0:09:17.600 --> 0:09:22.080 and paperwork can bog down newcomers. Moreover, Vietnam is vulnerable 0:09:22.080 --> 0:09:25.840 to international criticism for imprisoning dissidents and bloggers who challenge 0:09:25.840 --> 0:09:29.480 the government's one party socialist rule. And of course, if 0:09:29.520 --> 0:09:32.760 the US China trade war worsens or goes global, that's 0:09:32.800 --> 0:09:35.880 going to be bad for everyone, especially trade heavy economies 0:09:35.880 --> 0:09:39.760 like Vietnam. But A thinks Shena in his country will 0:09:39.880 --> 0:09:46.760 rise to the challenge. We see many opportunities in both 0:09:46.840 --> 0:09:50.960 domestic and international market. The trade war is bringing more business, 0:09:51.040 --> 0:09:53.920 for sure, while there are some potential areas in the 0:09:54.000 --> 0:09:58.360 domestic market that we haven't tapped yet. In talks about 0:09:58.400 --> 0:10:01.400 creating a so called smart fact Jory with more robots 0:10:01.400 --> 0:10:04.600 and advanced machines. He aims to double sales in the 0:10:04.640 --> 0:10:07.880 next five years. For now, the trade war is helping 0:10:07.920 --> 0:10:11.679 and keep things plans on truck for Bloomberg News. This 0:10:11.760 --> 0:10:18.440 is Michelle jam Risco. So that was Michelle jam Risco. 0:10:18.520 --> 0:10:22.000 I'm very pleased to talk now to Daniel Moss, who 0:10:22.000 --> 0:10:25.319 will be familiar to some of you long time listeners 0:10:25.360 --> 0:10:29.400 to the Benchmark podcast. He used to run the economics 0:10:29.480 --> 0:10:31.360 coverage here at Bloomberg. He has done a lot of 0:10:31.400 --> 0:10:34.559 other things for Bloomberg, but most importantly for our purposes. 0:10:35.360 --> 0:10:38.240 For the last few months, he's been based in Asia 0:10:38.280 --> 0:10:41.880 as the Asian Economy columnist for Bloomberg Opinion. Dan, thanks 0:10:41.960 --> 0:10:45.480 very much for coming back on the podcast. Step great 0:10:45.520 --> 0:10:48.480 to be here. So we were just hearing about this 0:10:48.760 --> 0:10:53.520 quite positive story about Vietnam potentially at least in the 0:10:53.559 --> 0:10:58.360 short term, being a winner from the trade wars. Is 0:10:58.400 --> 0:11:02.400 this something that you see generally when you think about 0:11:02.440 --> 0:11:06.640 the impact on Southeast Asia of the immediate sort of 0:11:06.760 --> 0:11:11.079 US China wrangling over trade, that there are some countries 0:11:11.120 --> 0:11:13.920 that are actually benefiting as well as the losses we see, 0:11:14.000 --> 0:11:16.280 or is it primarily a negative story. When you think 0:11:16.280 --> 0:11:18.280 about the impact of the trade wars on the region, 0:11:20.000 --> 0:11:25.240 it is overall a broadly negative story, with a couple 0:11:25.240 --> 0:11:29.640 of exceptions, and Vietnam is one of them, certainly in 0:11:29.679 --> 0:11:33.240 the short term. I was in Vietnam late last year 0:11:33.400 --> 0:11:36.880 and the place was getting quite a lot of positive 0:11:37.000 --> 0:11:42.000 buzz from foreign businesses who had set up there. Late 0:11:42.080 --> 0:11:46.000 last year, the government lifted restrictions on how much foreigners 0:11:46.080 --> 0:11:51.160 can own of huge swaths of industry. However, and this 0:11:51.240 --> 0:11:54.880 is the key caveat when you're talking about Vietnam, it 0:11:54.960 --> 0:11:59.880 remains a one party communist state, and so called sent 0:12:00.040 --> 0:12:05.520 citive areas they are still off limits to foreign control. 0:12:07.520 --> 0:12:11.520 Vietnam is a big country, but it's not so big. 0:12:11.679 --> 0:12:16.000 It has relatively warm relations with the US and with 0:12:16.040 --> 0:12:19.839 Western Europe that, of course, can all go wrong, though 0:12:20.440 --> 0:12:24.360 its system of government is not dramatically different from China's 0:12:24.920 --> 0:12:29.280 and steph. As you know from your own working experiences. 0:12:29.640 --> 0:12:34.960 When emerging markets let foreign investors have more and more 0:12:35.040 --> 0:12:38.319 of a say in the economic life of their country, 0:12:38.520 --> 0:12:43.080 governments also surrender a certain amount of control. Some systems 0:12:43.120 --> 0:12:46.160 of government and individual states are more comfortable with that 0:12:46.200 --> 0:12:50.000 than others. For now, it's probably a bargain that works 0:12:50.080 --> 0:12:53.880 for Vietnam. How long it works remains to be seen. 0:12:55.120 --> 0:12:57.960 I suspect there's a little bit of crush to this. 0:12:59.160 --> 0:13:02.920 Whether it's a long term player remains to be seeing. 0:13:03.360 --> 0:13:05.640 I mean, it's one thing that certainly we think about 0:13:05.640 --> 0:13:07.720 when we look at what you might call the Asian 0:13:07.960 --> 0:13:14.119 economic model, which was so focused on trade and exporting 0:13:14.120 --> 0:13:16.320 to the rest of the world, we know that that 0:13:16.720 --> 0:13:19.480 sort of the path that China took and that other 0:13:19.520 --> 0:13:22.520 countries before it took, is going to be much harder 0:13:22.559 --> 0:13:24.559 now looking ahead. I mean, the rest of the world's 0:13:24.600 --> 0:13:27.600 a bit more wise to that approach, but it's just 0:13:27.640 --> 0:13:30.760 a much more competitive environment. I mean, not just Vietnam, 0:13:30.840 --> 0:13:32.839 but if you're sort of stepping back and thinking about 0:13:33.360 --> 0:13:36.680 Southeast Asia as a whole and that Asian export economies, 0:13:36.720 --> 0:13:39.719 you know, how well do you think countries are grappling 0:13:39.800 --> 0:13:43.280 with moving away from it or needing to find a 0:13:43.320 --> 0:13:46.600 different kind of economic model. They do need to find 0:13:46.720 --> 0:13:49.520 a different type of economic models. Some of them are 0:13:49.600 --> 0:13:53.680 pinning hopes on their own middle class. But just to 0:13:53.760 --> 0:13:57.440 be clear about this, a move away from exports is 0:13:57.559 --> 0:14:00.959 essentially a move away from the model that got them 0:14:00.960 --> 0:14:03.600 where they are. You know, we're all familiar with the 0:14:03.679 --> 0:14:06.280 success stories of some of these Asian economies. You know, 0:14:06.400 --> 0:14:09.800 tigers was a term very much on vogue in the 0:14:09.840 --> 0:14:12.400 eighties and nineties. Who don't hear that so much anymore. 0:14:12.800 --> 0:14:16.880 They did really, really well out of exports, and part 0:14:16.880 --> 0:14:20.440 of that was an exports supply chain that sneaked through 0:14:20.600 --> 0:14:25.280 China and has recently served China as well as serving 0:14:25.520 --> 0:14:29.600 the US. Now, to attract all the multinationals that were 0:14:29.680 --> 0:14:33.480 part of those supply chains, they needed to make their 0:14:33.480 --> 0:14:37.640 economies more open. They needed to invest more money in education, 0:14:37.720 --> 0:14:41.200 They needed to keep up the momentum move up the 0:14:41.280 --> 0:14:44.920 value chain. Now, if you take away exports and if 0:14:44.960 --> 0:14:49.040 you at least subtract from China's role in that global 0:14:49.120 --> 0:14:52.440 supply chain, the model that got many of these East 0:14:52.480 --> 0:14:56.520 Asian countries where they are, well, you know, got another model. 0:14:57.600 --> 0:15:00.280 I don't know that they necessarily have a convinced seeing 0:15:00.280 --> 0:15:01.880 new one, and I guess one of them, I mean, 0:15:01.920 --> 0:15:04.360 one part of one big part of the model. The 0:15:04.440 --> 0:15:08.760 last few years has just been dependents on China, I mean, selling, 0:15:08.880 --> 0:15:12.320 selling into that China growth story. We think a lot 0:15:12.360 --> 0:15:15.440 about the impact of trade wars and as understandable because 0:15:15.440 --> 0:15:18.520 it's such a it's a change to have this kind 0:15:18.520 --> 0:15:22.680 of protectionist mood affecting relations between the two of the 0:15:22.680 --> 0:15:25.240 biggest economies in the world. But if you're sitting in 0:15:25.280 --> 0:15:28.560 major you're looking at Asian economies all around you, what 0:15:28.680 --> 0:15:31.240 are you worried about most? Are you worried most about 0:15:31.280 --> 0:15:33.360 the trade war? Or are you worried most about the 0:15:33.400 --> 0:15:35.920 slowing of growth in China because that's such a big 0:15:35.920 --> 0:15:38.800 part of this year's story as well. Yeah, when I 0:15:38.880 --> 0:15:42.520 wake up tomorrow morning, I'll be worrying about the trade 0:15:42.560 --> 0:15:45.600 war and the impact of that. But you know, as 0:15:45.640 --> 0:15:49.080 I wake up in the months and perhaps the year 0:15:49.160 --> 0:15:53.440 to come, I'll be worried that economies aren't thinking enough 0:15:53.560 --> 0:15:58.800 about the structural slowed down and the structural change in 0:15:58.880 --> 0:16:03.880 the Chinese economy. This is an economy that Donald Trump, notwithstanding, 0:16:04.360 --> 0:16:08.360 is becoming more and more driven by its own domestic 0:16:08.560 --> 0:16:14.880 consumer market, by technology. China is not going to grow 0:16:15.040 --> 0:16:18.360 at six percent forever. It didn't grow at ten percent forever. 0:16:18.840 --> 0:16:21.560 You know, we need to get used to growth of 0:16:21.920 --> 0:16:26.520 five points something, four points something, three points something. You know, 0:16:26.600 --> 0:16:29.960 the O E c D has done some modeling. Capital Economics, 0:16:29.960 --> 0:16:33.920 among other firms, have done some modeling. As China's economy 0:16:34.000 --> 0:16:39.120 continues to mature, you know it's going to look actually 0:16:39.120 --> 0:16:41.720 a lot like the US and to a degree Western 0:16:41.760 --> 0:16:45.400 Europe in terms of its rates of growth. Now, for 0:16:45.480 --> 0:16:48.000 all the people's staff that we've heard say, well, the 0:16:48.040 --> 0:16:52.760 biggest thing in my lifetime has been the super fabulous 0:16:53.040 --> 0:16:57.040 rise of China. That's great, that's true. But how much 0:16:57.080 --> 0:17:02.480 consideration is given to a China, know which looks normal? 0:17:03.600 --> 0:17:08.040 That is the really long term fundamental challenge. Being close 0:17:08.119 --> 0:17:13.360 to China was once an an unalloyed good. How much 0:17:13.400 --> 0:17:17.000 longer will that be true? Again? Got a new model. 0:17:18.240 --> 0:17:20.000 It makes me think. And it's interesting because you and 0:17:20.040 --> 0:17:22.280 I both have a sort of longer term perspect on this, 0:17:22.320 --> 0:17:25.160 although you had a much deeper understanding of the region. 0:17:25.200 --> 0:17:26.920 I mean, I think, you know, you've just moved back 0:17:27.240 --> 0:17:31.520 to Asia after many years away, and I think the 0:17:31.600 --> 0:17:33.600 last time you were there. You should remind us the 0:17:33.640 --> 0:17:36.200 last time you were there was in the late nineties. 0:17:36.480 --> 0:17:39.639 That was when I was making flying visits to Asia 0:17:39.720 --> 0:17:42.239 during the Asia Financial crisis, when I was working at 0:17:42.280 --> 0:17:44.520 the U. S. Treasury, working for Larry Summers. So, of 0:17:44.520 --> 0:17:47.800 course I got a rather crazed picture of these countries 0:17:47.840 --> 0:17:51.760 when they were going through this absolute worst moment of crisis. 0:17:51.840 --> 0:17:53.320 You were sitting there able to look at it a 0:17:53.400 --> 0:17:55.800 bit more calmly. But what struck you most you've been 0:17:55.840 --> 0:17:58.280 back for a few months now, how is that long 0:17:58.400 --> 0:18:01.639 term story of China influen punts and the development of 0:18:01.640 --> 0:18:04.560 the region played out relative to what you might have 0:18:04.640 --> 0:18:08.960 thought when you left? So I moved to Singapore three 0:18:09.040 --> 0:18:11.840 months ago. The last time I lived in Southeast Asia, 0:18:11.920 --> 0:18:17.359 I was the bureau chief of Bloomberg in Malaysia from 0:18:17.520 --> 0:18:20.840 so definitely that was a period of economic and political 0:18:20.960 --> 0:18:25.800 upheaval in the region. Having been away for two decades, 0:18:26.040 --> 0:18:30.760 I expected Steph that when I returned, China's footprint would 0:18:30.800 --> 0:18:35.719 be everywhere. You know, writ large, writ small, rip medium, 0:18:35.800 --> 0:18:39.119 you name it. The thing that surprised me most as 0:18:39.200 --> 0:18:42.280 I talk to people at central banks here and read 0:18:42.400 --> 0:18:48.280 more and more about monetary policy in Asia, the more 0:18:48.280 --> 0:18:50.800 it's apparent to me this is still largely about the 0:18:50.840 --> 0:18:56.160 Federal Reserve. This is still a dollar zone. Is China's 0:18:56.200 --> 0:19:00.280 footprint in the region expanding in other economic ways? For 0:19:00.520 --> 0:19:03.840 Shure is China funding a lot of infrastructure in this 0:19:03.960 --> 0:19:08.280 region for Shure, is the Belton Road Initiative having an 0:19:08.320 --> 0:19:13.200 impact for Shure. But when it comes to the monetary realm, 0:19:13.240 --> 0:19:17.480 this is still a dollar game. And whenever there's a 0:19:17.560 --> 0:19:21.800 Federal Open Market Committee meeting for two days, there's just 0:19:21.840 --> 0:19:24.280 this constant blitz. It's like I was back in d 0:19:24.400 --> 0:19:27.480 C at a fed lock up. People's Bank of China 0:19:28.280 --> 0:19:33.080 is barely mentioned. For me. That was a surprise. Now 0:19:33.160 --> 0:19:38.119 culturally and politically things have advanced significantly. I'm talking to 0:19:38.160 --> 0:19:41.160 you right now from Jakarta, the capital of Indonesia, which, 0:19:41.160 --> 0:19:45.159 as you know, was the epicenter in Southeast Asia of 0:19:45.240 --> 0:19:49.520 the financial crisis two decades ago. It ultimately became a 0:19:49.520 --> 0:19:54.560 political crisis and in some ways a sectarian crisis. Indonesia 0:19:54.680 --> 0:19:57.680 is in full bloom as a democracy as it prepares 0:19:57.720 --> 0:20:01.479 to vote this month. Country only been voting directly for 0:20:01.520 --> 0:20:04.960 presidents since two thousand and four. And democracy is a 0:20:05.000 --> 0:20:08.000 great thing. We all support that, but it does make 0:20:08.040 --> 0:20:10.960 it harder sometimes to get a handle on the debate, 0:20:11.359 --> 0:20:16.560 and it can also uncork some sentiments that authoritarian rules 0:20:16.840 --> 0:20:19.840 had papered over. No I think that's I mean It's 0:20:19.840 --> 0:20:23.560 fascinating and not necessarily what we hear all the time 0:20:23.640 --> 0:20:26.520 when we think about the rise of China and and 0:20:26.520 --> 0:20:29.719 how how dominant it's become. Some things have moved very quickly, 0:20:30.119 --> 0:20:32.639 but some of these long term aspects, certainly about the 0:20:32.720 --> 0:20:35.119 role of the dollar, we know it could take a 0:20:35.200 --> 0:20:38.000 lot longer. I seem to remember. I think the the 0:20:38.160 --> 0:20:40.840 UK was surpassed by the US in terms of the 0:20:40.880 --> 0:20:44.520 size of its economy in the late in the eighties nineties. 0:20:44.560 --> 0:20:47.920 It took another sixty years before the pound was really 0:20:47.960 --> 0:20:51.040 displaced by the dollar as the global currency. So maybe 0:20:51.080 --> 0:20:54.520 we shouldn't be surprised, but it's it's interesting to hear 0:20:54.520 --> 0:20:57.760 that you've come all that way, Dan, moving from the US, 0:20:57.840 --> 0:21:00.000 only to discover that it really is still all about 0:21:00.000 --> 0:21:02.080 at the FED. I appreciate that we got that insight. 0:21:02.720 --> 0:21:04.280 Thanks very much for joining us. I know we're going 0:21:04.320 --> 0:21:07.440 to have you back on the show very soon. Thanks Steph. 0:21:07.600 --> 0:21:16.680 Looking forward to it. So I'm joined now by someone 0:21:16.720 --> 0:21:19.600 who's also about to move from the US, Brendan Murray, 0:21:19.880 --> 0:21:23.200 who until recently was managing editor for the US economic 0:21:23.280 --> 0:21:26.320 coverage here at Bloomberg, but is now Our world trades 0:21:26.359 --> 0:21:29.360 are we've decided trade it become so important to Bloomberg 0:21:29.400 --> 0:21:31.240 we didn't just have to report it, but we needed 0:21:31.240 --> 0:21:35.680 to install an autocrat to keep the show on the road. So, Brendan, welcome. 0:21:36.000 --> 0:21:38.639 I wanted to chat to you partly to tell everyone 0:21:38.680 --> 0:21:41.159 that we have a global trades are now, but also 0:21:41.400 --> 0:21:43.920 because a news story out of Geneva caught my eye, 0:21:43.960 --> 0:21:46.840 which I don't say very often. It's the news that 0:21:46.880 --> 0:21:50.840 the World Trade Organization, based in Geneva has just published 0:21:50.840 --> 0:21:55.560 its first ruling on national security. Now, Brendan, this was 0:21:55.640 --> 0:21:58.959 about a trade dispute between Russia and Ukraine, which might 0:21:59.000 --> 0:22:01.399 be quite important for those two countries, but it's not 0:22:01.480 --> 0:22:03.440 necessarily going to be something the world has to pay 0:22:03.480 --> 0:22:05.879 attention to. Why did we make a bit of a 0:22:05.880 --> 0:22:08.760 fuss out of it here in Bloomberg. Well, this ruling 0:22:08.840 --> 0:22:12.800 is going to have bigger implications for the Trump administration's 0:22:12.880 --> 0:22:17.800 trade agenda around the world. Essentially, Trump is saying that 0:22:18.480 --> 0:22:22.400 the steel and aluminum tariffs that it is applying on 0:22:22.720 --> 0:22:25.639 a number of countries around the world are justified for 0:22:25.720 --> 0:22:28.760 national security reasons, so that this ruling out of the 0:22:28.920 --> 0:22:32.800 w t O will invite some disputes from from around 0:22:32.800 --> 0:22:36.760 the world, from countries like Canada, China, and EU. So 0:22:36.840 --> 0:22:39.679 he's always said so. The administration has always said w 0:22:39.760 --> 0:22:42.640 T shouldn't be getting itself involved in this, and in fact, 0:22:42.680 --> 0:22:44.280 even the w D has sort of said in the 0:22:44.280 --> 0:22:46.600 past they didn't particularly want to get involved in national 0:22:46.680 --> 0:22:49.400 security things. But if you look at the ruling itself, 0:22:49.600 --> 0:22:52.200 the w two seems to have said, yeah, Russia's claim 0:22:52.280 --> 0:22:55.440 of national security concerns was right in this case. I 0:22:55.480 --> 0:22:59.760 think they were. They were They've been putting restrictions on 0:23:00.160 --> 0:23:04.080 the goods going from Ukraine to other countries but through Russia, 0:23:04.600 --> 0:23:08.159 and because of the sort of conditions relations between Russia 0:23:08.160 --> 0:23:11.560 and Ukraine. Russia had said there's national security concerns, why 0:23:11.560 --> 0:23:13.359 I was doing this, And the w t O has 0:23:13.400 --> 0:23:16.159 agreed with that. So so why should the administration really 0:23:16.280 --> 0:23:18.000 worry about it? If it's going to be on on 0:23:18.040 --> 0:23:20.800 the Donald Trump's side, well, they should worry about it 0:23:20.840 --> 0:23:24.200 because they're probably on shakier ground calling the steel and 0:23:24.240 --> 0:23:28.080 aluminum tariffs justified for national security reasons. In the Russia 0:23:28.119 --> 0:23:30.960 and Ukraine case, there was an armed conflict going on 0:23:31.800 --> 0:23:36.800 when Russia installed these these restricted trade measures. The US 0:23:36.880 --> 0:23:40.280 UH doesn't have the same argument that there's an actual 0:23:40.280 --> 0:23:43.200 military conflict going on, that we need these tariffs for 0:23:43.320 --> 0:23:47.520 national security reasons. So the definition of of of trying 0:23:47.560 --> 0:23:49.879 to prove that these are needed for national security that 0:23:49.960 --> 0:23:53.280 the administration is probably hoping if there's a looser a 0:23:53.320 --> 0:23:56.960 looser definition of basically this could open up the floodgates 0:23:57.000 --> 0:23:59.679 to for other countries to say, oh, well, we have 0:23:59.840 --> 0:24:02.840 we have national security interests in in in maintaining our 0:24:02.880 --> 0:24:04.920 steel industries. And so you can you can see the 0:24:05.000 --> 0:24:08.520 sort of domino effect that that this could have. What 0:24:08.560 --> 0:24:10.640 about what's the timing on that? Do we think if 0:24:11.000 --> 0:24:13.200 I know that sometimes things take an awful long time 0:24:13.240 --> 0:24:15.520 to go through the w t O, but are we 0:24:15.560 --> 0:24:18.720 expecting a ruling on any of these things? Nothing? Nothing 0:24:18.720 --> 0:24:21.520 in the near term. That's that That's one of the 0:24:21.560 --> 0:24:24.680 potential outcomes of this particular case is that this could 0:24:24.680 --> 0:24:28.280 be appealed and and it could be tied up for years. Um, 0:24:28.320 --> 0:24:31.440 you know, that's probably what Donald Trump would be would 0:24:31.480 --> 0:24:34.800 be hoping happens if it does actually come to the 0:24:35.000 --> 0:24:38.040 ruling for national security against the US. Now, I feel 0:24:38.080 --> 0:24:40.360 kind of sorry for the World Weld Trade Organization. They're 0:24:40.359 --> 0:24:41.960 sort of damned if they do, and damned if they don't. 0:24:42.000 --> 0:24:45.040 If they don't get involved in these kind of issues, 0:24:45.080 --> 0:24:47.040 then you can imagine, as you say, more and more 0:24:47.080 --> 0:24:50.000 countries going around them and saying everything is a national 0:24:50.000 --> 0:24:52.800