Remaking Global Trade

so we're talking about trade I don't know about you but as an economist I've found I don't entirely agree with president Trump's economic theory of trade but I think his political theory of trade is maybe a little closer to the mark and the the global trading system that he sort of gone to war with or at least had a rhetorical war with over the last couple of years now I think we all know and maybe the audience know it has a lot of flaws and it certainly has a diminishing number of fans or so it often seems so I think it's important when we're thinking ahead and thinking of the the future landscape and how to make things better we're to recognize some of the areas that have been problems and that are problems and challenges for the multilateral rule-based system that many of us grew up to think was the best approach to global trade and that we heard a little bit about this morning so very quickly three I think other big challenges China you know in some ways China marks the the crowning achievement of the multilateral trading system if you look at China's entry to the global economy the global trading system over the last twenty years what that's achieved but it's also presented enormous challenges its sheer scale the sheer size of its labor force has caused adjustments and challenges which I think are only now being properly recognized and understood maybe to more than two million manufacturing jobs in the u.s. displaced by Chinese competition alone we're now estimating and it's top-down ambitious single-minded approach to economic development I think has also been has not followed the PlayBook should we say that many people had written for China when it entered the WTO that presents challenges will continue to present challenges if you look at the kind of ambitious targets that China has for the China 2525 agenda so China's something the multilateral system has not always dealt with well although in many ways it's so Bennet's achievement technology I think is now changing the economic landscape for trade in a way that will present challenges you've had ever more sophisticated global supply chains developing in the sort of first couple of decades of globalization but then technology is now changing the argument for those supply chains I think the days of the Spongebob Squarepants birthday cake baked in the UK sold in the UK but packaged in China are over those days did exist you knew that those cakes have been packaged in China because they were in boxes and they were each by 2027 we don't a lot of those supply chains within manufacturing are being unwound but we're also seeing technology expand the number of service sector industries that can be traded and I was struck the research that Bloomberg economics my economists at Bloomberg economics did was in your package for the forum one of the key facts in there is that all of the growth in the global labor force in the next 20 years it's going to be in skilled work not unskilled and most of that in emerging market economies not sure the multilateral trading system has so far shown it can cope with those growing service sector industries and finally obviously there's a political challenge coming out of all that we may have had albeit grudging political support for free trade over these last couple of decades that's clearly not there now it certainly can't be relied upon and there's big challenges coming so we're gonna fix all that in the next 30 minutes or so and we have with MasterCard and FedEx we have two of the Titans of those global services industries but we also have the practitioners of global trade here Ailish I'm going to put you on the spot because you said to me when we were meeting earlier I come from the future I come to tell you that things are not so bad so if we're thinking about saving the WTO or saving the global trading system is that the right way to put it you know where do we start where do you think is the best way forward sure well we were joking in the green room I was saying I'm here from the future to tell you that absolutely there is a better way forward and a deal can be done in many deals will get done our experience in Canada negotiating the u.s. MCA the trade agreement formerly known as NAFTA tells me one critical message for the business audience that is here and that is you know there's an incredible amount of volatility in politics just as their husband in the markets but keep your eye on the trend line and the trend line is at the end of the day that we did a very effective deal with the United States and I do believe that there are deals to be done for the benefit of the multilateral trading system as well so my second piece of advice is that all of us business and political leaders have to recommit to the multilateral trading system I won't go so far as to say I don't agree with the argument that that some have put forward that people are and nations have been Free Riders but I think we've been complacent and so I would really call on everyone in this room and I was very buoyed by the conversations this morning from the Chinese leadership and from the import-export Expo by President gee that China will recommit and become incredibly engaged and we will we will need all actors to recommit it's a it's a it's a governance renewal at the multilateral level and nothing less and the last thing I just want to share I think which really resonated with me from your opening video that Michael Bloomberg presented to us this morning is that we have to give people hope Prime Minister Justin Trudeau always says one thing and I'm a recovering trade negotiator myself I'm very comfortable with data I'm very comfortable in a negotiating room and the Prime Minister is always demanding to us as his officials make this real for people show me how this matters to entrepreneurs show me how this matters to inclusion so that more small and medium-sized enterprises see them selves visibly even if they're not the final exporter of record they are exporters in the supply chain process as part of creating dynamic services which matter more and more to the final products so my last message would be ladder down we've we've we've pursued a lot of politics and policies over the last 20 years that I think have been about lifting the ladder and being quite I think perhaps content to think that market forces will take care of everything let's not leave trade alone let's recommit to inclusive growth and for all of us ask how you can put the ladder down in your organization to lift other people up and include them in what you're working on okay I want to get in a minute one of the key goals of the panel is to think about how businesses can can contribute to this agenda and certainly think more about inclusion but just going to you Peter Madison Lord Madison just on this on the trading system itself is it possible I mean you have been a great friend of China and have worked closely on business ties with China when the dust settles from all the battles and and rhetoric from President Trump is it possible that we will end up in a better place God you are you're trying to be very optimistic here trihard trihard look as much as he would like to and his boycotting the WTO and taking apart its dispute settlement machinery by blocking the appointment of new judges to operate this settlement machinery in the WTO I wouldn't say that the WTO is doomed not yet but it is certainly at a very very serious crossroads that that's true it is drifting badly as an organization it risks collapse but it has not reached that point and that's why it's very important to double down and recommit to the multilateral trade system which the WTO embodies supports polices and runs to the best of its ability because every free trade agreement that you make is frankly second best to a multilateral trade agreement in the benefits that it creates the opening up of markets but also the fairer distribution of the benefits from those markets will come much more effectively from a multilateral trade agreement with its universal and global coverage than any free trade agreement would be able to do but we have to face the reality about the trading system and the WTO the first is that we are seeing a fraying consensus of public opinion which has hitherto supported it and that fraying consensus comes as a result of a loss of faith or not of calmness of confidence amongst people in the benefits of trade liberalisation know they see globalization and the huge restructuring of global supply chains and the impact that is having on production and people's jobs and place particularly but not only in the West we're seeing a process of deindustrialization among in many many countries particularly advanced developed countries where the movement towards services in a way from manufacturing is having a huge impact on the on the labor market and of course now we have seen the emergence of AI and robotics which in turn is having a third tertiary impact on how people earn their living and the sorts of jobs they do and people's fear is that the trade system they lay an enormous amount wrongly at my view at the foot of trade policy in the trade system their view is that this is a sort of you know non inclusive process which yes is growing the global economic pie and in that sense economics is doing its job but politics is failing to divide up that pie and to distribute the benefits in the way people expect and that's why people are turning against trade turning against globalization in in in the West they just feel they're not getting their fair share of the pie early enough and therefore we've got to address not only you know the sort of practical physical operation of of the international trading system rebuild and replenish confidence in in the WTO and we can come back to how we do that but we have a major political job a major political challenge on our hands too politics has got to work much better if we're going to recreate what I have what I describe is that fraying consensus amongst people in favor of trade liberalisation RJ Bongo I mean we we talk about how can businesses be more part of this agenda but you know part of the problem part of the political problem is that people feel businesses have been too much center frame when it comes to trade negotiations that these deals have all been done the ones that have been done it's been a long time since the WTO managed one but the ones that have been done have been done with multinational companies in mind and not people how can things need to change to combat the perception because it's not entirely wrong perception well I think that most companies in the last four or five years and their leadership through a series of things not just trade but the revolution in social media the social issues people are facing most companies are beginning to think about their role as being more than merely to figure out a way to advantage themselves through one agreement or another agreement and I think it shows up in many different ways and the public dialogue has yet to completely recognize that change in some ways but I would tell you that if he don't participate his companies in driving against this issue of exclusion that's the result that people attach to trade even though I would say as Peter said technology actually could well have contributed to some of that that exclusion and it's therefore not just trade but you've got to fight it so what am i what am I talking about my view is that everything ranging from if you look at a company like ours everything ranging from our commitment to Financial Inclusion we four or five years ago with the World Bank in the IMF said we will reach five hundred million people out of the two billion in the world who currently don't have a way to receive send or save money or get access to insurance we will reach them by 2020 when I said it I myself they don't have a clear plan of action to get to 2020 and I had a few people in my company who thought that their master boss had gone nuts which is probably correct however we've reached three hundred and sixty million people as we accounting and I think we can reach the 500 by 2020 so my view is working with governments working with telecom companies working with data companies working with banks and Merchants we found our way to make that happen that's one example I don't make much money out of it I lose money more or less on every single individual who gets connected but the fact is if I can connect them to an electronic payment system of some type to receive money to save money to get insurance I reduce the role of cash in the economy and reducing the role of cash and the economy is in my best interest so the trick here is to use private sector capital ingenuity technology in a way that allows us to do well in our company what suits our company and our shareholders but also do good at the same time if you align those two interests we can find a way to get the right public-private partnerships and private private partnerships to take on what I think is a very large issue the issue we are discussing so that's one example I can give you another example with you we've got a whole effort in Kimia where we go to small merchants who basically are out of the financial system but every week they buy product from Unilever Unilever knows how much product that merchant is buying and therefore if you were to digitize that record and you ask them to start accepting payments through a phone or a fingerprint or an eyeball whatever works sends for you and you then get the input and output of that merchant digitized you can use data to make credit scoring systems that make it much better for a bank to lend money to them we've reached 20,000 merchants the course of a few months they Unilever sales are up 20% the banks are getting paid the government's happy they're happy there are ways to do well and do good at the same time if leadership and Gov in companies is willing to recognize that our ingenuity and our capital can make a difference for the picture that's kind of sets of examples that I'm trying to work my way through nothing I'm saying takes away from the issues of the WTO or multilateral trade verses 50 years we can talk about that as well because I believe companies need to engage on that topic as much as they're engaging on this idea of doing well and doing good at the same time we cannot operate in our little space that space does not exist in its old parameters any longer you have to go on both sides of that is given us good examples of companies working and tried to submit support inclusion particularly in the developing economies but of course you know one of the things that's happened and Donald Trump has kind of put a spotlight on is the discontent in advanced economies like the US and we risk of going to a system which is not about the least well-off anymore when it comes to trade it's about single countries and the u.s. the law of the jungle as it was referred to yesterday how does a how does FedEx how does a big company try and combat that in a country like the US well of course most of the people at the political level including the president are talking about things you know from a theoretical standpoint we're down talking about them at the granular standpoint as we sit here and talk FedEx is moving millions and millions and millions and millions and millions of shipments around the world so we're we're watching a plebiscite or a referendum every day on the economy it's not something that you know we read about so the president's views on trade are quite rare he he he believes that trade deficits are a loss yeah I'm not sure they are rare in the world well perhaps but but I think there's a general consensus among mainstream economists that open trade and zero subsidies and and zero trade non non-tariff barriers is a good thing I mean I the United States of America became the rich country that it is for a very simple reason the Commerce Clause and so you could be having the same conversation in 1890 about textile mills leaving New Hampshire in Massachusetts and going to South Carolina it's just the law let this Schumpeterian readjustment take place so beginning in 34 with Roosevelt and and Cordell Hull there was a general consensus that open markets getting as close to zero tariffs zero trade barriers zero subsidies like the Commerce Clause permitted in the United States the UK obviously with the famous corn laws in the 19th century and that was the general consensus and so over the last 15 or 20 years it's broken down first because of of China's activities and then Trump seizing on that and 70,000 factories you mentioned 2 million US manufacturing jobs lost 80% the jobs lost in the United States being lost because of technology not because of not because of trade so I think the the issue here is are the benefits global trade which has lifted hundreds of millions of people out of poverty in which we're watching everyday down at the individual level will prevail or whether the mercantilism and the nationalism and all of the things that are so much in the news will prevail I'm an optimist I think people have an innate desire to travel and trade I think that these activities going on at the micro level overwhelm eventually the political resistance and I think you'll see that in China I think you'll you'll see China become much more open I was struck by Vice President Wong comment today I don't remember the exact term but I'm paraphrasing him it was something like the magic of the market you remember the phrase I'm talking about that's a pretty astounding statement from the vice president of the socialist government so I think there's a general consensus that markets are what should decide the economic activity and the rest is just a negotiation whether it's multilateral or or bilateral and the real test is going to come up November the 20th down in Buenos Aires whether President Xi and President Trump can make a transactional deal or whether the ideology of summit Trump's advisors prevail finish yeah I mean this sort of represents what might a bit of you maybe some would say it with a complete view to say that we that the sub overall support for free trade would would prevail do you think we have to be a bit more so I just want to say I mean it's a perfectly rational view and it's one that I share let's just look at the numbers though of Americans who when polled do they support free trade and that that number has been going down and it is less than 50 percent how do we increase that number I think there's a couple of really important issues that Canada has been working on because we want to create a you know I like your point about the market efficiency piece but we're also looking to create a sustainable society the u.s. spends one-fifth of the average of advanced economy on retraining displaced workers so yes it may be that technology is responsible for the vast majority of that dislocation that's not a good enough explanation no matter what the explanation for the dislocation is we can't leave people on the sidelines secondly I would draw a direct correlation from the global financial crisis to the concerns with trade today I mean people lost the most important thing in advanced economies to many of their to their asset base in their future and that was their house and people want to know that there is a way back into a stable future for themselves and their families and the last piece is education we spend I think too little on early childhood education in the advanced economies and I'll just speak of North America but we should be looking and education is of course a huge preoccupation for the sustainable development goals and a lot of the work in in developing economies so I mean I think of course you know FedEx I love your point there's a referendum going on every day and but never never underestimate I think people's ability to disassociate what they consume from what their politics is on trade and we have to start talking about that in order I think to rediscover that kind of policy and engagement and I I really take your point I think this is something that CEOs one of the best things I recommend to CEOs convene if you will a mutual mentoring group with your own employees the the men and women from the top to the bottom of your organization invite them for breakfast at least twice a year and if they're not convinced about your case for trade then you still have work to do Stephanie I think that we're sort of in danger of reaching us of consensus on this panel in danger of in this sense you know the single greatest achievement of progressive politics in the twentieth century certainly you know thinking of my own country in Europe was to build a society in which the individual risks created by market economics could be managed by social welfare and health insurance that's essentially the great sort of policy achievement of the 20th century and I think that what we've got to do now in the 21st century is basically we need to do the same for globalization just as we did you know for the emergence of capitalism in the last century to make its costs bearable for individuals and to share the benefits of globalization more transparently and and more fairly across society now I think that's a good starting point I mean in a sense I would say that wouldn't I because you know I'm a Social Democrat and that's where my politics are but unless unless we approach policymaking in that sense I don't think we're going to be able to repair successfully that consensus we need in the world to underpin the process of trade of open markets and of globalization we're not going to be able to sustain that sort of fleet of foot that we need unless we are going to manage better the impact of those adjustments on individuals I want to get Fred back in a minute and add a bit if you looked at you know we had we heard from Fred to kind of a us what would you might call a characteristically American way of viewing this and talking about Schumpeter and the fact that workers would inevitably move and cross borders and other things but if you thought you know how are we going to have more inclusion how are we going to have support that you've just talked about how would you make the US for example more supportive of training workers you would probably be talking about making it more like Europe if you actually look at Europe we tend to think Europe's quite good at having social partnerships at having welfare systems and say there's another problem and yet you look at the populism trade there's another problem here and that is that this borderless world that we're that we're talking about and have done so much to create and that fred has described quite rightly has sparked a back - no for fought fought for the globalizers like us and you know probably in this room you know globalization spells opportunity for many others the borderless Ness of globalization represents a threat you know it's somebody coming to eat your lunch it's coming somebody coming from another country freely across a border in order to take your job now this is sparking a cultural and an identity political backlash and an Malstrom but which we have got which we have got to address as intelligently and sensitively as we have done the economic and social policy aspects you know the issues of identity are not simply going to be addressed by fairer distribution that in my view is that necessary but insufficient condition for dealing with these wider cultural issues and we in the mainstream of politics I'm afraid have our failing to understand to come to terms and to address these issues in the way that we need to do you want to come back on any of that some of the places a listen and well I completely agree that that the that there have been a lot of people left behind because of globalization and the key is to provide a pathway for those people to to get employment but in the United States that is happening at a very rapid clip but not at the governmental level the way Europe has done it in our state of Tennessee we're the first state in the Union to make Community College free so we've in essence gone from 12 years public education to 14 to allow this kind of skills training that's going to be required for the jobs of the future secondly we as a corporation of putting millions of dollars into training aircraft maintenance technicians we're even now providing scholarships for people to become pilots because the military is not going to produce them so if you have a high growth rate if you've got good physical in tax policies in an advanced society I'm not sure that the solution is at the governmental level and I'd argue that Europe's a pretty good pretty good argument against it because Europe's growth rates now are so low because of the the Scot ik h er of some of these policies we'll see but I be interested in and what you're doing in mastercard but we're putting millions of dollars into retraining people and trying to to get the workers of the future and have you found that you found such ways to compensate the losers from doing things that work yeah look i that's what i was trying to say the beginning i think the world is changing very quickly in fact we don't were trade but technology look at what AI and robotics will do to jobs look at what driverless vehicles will do to the nature of work i'm not saying you should be scared of that technology having you should embrace it because of all the good things it brings but we've got to figure out it's gonna impact our societies and so all of us politicians trade negotiators ceos and others you've got to work to the idea that we've got to put our shoulder to the wheel through our own methods i'm a little bit fred is that i think government's role should be to help provide broad guidelines and principles and the right supportive environment but CEOs and companies need to step up and make a difference because it's in our own self-interest the reason he's doing that aspect of our training pilots is not because he suddenly woke up in the morning and got hit by an epiphany that his future depends on you know recruiting and training three more pilots it's because without them fedex cannot fly and so making doing well and doing good become a part of your natural cultural system because it's in your own self-interest is the best way to get corporate technology investment dollars and business models working on what I consider to be big problems that are way too big for government funding to solve the problem of the European system is government funding runs dry when Social Welfare and health care need to be funded by one source it becomes a high tax high payout system it creates inefficiencies it creates what is called leakage in the NGO world which I call theft and the best way to get out of all that is to allow government to play its natural role create the guidelines create the space allow private entrepreneurship to go at it full tilt because it's in our self-interest that combination is the combination that I'm a believer in that's what we are doing that's what Fred so that's what I'm getting to I think remaking global trades is an interesting topic but actually it's about remaking where our society is going because of trade and technology and that's a freight train that's coming our way it's not a light at the end of the tunnel it's a train coming our way I agree so much with that but if we're going to remake global trade we don't just have to remake the sort of political consensus that underpins it we have to remake the institution that runs it the WTO let's be absolutely clear amongst us that the WTO has almost become too big to avoid failing and I don't just mean too big in size I mean it is struggling very very hard indeed to accommodate the different interests reflected in the different sizes of economy levels of development and and openness of those economies but also the different sorts of economy that you now see represented in the WTO you know on a spectrum from the very market-based to the very state backed and led and this is the big challenge for the WTO it's to remake not just its ethos but above all to start rebuilding its rulebook to reflect that very very different pattern oh and large scale membership that it has within it right we're gonna run out of time but I think we should have a final last word because I think you know one thing that the Donald Trump has achieved I think is to demonstrate to everybody who has a stake in this system that if we don't do this better the pie could well shrink we're already seeing losses that are unnecessary losses and we can say irrational losses from the from trade wars and from this language but it will continue if we don't manage to get through some of these challenges so if you want if we want to be in a better place in the 5 or 10 years time on trade and not on what feels like quite a negative trajectory now quickly from each of you you know what is the one thing that puts us in a better place that is not just business as usual I think engagement on this entire policy debate on reforming the WTO those of us who sit outside and let somebody else discuss it we will be all be losers gotta engage in that while doing well and doing good in your company at the same time I I just believe without that you don't deserve to be in the kind of jobs that we are lucky enough to be in ok try to move to a zero tariff zero subsidies zero non-tariff barrier world that's the proven formula for success everything that at the political level that works against that is a net drag and so I don't think you can you can argue with the with the history of the positives so I'm trying to make that the ideal and it should be enforced obviously by some sort of multilateral organization like the WTO yeah I think that each of us you know can't be complacent and certainly I'll say there's one other fire that's been lit here and that is real questions around reciprocity and we should just start having really honest conversations about what it's going to take I think the WTO in terms of governance has brought us as far as it can it's too important to fail so what are we gonna do about alternative dispute settlement engaging like Canada has in plurilateral agreements where we can do them and that last piece of having conversations about the behind the borders issues frankly around competition and subsidies that are some of the leftover issues and like I said I know that there is a there's a way forward together I congratulate Canada for taking the initiative at the end of October with the EU and Japan about thirteen reform-minded nations in the WTO met to talk about how the WTO can be repaired but that overhaul of the WTO will will not happen it will not succeed without China it's completely committing to it the reason why China opposes such a huge challenge to the international trade system it's partly obviously because of the size of its economy it's like a juggernaut almost running out of control in the international trading system but the scale and penetration of its industrial policies the issues to do with intellectual property protection the issue of subsidies I'm not saying that I'm not condemning China for pursuing these policies all I'm saying is that to enable the international trading system and the WTO news rules to come to terms with and accommodate such a state-led economy of the sort that we're seeing in China China has to do very very much more than it is in taking the initiative and exercising that responsibility and stepping up to the plate in helping everyone else lead a reform process in the WTO if we don't see China doing that then you're going to see more and more trumpian rhetoric and disaster norm Anderson commissioner Campbell Fred Smith RG Vanga thank you very much

Channel: Bloomberg Television

Views: 7,816

Keywords: Bloomberg

Id: WDpxdrD2zTQ

Length: 36min 51sec (2211 seconds)

Published: Tue Nov 06 2018