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Welcome to HSBC Global Viewpoint, the podcast series that brings together business leaders and industry experts to explore the latest global insights, trends, and opportunities.
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Make sure you're subscribed to stay up to date with new episodes.
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Thanks for listening, and now on to today's show.
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Hello, my name is Fred Newman.
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I'm the Chief Asia Economist at HSBC and co-head of the Global Investment Research Department in Asia.
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Now, we have a special episode for you of the Global Viewpoint podcast, and we're delighted to have Dimitri Grosubinski with us, the founder of the Explained Trade Consultancy based in Geneva.
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Dimitri, thank you very much for joining us.
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Thank you so much for having me.
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Now, the recording is taking place at the HSBC International Day in Singapore, where trade was really at the forefront of the discussions.
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Many companies, of course, having questions about tariffs and trade and the future of globalization.
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So it's a very opportune discussion.
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to have Dimitri with us today to answer some of the questions that were posed at this conference today.
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I want to take it right from the top.
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Now you published recently a book with the title Why Politicians Lie About Trade and What You Need to Know About It.
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A bit of a challenging title there.
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You're telling us that politicians are not always straight when it comes to trade.
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What do you mean by this?
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Well, let me confess that title is a little bit clickbaity, but fundamentally, I think that what we are seeing all over the world is politicians facing challenges in their economies and faced with hard choices are looking for ways and policy prescriptions that they can present as not being choices at all, or at least being choices between domestic and foreign interests.
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And the way they're doing that is through trade policy.
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They're looking for solutions at the border and behind the border to challenges like growth, like employment, like inflation.
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And they're presenting these solutions as being something that will only hurt foreigners.
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And so,
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And I think that's pernicious.
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I think that's taking away from people the ability to realistically assess some of the political views being put forward.
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And I wanted to write something to help people understand the way that trade connects to the things that they genuinely care about, whether that's economics, whether that's the environment, national security, or jobs.
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Now, give us an example of why the average person on the street really care about trade.
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A lot of people saying, look, my job, I might lose my job, maybe to a foreign competitor.
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But by and large, who benefits from trade in a domestic economy?
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And these voices heard.
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Look, I think day to day most people shouldn't care about trade particularly in the same way that they shouldn't care about the electricity grid.
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Provided it's working, provided when goods arrive on the shelves, provided there's good competition to make sure that those goods keep getting better and more competitive in price, the average person can well tune out the details of the international trading system and what's happening at the World Trade Organization.
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When I think it becomes significant is when trade becomes part of the global discussion on the things that do affect people's lives.
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So you offered the example there of jobs.
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There are a whole bunch of reasons we are seeing forms of some traditional employment.
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So for example, manufacturing labor for those without a college degree has been under strain for a long time.
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And there are a lot of reasons behind that, a lot of factors driving that.
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When people should start to care about trade is when someone turns around and says, ah, this is exclusively because of trade, and the solution lies through trade policy.
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At that point, these messages are touching people's lives, and it's worth tuning in because there's a good chance the wall might be being pulled over people's eyes.
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So you're saying it does touch everybody's lives, everyday lives.
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We tend to think of this being very abstract and it's happening in Geneva, trade negotiations, but really touches every individual business and individual person on the street.
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Even if they're not really engaged in trade, it still touches people's lives.
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But help me understand what's changed in discussion, because for many decades politicians do,
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did succeed in reducing trade barriers.
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And recently, we've seen the opposite happening.
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So what changed in the conversation?
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It's a really great question.
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I think one of the reasons that most people tune trade policy out was because of kind of the direction of travel.
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The way trade policy ended up playing out over the last sort of half century or more is that countries very quickly, or I should say in a couple of big steps, liberalized pretty much as much as they were willing to.
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They lowered tariffs, they removed regulations.
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And then the conversation in trade policy began...
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from there.
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So they liberalized 90% of the way.
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They left 10% of barriers in place in the most politically sensitive areas, protecting, say, Japanese rice producers.
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The discussion when we talked about free trade agreements or negotiated in Geneva was, okay, we went 90% of the way there, can we get another couple of percent?
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For most people, that doesn't really affect their lives too much.
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We're talking about individual sectors that might have been liberalized.
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We're now seeing a rollback of that.
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So instead of discussions around, we've liberalized 90% of the way, can we get to 93%, we are seeing discussions of, we've liberalized 90% of the way, we're going to roll that back to 80 or 60.
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And that means disrupting existing business operations, not merely creating the possibility of future trade, new market access.
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You're talking about business and supply chains that existed,
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and you're talking about putting in place new barriers.
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That's exponentially more urgent and more pressing and revitalizes sort of interest, and that's why you're seeing it on the front page.
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Now, sort of the second part of your question is, why is that happening?
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And I think fundamentally what is happening is that major players, and this isn't US-specific, though the US is obviously at the tip of this spear, are no longer comfortable with the fundamental trade-off of the rules-based system, which was giving away a lot of their policy agility, their ability to tinker with borders on a day-to-day basis in exchange for the stability and the predictability investors needed to make long-term investments.
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Now that other issues like national security, like the need for economic reform to tackle unemployment, like environment, are rising to the fore of policymaker minds, they're saying we need more of that agility back, and we're willing to sacrifice some predictability and stability to do that.
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And that's what's driving these changes, I think.
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Now, you're talking about the fact that what politicians don't tell you, but it seems to be working for politicians in some countries because, obviously, the electorate speaks and votes and seems to be demanding, at least indirectly, perhaps some form of trade protection.
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Is that the right reading?
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Do we need to have a campaign that kind of clarifies the benefits of trade?
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What's really needed in order to kind of change the conversation to a direction of having more trade liberalization rather than more trade protectionism?
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I wish this were simply a messaging problem, or at least a solvable messaging problem.
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The fact is that protectionist rhetoric, this idea of the way we're going to revitalize growth at home and create jobs at home, is by shutting out foreign goods or foreign services.
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This has always been a politically resonant message, because in politics, the messages that are the most dangerous are the ones that common sense would say are true,
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and really require a lot of deeper analysis to figure out why they are not.
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And intuitively, if you lock out foreign goods and there's still demand at home, someone is going to build factories and create businesses to meet that demand.
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So it's a compelling argument.
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And the counter argument, the challenge with explaining why that's not true, requires 40 minutes sort of slideshows and visual aids to even begin to explain to people.
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Moreover, there's always been a challenge with trade that the benefits are diffuse while the pain is targeted.
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Something that economists used to say that drives me insane is the idea that trade has no losers.
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Well, probably a lot of things that economists think drive you insane.
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The trick is not to listen to them.
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But one of the things it is is this idea that trade has no losers.
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And sort of maybe that's true on the most macro level, but in practice it does.
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You know, if you buy from one factory and not from another factory, then you and one of the factories have won.
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But the second factory has indeed lost.
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And the fact is, when a factory closes, that is acute pain for that factory and its community.
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Whereas the benefits of better value goods, more competition, or even more competitiveness because of better inputs.
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Is there not hope that maybe we can avoid some of the mistakes in the future, like in the 1920s and 30s when trade barriers went up?
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Really, the historical experience is that that's not necessarily beneficial for the global economy.
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Is there hope here that maybe globalization can prevail, that this is just a temporary blip what we're experiencing now?
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Or do you think we have to go through more of a realization of the downsides of protectionism?
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I think the feedback mechanisms in our systems are a lot faster now than they were in the 1930s.
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We have better data.
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Our economies are more responsive to signals.
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And therefore, what's currently happening may be self-correcting.
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as well as preventing a spread of the contagion, as it were.
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The challenge in the 1930s is that the tariffs weren't confined to just one or two players.
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You saw a number of major actors start going down this route.
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And I think at the moment...
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The systems that we have, as well as sort of the instant information environment, means that even if we do to some extent have to repeat some of the mistakes of the past in order to learn our lessons, we're able to potentially learn those lessons a lot faster and correct them a lot more quickly, as well as not necessarily replicating them in 166 economies or 192 economies,
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rather than watching one economy attempt it, see what happens there, and perhaps learning some lessons preemptively.
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The other issue, of course, is how do we define globalization?
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And we see protectionism being on the rise when it comes to goods trade, for example.
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But there's other areas like services trade, for example, which we're not really trading yet, and that's starting to rise and become an increasing part of traded economic activity.
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Do you see a similar anti-trade
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trade backlash in services, or is this largely confined to goods at the moment?
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And would that mean that globalization is just transforming rather than being rolled back?
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So this is something that keeps me up at night a little bit, because if you look at what is happening now in services, we are seeing for the first time traditionally white-collar jobs, which were in many ways immune from both automation and from competition from abroad.
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are for the first time facing quite intense competition.
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You can now have your payroll department for a North American company be sitting overseas.
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And that is jobs for accountants and sort of HR professionals that are now sitting overseas.
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So you're having an entire new class of worker that is for the first time in human history exposed to competition from abroad.
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And at the same time, because of the rise of AI and other electronic systems, facing challenges from automation the way they didn't before.
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Now, at the moment, we haven't seen a huge rush to put in place new barriers to prevent that.
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But governments absolutely have the tools to do that.
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through regulations on where data is stored, how it moves, what part of certain processes must legally be done by, for example, citizens or onshore.
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Governments have measures to prevent it.
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One of the reasons I think it maybe hasn't happened yet is that the US is a massive services exporter.
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And for the same reason that, you know, probably Saudi Arabia isn't going to be the first one to suggest a massive global tax on oil, for the same reason the U.S. has pretty strong incentives not to be the first one to go, hey, we've got a brand new battlefield in trade policy, its services.
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So I think that's what's holding it back.
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But I do think there are going to be structural forces in our economy that potentially make it tempting to,
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to put in place some barriers to what are currently really lucrative services exports.
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So rising restrictions on services trade is keeping Dimitri up at night.
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What makes you look forward to what gives you hope that maybe, you know, this era that we see in the post-war era of increasing global production,
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corporation, integration, that that actually may hold.
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There must be something that gives you a bit of hope that we're going to stay on the right track.
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Yes, a number of things give me hope.
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In a really practical way, I think the energy revolution, the absolutely stratospheric rise of renewables is massively encouraging.
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And the fact that that does not appear to be slowing down despite sort of all of the hurdles thrown in its way, despite fluctuating political will in major economies, if we can't solve the renewable energy sort of challenge,
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we really don't have a future and it looks like we might be able to do it.
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And that's hugely encouraging.
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But more broadly from a policy perspective, I think in a lot of ways governments may be learning the right lessons.
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For example, I think the Chinese government has just taken a massive step in the World Trade Organization where it said, we will no longer take advantage or benefit from special and differential treatment in future agreements.
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This is something they are entitled to under the rules.
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It has been a massive bugbear in negotiations.
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And China, very much as a symbol of its reinvestment in the multilateral system, has taken this big symbolic step.
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So you are seeing countries look around and say, we're really not enjoying this chaos.
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Investment is frozen.
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There's no certainty.
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We have no idea what to tell our companies.
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And numbers are going to start trending down.
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We need to rebuild as much of this certainty as we possibly can.
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And I think a lot of governments worldwide are learning the right lessons.
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Well, thank you very much, Dimitri.
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And thank you, ladies and gentlemen, for joining us for this special edition of the Global Viewpoint podcast, a conversation with Dimitri Kruzobinski, the founder of the Explained Trade Consultancy based in Geneva and author of the book, Why Politicians Lie About Trade.
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Okay.
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We hope you enjoyed this podcast, and please don't forget to subscribe to the HSBC Global Viewpoint podcast, and we hope that you join us again on the next episode.
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Thank you for joining us at HSBC Global Viewpoint.
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We hope you enjoyed the discussion.
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Make sure you're subscribed to stay up to date with new episodes.
1
00:00:01.067 --> 00:00:11.962
Welcome to HSBC Global Viewpoint, the podcast series that brings together business leaders and industry experts to explore the latest global insights, trends, and opportunities.
2
00:00:12.763 --> 00:00:15.326
Make sure you're subscribed to stay up to date with new episodes.
3
00:00:15.687 --> 00:00:17.850
Thanks for listening, and now on to today's show.
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00:00:22.832 --> 00:00:24.033
Hello, my name is Fred Newman.
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00:00:24.073 --> 00:00:31.177
I'm the Chief Asia Economist at HSBC and co-head of the Global Investment Research Department in Asia.
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00:00:31.658 --> 00:00:44.746
Now, we have a special episode for you of the Global Viewpoint podcast, and we're delighted to have Dimitri Grosubinski with us, the founder of the Explained Trade Consultancy based in Geneva.
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Dimitri, thank you very much for joining us.
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Thank you so much for having me.
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Now, the recording is taking place at the HSBC International Day in Singapore, where trade was really at the forefront of the discussions.
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Many companies, of course, having questions about tariffs and trade and the future of globalization.
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So it's a very opportune discussion.
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to have Dimitri with us today to answer some of the questions that were posed at this conference today.
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I want to take it right from the top.
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Now you published recently a book with the title Why Politicians Lie About Trade and What You Need to Know About It.
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A bit of a challenging title there.
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You're telling us that politicians are not always straight when it comes to trade.
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What do you mean by this?
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Well, let me confess that title is a little bit clickbaity, but fundamentally, I think that what we are seeing all over the world is politicians facing challenges in their economies and faced with hard choices are looking for ways and policy prescriptions that they can present as not being choices at all, or at least being choices between domestic and foreign interests.
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And the way they're doing that is through trade policy.
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They're looking for solutions at the border and behind the border to challenges like growth, like employment, like inflation.
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And they're presenting these solutions as being something that will only hurt foreigners.
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And so,
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And I think that's pernicious.
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I think that's taking away from people the ability to realistically assess some of the political views being put forward.
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And I wanted to write something to help people understand the way that trade connects to the things that they genuinely care about, whether that's economics, whether that's the environment, national security, or jobs.
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Now, give us an example of why the average person on the street really care about trade.
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A lot of people saying, look, my job, I might lose my job, maybe to a foreign competitor.
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But by and large, who benefits from trade in a domestic economy?
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And these voices heard.
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Look, I think day to day most people shouldn't care about trade particularly in the same way that they shouldn't care about the electricity grid.
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Provided it's working, provided when goods arrive on the shelves, provided there's good competition to make sure that those goods keep getting better and more competitive in price, the average person can well tune out the details of the international trading system and what's happening at the World Trade Organization.
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When I think it becomes significant is when trade becomes part of the global discussion on the things that do affect people's lives.
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So you offered the example there of jobs.
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There are a whole bunch of reasons we are seeing forms of some traditional employment.
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So for example, manufacturing labor for those without a college degree has been under strain for a long time.
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And there are a lot of reasons behind that, a lot of factors driving that.
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When people should start to care about trade is when someone turns around and says, ah, this is exclusively because of trade, and the solution lies through trade policy.
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At that point, these messages are touching people's lives, and it's worth tuning in because there's a good chance the wall might be being pulled over people's eyes.
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So you're saying it does touch everybody's lives, everyday lives.
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We tend to think of this being very abstract and it's happening in Geneva, trade negotiations, but really touches every individual business and individual person on the street.
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Even if they're not really engaged in trade, it still touches people's lives.
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But help me understand what's changed in discussion, because for many decades politicians do,
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did succeed in reducing trade barriers.
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And recently, we've seen the opposite happening.
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So what changed in the conversation?
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It's a really great question.
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I think one of the reasons that most people tune trade policy out was because of kind of the direction of travel.
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The way trade policy ended up playing out over the last sort of half century or more is that countries very quickly, or I should say in a couple of big steps, liberalized pretty much as much as they were willing to.
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They lowered tariffs, they removed regulations.
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And then the conversation in trade policy began...
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from there.
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So they liberalized 90% of the way.
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They left 10% of barriers in place in the most politically sensitive areas, protecting, say, Japanese rice producers.
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The discussion when we talked about free trade agreements or negotiated in Geneva was, okay, we went 90% of the way there, can we get another couple of percent?
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For most people, that doesn't really affect their lives too much.
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We're talking about individual sectors that might have been liberalized.
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We're now seeing a rollback of that.
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So instead of discussions around, we've liberalized 90% of the way, can we get to 93%, we are seeing discussions of, we've liberalized 90% of the way, we're going to roll that back to 80 or 60.
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And that means disrupting existing business operations, not merely creating the possibility of future trade, new market access.
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You're talking about business and supply chains that existed,
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and you're talking about putting in place new barriers.
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That's exponentially more urgent and more pressing and revitalizes sort of interest, and that's why you're seeing it on the front page.
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Now, sort of the second part of your question is, why is that happening?
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And I think fundamentally what is happening is that major players, and this isn't US-specific, though the US is obviously at the tip of this spear, are no longer comfortable with the fundamental trade-off of the rules-based system, which was giving away a lot of their policy agility, their ability to tinker with borders on a day-to-day basis in exchange for the stability and the predictability investors needed to make long-term investments.
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Now that other issues like national security, like the need for economic reform to tackle unemployment, like environment, are rising to the fore of policymaker minds, they're saying we need more of that agility back, and we're willing to sacrifice some predictability and stability to do that.
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And that's what's driving these changes, I think.
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Now, you're talking about the fact that what politicians don't tell you, but it seems to be working for politicians in some countries because, obviously, the electorate speaks and votes and seems to be demanding, at least indirectly, perhaps some form of trade protection.
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Is that the right reading?
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Do we need to have a campaign that kind of clarifies the benefits of trade?
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What's really needed in order to kind of change the conversation to a direction of having more trade liberalization rather than more trade protectionism?
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I wish this were simply a messaging problem, or at least a solvable messaging problem.
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The fact is that protectionist rhetoric, this idea of the way we're going to revitalize growth at home and create jobs at home, is by shutting out foreign goods or foreign services.
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This has always been a politically resonant message, because in politics, the messages that are the most dangerous are the ones that common sense would say are true,
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and really require a lot of deeper analysis to figure out why they are not.
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And intuitively, if you lock out foreign goods and there's still demand at home, someone is going to build factories and create businesses to meet that demand.
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So it's a compelling argument.
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And the counter argument, the challenge with explaining why that's not true, requires 40 minutes sort of slideshows and visual aids to even begin to explain to people.
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Moreover, there's always been a challenge with trade that the benefits are diffuse while the pain is targeted.
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Something that economists used to say that drives me insane is the idea that trade has no losers.
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Well, probably a lot of things that economists think drive you insane.
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The trick is not to listen to them.
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But one of the things it is is this idea that trade has no losers.
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And sort of maybe that's true on the most macro level, but in practice it does.
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You know, if you buy from one factory and not from another factory, then you and one of the factories have won.
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But the second factory has indeed lost.
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And the fact is, when a factory closes, that is acute pain for that factory and its community.
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Whereas the benefits of better value goods, more competition, or even more competitiveness because of better inputs.
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Is there not hope that maybe we can avoid some of the mistakes in the future, like in the 1920s and 30s when trade barriers went up?
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Really, the historical experience is that that's not necessarily beneficial for the global economy.
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Is there hope here that maybe globalization can prevail, that this is just a temporary blip what we're experiencing now?
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Or do you think we have to go through more of a realization of the downsides of protectionism?
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I think the feedback mechanisms in our systems are a lot faster now than they were in the 1930s.
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We have better data.
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Our economies are more responsive to signals.
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And therefore, what's currently happening may be self-correcting.
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as well as preventing a spread of the contagion, as it were.
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The challenge in the 1930s is that the tariffs weren't confined to just one or two players.
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You saw a number of major actors start going down this route.
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And I think at the moment...
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The systems that we have, as well as sort of the instant information environment, means that even if we do to some extent have to repeat some of the mistakes of the past in order to learn our lessons, we're able to potentially learn those lessons a lot faster and correct them a lot more quickly, as well as not necessarily replicating them in 166 economies or 192 economies,
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rather than watching one economy attempt it, see what happens there, and perhaps learning some lessons preemptively.
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The other issue, of course, is how do we define globalization?
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And we see protectionism being on the rise when it comes to goods trade, for example.
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But there's other areas like services trade, for example, which we're not really trading yet, and that's starting to rise and become an increasing part of traded economic activity.
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Do you see a similar anti-trade
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trade backlash in services, or is this largely confined to goods at the moment?
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And would that mean that globalization is just transforming rather than being rolled back?
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So this is something that keeps me up at night a little bit, because if you look at what is happening now in services, we are seeing for the first time traditionally white-collar jobs, which were in many ways immune from both automation and from competition from abroad.
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are for the first time facing quite intense competition.
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You can now have your payroll department for a North American company be sitting overseas.
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And that is jobs for accountants and sort of HR professionals that are now sitting overseas.
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So you're having an entire new class of worker that is for the first time in human history exposed to competition from abroad.
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And at the same time, because of the rise of AI and other electronic systems, facing challenges from automation the way they didn't before.
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Now, at the moment, we haven't seen a huge rush to put in place new barriers to prevent that.
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But governments absolutely have the tools to do that.
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through regulations on where data is stored, how it moves, what part of certain processes must legally be done by, for example, citizens or onshore.
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Governments have measures to prevent it.
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One of the reasons I think it maybe hasn't happened yet is that the US is a massive services exporter.
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And for the same reason that, you know, probably Saudi Arabia isn't going to be the first one to suggest a massive global tax on oil, for the same reason the U.S. has pretty strong incentives not to be the first one to go, hey, we've got a brand new battlefield in trade policy, its services.
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So I think that's what's holding it back.
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But I do think there are going to be structural forces in our economy that potentially make it tempting to,
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to put in place some barriers to what are currently really lucrative services exports.
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So rising restrictions on services trade is keeping Dimitri up at night.
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What makes you look forward to what gives you hope that maybe, you know, this era that we see in the post-war era of increasing global production,
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corporation, integration, that that actually may hold.
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There must be something that gives you a bit of hope that we're going to stay on the right track.
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Yes, a number of things give me hope.
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In a really practical way, I think the energy revolution, the absolutely stratospheric rise of renewables is massively encouraging.
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And the fact that that does not appear to be slowing down despite sort of all of the hurdles thrown in its way, despite fluctuating political will in major economies, if we can't solve the renewable energy sort of challenge,
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we really don't have a future and it looks like we might be able to do it.
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And that's hugely encouraging.
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But more broadly from a policy perspective, I think in a lot of ways governments may be learning the right lessons.
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For example, I think the Chinese government has just taken a massive step in the World Trade Organization where it said, we will no longer take advantage or benefit from special and differential treatment in future agreements.
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This is something they are entitled to under the rules.
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It has been a massive bugbear in negotiations.
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And China, very much as a symbol of its reinvestment in the multilateral system, has taken this big symbolic step.
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So you are seeing countries look around and say, we're really not enjoying this chaos.
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Investment is frozen.
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There's no certainty.
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We have no idea what to tell our companies.
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And numbers are going to start trending down.
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We need to rebuild as much of this certainty as we possibly can.
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And I think a lot of governments worldwide are learning the right lessons.
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Well, thank you very much, Dimitri.
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And thank you, ladies and gentlemen, for joining us for this special edition of the Global Viewpoint podcast, a conversation with Dimitri Kruzobinski, the founder of the Explained Trade Consultancy based in Geneva and author of the book, Why Politicians Lie About Trade.
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Okay.
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We hope you enjoyed this podcast, and please don't forget to subscribe to the HSBC Global Viewpoint podcast, and we hope that you join us again on the next episode.
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