Introduction to Trade Knowledge Matters Podcast

Episode Summary

This is an introductory podcast episode of Trade Knowledge Matters. TKM is designed to discuss international trade, international economic relations and the challenges it faces. We will be joined by global experts in international trade who will share international trade policy insights and analysis with a special focus on the UK’s trade policy.

Full Transcript

Amar (00:01.794)

Hello and welcome to our introductory Trade Knowledge Matters podcast. My name is Amar Breckenridge and on this podcast series I look forward to discussing some of the most pressing issues in international trade with a range of leading experts. Four years ago we set up the Trade Knowledge Exchange to provide a forum to discuss international trade policy. We thought the circumstances were challenging. The UK was in the process of negotiating Brexit.

Donald Trump was instigating trade wars. What we hadn’t anticipated was a scale of convulsions that over the last two years have rocked international trade and international economic relations. The COVID-19 pandemic and responses to it disrupted trade and then fed into a supply chain crisis, the effects of which we’re feeling now. But the pandemic almost seems like a distant memory.

when set against the backdrop of Russia’s invasion of Ukraine and the consequences this has created in terms of international economic relations and the proliferation of sanctions, the increase in food and commodity prices and the tensions this has created. What we seem to be seeing also is a fragmentation in the governance of trade and in the way countries deal with each other, a process that already had been underway.

but which seems to have been given further fuel by both the pandemic and the war in Ukraine. And to cap it all, we seem to be on the brink of another debt crisis, particularly in South Asia. Now, you may think that this summary neatly highlights the reputation of economics as a dismal science. So in this series, we will attempt to deconstruct some of these issues to try and find a way forward.

Amar (01:55.850)

And so with me to introduce the series, I’m pleased to welcome Gus O’Donnell, the chairman of Frontier Economics and a member of the House of Lords. Gus was also a former cabinet secretary to three UK prime ministers, and as such, knows both the politics and the policymaking of international trade inside out. Also with me is Tom Pengelly of Sana Consulting. Tom has several decades of experience in international trade.

and multilateralism with a particular focus on trade and development. Turning to you Gus first. We seem to be at a moment of stress in international relations that we have not seen since the height of the Cold War.

Amar (02:37.746)

And thinking about the current juncture, a few questions come to mind. First of all, for a country like the UK, what role can it play in finding a way forward? And from your perspective, as someone who is well acquainted with the ins and outs of economic policy, what are the main asks you have of economists when it comes to finding a way forward?

Gus (03:00.284)

Well, I’d say the UK faces an enormous number of challenges. I mean, we thought this period was going to be dominated by how we manage ourselves post-Brexit. We’re sorting out free trade agreements with lots of other countries, and we haven’t done that for decades because we’ve been part of the EU. We need to sort out our post-Brexit relationship with the EU, our number one trading partner. That’s going to be very fraught. It’s not just the economics, but things like the Northern Ireland Protocol.

Gus (03:42.592)

and the politics of that. So a lot of political economy in all of this. On top of that, as if that didn’t make life hard enough, we have got all the global challenges that you mentioned. I mean, the Russia-Ukraine war has added this massive dimension where trade has been disrupted. We’ve seen massive increases in global energy and food prices. That’s caused a cost of living crisis, which you see reverberating around the world. Places like Sri Lanka, you have riots.

But in virtually all countries, you’ve got this issue about how do you manage to try and reduce this impact on the cost of living when you were hoping from a public finance point of view, from an economics point of view, to be reducing debts and deficits because you’ve got this hangover from COVID where you’d built up debts thinking that when you get back to normal, it’ll be fine. But of course, we’re not back to normal. We’ve got this amazing…

Gus (04:22.412)

really savage war going on and it’s causing repercussions everywhere. The thing I would add is that it’s created this feeling in the world that, you know, while we’ve been through this long period of globalization and the gains from trade, we’ve all seen it, comparative advantage, all of that, we’re now in a world where people are beginning to move backwards. We’re getting deglobalization, protectionism. In America, they’re subsidizing massive investments in chip plants with Intel and countries, companies like that. In the UK, we’re thinking about how do we diversify our energy supply, and particularly in Europe, you’ve seen it in Germany, particularly in other countries, how do they get themselves away from dependency on Russian oil, gas and coal? So big diversions in world trade, economists need to tell us what are the costs of that.

Gus (05:20.832)

and manage the economics and the politics together. I think it’s pretty fraught. And the final point I’d add is that against all of these issues, which we hope will be short to medium term, we have the long-term issue of climate change, where we are all trying to move towards a world where we’ve got net zero, and that means greener growth. And to be honest, the increase in fossil fuel prices will stimulate

big investments in renewables, but we need to make sure that those, the implications of that for growth and trade where, you know, a country like the UK wants to be at the forefront of green growth and green trade. And they make the most of these opportunities in a world which is particularly difficult and particularly stressed at the moment.

Amar (06:10.270)

Thank you, Gus.

Gus (06:13.564)

So I’m really looking forward to your podcasts to give us answers to all of those questions.

Amar (06:23.358)

That’s in and of itself an optimistic take when you’re dealing with economists, but we will at least try and frame the problems in a way that…that might be conducive to finding a way forward. With that in mind, turning to you, Tom, you’ve been very closely involved with multilateralism and with the UK’s trade policy agenda well before Brexit, and particularly in relation to developing countries. Just building on what Gus said, what are some of the distinctive things that the UK can bring to the table in terms of policymaking at this juncture?

Amar (07:00.486)

And do you see a role for the UK in maintaining multilateralism at one of the most perilous times in its history?

Tom Pengelly (07:10.896)

Yeah, I think really the UK has a really important role to play in sort of providing some of the kind of bedrock foundations or shoring those up in the global sort of economic system and the multilateral trading system to kind of help us weather those sorts of storms that Gus was outlining. And hopefully, you know, set the foundations for…

you know, faster growth, you know, moving forward. And I think that there’s kind of two aspects of that that I would pick out that hopefully are a pragmatic and realistic view of the UK as influence and within particular fora and taking into account particular kinds of economic relationships that we have.

So the first one would be through the WTO system in Geneva. I think whilst we’re not one of the kind of, the quad countries, like the big four dominating in the sort of decision making in Geneva, is useful to have countries like the UK in the inner circle in the WTO. It can often play quite a constructive role between the big powers and getting solutions through and pragmatic solutions through. But particularly in the UK’s case, if we compare the UK to say Canada, for example, which might be, you know, another similar one we could think of that plays that kind of role, like they do with the Ottawa Group on trade reform in the WTO. I think that the difference is the UK has these relationships with so many of the developing countries that make up…

about half of the membership of the WTO. I know in terms of global trade share, they’re still very small, but in terms of one member, one vote, and operating by consensus, they do represent quite a significant constituency in the WTO. And really if you’re gonna have multilateral agreements or plural agreements with a lot of participation across the globe, you’re gonna need support from developing countries and the UK is really well placed to do that. And I’m not just talking about kind of general relationships like through the Commonwealth, for example, and our diplomatic, our powerful diplomatic networks around the world, but also because since 2011, so for over a decade now, the UK has been very active in providing funding to support those groups in Geneva, in helping them participate in the WTO system. And that’s been really, really well.

Tom Pengelly (09:53.104)

received and it’s not about kind of exerting UK policy influence so much as allowing those countries to kind of participate positively in negotiations as sort of active members and level the playing field a bit. So I think that’s the first thing that the UK has that really strong foundation and can build on that and that is aimed at kind of keeping

Tom Pengelly (10:18.944)

ticking over and being as positive as it can be in making headway. But secondly is around the rest of the world are two-world bilateral agreements which are all post-Brexit in developing countries really replicating those that we had as an EU member. So particularly in the eight or so that we have trade agreements with African countries.

the Caribbean and the Pacific, about 30 countries in total. If you look at these agreements, and we can talk about that a bit more later, and also agreements these countries have within themselves, like the new African Free Trade Area, you see that despite there being called bilateral trade agreements, or African Free Trade Area agreements, the bulk of them are actually the WTO rules being incorporated by reference.

in particularly in the areas of trade facilitation, standards, SPS, TBT, customers valuation, and so on. And I think, so a focus from the UK on implementing those rules, those WTO rules are still quite a lot to do, would bring benefits in terms of implementing those agreements directly and the trade flows that.

those agreements are supposed to be increasing. But also, you can see how that was quite a long-term process, but it builds very solid foundations for a return to a more vibrant global trading system, hopefully in the not-too-distant future.

Amar (11:49.398)

Thank you, Tom. And so I think I get the sense there that there’s still a fair degree of a momentum behind the initiatives to build common ground and rules. And so if we take Gus’s point that we are now at a moment of unprecedented challenge, at least we have some reassurance that we are not at least working from a blank slate and that there are

Amar (12:13.422)

at least options to find ways of managing the confluence of these different crises. I think someone once compared trade negotiations and diplomacy generally to riding a bicycle. If you’re not moving forward, you’ll fall off. So it’s really down to…

Amar (12:31.262)

economists, lawyers, politicians to keep that momentum going and to provide the insights on the way forward and hopefully the UK can play its role in keeping that bicycle going forward. So thank you for your participation today. We look forward to launching this podcast series with our first episode on the 19th of May and in the meantime we invite you to subscribe to our podcast on Apple, Spotify or wherever you listen to your podcasts these days.

Amar (13:04.971)

and we look forward to interacting with you over the course of the next week. So thank you to our speakers, to Gus and to Tom and see you soon.