Panel
A Glance through the Global Trade Window: Like the View?
Milken InstituteAdrian Wooldridge, Ailish Campbell, Ian Goldin, William Lee, Rhonda Schmidtlein, David Walker
- The Canada-EU Comprehensive Economic and Trade Agreement (CETA) is projected to achieve 99% tariff-free status within seven years, potentially serving as a model for a post-Brexit United Kingdom to replicate.
- The United Kingdom must rapidly navigate its current uncertainty and develop new negotiation capabilities to replace functions previously handled in Brussels.
- Future global integration is viewed as contingent on the rule of law and adherence to international law, though no region currently practices pure free trade, necessitating navigation within a landscape of "distorted trade."
- A new wave of globalization could be negotiated in under 10 years via a bilateral approach designed to address domestic economic disparities and facilitate internal redistribution.
- Trade flow growth is expected to slow as the opportunities for liberalization have been largely exploited, though current trade expansion rates have temporarily exceeded GDP growth.
- The Trump administration is actively renegotiating agreements, such as the US-Korea free trade agreement, to rebalance terms and bring jobs back to the United States.
- Economic progress is accelerating due to technologies like the fourth industrial revolution, 3D printing, and data trade, driving the integration of China with developing economies like India.
- "3D printing and robotics localization" are identified as primary challenges to trade flows, as production decisions shift from labor costs to the price of capital, leading to a "great reshoring" of production that may not significantly increase employment.
- Political movements like Brexit and Trump are expected to exacerbate global tax competition and inequality by reducing cooperation, while advanced economies face rising protectionism compared to China and India.
- Societal stability and support for open markets depend on robust public institutions, with Canada's free education system cited as a supportive factor, whereas Singaporean families may spend 25% of after-market income on supplementary education.
- The era of liberal globalization is approaching its end, with warnings of potential disaster comparable to the 1930s due to the decline of responsible US engagement in driving globalization.
- Historical parallels suggest the US may withdraw into itself, creating massive global disruption similar to the 1920s, while the UK average worker may not recover pre-financial crisis living standards until the 2020s.
- Stagnant wages and declining productivity growth during previous globalization phases contributed to current inequality, with the next stage driven by the flow of ideas and best practices.
- Multi-factor productivity in America remains dismal due to poor social institutions, causing investment opportunities to shift toward China and India, while small countries like Canada gain disproportionately from trade terms changes.
- The primary global challenge involves the untaxed nature of digital and data flows, which prevents adequate redistribution of globalization benefits to industries reliant on these sectors.
- Global financial institutions can create a resilient system through effective risk management, provided they avoid the "race to the bottom" in regulation and local knowledge destruction associated with lending based on distorted indicators.
- Solutions for those left behind focus on educating the population in adaptability and new technology use rather than predicting specific jobs, as Universal Basic Income is opposed for potentially increasing inequality and poverty.
- New forms of work, such as home care and mentoring, are central to addressing workforce needs for meaning and status, while Trade Adjustment Assistance in the US is currently considered ineffective due to lack of support.
- The US strongly advocates for the free flow of digital data and opposes data localization, whereas the EU acts as the epicenter for discussions that may adopt a "stiff" approach impacting business investment.
- Data trade may evolve from managed trade or export restraints toward openness, though existing systems make this transition difficult, and the US-EU "safe harbor" framework remains uncertain.
- The VIX index shows historically low volatility but an extraordinary skew suggesting missed "fat tails" and specific sector risks, prompting the use of structured products to funnel institutional capital into infrastructure.
- Derivatives traded with moment-to-moment pricing could serve as early indicators of risk, while a global opportunity index combining economic, social, and business indicators is being developed to guide investment.