Conference Presentation, Panel
Globalization in the Crosshairs
Milken InstituteGillian Tett, Steven Ciobo, J. Bradford DeLong, John Hagel, Alejandro Ramirez Magaña, Stephen Schwarzman, Brad DeLong
- Steve Schwarzman (Blackstone/White House Strategy Council) characterizes the current U.S. trade administration stance as a pursuit of "equivalence" rather than pure protectionism, aiming to align tariff levels between the U.S. and trading partners to ensure "equality" in trade rules.
- Schwarzman argues that the administration prefers bilateral negotiations over multilateral deals (like the TPP) to avoid "giving away" concessions made to one partner to all 15 nations in a bloc, though he acknowledges this creates a "noodle bowl" of complex rules that disadvantages small and medium-sized exporters.
- Alejandro Ramirez (CEO, Cinepolis) confirms that the Mexican private sector perceives the U.S. rhetoric as "protectionist," citing the U.S. withdrawal from the TPP and threats to withdraw from NAFTA as significant risks to North American supply chains.
- Ramirez notes that 90% of films shown in Mexican cinemas are American, and the company relies on U.S. imports for popcorn, cheese, and audio equipment, making the sector vulnerable to retaliatory tariffs if NAFTA is repealed.
- John Hagel (Deloitte/Center for the Edge) identifies a structural crisis where return on assets for U.S. public companies has collapsed over decades, predicting it could hit zero by 2030 if institutions fail to adapt to "mounting performance pressure."
- Hagel links rising protectionism to a psychological response to pressure, noting that institutions and populations are shifting toward "threat-based narratives" and zero-sum thinking, which erodes trust and drives short-term policy decisions.
- Brad DeLong (UC Berkeley) contextualizes the current trend as a retreat from globalization similar to the 1930s, driven by "secular stagnation" and central banks having exhausted monetary policy tools, leaving trade barriers as a potential tool to attract jobs back home.
- DeLong highlights the risk of "reshoring" due to robotics advancements; as robots master flexible manufacturing (e.g., sewing), the low-wage labor advantage of countries like Vietnam may diminish, encouraging production to return to high-cost regions.
- Steve Chaubeau (Australian Minister for Trade) reported that Australia has achieved 26 years of continuous economic growth following unilateral tariff reductions in the 1980s, arguing that trade drives both growth and employment while avoiding the inefficiencies of subsidies.
- Chaubeau announced Australia's active role in leading the "TPP-11" (remaining nations), aiming to keep the agreement in force without the U.S., with potential entry for China or the UK in the future.
- Key Economic Data Points:
- U.S.-Mexico bilateral trade exceeds $520 billion annually, with over 6 million U.S. jobs dependent on this trade.
- Trade volume between the U.S. and Mexico has increased six-fold since NAFTA's 1994 implementation.
- Australia's trade growth rate has historically been double the pace of its real GDP growth since the 1960s.
- If global trade were fully deglobalized, global GDP could face a 3% hit (approx. $240 billion/year), which would severely impact the bottom billion living near subsistence levels.
- Policy Outlook and Decisions:
- Schwarzman and Chaubeau both expressed optimism that a renegotiated NAFTA deal could be finalized within the next year to normalize relations.
- Ramirez emphasized the urgency of concluding NAFTA renegotiation before the June/July 2018 Mexican presidential elections to avoid domestic political instability.
- DeLong warned that short-term political cycles will likely incentivize leaders to blame non-voting foreign entities for domestic economic stagnation, increasing the probability of near-term protectionism.
- Hagel and Schwarzman agreed that the current protectionist friction serves as a necessary catalyst to force a systemic shift from "scalable efficiency" to "scalable learning" and to address declining educational rankings (the U.S. fell to 27th globally in 35 years).
- Forward-Looking Consensus:
- Four of the five panelists (Hagel, Chaubeau, Ramirez, Schwarzman) expressed medium-to-long-term optimism, viewing current protectionism as a cyclical correction that will eventually lead to a new, potentially higher baseline of globalization.
- DeLong remains the sole pessimist regarding the immediate future, predicting a sustained rise in trade barriers due to structural economic stagnation and the rise of automation.
- All panelists agreed that moving away from multilateral frameworks toward a complex web of bilateral deals risks administrative failure and economic inefficiency, though the current political reality in the U.S. demands a shift in strategy.