How Asia Is Responding to US Tariffs

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Amar Breckenridge: Hello everyone and welcome to this episode of our Trade Knowledge Matters podcast. Our regular podcast on all things related to international trade. Now the eagle eyed amongst you will have spotted that the US has implemented tariffs on most of its trading partners at a base rate of 10%. Too much higher rates for a number of these partners. And now these tariffs have been dubbed as reciprocal tariffs by the White House. Though in reality, while the White House released a long list of trade grievances against its trade partners, the tariffs are not calibrated on any measure of trade restrictions imposed by those partners. Rather, the tariffs are based on a measure of the US bilateral deficit in goods. With each of them an approach that really has no basis any known form of economic and that explains in part the wide dispersion in tariffs that we see. And it also explains why countries in Asia have been particularly exposed to the recent round of tariffs imposed by the United States. And this is because of the pivotal role that many Asian countries have played in global trade and value chains. And thus we have tariffs in the for the likes of Malaysia, Thailand, Indonesia and Taiwan and in the high 40s for, for countries like Cambodia, Sri Lanka, and Vietnam. India, which has been relatively less engaged in good trade, faces somewhat lower but still significant tariffs of around 27% while China for its part faces tariffs of over 100%. And this is because it chose to retaliate to the original slew of tariffs on its imports, prompting a further barrage of tariffs from the United States. And that’s an episode that illustrates the potential for escalation embedded in this new tariff prone world. So the picture is a complex one. And beyond the blizzard of numbers surrounding tariff rates, what this episode brings in to us is that major changes are under in the way in which trade works and the way in which trade is governed. And as I mentioned, Asia is a particular point of interest. That’s partly because of its exposure to tariffs, but also because Asia has been over the last few decades a large scale real life laboratory that has enabled us to understand how trade works. As we said in a previous podcast, if you want to understand trade, go to Asia and what should happened so how Asia responds to these tariff matters. Not just to Asia, but to the world at large.

And to navigate these questions, I’m delighted to welcome back to our podcast to eminent experts we’ve had the privilege of welcoming before starting at Deborah Elms and Dr. Elms is the Head of Trade Policy at the Hinrich Foundation in Singapore. And prior to joining the Foundation, she was the Executive Director and Founder of the Asian Trade Centre and she was also President of the Asia Business Trade Association and Board Director of the Asian Trade Centre Foundation. Dr. Elm serves on the Board of the Trade and Investment Negotiation Advisor at the UN Economic and Social Commission for Asia Pacific. Also with me is Professor Anirudh Shingal. And, Anirudh is a Professor in Economics at the SP Jain Institute of Management and Research in Mumbai and a Senior Programme Associate at the Global Governance Programme at the European University Institute in Florence. He was a Jean Monnet Fellow at the EUI during the 2016/2017 academic year, and he’s also been a Senior Research Fellow at the World Trade Institute at the University of Bern, from 2010 to 2017. So, Anirudh Deborah, welcome to, this podcast. It’s good to have you back.

Deborah provides an overview of proposed US tariffs on Southeast Asia

Amar Breckenridge: And let’s start with an opening question. So, one of the notable features of proposed tariffs, as I said, is the degree of variation across countries when it comes to tariffs, relative as well as absolute levels matter. And in addition, the effects of tariffs will depend on exposure to US markets and the ability of exporters to diversify markets quickly, whether in terms of geography or in terms of products. So if we look at the range of tariffs imposed by the us, can you provide an overview of how these effects may play out across the region? And maybe, Deborah, I’ll start with you with a particular focus on the ASEAN countries and East Asia. And then, Anirudh maybe you could speak a bit more to, the experience of India and South Asia. Deborah, starting with you.

Deborah Elms: Sure. Thanks so much and thanks very much for having me again. I think you’ve pointed to some important issues, especially around the incredibly high levels that we have now in place against most of this region in Southeast Asia,

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Deborah Elms: including 49% at Cambodia, 46% in Vietnam, 44% for Myanmar, which is undergoing a civil war and an earthquake. And again, why these levels? It’s not about their unfairness. It’s not about whether the US likes them or doesn’t like them, whether they were cooperative or not. It’s really just a crude formula that slapped you with very high tariffs. Now, that’s not great. And especially from very low tariffs, just suddenly facing up to 50% is a real challenge overnight. But I do think you have to be a bit cautious because you have to compare that to your other competitors in similar spaces. So let’s take Cambodia for a moment. Although Cambodia has been moving, or trying to move quite quickly out of textiles and footwear into higher value products, electronics, et cetera, that transition has been challenging for Cambodia to make, so not great. 49% on textiles and clothing is going to be challenging. The US is one of their major markets. They buy particular things in the US and quantities and qualities that others don’t buy. But if you think about the comparison between Cambodia and, and other textile producers who are in similar kinds of spaces, many of them also got hit with very high tariffs. So as bad as 49% is, it’s not as quite as awful as it sounds relative to others who make similar kinds of, like baby clothing. So if you think about who makes baby clothing, most of them are also similarly situated developing countries. Many of them have, again, very high tariffs coming from this policy. The damage may be less than it first appears, but it is still going to be a real shock to the system. And it will lead to, among other things, I worry, job losses in Cambodia and Bangladesh and elsewhere where they do not have a lot of alternative options. And the speed with which this was implemented makes it hard as well to adjust. And so the implications in the fallout in the region I think is going to be quite substantial.

Amar Breckenridge: Thank you, Anirudh.

Anirudh Shingal: Thanks, Amar. it’s good to be back as well.

How countries in the region respond to the new U.S. tariffs is uncertain

Anirudh Shingal: So, yeah, so just following up on what Deborah was saying in the context of ASEAN. So for South Asia, the average, reciprocal tariff is around 24%. this is led by Sirri Lanka, which has attracted a 44% import duty. In Bangladesh, you know, where it’s 37%. Though fortunately the LDCs in the region get the base tar of, of about 10%. India is 26%, Pakistan is 29%. What is interesting is that, within ASEAN, a lot of the countries are a lot more exposed to the US in terms of selling a lot of their products to the US as a share of their total exports. For South Asia also, this is true, except for Afghanistan, Bhutan. For the other countries, at least 10% of their exports are going to the US and as Deborah also pointed out, a lot of these countries mostly export footwear, garments and light manufacturing goods. And unfortunately, these are the products that have attracted the highest tariffs. So, you know, some work that is recently been done by my friends Max and Prachi at ODI, they actually show that the incidence of tariffs on these products is particularly high. Now, in terms of the impact, of course, a lot of this will depend on how countries in the region respond. And when I was thinking about it, I could think of a couple of scenarios. One, of course, is they choose to retaliate, which seems quite unlikely, looking at the kind of countries we have in this region. They could of course also absorb some of the tariff induced price hike either voluntarily or under pressure from lead buyers, in global value chains. But there are limits to this. Right? So I think what is going to be more likely is they’ll probably end up locating President Trump by reducing import duties on U.S. imports. Now, to the extent that they’re doing these on barriers that were either unnecessary and you know, dismantling those barriers would unleash competitive forces in their own economies and benefit consumers, then by all means this would the right thing to do. But not if that’s not the case. So what I would really actually like is for the impacted countries in the region is for them to use these tariffs as an opportunity to reduce or remove unnecessary barriers to trade barriers that would otherwise be hard to dismantle for reasons of political economy. So I think they should use this as an opportunity. And of course they can do that unilaterally or by forming alliances with countries either in the region or beyond. This of course could irk the current US administration, but that is a call that they should all take strategically safeguarding their own interests at the same time.

Amar Breckenridge: Thank you. So there’s quite a nuanced picture then and also probably opportunities for internal reform that’s prompted by these tariffs.

How might countries in Southeast Asia respond to U.S. proposed tariffs

Amar Breckenridge: Now, diving into more specific issues, we see that in recent years industrialised countries including the US became more restrictive towards China. And as a response, investors diversified value chains, especially through investments in emerging Asian economies such as Vietnam, Cambodia, to some extent Southeast Asia. And China has also invested quite heavily in these countries.

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Amar Breckenridge: Now these diversification strategies also seem to be impacted by U.S. proposals. And so how might countries in the region, particularly Southeast Asia, respond to these developments? Deborah, I might start with you again.

Deborah Elms: Well, I think you can see a range of responses, one of the, between important Deputy Prime Minister level and other ministers, as well as the large business delegation to try to figure out if there was some way for them to have a pause on the tariffs or come to some kind of early agreement because they could recognise that a 46% tariff on their exports was going to be quite catastrophic. So there are groups like Vietnam at the front end of the negotiations process. The Malaysians, who are the ASEAN Chair this year, have been trying to collectively organise ASEAN and take a delegation to Washington as a collective. We’ll see how that goes. Because ASEAN is always famously challenging to coordinate and they have very different interests around this particular set of policies where some were hit much harder than others. How coordinated they could be when they land on the ground in Washington remains unclear. And then there are some, not very many, but we have a few, like the Philippines, that actually thinks this may be an opportunity for them because their tariffs were relatively modest. The level of inbound investment that they have received is relatively small compared to, Vietnam, for example. So they may see a bit more of an opportunity in this shift than others would otherwise see. So I think, as is typical in ASEAN, we have very diverse countries with very diverse impacts from this kind of policy shift and coordination would be great, but ultimately hard to manage. And so I think you’re going to just see this range, at least for a while. However, and this just sort of gets wrapped around to the first part of your question. These are also countries that are very dependent on the Chinese market and increasingly, in fact, China is the largest market for all of them, for inbound and outbound and investment, increasingly investment as well. And so if this gets to be very complicated to work with the United States or if the Chinese put particular pressure on, companies in Southeast Asia, then we have a whole new level of challenge ahead for the region because they will have to make choices that they have not wanted to make. And I think the more that this escalates between the US and China, the more challenging it will be for the Southeast Asian countries to continue to play this sort of balancing, neutral, non-aligned role that they would like to play. And that’s going to get again, increasingly challenging, even in the economic sphere, where investment policies, trade policies, data policies are all going to be up for grabs again. And it’ll be interesting to watch in a not fun way, frankly, how this all evolves in the short run.

Anirudh Shingal: Yes. So I think Deborah has made some very good points there. So just to add to those, clearly, in my opinion, the high tariffs on ASEAN and Southeast Asia are not really innocuous because countries in the region were a part of the China+1 Strategy. But at the same time, a lot of these countries are also very dependent on China. So even if firms and countries felt they were reducing their dependence on China, there was still an indirect dependence on China, if you will. So, you know, through this strategy you’re actually targeting countries in Southeast Asia which are very well embedded in regional value chains, especially with China. So, you know, the tariffs therefore hurt these countries both directly as well as indirectly. You know, in terms of response I would suggest, or you know, it would be great if these countries also enhance the ease of doing business in their own economies by liberalising regulatory barriers to both trade and investment and also pursue sound macroeconomic policies so that they continue to attract investment to other countries, including the us. If American firms actually got well invested in these economies again, they could, you know, in due course actually put some pressure on the Trump administration to have a rethink about those tariffs. So, you know, that could be one possible strategy going forward. In any event, if in the event that they do actually do well in terms of getting rid of regulatory barriers and doing well on the macroeconomics, they are bound to attract investment to other countries. And that investment is also going to help them embed into other value chains, not necessarily those that are part of the US. So I think that would be a safe bet.

So a couple of themes emerging here, regional integration and domestic reforms

Amar Breckenridge: Yeah. So a couple of themes emerging here, regional integration and domestic reforms. Let’s look at those perhaps in a bit more detail in turn. So starting with regional integration, as you said Deborah, that has posed challenges in the past for ASEAN countries and it’s also an agenda that hasn’t really developed as well as it should in South Asia. So what concretely are the possibilities that are on offer for these countries in light of regional frameworks? And those include not just geographically region specific ones, but also broader ones like the CPTPP or RCEP, and could include, I guess, accession by countries that are not part of these frameworks at the moment.

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Deborah Elms: I think we’re going to need to have concentric circles of responses to this. So you’re going to. Some countries will be in multiple circles, some countries will be in fewer circles. But we will need to think about how do we rebuild the economic structure that’s better fit for purpose, that works for the future. And I think that’s going to be challenging to do. It’s going to be a long term project. It will involve using the existing structures, including potentially agreeing to stick to the WTO rules for the rest of us so that we don’t have everybody just decide to pursue protectionism. But it will also involve, I think, some important steps taken by what are often called middle powers. So the most obvious one to me is the combination between the CPTPP, the Comprehensive and Progressive Trans Pacific Partnership 12 with the EU27. You could put the two of them together. Now I’m not talking about making, let me just be clear, I’m not talking about making a new Free Trade Agreement. This is not the time. But if you brought together those 39 countries, you could do a couple of things. The first thing I think you say is that trade matters. I’m really at low ambition on this case. One page document. Trade matters, Integration and Cooperation matters. We, the members of CPTPP and the EU, agree that these things are important. A more important issue is we agree that because trade and integration matters, we among ourselves agree not to impose new restrictions on trade with each other so that we are not somehow going down that protectionist battle between each other. And we agree that we need to work much harder on developing a system that’s fit for purpose as we go forward in time. That’s all I think they need to do at the outset, but it needs to be done, and it needs to be done sort of quickly. So a very simple agreement that just says that, and then from there you could just say, well, now do we move to creating a trade agreement? Do we think about some new ways in which we might cooperate that we haven’t had in the past? Do we consider additional members could sign on to that document? So it starts with the 39, but then, of course it could expand. The UK could bring in others. You know, I don’t know, the Koreans could potentially be there if they get a president and a government back in place. I mean, so there’s a number of things you could imagine. I think that’s important. But we also are going to need to have, I think, especially given the damage caused to developing countries and to least develop countries by this US Policy, some way to coordinate among developing economies. What is it that we would like to see on an agenda in 2025 and beyond? Let’s not go back to the old tired arguments that we’ve heard for 20 years that went nowhere. So let’s, you know, what kinds of things would we like to see? Let’s start again those dialogues and conversations about how do we get from where we’re at now to some future approach that we think is fit for purpose. And again, in the conversations that we’re likely to have eventually, I would like to think in hopefully not in another 80 years, we develop a new system that helps support trade and integration, that helps developing countries grow, that helps middle powers continue to experience economic growth, and ultimately at some point brings back in the larger players. But at the moment, I don’t know when that will be, and certainly not for the United States anytime soon, but at least sort of thinking about what those, those policies might look like.

Amar Breckenridge: Thank you. Anirudh

Inward reforms as a window of opportunity for trade reform

Amar Breckenridge: What about, South Asia? It’s been a region that’s not as integrated as you might have imagined it to be. An India in particular has Always been a bit of an outlier, both in relation to multilateralism and in relational to regionalism. Any prospects that things might change or are there particularly things that you think should be acted upon?

Anirudh Shingal: So you know, India for instance is already, you know, upping its ante on this, you know, negotiating trade deals with several countries including you know, the US it seems, but also the UK, EU27, Chile, Australia, New Zealand and Bahrain, Qatar and even the GCC countries. So you know, I think India is going all out on that, but I think this may also not be a bad time to revisit the India-ASEAN Trade Agreement. India should also probably consider joining the RCEP, having backed out of that at the last minute. What this does is in addition to what Deborah, I was saying is also it improves market access amongst the non US fraternity and you know, that might not be that bad actually.

Amar Breckenridge: Now, Anirudh on several occasions you talked about inward reforms and using this as a window of opportunity, particularly to tackle some of the political economy obstacles that might exist. So the virtue that internal reform has is that it reduces self-imposed trade costs and can also be offered to the US as evidence that barriers have come down and there’s reasons for mitigating duties. So what actually is the scope and form of this domestic reform agenda? I imagine it would look very different across different countries. What contours take would that reform agenda take? Deborah, again I’ll start with you.

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Deborah Elms: Sure. I mean I think one thing that I would love to see is I would love to see governments have a new focus on small businesses. And the argument for me would be if you could get trade working for small businesses, then trade works for all right, so when you start to create regulations, when you start to create policies, you have to do so with a one eye on. Is this something that a small business could follow? Can they understand what I’m talking about? If I write these regulations in this way, can we prepare something that if it doesn’t, obviously legal language is different, but can we translate legal language into something that makes sense to small businesses? And if the answer is no, then maybe we need to rethink the legal language as well. Like does this actual regulation make a difference? Why do we need it? So if you’re going to reform, let’s think a bit harder about how do we support small businesses so that they grow and they develop and that they’re engaged in trade, whether that’s importing or exporting. I think we shouldn’t forget that importing is also crucial to the success of small businesses and making obstacles to imports is also a problem. And again, we’ve been hyper focused in this Trump world and few months on trading goods, but ultimately most of the trade that we have is really in services or in digital. And we need to think hard about what kinds of rules, if any, do we want to have in services. What are digital trade rules that make sense? What are rules around intellectual property rights that make sense? I think those are going to come under assault in a real hurry here. But we’re in a different environment now than we were in before and I think that allows us maybe the opportunity to think differently. And many concepts, ideas, approaches that simply were non-starters in the past really need to be reconsidered in my view. Like why is this a no? Is it still a no? What is it that we objected to? What are we still object to? And just as important, some of the things that have been sacred cows really need to be reflected on. Are these still important to us as we move forward 2025 and beyond? And if they’re not relevant, then let’s change policies. I mean, if the world is fundamentally different, if we are restructuring supply chains, if we are rethinking the trade agenda, let’s take it seriously and make it happen. And it’s hard.

There’s huge disconnect and trade policy between India and Southeast Asia

Amar Breckenridge: Thanks. So Anirudh, are there particular relics of the past that you’d like to see go and for which you might now have a window of opportunity to act on?

Anirudh Shingal: Absolutely, Amar. So I think there is enormous scope for domestic reform in India. So you know, just to sort of put this in perspective, there’s a huge disconnect and trade policy between India and Southeast Asia. So while import tariffs in Southeast Asian countries have actually come down over the last decade, average import duties in India have risen. Now as a result of this, India’s global export shares in some of the most trade dynamic sectors have either remained stagnant or fallen over time. While for Southeast Asia, the countries have actually gained market shares. So even in the context of FDI, for instance, India’s share of the global stock of inward FDI has increased only marginally from 1% in 2010 to 1.2% in 2022, while the corresponding share for ASEAN member states has actually gone up from 5.8% to 8.1% over the same time period. And for these countries, it’s driven by complementary investment climate reforms, reforms that have attracted businesses, including in services sectors, as well as deep and comprehensive PTAs with major trading partners which also embeds them into regional and global value chains. So, a good example here is Vietnam. It’s a part of two mega trade deals. It has FTAs with the UK and the EU. It’s also in ASEAN member state. In contrast, India has been a reluctant participant in PTAs. You know, notwithstanding the recent burst, even the agreements that India has are characterised by limited tariff liberalisation, exclusions, carves out, are limited to no coverage of behind the border regulatory issues and complicated rules of origin require. So India needs a lot of complementary domestic reforms, including in land, labour markets, to support domestic industry to participate in international trade and GBCs. Think India also needs to review its model a bilateral Investment Treaty of 2016 so that it can attract more foreign investment. And it’s not just true of India. It turns out that within South Asia, India and Sri Lanka are amongst the most liberal economies. And if this is what I’m saying in the context of India, we can well imagine what needs to be done in the remaining South Asian countries.

Services indirectly face consequences of tariffs because they are embodied in goods trade

Amar Breckenridge: So we’ve already heard the word services mentioned a few times. And so services have many virtues, one of which is that they can’t be directly tariffed. They indirectly face the consequences of tariffs because services are embodied in goods trade to a significant extent, so they can be indirectly affected. But generally speaking the fastest growing part of international trade is not directly tariffiable.

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Amar Breckenridge: So as we observe the increase in services trade globally and the importance of digitalised services trade and particularly in countries like India, which are very important players in a number of services segments, servicification and a greater development of services trade also a way of mitigating your exposure to a more tariff prone world. And what are the options for countries in the region? I might start with you Anirudh on that. Given the significance for India.

Anirudh Shingal: Absolutely Amar. It can for South Asia and Southeast Asia. Both countries in both regions are hugely services intensive. So in the context of India for instance, the sector contributes more than half of the country’s GDP was almost a third of the workforce on a balance of payment basis. Services exports are over 40% of India’s total exports. And even though these are concentrated in IT and related services, with the rise in global capability centres, India is also beginning to emerge as an international player in professional services. So I think there is a lot of scope for moving the focus away from tariffs, talking about and moving away from goods, talking about services and in fact a lot of work by the World bank and the WTO shows that over the last two decade services exports have actually, and within that digital services exports have grown even faster than traditional services. And of course we mentioned servicification, services are increasingly used as inputs in all sectors of economic activity in countries around the world, including in India. But having said that, India continues to be more services trade restrictive than the average OECD and non-OECD economy in several sectors, including professional services, courier and distribution services and financial intermediation services. So I think again, my general speech here is removing unnecessary regulation and unnecessarily restrictive regulation in sectors and in digital services, either unilaterally or via FTAs, will not just promote services, but also manufacturing activity and exports. Given the extent of servicification.

Deborah – “Tariffs have implications for the governance of world trade”

Deborah Elms: I think this is actually more urgent than it first appears. And my reason for that is I’m trying to think several steps ahead of where we’re at right now with the Trump tariffs. Once you’ve got tariffs at over 100% on China, China as we well know, a powerhouse of manufactured production. And those products are going somewhere if they’re not going to the United States, which admittedly is not the same share of Chinese exports that it used to be, but they’re still important. If they’re not going to the United States, where are they going? And they’re going to be heading to places I think that, that may not have experienced competitive pressures in goods trade in the same way because markets were too small, because they were too difficult to fragment it. But now if you can’t go to the US you will pivot and go somewhere else. And it’s not just Chinese firms who will do this. Presumably it would be Vietnamese companies, Cambodian companies, et cetera. So I think the level of competition that we are about to experience in trade in goods globally is going to accelerate again in patterns that we haven’t seen. And that’s going to start, I think, to create challenges for governments and for firms in lots of the rest of the world who will be uncompetitive compared to first the speed and the scale and the size, et cetera, of China, but also the relative competitiveness of places like Cambodia and Vietnam. So that’s going to make it hard for the sort of traditional development path, agriculture to light manufacturing to more complicated manufacturing to services. And if that’s the case, then we’re really going to need to think harder about how do we ensure that developing economies and more developing parts of other economies are part of the services trade and have the skills and the abilities to compete in services sectors. Because if you can’t get a job in manufacturing and making clothing or whatever as the first step, we had to find jobs for these folks somehow. And so I think this is complicated because we’re talking about expanding services access at a moment in which services themselves are being fundamentally disrupted by technology. But these are the kinds of things I think as we design a trade system fit for purpose, we need to think a lot harder about what does it mean to have services and developing economies at scale? How would we get people for the, what jobs are they going to do? What kinds of ideas do we have? How do we make services supply chains in ways that we might not have considered before? So I think again, maybe it’s an opportunity, it’ll look like a threat in a lot of places. But let’s think of it at the moment as an opportunity to think harder about how do we make sure that services are successful globally? Because that’s I think the future for an awful lot of people and an awful lot of places.

Amar Breckenridge: Thank you. Let me just bounce on that idea of making the system fit for purpose. I mentioned at the start that these tariffs have implications on a number of levels, but one of them is for the governance of world trade. I suppose one of the things you can say about the approach to reciprocal tariffs, that the US doesn’t want MFN anymore. That attitude frankly is probably well entrenched on a bipartisan level in the US So it’s not going to necessarily go away with the change of administration.

00:30:00

Amar Breckenridge: And that similarly goes for sort of an appetite for intervening in trade. So to what extent does the current state of play increase the interest on the part of Asian countries in what we might call N minus one multilateralism that is multilateralism for everyone, one outside the U.S. is it even feasible? And what will be the mechanisms through which this is achieved? I suppose starting by building on regional and cross-regional trading blocks. Deborah, I might start with you on that.

The world needs leadership to pursue N minus 1 or N minus small N multilateralism

Deborah Elms: These are huge questions that we really need some high level thought around. How do we get there? How do we get. Well, where are we headed and how do we get there? Obviously, it would be great if the international community came together and said to the United States, this is totally inappropriate. What you’re doing is contrary to everything that you’ve said for 80 years. We will collectively do. I don’t know what, but something collectively. But that’s not happening. And so it’s not happening, both because the system itself is not working well, which is part of the US complaint, but also because others within that system are equally unlikely to use the WTO system as it currently stand. So, as much as I would like to blame this particular problem on Donald Trump, I think it’s not just a Trump issue. This is a…we have a system built on the World trade organisation, again 80 years old, that has proven stubbornly resistant to change over the last couple of decades, and that has created tensions within the system itself. And so finding people who will come forward and defend what we currently have is difficult. That suggests to me that as lovely as it would be to say let’s do an N minus one system, we well just do it without the somehow that’s not going to solve the problem either, because there’s more than just one minus, there’s N minus, I don’t know, a dozen, let’s say, for different reasons. So this is where my concentric circle idea comes from, which is, let’s start thinking about it in different contexts. How do we get where we want to go without. Let me just be clear. I’m trying not to abandon the World Trade Organisation. It’s got an infrastructure and an institutional setting and many of those rules could get, you could even get an N. All of us could agree on some of those rules, but there would be some that we have varying commitments to. So then how do we make that work? I think this is where we have to throw out ideas that we’ve had about WTO reform, for example, and be discussing the Appellate Body. Forget the Appellate Body, like, were past that. So now you’re really at fundamental how do you get world trade to work? And, what kinds of ideas have we not discussed that are suddenly in play? And what kinds of ideas could we please, for the love of God, jettison? Like whatever you said in 2001 in the Doha development agenda, please never mention it again. Let’s move on and talk about where we’re at today and then figure out what that agenda would look like, hopefully without recreating everything from scratch, because that will be more time consuming and we don’t really have 80 more years. But, you know, again, thinking creatively, I think is absolutely critical.

Amar Breckenridge: Thanks, Anirudh. What would creative thinking look like for you?

Anirudh Shingal: So, Amar, before I address that, I wanted to just touch on a couple of points in the services question. and actually adding to what Deborah mentioned, I think two aspects. There is one also the fact that we would need to reduce barriers to services trade on A modal basis and that becomes important. The other is a lot of the traditional services have the capacity they are. So traditional services are not as skill intensive as the digital services and therefore they have the capacity to absorb people who may be out of jobs because of competition in manufacturing sectors or even from agriculture in cases where there is disuise and employment there. So I think there is a lot of case for removing barriers to traditional services, both cross border and domestic barriers, to trade in those traditional services. Okay, so that is one the other, of course you know the question you’ve raised about N minus one multilateral. As I said, that’s part of my wish list and I actually tend to agree with Deborah. It’s probably not n minus 1, it’s probably n minus all. As I would say the force of multilateralism right now. And how do we get this to work? So I think for me two very important determinants in this regard is firm behaviour and leadership. Talking first about firm behaviour, outsourcing was not just driven by technological developments that unbundled value chains but also by commercial consideration. So the cost cutting advantages of shipping activities to low wage economies, low wage skilled economies is what led to this.

00:35:00

Anirudh Shingal: Similarly, if the costs of doing business in and with the US go up now because of the tariffs, firms are going to be forced to look for alternative players, alternative partners and alternative market. So that’s the first point. I think the other important determinant is leadership. So the world needs leadership at this point in time both to initiate and pursue N minus 1 or N minus small N multilateralism. And I think, you know, know now this is where I just become a pure academic. This may actually be an opportunity time for the EU to come out of shadows and provide this leadership. That could be one option. The other option could be China, right? The second largest economy in the world in terms of GDP, becoming very technologically advanced, still very deeply embedded in regional and value chains despite the tariffs. But the question is, is China ready to be what the US was and has been for the last 70, 80? Can it be a liberal economy and a free democracy? So those are important questions. Even more provocatively, can the remaining friends of multilateralism do something which either suspends or even expels the countries that are actually not in sync with this agenda? Get the appellate body to move again, give a fresh impetus to multilateralism. Jettisoning old ideas, jettisoning things that are not going to work anymore and I think that that is Actually, that is the kind of thinking we would need for any kind of N minus 1 or N minus N multilateralism going forward.

Amar Breckenridge: Okay, thank you. We’re reaching the end of, our podcast time together, so, obviously a lot of things we can cover. I might just give each of you a minute for any final thoughts you wish to share on this subject, which obviously will be evolving and probably in ways we can’t predict at this moment. So, starting with you, Deborah, maybe any closing thoughts you want?

Deborah Elms: Well, I would say, you know, one of the things that is str striking to me about this last week is that you rarely see a, turning point in history. It doesn’t happen very often, and you don’t normally know that you’re in one until afterwards. You only know them in hindsight. But here we have a, bizarre moment, at least in my lifetime, where you could see this coming. It came, and now we have to deal with the consequences. I think that is challenging because it shakes people to your foundations. You’ve built a career and a lifetime around a certain way of operating, and that just got smashed in the last week. And, we’re now trying to figure out how to pick up those pieces. So I think it’s reminding listeners, at least, that that feeling of disorientation, confusion, grief, anger, fill in the blank, what your emotions are is justified, because that is the level, in my view, of the sort of change that we’re experiencing. And so, you know, that’s where we’re at. And then where we go from here depends on all of us trying to come up with better ideas that actually deliver what we hope we’re going to get as opposed to sort of muddling through. And so let’s just take, like, pause for a moment. This was a very big week, and the task ahead is not going to be simple.

Amar Breckenridge: Anirudh?

Anirudh Shingal: Yeah, Amar, I think this is probably also the right time to recount and to read all the gains that we’ve got from trade, from multilateralism, to keep and reminding ourselves why that system worked, how it worked, and how it delivered, what were the benefits that people got, and also not be scared to discuss what the challenges were and also acknowledge our own shortcomings in addressing some of those challenges, which probably has led to the turn of events. You know, there was Brexit and now the tariffs. So things where probably, as, you know, trade people, even though we had done our homework, we were probably not vocal enough in telling the world around us that, look, there are going, there are gains, but there are also going to be losses. It’s important to mitigate the losses but in the end there will be gains, if you do this well. So I think there’s a lot of onus on us. We need to recount what has happened because the way things are and, and you know you posted a very nice piece on LinkedIn Amar, when we’re talking about high the George Bush administration, you know, in its own. So the time they were trying to push in AGOA. Right. And they were reminding the world how important trade was for development and now this is, you know, a complete whole farce if you will. Right. I think it’s important to hark back to those times, remind ourselves that look, this is what has been gained and then there are serious consequences of this not just in terms of development but also in terms of climate change. This is the time when countries need to get together to try to get around those challenges instead of creating new ones. So you know what is happening now with the tariff war? The Chinese have again retaliated, the Americans are posing new tariffs and so on and so forth. This is such a bad use of scarce resources. This is obviously the most suboptimal use of scarce resources and it just worries me, you know, the path we are heading down if we continue this.

Amar Breckenridge: Thank you and I like to thank both of you for joining this podcast. Clear. There’s a lot more we can discuss and a lot more that will happen over the next few weeks. So thank you again Deborah and Anirudh to our listeners. Also, thank you for joining us and remember to review to share the podcast and we look forward to welcoming you all back to another episode in the next few weeks. Anirudh, Deborah, thanks a lot.

00:40:00

Anirudh Shingal: Thank you so much Amar. Thanks everyone.