CGTN Europe spoke to Robert Koopman, Hurst Senior Professorial Lecturer at the American University and the former Chief Economist at the World Trade Organization.
Category
🎵
MusicTranscript
00:00Let's talk to Robert Koopman, a former chief economist at the World Trade Organization,
00:05now a Hearst senior professorial lecturer at the American University.
00:09Robert, good to see you. Welcome.
00:11I mean, it's difficult to see why the world is having a touch of vapors, really,
00:14because Trump has done exactly what he said he'd do.
00:17What's your reaction?
00:20Yeah, he has indeed done exactly what he said he would do.
00:24I think the big question is, what does he want to get out of it?
00:27And there's a reasonable chance this could just be performative,
00:31so he gets some minor concessions from partners that he can then announce that,
00:37look, I'm big, I'm strong, I twisted their arms to get this, that or the other thing.
00:43So maybe we don't see the full-blown trade war.
00:46So might he be right? Is that what you're suggesting?
00:51No, I'm not saying he's right, because there'll be long-term costs of this,
00:55regardless of whether or not there's tariffs put in place.
00:59The tariff impacts would be negative, for sure.
01:02They could be offset by other economic growth drivers,
01:07but they could amplify other uncertainties.
01:11And his raising all this policy uncertainty,
01:14particularly with countries that are considered to be our allies,
01:18could really disrupt firms' investment decisions, long-term economic relations.
01:24So regardless of whether the tariffs get put in place,
01:27I think what we see is a fragmentation of business,
01:32not full fragmentation, but a slowing and reduction of global integration,
01:40and encouraging our trade partners, the United States trade partners,
01:43to look elsewhere for continued integration,
01:46because my guess is they will continue to look for integration.
01:50Might the U.S. reduce its trade deficits with its major trade partners, though?
01:56That's a very difficult thing to do with tariff policy.
02:00It's not a trade policy thing. It's a macroeconomic policy challenge,
02:04both for the United States.
02:06We don't save enough. We invest a lot.
02:09We depend on foreign investment, or foreign investors,
02:13for much of that difference between savings and investment.
02:17Other countries, like China, save a lot compared to their investment.
02:24And so we run these imbalances.
02:27Most economists are not worried about these imbalances at all.
02:31They can become bad. They can become a real negative issue
02:35if the rest of the world doesn't believe in your economy,
02:38won't buy your currency, won't continue to lend the money.
02:41But that hasn't been the issue with the United States.
02:44There is a national security element
02:46where the U.S. probably should diversify its sourcing for many products
02:51and perhaps build some more manufacturing capacity at home for certain products.
02:57But when you do that, you have limited capital and labor,
03:01and you're going to be giving up other sectors' opportunity
03:06for access to that capital and labor.
03:08So you may build out one part of your economy,
03:11but you'll be limiting the potential growth in other parts of your economy.
03:15Robert, before you took up professoring,
03:17you were chief economist at the World Trade Organization.
03:22The World Trade Organization is impotent in all this, isn't it?
03:25It just stands by and watches.
03:28It does stand by and watch these bilateral,
03:30the way Donald Trump is going about this.
03:33However, remember I said the rest of the world's likely to want to continue to integrate?
03:38The WTO rules allow that to go forward smoothly.
03:43The WTO rules actually help those other countries that don't want to,
03:49they may have bilateral conflict with the U.S.,
03:51they don't want to have conflict with one another.
03:54It gets much worse if the whole world decides to fight one another in a trade conflict.
03:59If it's just the U.S. picking its trade partners,
04:02most of the costs are going to be in those bilateral trade relations.
04:08That's going to encourage all the other countries to look for stronger trade relations
04:12with their other trading partners rather than the U.S.
04:16and end up isolating the U.S.
04:18and creating a higher cost island of production and consumption in the U.S.
04:23and a reduced role in the global economy.
04:25Robert, good to talk to you.
04:26Thank you for that.
04:27Robert Koopman, Hurst Senior Professorial Lecturer at the American University.
04:32Thanks, Jamie.