Come on, thank you for having me. Let me scan my screen with you.
Hopefully this will work. So I'm very happy to be joining you, I'm talking about why trade finance matters in times of uncertainty.
I will briefly go over to papers and the first paper is forthcoming in the extract issue,
the supplement that you have just mentioned, and it's co-authored with Bundu Damu from Bilkent University.
And this paper is incredibly simple, but nevertheless, the issue is important and it has policy implications.
So I think it's it merits a discussion and admits bringing it to the attention of the world.
Namely, the issue is trade, finance and its importance during times of uncertainty.
But let me start with some very basic observations.
In the beginning of the paper, we looked at the performance of exports relative to their historical average.
So we took into account seasonality of exports of various products.
And then we looked at what's happened to, let's say, a French or German exports.
Month by month relative to the same period in the past three years.
And here the solid lines show you the estimates, dislikes, why the dashed lines are the 90 percent confidence intervals.
And look you see here is that since October, Germany and France have seen a decline in their exports relative to a historical average.
That is not surprising. There has been a slowdown in the eurozone, which predates the pandemic.
But then look at the figures for March. In France, it's dipping exports of almost 40 percent.
In Germany, it's over 20 percent. If you look at the US, the decline is smaller.
It's on the order of 10 percent. Why in Turkey?
It's 25, actually. Turkey is quite an interesting case.
It's a country where the pandemic were dependent.
It got later and Turkey did not impose a lockdown on weekdays.
Instead, they had lockdown's on weekends. So that means that during the period we are looking at.
There was no supply shock. It just probably mostly the demand shock that we see here being responsible for the decline in Turkish exports.
And of course, we wrote this paper a few weeks ago.
By now, the figures for April are available.
And actually globally we see an even bigger dip in international trade happening in April.
Hopefully a pro will be at the bottom of that decline.
Now that what we are interested in the paper is the resilience of exports.
What type of exports prove to be more resilient than others?
And the starting point of our paper is the observation that international trade is more risky than domestic trade.
International trade involves shipping goods over long distances.
That often takes a lot of time and the world will change. Can change while the goods are in transit, demands may change currencies.
Exchange rates are shifting. Also, if you are doing business with foreign buyers, chances are you don't know that it's cheap.
A lot of international trade relationships are short lived.
They speak different language. They are subject to different regulations.
And if you actually have talks to exporters, you would have come across stories of export to shipping goods and never seen the money.
I came across such a company in Jakarta, Indonesia.
They told me they made a shipment to Bosnia and they said, well, look, we send our goods.
We never saw the money. Bosnia is far from Indonesia. It costs a lot of time.
A lot of money to fly there. We don't speak the language. There isn't even our embassy in that country.
So, you know, they never send the money. They just let it go.
Now, if there are adverse events happening in the world in times of crisis, uncertainty goes up.
So you are even more worried than normally whether you will be paid for the goods you shift, whether you will receive the goods you have prepaid.
So firms, traders increase their demand for insurance.
Actually, had the IBRD. We are active in the trade insurance space and we have seen actually a big demand increase in demand for those services.
So in this paper, we ask a very simple question. Have trade flows insured by trade finance instruments being more resilient to the current crisis?
So let me give you some background on how payment terms tend to be structured in international trade transactions that are standard ways of doing so.
There's something called cash in advance, also known as pay and pray.
You pay for the goods and then you wait for the producer to ship them to you.
So that means that as an importer, you bear the whole risk of the transaction.
Of course, there is another possibility that the roles can switch and it may be the exporter who bears all the risk.
This is on their so-called open account terms. The exporter shifts the goods and then allows the buyer 30 or 60 or 90 days to make a payment.
So in this case, it's the exporter who faces uncertainty about being paid.
But of course,
it is possible for the trading parties to shift the risk onto a bank that can be done through this so-called letter of credit where for a fee,
a bank will insure an international trade transaction.
It works in a very simple like the importer approaches their bank and gets purchases.
This instrument. Letter of credit, which is a guarantee to the exporter that the exporter will be paid exporter if this
quarter is worried additionally about the bank in the importing country going under,
they can reconfirm the letter of credit, meaning they can obtain a guarantee from a bank in their own country,
a guarantee against the bank in the important country going up under.
So then the exporter ships the goods and the importer will not get to the ownership of
the goods until the importer makes a payment and the payment is sent to the exporter.
So basically the bank serves as both an intermediary and an insurer.
Insurer. And there is no essentially this eliminates all the risk on the part of the trading partners.
Of course, you know, there's a catch. It casts a bit of money to make to purchase.
This is just the final type of payment terms is so-called documentary collection.
If there's a situation where banks are used as intermediaries, but they do not explicitly provide insurance.
However, because the trading partners are dealing with a bank, they owe money to the bank.
If you're properly structured this this transaction, it can help you mitigate risks.
So in this very simple paper, what we did is we looked at Turkish data monthly monthly data between January 2013 and March of this year.
These are the figures on exports. They are just this aggregated by this so-called six digit codes under the harmonised system.
That means that we have several Toussant observations by product.
There are several thousand products in those categories. And on top of that, we also know the payment terms that have been used in those transactions.
Turkey is actually unique amongst us, amongst countries by requiring this information for both imports and exports and requiring
proof that the payment terms stated are actually in those payment terms that are cheap use.
So what we did is we looked at how Turkish exports, under various payment terms, performed relative to their historical average.
We control for product specifics, seasonality. We controlled for the fact that durable goods tends to be hit more by economic downturns.
We allowed for different effects on intermediate goods,
on goods that's required greater contract intensity or goods produced by sectors that are more dependent on external financing.
And when we did this, we saw a striking pattern.
If you look at cash in advance exports, those were experienced a 40 percent decline in March of this year relative to historical average there.
In that line, you see that's the confidence interval.
So cash in advance. That's pay and pray. That's a very risky form of of trading, good assets, open account.
Again, open account experience, a 28 percent decline.
Documentary collection, which involves bank intermediation and therefore leads to some mitigation of risk, was affected much less severely.
Why a letter of credit which provides insurance against the risk of non-payment of no delivery experience, no decline relative to historical average.
So even though the green bar is slightly negative, the confidence interval shows you that the effect is not statistically significant.
It's not significantly different from zero. That we consider this share of exports insured through letters of credit.
In total exports. So here we did this at the product level, looking at Turkish exports to all destinations.
Again, controlling for seasonality.
And what you see that in March of this year, there is an increase in share of exports that are traded in on letter of credit terms.
So exports that are insured through trade finance instruments while before March.
You don't see any change because as the confidence interval includes zero prior to March,
there is no statistically significant change in the share of exports backed by letters of credit relative to historical average.
Now, when we repeat this exercise just for China, you'll see the same pattern, except that the happens earlier.
It's in March where you see this spike in as sea based exports.
Of course, China was facing the pandemic earlier.
And therefore, the uncertainty when trading with China was present.
Now, in our earlier work with Varnedoe and mature Croisette, we looked at trade finance in more general terms.
And in particular, what we did is we created an index of how dependent various products are on trade insurance.
So we looked at how frequently or how prevalent the usage of letters of credit is for particular products.
And essentially we backed out from that information. Products, specific components, which captures how how much a given product needs trade insurance.
And then we looked at global trade flows during the financial crisis.
We know that during the financial crisis, I did the banking system in some countries.
We went into a standstill and it was very difficult to obtain trade finance instruments.
Essentially, our trade finance dried out.
And what we saw in our analysis is that products that typically are very reliant on using trade insurance took a bigger hit
during the financial crisis when they were destined for countries where it wasn't possible to buy to obtain this trade insurance.
And also that we saw that in Shafron from trade the better.
It was more resilient than arm's length trade off to the financial crisis.
Why is that? Well, if you are trading within your firm, if you are trading with a subsidiary that's located in a different country,
there is no risk your trading just with your within your company.
If you are trading with with a business partner who you don't know, you are barranca big risk.
And so, not surprisingly, trading interest from trade.
So trade done by multinational corporation was much more resilient when it was
destined for countries where it wasn't possible to obtain trade insurance.
And in that paper, we tried to estimate to the importance of trade insurance to the great trade collapse that took part in 2009.
And we came up with a figure of about 10 percent.
So a lot of the great trade to collapse was due to the economic downturn to demand drive for goods drying out.
But according to our estimates, 10 percent of that wall of this collapse was due to inability to insure trade flows.
Of course, you know, the great trade collapse does not look like such a great trade collapse comparable to the figures we are observing now.
The decline in trade is big. So these are two very simple papers, but I think their findings matter and their matter for the following reason.
Since the financial crisis, we have observed a decline in the supply of trade finance.
Now, as I was explaining letters of credit, I mentioned that often you need a bank that will reconfirm a letter of credit stock.
If you are doing business, if you are exporting to Nigeria and you are Nigerian.
Trading partner provides you with a letter of credit.
You may have doubts whether the Nigerian bank will not go out of business.
So you may want to reconfirm your letter of credit.
So these links between banks in industrialised countries and emerging markets are extremely important for the good functioning of trade finance.
This. International correspondent banks there you reconfirm letters of credit.
They held a clear trade related payments.
And what has happened since the financial crisis is that we have seen an increase in regulation,
regulation pertaining to combating money laundering, combating terrorism, regulations pertaining to sanctions.
And banks are expected to get to know their customers, to not have a lot of information about where a particular straight shipments of are going.
And that means that, you know, the the reporting requirements are quite tough.
And banks, which do not quite trust information they obtain from emerging markets, simply frequently choose not to take this risk.
The risk of not having the information that is required by regulators and they simply decide to exit trade finance in emerging markets.
And according to a recent report by the WTO and the International Finance Corporation,
about 200000 of correspondent banking relationships have disappeared during the past decade.
And that's about 20 percent of those of all existing correspondingly banking relationships.
And African countries, Caribbean, Central Eastern Europe and Pacific Islands have been particularly affected.
And this matters because this means that going forward, it will be if uncertainty continues,
if we have a second and perhaps even third wave of the pandemic trade with developing countries
and emerging markets will be adversely affected due to inability of ensure transactions.
And also, you know, many observers are worried about how firms will fare through the crisis in particularly small and medium sized enterprises.
The European Commission, for instance, is paying a lot of attention to SMB exporters.
And it is and, you know,
the lack the inability to ensure trade flows means that the level the playing field is tilted to the advantage of multinational firms,
of big players at the expense of SMP.
So let me stop here and give the floor back to Cameron.
Thank you. Thanks, Panopto. That was extremely interesting.
I'm not actually launched 10 questions for you.
But I said there are already four on on the front from the from the world outside two.
And they're actually incredibly good. So I'm gonna do the right thing and dump my questions, at least for the moment, and go to them.
And I'd like to start with a very big one, which is around the relationship between trade and globalisation,
and in particular, whether you think the current both the situation with the pandemic,
but also, well, let's describe it as it is the fairly frosty relationship with many of the the bigger countries around the world.
Is that going to affect the degree of globalisation, do you think?
Well, we see these shortening of supply chains, as is often feel that this is an excellent question coming out.
I mean, a lot of people are wondering whether globalisation will be rolled back.
The US China trade war is not over. The US EU conflict is brewing.
Many leaders will be tempted to protect their markets.
And that may become very popular with the public. The public still has in mind the images of shipments of BP equipment being seised at the borders.
So I think it would be very easy to sell to use resilience as an arrow to it for protection.
Now, we did worry about protectionism during the financial crisis, but back then,
G20 issued a statement very early on expressing commitment to free trade.
This time we have not seen such a state. And because every government is extending help to its funds,
it will be very easy to make a case that imports are subsidised and used existing exceptions under WTO rule and introduced countervailing duties.
So in the absence of global leadership, the world sneak walk into protectionism.
Yeah, I think that's that's a really interesting point, which I am thought of. I mean, it's probably obvious if you're in international trade.
But the fact that there's so much support out there for firms gives the brilliant cover for protectionist responses.
That's a great point. I've got to, again, sneakily ask one of my own questions.
That difference in trade dropped between just, say, the French and the Germans.
Friends and neighbours as they are 40 percent to 20 percent.
It does lead you to wonder exactly what the drivers were and given your work,
which was just really interesting around the difference between the drop in pay or pay and private,
which I love that phrase and ensured trade with the letter of credit.
Is it that the French are more likely to pay and pray?
Does the strong Catholic religion give them more succour and they do more praying and paying than the Germans or what?
What is behind the difference? You know, so we haven't looked at it in detail.
I suspect some of it could be differences,
geographic differences in what our exports are desperate for us as Germany shakes happily with China simply may have been affected, perhaps more.
But, you know, we know that Eurozone has been slowing down and that's why we've seen a decline already before.
And that's presumably something you could cheque, I guess, in your data set, because it sounds like it's quite rich.
But the China example does make a lot of sense. Let me move to another question, which is also one on my list.
So so I should actually credit rich cash from India for that last question about globalisation.
Thanks for Tache. This one is from John Rosenfield about the role of block chain or Hollard chain.
I have to admit, I'm not on top the whole of China, but the role of block chain in playing a role in international trade contracts post copeton.
And I guess the question that I had that's related to this, I mean, two hundred thousand correspondent banking relationships lost.
It's a phenomenally large number and it's kind of, as you say, a worryingly large number of international trade, particularly with,
you know, less developed economies, unless there is some other mechanism that can kind of serve that role and could maybe not work hard.
But but it. But is there some other fintech arrangement that could replace the correspondant
banking relations and keep the wheels of trade working and running smoothly?
I. I do not know. That's my honest answer. But I hope that somebody would develop an alternative.
Now, let me tell you give you another reason why enthusiasm for trait's pinus has been dampened.
That's because under Basel regulations, street finance is it receives high risk weighting.
So it's treated as risky transaction, even though in reality the default rates are tiny because transactions are based by collateral.
The goods that are being shipped now, you know, coming back to block your block chain,
help with Records' with either records that could prove what what has been transacted.
The problem always is enforcement and enforcement is it's costly.
So at the moment, it's actually my multilateral development banks that are stepping, stepping in and trying to fill the vault.
But, you know, the change that I'm happy to talk about are local value chains, because this is the other aspect of globalisation.
So what the pandemic did is it drew our attention to a low probability events and to draw
attention to the pretty good possibility that we may be facing more shocks going forward.
You, of all people, know very well that climate change is progressing and it's going to bring more adverse weather events.
So now it's not just pandemic. Is the possibility of more shocks coming forward.
Is uncertainty about policy, which created this realisation that a long supply chain means vulnerability to shoppers?
So the question is, will firms re optimise and move from just in time to just in case?
And they are under tremendous pressure from policymakers to do that.
President Macron spoke recently about economic patriotism and Warren Renauld got its five billion euro bailout.
It was strongly encouraged to bring high value other activities to France.
Japan is making funds available for its funds to reach shore.
And I was just on a panel earlier today with somebody from China who was talking about some value chains already moving to Southeast Asia.
But, of course, you know, building resilience is neither cheap nor easy.
And, you know, during an economic downturn, very few firms have the courage to increase cost and price.
And if you are a car manufacturer with hundreds plus first tier suppliers and hundreds of second tier suppliers, it's not a trivial task.
It's interesting. There's some kind of Trade-Off for tension between efficiency on the one hand and resilience on the other.
I'm just thinking about the analogy with the the energy system we try to understand better than that trading system.
So this is some part of it where you often find people thinking that energy independence gives you that resilience, not energy security.
But actually you look at the data and it isn't necessarily true. Having an international liquid market in a particular product like LNG can lead
you to have greater security than if you're trying to do everything at home.
And I guess I'm wondering whether there's an analogy there with just the general goods and services
markets where actually resilience isn't necessarily served by shortening your supply chains.
Maybe it's by thinking a bit more strategically about precisely how those supply chains are structured and where and with whom they connect.
I don't know. What do you think of that idea? There exists at Trueblood Pala.
So policymakers politicians actually not often say you don't need to be sure to increase resilience,
but it's a flawed argument because any country is subject to shocks such as flooding strikes right at birth, whether some countries have earthquakes.
So in a sense, bringing production home doesn't solve the problem.
What solves the problem is diversification. So double sourcing and but, you know, it's precisely this double sourcing that increases the cost.
Now, you know, in terms of. And food and the argument is often made, right?
We need to be self-reliant. That's the wrong things to do. What the way to solve this issue is stockpiling strategic stockpiling.
And, you know, in Britain, there were some shortages of food early in the pandemic.
There were no shortages in Switzerland. Switzerland has stockpiles of food.
This is done by the government in connexion with the large supermarket chains.
And it's cost 12 euro per head per year and incredibly cheap way of ensuring supplies.
How fascinating.
It is definitely an analogy there with with the energy storage space, again, which I know better than than here, where you can look at the amount,
I mean, so-called stockpiling that's affected the same thing, where you you insure yourself that you've got the supplies that you need.
And in the event of something going wrong and in a way, I mean, while it feels like this pandemic has increased costs,
you could argue that this brittleness of the system, this lack of resilience was always there.
And we were just instead of bearing those costs, like you might take out insurance on an annual basis to cover yourself when a shock does happen.
We've just been made brutally aware that we didn't really have the systems and the insurance in place.
So the system might be more costly on a year on year basis.
But actually, by eliminating these very nasty shocks,
you're probably you're potentially you're better off by paying for the insurance, as it were, rather than just suffering the shock.
I guess you'd agree with that? Well, I think previously we made or firms made a calculated decision that it wasn't insurance wasn't worthwhile.
I was shocked before that. Well, you know, the Japanese earthquake in 2011,
which meant that Japanese auto makers in the U.S. stopped production because they couldn't get pricing components.
But the perception was, you know, an earthquake is a one off.
It's not going to come back tomorrow. But this time it's different and it is different because we have two shocks.
We we have pandemic and we have uncertainty about trade policy for the past 20 years.
We've been taking stable global trading rules, low stable tariffs for granted.
I think we no longer can take that for granted. So it's the two types of shocks.
And the idea that they are likely to come back.
And that's, I think, what will increase the need for foreign choice for action right now is an interesting question.
Come in here from the NSA about the psychological effects of CADAVID and the implications for the trade regime and for global markets.
And, of course, I mean, a lot of economics is around expectations fulfilled or otherwise, and animal spirits.
And you've already referred, I guess,
to ways in which behaviour is changing because people have had a kind of cognitive shift in the way they see the world.
So, Vanessa. Vanessa's question is, will this change perspectives, I guess, around the trade regime, but also about the significance of consumption?
I mean, are we more likely to buy locally sourced goods locally?
Is there any evidence of that in the data or do you have any personal views on that?
So I think the most basic question is, are we going to change our consumption behaviour?
So now the challenge is how do you you know, if governments say lockdown's are over?
But how do you get people to go out and start?
So I think this is the first issue. How do you revive the hospitality industry if people may still be hesitant to travel, to go to restaurants?
And also because millions of people, tens of millions of people have lost their jobs.
People may increase precautionary savings, so they may be less willing to spend.
And then, you know, there is this whole issue of expectations and expectations related, for instance, to the future of trade policy.
So if you remember the deal that has been made between the US and China,
essentially China promised to import a certain amount of of goods from the US.
And people tracking this say that, you know, that China is not on track to buy all these goods that they promised.
So that means that there is there will be scope for reigniting of the conflict.
And it is partially, you know,
the reason why some observers are already commenting on the global value chains
moving away from China to Southeast Asia to avoid tariffs on on Chinese products.
I've got a kind of personal interested question. I've just spent three and a half hours with business school students on energy access.
And one of our guest speakers, the chief executive of a business in India,
noted that tariffs on clean energy had been really harmful to sat on panels and etc. been quite many batteries in particular,
been harmful to the deployment of cleaner energy and renewables in India.
I just I guess I'm wondering, given what you say about the potential rise in tariffs for a bunch of reasons,
actually, do you do you think that tariffs are harmful?
For a number of reasons, obviously.
And you probably got some measure of the welfare cost of these kind of events that's presumably in the tens or hundreds of business billions.
But I'm just wondering if there are consequences for energy, for health care, for other sectors of real social significance as well.
I think you know, that the big discussion now we are having in Europe is about carbon adjustment taxes collected at the border.
Right. So in a sense, if Europe gets serious about carbon prices pricing,
then there will be a need to prevent the kitchen by by essentially charging the same equivalent of that on imports.
And because it's incredibly difficult to implement something like this,
I think this will create a lot of uncertainty about treatment of production outside of Europe.
And this will be another factor that may incentivise firms to bring production back to the European Union, because this will give certainty about how.
Carbon taxes will be assessed. I think it's just too neat.
This is the biggest issue now. You know, interplay between environment and trade.
My my view has long been, and I'm know accords with many, but perhaps not all other economists.
That carbon border adjustment is in a way,
it's a pro trade policy because you're levelling the playing field between domestic and international competitors.
So everybody's paying the same carbon price. I haven't actually ever ask you this question.
But as an international trade expert, as you see it the same way or what you see it as a kind of dirty protectionist strategy.
You know, the devil is in the details. The devil is how you implement it.
So it could be used as a force for good.
It could be used to focus the minds off of European trading partners to take action on carbon pricing.
Presumably, if they have if they do something on that front, there will be no need for carbon adjustment talks.
But, of course, it could be misused as a protectionist measure.
That is a fair enough answer. If I may just add.
Yeah, I think the only way it can be made compatible with WTO rules is if you say it doesn't discriminate between domestic and foreign producers.
Right. And, you know, that would provide some assurance that it's not protectionist.
But, of course, you know, with global value chains, with goods and building components from many countries,
it will be incredibly hard to do that calculation.
My my response to that kind of concern has been, in fact, you don't need to be don't need them to be identical.
You just need to favour the other producer rather than your domestic producer.
More so provided your erring on the side of caution and imposing a lower carbon border adjustment on importers rather than on your domestic producers.
You're probably sites. You're under WTO rules, you will be safe, but then you will then be popular with domestic producers.
Right. And, you know, you need to be able to get and buying into the policy.
And mind your population.
But then if we're starting from no border adjustment, it's this is this also not a case of not letting the perfect be the enemy of the good?
I mean, your domestic producers would be would be would prefer to have something rather than nothing.
And something is a lot better than nothing, even if it isn't perfection and having absolute equality between domestic and international producers.
Well, my sense is that, you know, this would be introduced in conjunction with increasing the price of content.
And that's our idol. I say, you know, the biggest challenge at the moment is, you know, we are spending tons of money.
Every government is we would like to use the money to promote climate change mitigation efforts.
But you don't want you know, you still want to get to buying from the population, from the business community.
And it's incredibly hard to to sell the idea that we will increase carbon taxes at the time of very severe economic downturn.
Thanks. So we've got a couple of questions from Ben and from John, again, Rosenfield,
about trade finance effectively and whether the this could be delivered by a nation state, stem cells.
And I guess to some extent it is with with Exim Bank and so on,
whether or whether private sector banks should be taking a lead in managing these
letters of credit and insurance products for for the international trading regime.
After me, I don't know enough about this as I should. But is this dominantly private or public?
And do you think there has been or could be a shift one way or the other?
So, you know, there is a huge industry providing trade finance, you know, private industry.
Now there are government agencies that provide export guarantees and, you know, Exxon X in banks, you know, are sponsored by governments.
I think the key question is how to make sure that whatever is provided by the state is not perceived as state aid run.
Well, that this is this is the big issue.
And in a sense, you know, one of the most thorny issues that need to be resolved at the WTO is state aid provided by China.
You know, if you go back to 2000 when China joined the WTO on what was perceived back then as very tough times.
But, you know, over 20 years, it like it grew incredibly fast.
It became a much more important market. And also back, you know, 2001, it was still the time, you know, end of history.
Everybody assumed a state owned enterprises would go out.
We all would go away. Right. China would move away from state owned enterprises.
This has not happened yet. And now, you know, the WTO rules are not being fit for purpose.
And I think, you know, I would expect tightening of rules on state aid going forward.
And I think that's why state intervention here may be difficult if it's on a large scale.
Yeah, that makes sense, actually, that we would be heading in that direction. It leads me to one of the other reflections I had as you were talking.
This is a little bit more perhaps tangential,
but given the amount of injections into the into various economies where you've had and the potential for inflation down the line,
possible possibly currency movements as well.
And the context where NoDoz, this U.S. Chinese dispute about whether the Chinese were an exchange engaging or exchange rate manipulation.
Have you noticed any of this going on during the carbon price crisis where where there have been big,
I guess, monetary responses that have shifted exchange rates that have affected trade patterns?
Or is that too early to say or perhaps too marginal an issue?
Well, what was striking early on was that many emerging market currencies lost value.
And one of the trade consequences of that was that suddenly it became more
attractive for domestic food producers to export rather than sell domestically.
Emerging market governments started being worried about food inflation, so they started imposing export bans on agricultural products.
And that was extremely worrisome because it had a cascade that we could have artificially created a spike in food prices,
even though there is absolutely no concern that we would have a shortage of food.
And, you know, 10 years ago, we had a case of such spikes.
Fortunately, this time, many of these governments have decked out because, you know,
these these export bans, the restrictions are very harmful because they fuel this protectionist rhetoric.
Right. You know, countries are exports. We need to be resilient. Therefore, we need to protect.
That makes makes sense and it's fascinating how these interconnections can emerge in ways that you hadn't.
Well, I certainly hadn't anticipated that. I yeah.
Very interesting. There's another slightly off the wall question here.
I hope John won't mind me saying that, but what is the relationship between big data and artificial intelligence in the trade regime?
And could this shift as we move into a post Kofod trade regime?
Wow, what a question. I think all trade economists tend to be a very conservative bunch.
So the most adventurous papers I've seen were on 3D printing.
And trying to ask, you know, will 3D printing lead to a decline in international trade?
Right. Why should goods if you can just print them?
And you know, at least that this study I have seen it, which was actually focussing on a pretty particular product.
Hearing aids. Where are you this pregnant? You third into the aether. And 3D printed out.
The answer I gave was no, actually, trade will not you know, it could actually be printed, could be trade promoting on big data.
I don't see why it would harm trade. I asked you could see the positives.
Right. You are better able to assess where the demand is.
You know, using using information, you don't need to sell high frequency information.
So that's good. That could allow you to target your shipments.
And you are in make production more responsive. That makes sense.
I'd like to take you back, though, to the point that 3D printing could be trade promoting, at least in hearing AIDS patents and other goods as well.
But what is the underlying economics that that does promote that?
I mean, I guess I probably need to know the cost structure of the sorts of goods that are 3D printed.
Is it energy? Is it the raw materials and then the trading,
the costs of actually moving the goods around to have a sense of why this could be trade promoting rather than trade reducing.
So in this particular paper written by Caroline Floyd and co-authors from the World Bank,
I believe the argument was was the following before when you were getting a hearing aid, somebody had to take an imprint of your ear.
This had to be shipped somewhere as somebody made in that rich country factory
in France is Denmark is a country that specialises in production of Q&A.
So in the context of the shift and in this factory, in a high cost country, they would produce the piece that you needed using 3D printing.
Cut the cost. Increase the speed. But primarily by cutting costs, it made it affordable for more people.
So it expanded the markets. Oh, I see.
So now you have your earpiece made locally, then you are just buying the actual electronics that's needs to go inside that piece.
But the is still made in the no longer made in Denmark or they asked made in demo.
So the idea was that you know, you locally get to do the plastic part that gets into your ear toward buying the electronic always.
The Governor, Mark Sanford instigated it actually, so that for most expensive markets and that's, you know, increases trade, I say.
So another way of putting it is perhaps that you've got components of a good that can be 3D printed components that can't.
And if you expand the market for the overall good, then the components that aren't subject to this technology are still going to be traded even more.
Yeah. OK, now I wanted to actually.
We're running out of time here, but we got time for one last question and I might ask about trading services.
I've been mainly focussed on trading goods in this discussion.
Clearly, the trade in services domestically of haircuts has diminished.
So the classic example in your international trade, one hour one, and I could probably do with a bit more trade in haircuts myself.
But what are we learning about international trade in services?
So, you know, so we have, in a sense, exploited a lot of benefits that have come from low tariffs on goods and low transportation costs.
And that's why, in a sense, you know, that there has been a slowdown in global trade in goods,
in the growth rate of trade, in goods that pre-date three dates.
Call it so. Trading services exploiting differences in wages of skilled workers across countries is the next frontier.
And I think here we may see an increase, you know, since the beginning of the pandemic.
Many people have been thrown into this giant experiment of working from home.
And once you cross the psychological border too remote to work, you know,
if you are a British farmer or a German friend, why do you have to constrain yourself to British or German workers?
You know, why not hire somebody from Poland, Bulgaria or India?
Now, obviously, there are some limitations, time zones and data protection regimes.
In some industries, there are requirements about where they tend to distort the ability to travel.
You know, we still want to see your employees once, once in a while.
But I think the fact that so many firms have tried remould work, many of them are going to stick with it.
And I think that's going to make them think seriously about hiring workers located somewhere else.
Yeah, that's a great point. I'm a Hans. Trade in services could get a real kick from this cross.
Interesting. I thought I thought that might be the last one, but I think I'm going to squeeze in one more.
I wanted to ask you so you can blame this one on me.
No. Anybody else. It's just it's a bit more of a parochial question.
Here we are. Well, it's here I am in Oxford facing Brexit.
Within less than, well, six months. I mean, formally, we've left.
But potential no deal scenario. And that's being led on top of a curve.
It induced economic downturn and trade issues. Where does this leave this particular country?
Are we facing the sunny uplands of global Britain trading with the rest of the world?
We're using our newfound freedoms. Or are we in a bit of a mess?
Well, Cameron, if you have broken your lack leg, doesn't matter that you broke your ankle as well.
It does matter, particularly when you are trying to learn how to walk with crutches.
So in a sense, you know, Kovack has been such an incredible shock to the economy.
Anything else that creates further uncertainty and increases costs of doing business now is less than optimal.
That's a lovely line about breaking your leg and breaking your ankle.
My fear is we might have broken one leg and then broken the other. Which is which is significantly worse.
Oh, no. Thank you very much for sharing all of your wisdom,
intelligence and insights from those two papers and for contributing to this special issue of the Oxford Review of Economic Policy.
Very grateful. And I'm sure those watching will be grateful to him.
Before we wrap up, I just wanted to note that again, joint with the Oxford Martin School,
we have three more sessions coming before the summer break and then some more coming in the new academic year with some authors in this issue.
Next stop on the 21st of July, which is in five days from today,
is Professor Colin Meyer and support Colea on reforming the UK's financial system to promote regional development in post in Britain.
So I hope you listening and will join me then to hear Paul and Colin.
And I hope you'll join me again, at least virtually.
I'm afraid that you're not going to hear the riotous applause in the audience in the lecture theatre and the old Indian Institute on Broadstreet.
Take it from me virtually. We're very grateful. Thank you very much. Thank you very much.
Thank you for having me.