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Hello and welcome, you are 
listening to Patrick boil on 

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finance a podcast, exploring 
ideas, from quantitative Finance

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examining events occurring in 
markets right now and financial 

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history to see what lessons can 
be taken away including 

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interviews with some of the most
interesting people in the world 

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of Finance to learn more about 
the podcast, visit on finance 

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dot-org at an event in Arizona. 
A few months ago, marking the 

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opening of a new Taiwan 
semiconductor planned. 

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Morris Chang, the company's 
founder stated that 

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globalization is almost dead and
free trade is almost dead and 

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they're unlikely to come back. 
Globalization is a termed a 

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gained popularity after the Cold
War ended and it's used to 

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describe the growing dependence 
of the world's economies 

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cultures and populations on each
other. 

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What about by International 
Trade technology and flows of 

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investment people and 
information? 

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It's by no means a new idea 
countries have come together to 

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facilitate these movements over 
many centuries but the world is 

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more globalized today than ever 
before the wide-ranging effects 

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of globalization are complex and
politically charged. 

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As there are, of course, winners
and losers associated with any 

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big economic Accor social change
globalization has had a 

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significant effect on global 
growth, poverty reduction, and 

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inequality, both between 
countries and within countries. 

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Not to mention its political 
societal and cultural 

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consequences. 
It's not surprising. 

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That a potential reversal has 
become a major topic of 

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discussion. 
Trade tensions between the US 

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and China had been growing for 
at least a decade. 

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Cade and were accelerated by the
pandemic and the global supply 

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chain disruptions that ensued 
The geopolitical Fallout from 

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Russia's war in Ukraine added to
these global trade tensions, 

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raising serious concerns about a
decoupling World. 

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Some of the most influential 
investors on Wall Street Like 

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Larry Fink of BlackRock and 
Howard marks of Oaktree have 

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been saying that these issues 
may be permanently, altering the

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World Order think wrote last 
year that recent events, have 

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prompted government worldwide to
reevaluate their dependencies 

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and reanalyze their 
manufacturing and assembly 

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Footprints, Howard marks, iding 
the problems of Europe's, 

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Reliance on Russian energy, and 
Western Outsourcing of computer 

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chip. 
Manufacturing wrote that the 

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recognition of these negative 
aspects of globalization has now

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caused the pendulum to swing. 
Hang back to local sourcing 

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rather than the cheapest. 
Easiest, and greenest sources 

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that will probably be more of a 
premium, put on the safest and 

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surest Charles K of Warburg. 
Pincus told the Ft, the 

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geopolitics had been on The 
Fringe of the way we taught 

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since the fall of the Berlin 
wall and that that had provided 

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a certain oxygen to Global 
growth. 

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However, he said geopolitics is 
now front and center, Center in 

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investment decision-making. 
Talk of D, globalization 

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nearshoring on Shoring friend 
Shoring. 

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And reassuring has been growing 
on corporate earnings calls to 

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according to sin t 0, financial 
data firm based on their 

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analysis. 
So is the global economy. 

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Actually D globalizing. 
And if, so, what's next? 

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Historically, limitations on 
Transportation meant that goods 

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were Close to their point of 
consumption as Transportation 

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infrastructure, grew it became 
possible to separate production 

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from consumption by at first 
hundreds and eventually 

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thousands of miles. 
Eventually Goods could be 

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produced where labor was either 
most available most affordable, 

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or most skilled at producing a 
particular good allowing the 

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benefits of specialization to be
maximized after World War 2 Chi.

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Cheap labor, and modern 
manufacturing techniques, led to

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the rise of Japan as a 
manufacturing and exporting 

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Powerhouse. 
I made a video on that topic, a 

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few months ago, as shift to 
Manufacturing in China began to 

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really build momentum, by 
around, 1995 Asia's, ability to 

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manufacture cheaply. 
LED American companies to build 

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factories abroad and higher 
Asian contractors to do 

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manufacturing for the The result
was more jobs abroad economic 

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growth for the countries, where 
the manufacturing was being 

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done. 
Increased competitiveness for us

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importers and cheap goods for 
American consumers. 

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Offshoring, kept inflation low 
in the United States over the 

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last 40 years to the personal 
consumption. 

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Expenditures, deflator measure 
of inflation Rose by only one 

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point eight percent per year 
from 95 when Chinese exports to 

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the US started to, really pick 
up pace through to 2020 the 

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price of durable goods. 
Actually fell by almost 40% over

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the 25 years in question. 
Making life easier on many 

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Americans. 
The other side of the coin is 

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the globalization allows 
production to occur. 

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Wherever, the costs are lowest 
and this offshoring led to the 

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elimination of millions of 
Americans. 

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All types, the hollowing out of 
the manufacturing regions and 

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middle class and the weakening 
of private sector labor. 

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Unions, making life harder for 
many Americans. 

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For the past decade economists, 
have been debating the future of

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globalization, pointing out that
since the financial crisis of 

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2007-2008 World Trade has been 
growing more slowly than GDP. 

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A reversal of an earlier Trend 
observed during The 20 years 

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that marked the era of so-called
hyperglobalisation 1989 through 

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2009, the slowing of 
globalization has become 

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intertwined with discussions of 
supply chain resiliency, over 

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the last few years Europe's 
Reliance on Russian energy led 

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to a greater focus on supply 
chain diversification in the 

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wake of the Russian invasion of 
Ukraine additionally in the 

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United States. 
There's been a lot of talk about

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Job losses to low-wage 
International competitors. 

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A recent paper by Penelope 
Goldberg of Yale University and 

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Tristan read of World Bank digs 
into the data that has 

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traditionally been viewed, as a 
reasonable measure of 

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globalization things like trade 
flows, Capital, flows, labor 

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movement across the world, 
measurable items like that. 

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They also look at. 
Government policy changes and 

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changes in sentiment that can be
found in the data to they 

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analyze the occurrence of 
certain terms and phrases in 

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news. 
Articles, for example, to 

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understand how public discourse 
has changed over time, they 

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break down a lot of the data by 
country to to show how different

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countries are having different 
experiences of globalization. 

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The authors describe three 
phases of the Down in 

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globalization that has occurred 
since the financial crisis. 

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The first phase starts around 
2015 with concerns, about the 

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impact of import competition 
from low-wage countries, 

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especially China on the labor 
market and impact of refugee, 

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flows primarily in Europe. 
This phage is marked in Europe 

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by brexit and in the US and 
China by increasing tariffs on 

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one another. 
They Say that the economic 

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effects of this phase were 
meaningful but not sufficient. 

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To reverse decades old 
globalization Trends. 

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The second phase, according to 
Goldberg and Reed played out 

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during the pandemic. 
When new argument against 

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International Trade, began to 
emerge. 

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These were driven by temporary 
shortages of PPE like face masks

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and other items that could be 
blamed on fragile Global Supply 

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chains. 
There was public outcry around 

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the world for export bans, on 
certain items that were deemed 

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critical in the fight against 
covid. 

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The authors argue that, if 
anything trade, increased 

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economies, resilience during the
pandemic, but they argue that 

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the extensive coverage of some 
of the difficulties by the 

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Press, contributed to the 
villain ization of globalization

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and laid, the groundwork for 
phase 3, the Third Phrase, 

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according to the paper began 
with the Russian invasion of 

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Ukraine last year and provided 
possibly the strongest argument 

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of all for rethinking, 
globalization concerns about 

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National Security Europe's, 
Reliance on Russia for energy 

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exposed, a real weak point, the 
new term friendship during 

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entered, the international 
trade, vocabulary, the example, 

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provided by Europe's Reliance on
Russia. 

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Fur a critical. 
Led to strong policy actions by 

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the US that included sweeping 
export restrictions in the 

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semiconductor sector targeting 
China, Goldberg, and read. 

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Say that these developments can 
be plausibly considered the 

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markers of a new era in 
international trade and 

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globalization digging into the 
data. 

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A popular measure of 
globalization is international 

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trade in goods and services. 
World Imports can be seen to 

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have grown rapidly over the last
30 years, including after the 

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credit crunch, as shown in the 
chart on screen right now, you 

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can also see that world Imports 
bounced back sharply in 2021. 

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After the decline in 2020 driven
by the pandemic, they shows the 

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longer-term resilience of 
international trade now when 

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measured as a share of GDP 
Imports have Likely declined 

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since the global financial 
crisis. 

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This is the trend that I 
mentioned earlier that has led 

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to concerns that the world has 
started D globalizing. 

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Since the credit crunch, because
the decline is small and trade. 

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As a percentage of GDP is still 
close to its highs. 

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A lot of people are describing 
this as more of a Slowdown in 

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globalization it's not exactly a
reversal of trend. 

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It can also be argued that 
slowing traffic Trade in goods 

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from this level is not a great 
indicator of any big problems in

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the global economy to begin 
with. 

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There's little reason to believe
that international trade in 

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Goods, should have continued 
increasing at the previous 

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decades. 
Pays, there are practical 

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constraints on how many goods 
were ever going to be shipped 

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around the world rather than 
being locally produced things 

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were bound to slow down 
eventually. 

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Additionally, some Of the 
flattening out, likely reflects 

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the fact that countries 
increasingly produce and consume

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services and move away from 
Goods as they develop and 

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services tend to be more local 
in nature. 

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Looking at trade in intermediate
Goods which are Goods that are 

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used to make other finished 
goods. 

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We can see the trade in 
intermediate Goods has grown 

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since 2019 a period that 
incorporates the slump during 

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the pandemic This growth can be 
seen as a measure of countries 

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continued participation in 
global value chains, where 

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different stages of production 
processes are happening in 

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different countries. 
Looking at a longer-term graph, 

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you can see that intermediate 
Goods Imports are a declining 

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share of GDP in China and India 
as both countries. 

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Now, produce more inputs 
domestically these two economies

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are becoming less reliant on the
Economy for inputs, though, it's

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much more subtle. 
There's also a downward Trend in

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intermediate, Imports in Germany
and the United States to in the 

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rest of the world. 
The trend is slightly upwards. 

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So some countries are 
participating more than others 

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in Global Supply chains. 
Another way of looking at 

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globalization is to examine the 
stock of inward foreign direct 

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investment the chart on screen 
right now. 

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Shows the globalization of 
capital markets in the United 

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00:13:33,500 --> 00:13:35,500
States and the rest of the 
world. 

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The stock of inward FDI 
investment accounts is valued at

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00:13:40,300 --> 00:13:43,800
nearly 60 percent of GDP and 
shows. 

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No major downward Trend in 
Germany. 

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In word FDI, as a share of GDP 
grew until the global financial 

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crisis and has not yet recovered
to that Peak. 

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China experienced a boom in FDI 
in the period leading. 

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Digging up to its boom, and 
exports osted. 

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00:14:02,800 --> 00:14:07,000
India the stock of inward 
migrants shown on the screen 

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00:14:07,000 --> 00:14:11,000
right now, measures the 
globalization of Labor markets, 

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Germany. 
And the United States have 

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00:14:13,100 --> 00:14:16,800
absorbed migrants as an 
increasing share of their 

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00:14:16,800 --> 00:14:20,400
population. 
We Germany recently surpassing 

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the United States in migrants as
a share of the population as it 

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00:14:24,800 --> 00:14:29,500
absorbed a huge number of 
refugees in the 2010s. 

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China and India are homes too 
far, fewer migrants as a share 

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of their population. 
And this trend appears flat in 

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00:14:37,700 --> 00:14:42,800
these countries, these charts 
show that the growth of trade as

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a percentage of GDP has stalled 
since the financial crisis, and 

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00:14:47,700 --> 00:14:52,000
even declined in some cases, but
Trends in capital and labor 

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00:14:52,000 --> 00:14:54,500
markets. 
Tell us somewhat different story

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combined. 
These Trends suggest that it's 

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00:14:57,500 --> 00:15:02,400
probably too early to talk of 
Globalization, especially when 

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the Slowdown of global trade 
might be reasonable to expect 

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after its earlier period of fast
growth which possibly reflects 

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the growth of the domestic 
Market of two, large formerly 

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00:15:15,900 --> 00:15:20,400
low-income countries, China and 
India s d. 

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Globalization Trends are quite 
different in different 

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countries. 
While the United States and 

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00:15:26,100 --> 00:15:29,800
China seem to be gradually. 
Decreasing their Reliance on On 

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00:15:29,800 --> 00:15:32,900
global markets. 
This is not at all true for the 

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00:15:32,900 --> 00:15:36,700
rest of the world. 
While the data doesn't yet show,

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00:15:36,700 --> 00:15:41,400
strong signs of D, globalization
already happening, the trade 

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policy. 
Environment has changed 

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dramatically over the last five 
years, especially in the United 

234
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States. 
This matters as these policy 

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changes will drive how trade 
goes in the future. 

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Since the end of World War Two 
global trade barriers had been 

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gradually fall. 
Length and a variety of trade 

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00:16:01,600 --> 00:16:04,500
agreements allowed, many 
countries to become more 

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integrated in World Markets, 
several developing countries 

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reduce their tariffs 
unilaterally, and joined the 

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World Trade Organization. 
The Us and other advanced 

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00:16:16,200 --> 00:16:20,100
economies played a leading role 
in the reduction of trade 

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00:16:20,100 --> 00:16:24,500
barriers and the design of the 
World Trading System. 

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The picture changed dramatically
in 2018, when the u.s. announced

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Our first set of tariff 
increases targeting several 

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countries but especially China. 
Eventually these tariff 

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increases led to a tariff war 
between the US and China. 

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00:16:41,900 --> 00:16:46,500
The world's two largest 
economies the u.s. also imposed 

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00:16:46,500 --> 00:16:50,900
tariff increases on steel and 
aluminium imports from nearly 

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00:16:50,900 --> 00:16:54,400
all countries. 
There was no real change in any 

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00:16:54,400 --> 00:16:59,000
of these policies when the US 
Administration changed with the 

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00:16:59,000 --> 00:17:02,200
US are During the these 
terrorists were necessary for 

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00:17:02,200 --> 00:17:06,800
national security purposes. 
Over the last year, there's been

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a clear shift in the u.s. 
approach to international trade,

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in the name of supply chain, 
resilience and National 

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00:17:14,200 --> 00:17:17,099
Security. 
There were sweeping export 

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00:17:17,099 --> 00:17:21,200
restrictions placed on the 
semiconductor industry justified

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00:17:21,200 --> 00:17:25,700
in the name of National 
Security, the chips act provided

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00:17:25,700 --> 00:17:29,600
multibillion-dollar support for 
the development of the 

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00:17:29,700 --> 00:17:32,700
semiconductor industry in the 
United States. 

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00:17:32,900 --> 00:17:37,200
A number of Provisions, in the 
inflation reduction act have led

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00:17:37,200 --> 00:17:42,000
to EU complaint that subsidies, 
and tax credits, discriminate 

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00:17:42,000 --> 00:17:46,700
against products, imported into 
the u.s. to the detriment of 

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00:17:46,700 --> 00:17:50,700
European companies. 
There is, of course, a risk that

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00:17:50,700 --> 00:17:55,100
the EU might respond to this 
with legislation of its own, as 

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00:17:55,100 --> 00:17:59,900
right now, us companies are not 
similarly disadvantaged in The 

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00:17:59,900 --> 00:18:04,500
EU there is some evidence that 
while the trade war between the 

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00:18:04,500 --> 00:18:07,300
United States and China reduced 
trade. 

269
00:18:07,300 --> 00:18:10,500
In the targeted product 
categories between these two 

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00:18:10,500 --> 00:18:13,500
countries. 
It boosted trade between other 

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00:18:13,500 --> 00:18:16,000
countries and the rest of the 
world. 

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00:18:16,000 --> 00:18:19,600
In the same products, the 
countries that showed the 

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00:18:19,600 --> 00:18:24,100
largest export growth to the 
rest of the world were countries

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00:18:24,100 --> 00:18:28,500
with expansive trade agreements.
So the trade conflict between 

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00:18:28,500 --> 00:18:32,700
the world's two largest Largest 
economies did not simply cause 

276
00:18:32,700 --> 00:18:35,300
reallocation of global trade 
flows. 

277
00:18:35,500 --> 00:18:39,000
It also generated, new trade 
opportunities for other 

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00:18:39,000 --> 00:18:41,600
countries. 
The professor's argued. 

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00:18:41,600 --> 00:18:45,800
That just as economic variables,
respond with a like to policy. 

280
00:18:46,100 --> 00:18:50,200
Policy responds with a lag to 
public sentiment and attitudes. 

281
00:18:50,400 --> 00:18:54,700
So they tried to quantify the 
change in public sentiment with 

282
00:18:54,700 --> 00:18:59,000
regard to International Trade 
sentiment is, of course 

283
00:18:59,000 --> 00:19:00,400
difficult. 
Measure. 

284
00:19:00,600 --> 00:19:04,900
But they used text analysis to 
get some sense of how frequently

285
00:19:04,900 --> 00:19:08,100
people talk about. 
Things like reassuring or friend

286
00:19:08,100 --> 00:19:12,300
Shoring or China. 
Plus one, these days the paper 

287
00:19:12,300 --> 00:19:16,900
points out that the use of the 
phrase National Security shows 

288
00:19:16,900 --> 00:19:21,600
up in a higher percentage of 
news articles today than it did 

289
00:19:21,600 --> 00:19:24,100
immediately. 
After the September 11th 

290
00:19:24,100 --> 00:19:27,800
attacks, this is maybe a little 
bit, surprising. 

291
00:19:28,200 --> 00:19:31,800
The authors found And that the 
public still views trade as 

292
00:19:31,800 --> 00:19:35,800
being beneficial to the economy.
But that there's an increasing 

293
00:19:35,800 --> 00:19:40,100
skepticism about the benefits of
participating in the global 

294
00:19:40,100 --> 00:19:42,600
economy. 
The paper argues, that 

295
00:19:42,600 --> 00:19:46,700
governments are not actually 
responding to private sector 

296
00:19:46,700 --> 00:19:50,200
demand our voter Demand with 
these new trade restrictions, 

297
00:19:50,500 --> 00:19:55,100
but are instead driving this 
trend, the data shows that right

298
00:19:55,100 --> 00:20:00,000
after covid firms were looking 
to add new suppliers to Find 

299
00:20:00,000 --> 00:20:03,000
their supply chains. 
But crucially, they were also 

300
00:20:03,000 --> 00:20:06,500
trying to maintain their 
relationships with their 

301
00:20:06,500 --> 00:20:10,500
existing suppliers. 
Well, companies might be aiming 

302
00:20:10,500 --> 00:20:14,500
to reduce their Reliance on a 
single country for supplies. 

303
00:20:14,700 --> 00:20:18,500
Especially after the lessons 
learned from over-reliance on 

304
00:20:18,500 --> 00:20:22,100
Russia by Europe. 
It's worth noting how difficult 

305
00:20:22,100 --> 00:20:26,000
it would be to significantly 
reduce American trade with 

306
00:20:26,000 --> 00:20:30,100
China, in the near term Apple 
has Diversified Fide, their 

307
00:20:30,100 --> 00:20:34,400
supply change by manufacturing. 
All of their main product lines 

308
00:20:34,400 --> 00:20:38,400
in more than one country, but, 
because of the lack of trade 

309
00:20:38,400 --> 00:20:42,900
infrastructure, things like high
quality roads and ports in 

310
00:20:42,900 --> 00:20:46,400
places like India and Vietnam, 
where they've moved some of 

311
00:20:46,400 --> 00:20:51,000
their manufacturing, it would be
almost impossible to manufacture

312
00:20:51,000 --> 00:20:54,300
in these countries on the same 
scale that they're currently 

313
00:20:54,300 --> 00:20:57,000
Manufacturing in China at 
present. 

314
00:20:57,000 --> 00:21:01,000
China has an experienced 
Workforce, Horse and a huge 

315
00:21:01,000 --> 00:21:04,000
manufacturing base and skills 
pool that. 

316
00:21:04,000 --> 00:21:06,400
No other country can compete 
with. 

317
00:21:06,700 --> 00:21:11,400
If D, globalization began to 
materialize and a meaningful 

318
00:21:11,400 --> 00:21:15,200
part of the productivity gains 
that have been driven by 

319
00:21:15,200 --> 00:21:19,200
globalization were to disappear,
over a short period of time, 

320
00:21:19,500 --> 00:21:23,400
this would likely be 
inflationary and result in major

321
00:21:23,400 --> 00:21:27,200
trade disruptions and a 
protracted recession, major 

322
00:21:27,200 --> 00:21:30,700
economic Powers. 
Most likely Recognize this 

323
00:21:30,700 --> 00:21:35,900
reality a name to avoid such a 
devastating outcome, in complex 

324
00:21:35,900 --> 00:21:38,600
areas, like economics and 
geopolitics. 

325
00:21:38,800 --> 00:21:42,400
There are no easy answers. 
There are too many moving Parts,

326
00:21:42,500 --> 00:21:46,500
too many unknowns and too many 
pros and cons, whose merits 

327
00:21:46,500 --> 00:21:50,400
can't be easily Wade. 
They'll never be a perfect 

328
00:21:50,400 --> 00:21:53,600
answer and for that reason 
there's always a swing back and 

329
00:21:53,600 --> 00:21:57,600
forth as different ideas are 
expressed so far. 

330
00:21:57,600 --> 00:22:01,400
There's no evidence of Deep. 
Mobilization having already 

331
00:22:01,400 --> 00:22:05,600
started, but there is some 
evidence of a political will 

332
00:22:05,600 --> 00:22:09,300
within some of the largest 
economies in the world to make 

333
00:22:09,300 --> 00:22:11,700
changes to the way things are 
being done. 

334
00:22:11,700 --> 00:22:14,200
Thanks for tuning in to today's 
podcast. 

335
00:22:14,300 --> 00:22:18,100
If you enjoyed it, send a link 
to a friend, a special thanks to

336
00:22:18,100 --> 00:22:22,200
my patreon supporters, who make 
this all possible, have a great 

337
00:22:22,200 --> 00:22:24,800
day and talk to you again soon. 
Bye. 

338
00:22:25,500 --> 00:22:28,900
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