The video features an engaging discussion with Ambassador Ty at the Bloomberg New Economy Forum, addressing global economic challenges that have emerged since 2018. The conversation highlights significant issues such as world protectionism, national industrial policies, and geopolitical fragmentation, with a particular focus on the changes brought about by the COVID-19 pandemic. Ambassador Ty emphasizes economic recovery, job creation, and small business applications as key achievements within the Biden administration, advocating for middle-out economics to support these developments.

The discourse shifts to discussions on the influence of China in the global marketplace, specifically in industries such as steel and solar energy, and their implications for U.S. trade policies. Ambassador Ty underscores the necessity of creating resilient supply chains and managing economic relationships, particularly in the face of growing Chinese dominance. The talk explores how various sectors like solar module supply chains are largely dependent on China, which raises concerns about economic and supply vulnerabilities.

Main takeaways from the video:

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Key Vocabularies and Common Phrases:

1. protectionism [prəˈtɛkʃəˌnɪzəm] - (n.) - The economic policy of restricting imports from other countries to protect domestic industries. - Synonyms: (trade barriers, economic isolation, restrictive barriers)

A lot of people have talked about more protectionism, national industrial policies, geopolitical fragmentation.

2. fragmentation [ˌfræɡmənˈteɪʃən] - (n.) - The process or state of breaking or being broken into small or separate parts. - Synonyms: (division, disintegration, breaking up)

geopolitical fragmentation.

3. inflation [ɪnˈfleɪʃən] - (n.) - A general increase in prices and fall in the purchasing value of money. - Synonyms: price rise, cost increase, deflation (antonym)

We've brought inflation down to 2.6%.

4. bipartisan [baɪˈpɑːrtɪzən] - (adj.) - Involving or cooperating with two political parties. - Synonyms: (cross-party, nonpartisan, two-party)

I feel like, you know, I'm thinking about aerial gymnasts.

5. remedy [ˈrɛmɪdi] - (n.) - A means of counteracting or eliminating something undesirable. - Synonyms: (solution, cure, answer)

as of today, we have seen about a 60% increase of trade remedies.

6. domination [ˌdɒmɪˈneɪʃən] - (n.) - Control or superiority over someone or something. - Synonyms: (control, supremacy, leadership)

for global marketplace domination.

7. geopolitical [ˌdʒiːəˈpɒlɪtɪkəl] - (adj.) - Relating to politics, especially international relations, as influenced by geographical factors. - Synonyms: (international, diplomatic, global)

A lot of people have talked about more protectionism, national industrial policies, geopolitical fragmentation

8. resilience [rɪˈzɪlɪəns] - (n.) - The capacity to recover quickly from difficulties; toughness. - Synonyms: (hardiness, adaptability, flexibility)

We're really focused on trying to define an approach to resilience in supply chains

9. sovereignty [ˈsɒvrənti] - (n.) - Supreme power or authority over a territory. - Synonyms: (autonomy, independence, self-government)

sovereignty is a very, very important aspect of what we are trying to preserve in the world economy.

10. extraction [ɪkˈstrækʃən] - (n.) - The action of taking out something, especially by effort or force. - Synonyms: (removal, withdrawal, pulling out)

the degree to which that extractive model maps onto essentially a trickle down theory of economic growth.

In Conversation with T.H. Katherine Tai

Well, hello again and well done for sticking out. We've had a pretty exhilarating morning at times and covered a lot of issues, but I think in many ways we have the headliner now. Ambassador Ty, thank you so much for joining us at Bloomberg New Economy again, but in a different continent. We've had a lot of discussion and mention in the panels earlier today about how the economy, how the world has changed since New Economy was launched in 2018. A lot of people have talked about more protectionism, national industrial policies, geopolitical fragmentation. I mean, more than many people. You are living that dream as U.S. trade representative. I just wonder, we used to measure the success of someone in your job as had they opened, which markets had they opened, what tariffs had they lowered, what do you think of as success now?

So it's a great question and thank you for putting it in the context of the New Economy Forum. If it started in 2018, that means new Economy had just a couple years before the onset of the pandemic. And I know I had the pleasure of joining for the New Economy Forum in Singapore, I think it was two years ago, and had moved from being in China and Beijing to Singapore. And then of course, now we're all meeting in Sao Paulo. I think that when you're going to be charting the course of international trade policy, US Trade policies, you have to put it back into the context of our experience in the global economy.

So the pandemic is at the forefront of our minds still because when you think back to four years ago, in 2020, we were still really without vaccines, yet maybe they were just being produced and becoming accessible and everything was disrupted. These types of convenings were just not possible and were not responsible from a public health standpoint. So if you look at the US Economy today, I'm going to take the opportunity to do a little bit of a cheerlead. We've brought inflation down to 2.6%. We've created 15 and a half million jobs in the last three and a half years, which means that we've made up for jobs lost during the pandemic and we've created more on top of that. We've seen 18 and a half million new small business applications in this period of time. It's a time of a small business boom in the United States. And then most recently in September, you saw the Fed lower interest rates without our having to spike unemployment in order to cool down the economy. So overall, I know in the parlance of the finance folks, we would describe this as really a soft landing. And I've heard Janet talk about it that way.

Janet at Yellen, Something that's always confused me is why we would be talking about this in terms of an airplane, potentially an airplane out of control in many ways. I think if you look at our record over the course of the last four years, it's not really a soft landing that we've accomplished since the Olympics just happened. And they're still very fresh on my mind. I feel like, you know, I'm thinking about aerial gymnasts. I really feel like as the United States, as the Biden Harris administration, we have stuck this landing. The question then is, what's been the secret sauce? What's allowed us to navigate this very successful outcome from some very turbulent, very disruptive, and in many cases just tragic years?

And I think that you want to bring it back to the core economic vision of the Biden Harris administration, which is middle out economics. Building the economy from the middle out and the bottom up. That means leading an economic recovery that's middle out and bottom up. And all of that is in contrast to a top down, trickle down approach. So I would also then put everything that we have been doing in trade, all of the changes in direction and in metrics for measuring our success in that context of whether or not our trade policies have been supportive of middle out economics and whether or not we are bending those trade policies away from a trickle down approach that over time has left us with a lot of shortcomings.

Because I want to end here for all of the successes of navigating through the economic recovery and really sticking the landing. As we look at our economy and we look at the global economy, we still see structural challenges. Those go to our supply chains, which have been a real focus of our trade policy work and our trade architecture. But also, I just want to point out one of the things that became very, very apparent through the pandemic disruptions was the widening inequality in individual economies and in the global economy. And I think that even as we are very proud of the successes in our navigation through some very turbulent economic times, we still remain focused on taking on those larger structural challenges.

You mentioned 2018, Covid. I mean, obviously a massive theme of this period has been the ongoing challenge, conflict, tension, whatever between us and China and how that's changing the world for other countries. China has a palpably growing influence in this region. And you look at flows coming in to this country, there's a. It's one of the dominant sources of inflows in terms of private investment. You have President Xi Jinping is going to be in this region for nearly a whole week after the US election when the US May well be in flux. President Lulu is meeting President Xi in Peru and then hosting him for the G20 in Brasilia. How are you thinking about that? Is the US directly trying to counter or respond to that rising influence?

Let me put it this way. I think in trade, for a very, very long time, we've been concerned by the indications that we've seen of growing economic dominance of the PRC economy in the global economy, as represented by industries that have been grown strategically and intentionally, not just for dominance within the Chinese economy, but for global marketplace domination. We've seen that in steel, we've seen it in solar. We are now seeing it in EVs and batteries. And what I think is really interesting about today in 2024 is that across our administration, whether you're the U.S. trade Representative, you're the Secretary of the treasury, whether you're the Secretary of State or the Director of the National Economic Council, we are all focused on this challenge of Chinese overcapacity, excess production, and the impacts that that is going to have on very open economies like the US Economy. Now you have a growing unity of diagnosis and a growing unity of focus in terms of engaging with the PRC itself, but also with our partners from within the administration.

I know that our partners are situated differently around the world and we all have our different relationships with Beijing. Nevertheless, if you look at the data, as of today, we have seen about a 60% increase of trade remedies, investigations and cases being brought by emerging economies against the PRC. If you look at the data in terms of. Just look at solar, and this is really critical because for the clean energy transition to happen, we are going to be moving. Our goal is to move from a fossil fuels based economy, a resource based economy in energy, to one where energy is produced using technology and goods like solar panels. For example, if you look at the solar module supply chain, it's, it's fairly short. You start with polysilicon, you go to ingots and wafers, you go to cells which are then assembled into modules, and then the modules go into the panels that ultimately get installed.

As of today, China has between 80 to 100% of that module supply chain. So if you look at each one of the segments in that stream at the very, very upper end for polysilicon, China produces 83% of polysilicon. For ingots and wafers, 98% of ingots and wafers that go into cell modules come from the PRC, the modules themselves, I think it's at 81%. Sorry, the cells 81%, the modules 86%. Or I may have flipped those two. In any event, that is a very, very high degree of reliance that the entire world has on one economy. If you're just thinking about risk in supply chains, and we saw this with COVID where the one place that was producing all the things that we needed, PPE and masks, was the first place that had to be locked down, that's a tremendously concerning place for us to be. And as much as it is concerning for us in the United States, I just want to draw attention from your audience to the fact that this is a concern for all of us.

And just to follow up directly on that, do we consider it to be the same risk if we're reliant on Chinese producers in Mexico for those products or in Brazil? Because I think there has been this issue around the FDI coming into countries, you know, we have, is that, does that pose the same risk? Chinese owned factories producing these things, but close to the U.S. so for all of 2024, USDR has been carrying on a supply chain focused initiative and everybody works on supply chains. I know that you and many, probably all of your colleagues are reporting on supply chains. We're all obsessed with supply chains.

So within the administration, USTR looked at our competencies, which is really in trade policy, trade negotiations, trade enforcement. And the question that we pose to ourselves and to the general public has been, please share with us all of your wisdom on supply chains and the incentives for making supply chain decisions so that we can take another look at what kinds of trade tools, trade arrangements, trade policy approaches we need to create or harness in order to incentivize more resilient supply chains. We're really focused on trying to define an approach to resilience in supply chains. By the end of this year, our target is to have a series of white papers published to share with everyone our analyses and some of our conclusions. But in terms of the work that we've already done, we've identified four complementary dimensions that need to be taken into account in terms of supply chain resiliency.

So the first one is transparency. The second is diversity and diversification. The third one is security. And in terms of security, what we mean is trustworthiness, the trust that you have in the links in your supply chain and where those links are. And then the fourth one is sustainability. And that goes both to environmental sustainability and also human impact sustainability. So to get back to your question about Chinese investments and third countries and how we're thinking about those supply chain risks, we would raise those up against those four dimensions. What is the transparency in terms of those Chinese investments? What is the diversity that's represented? If it's outside of China, you've got some geographical diversity. But in terms of trust in terms of those companies, the relationship between those companies and the PRC government and the relationship between those, those companies and their host countries, and then finally in terms of sustainability practices, we are trying to develop this resilience tool that we can use in a very objective way to be looking at the risks, including the ones that you've identified.

So just to follow that thought in a sort of concrete way, if you have, for the sake of argument, Chinese owned electric vehicle factories in Mexico, they might score relatively lowly on those supply chain measures. Would that mean that you'd be looking to prevent them from getting into the US and how would you do that within the terms of the trade agreement? So the benefit of having the structure would be that we would be approaching the fact pattern that you've put out through the lens of we want resilient supply chains and so how do we incentivize resilience and how do we mitigate the risk of non-resilience?

We have seen some potentially concerning developments in terms of Chinese company acquisitions in Mexico to build factories. And a lot of the questions that we're asking include who will be working in those factories, what kinds of rights will those workers have, what will be the environmental and the climate, production concerns and considerations that are put into place. But ultimately, I think that one important question that we need to ask is in terms of the challenge of the PRC economy's place in the world, that very nebulous and often non-transparent connection between the state and the economic actor. And trying to understand that connection to get to the issue of trust in an increasingly geopolitically tense world, that value when it comes to trust and security is only increasing. And what we've seen from the PRC is a real willingness to reach for trade and economic levers, to exact consequences and punishment for political decisions that countries have taken. That is something that we need to be paying a very considerable amount of attention to.

I want to go back to that in a minute, but I think there's also just some sort of concrete things that also come up here in Brazil and go a little bit to this transparency issue and the rising influence of China. The Brazilian government is considering, we believe, quite seriously joining the Belt and Road initiative. How would you feel about that? It's a decision for the Brazilian government. So I want to be upfront about that. sovereignty is a very, very important aspect of what we are trying to preserve in the world economy, as well as openness to the extent that we can trust each other and democracy too. So first and foremost, that's a decision that is entirely up to the Brazilian government. That said, I would encourage our friends in Brazil to look at the risks in today's economy through a lens like the ones that we are using, through an objectivity lens, through a risk management lens, and to really think about what the best pathway is for forward, for more resilience in the Brazilian economy and in the world economy.

Supply chain fragility is one aspect of the challenge that we have. But I think that this is an area where a lot of my conversations with my counterparts around the world, including my Brazilian counterparts, where I've seen a lot of synergy is this desire to address these widening gaps in inequality around the world. And on this, I might just take a moment to say how much attention we paid to the Nobel Committee's recognition of AJR, Achimolu, Johnson and Robinson just last week in terms of their work in examining factors that contribute to successful and less successful post colonial economic outcomes. That element that they've identified, that the countries that have more inclusive post colonial institutions, economic and political institutions, have seen more success in terms of generating wealth vis a vis countries with more extractive post colonial institutions.

I think I've not had a chance to talk to either of those three laureates since they were awarded the Nobel Prize. But something that I'd like to explore with them is the degree to which that extractive model that they've identified as leading to poorer outcomes, the degree to which that extractive model maps onto essentially a trickle down theory of economic growth. And so what I would say coming, bringing it back is in terms of the path forward and the work that we have to do as the United States in partnership with our friends and neighbors. I think that we have a lot of common ground to be thinking about, how you use trade policy and trade tools to develop, enhance and reinforce inclusive economic institutions.

I guess a lot of people listening to this, we'll see here something that we see quite a lot in the Biden administration. It feels like there's an intellectual structure being built to defend a basic sort of political impetus which has been led by former President Trump, that we just don't want Chinese made cars flooding the US Whether it's from Mexico or from China. And he doesn't talk about the resilience of supply chains. He just says he doesn't want them and he's going to put a thousand percent tariffs or 200%. It varies. I know you can't get into the campaign itself, but it feels like a lot of this is all about trying to make it harder for the Chinese cars to get into the US.

One way or another. And ultimately that's also going to trigger a review of the trade agreement. Well, Stephanie, I feel like the way you've posed that question, while very, very friendly and with a smile, is in a way challenging whether or not I've been lying to you for these 20 minutes. And I just want to an intellectual justification for a political policy. I mean, I think if that's what you've taken away from this conversation, you've really missed everything that I've just said to you. Okay. Which is it's an intellectual framework that is placed in objectivity, that is not xenophobic, that is not about keeping the PRC down, but is about growing inclusive economies at home.

So that the parts of our population and our fellow Americans, our fellow Brazilians, who are really struggling today, struggling even more than they were before the pandemic, before the great financial crisis, and before the takeoff of this era of trickle down trade policies has hollowed out significant parts of our economy. And I know that in Brazil there is a huge, huge outcry when major auto manufacturers pulled out of Brazil and shut down production here. Those are not political. Those are about economics. It's about livelihoods and it's about the ability of a democracy to deliver livelihoods and hope for its people. That is the whole point of a democracy. So let me just end there. To say that an intellectual framework that we've put forward is undergirded by President Biden and Vice President Harris deep conviction that our democracy and its economic promise that these are the most important elements of what we have to deliver to our people.

Do you feel that the Mexican government under President Sheinbaum is an ally in that effort? I certainly hope so. And I look forward to having my first interaction with the new economy as secretary. Marcelo Abrard because there's a number, I guess we've run out of time, but I think there are a number of reforms that have happened. Legislation that's been passed since she was elected that have raised some flags, I believe for your department and potentially could trigger a broader review. We just wondered how you see that process proceeding, the judicial reform, for example, which has also raised concerns in the investment Committee.

The United States of Mexico have a very special relationship similar to the relationship we have with Canada. They are our closest partners and trading partners because as long as geography looks the way it does, they will always be our neighbors. It's a bit like being family that your siblings are forever going to be your siblings by virtue of how you came into the world. There is a lot ahead of us in terms of our work with Mexico. A lot of it I think very positive. And it will just require us to sit down at the table and start mapping out all the components of what we need to tackle.

You don't have a sense of the timing of that process or what the next steps would be if they were judged to be against the terms of the agreement. So I think that their administration came in. President Sheinbaum was inaugurated on October 1, so that was just over two weeks ago tomorrow for the trade ministers meeting. I don't believe that Secretary Abrard will be able to attend. That said, we are neighbors and it's a short, short flight between Washington and Mexico City, so I'm looking forward to sitting down with him.

A lot of my colleagues think that it's sort of almost a certainty that there will be a full review triggered of the US Canada Mexico Trade Agreement in the period next year, from next year. Do you share that expectation whoever wins the presidential election? So nafta, which has been reborn as the US Mexico Canada Agreement, is probably the most consequential trade agreement because of the close proximity we have to each other and also because this is really the newest of our agreements. It's the oldest and also the newest of our agreements. The world and the world economy are quickly changing around us and I think just on that basis alone there's going to be a lot for the three of us to talk about in terms of how we orient ourselves to ensure that the USMCA continues to be relevant to our place in the world and our relationship with each other.

A lot to talk about, but you don't know about triggering a formal review. I'm not even quite sure what that means, Stephanie, so perhaps we can talk about that a little bit more. There's a July 1, 2026 in the agreement and under statute the three countries have to come together and either affirm that they would like to continue the agreement or if there's any disagreement, it starts a 10 year wind down on the agreement. So July 1, 2026 is an important inflection point and I think that that's an important moment for us to be working towards. But if you under any. It just feels like whoever wins the presidential election that is likely to be. It's unlikely to just proceed without further review. I think the whole point of having that review is for us to use it.

Ambassador Ty thank you very much. Roderick. Lively conversation. Thank you. Thank you very much.

Economics, Global, Politics, Us Trade Policy, China-Us Relations, Supply Chain Resilience, Bloomberg Live