Submitted by Taps Coogan on the 21st of February 2019 to The Sounding Line.

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Allianz chief economic advisor Mohamed El-Erian recently spoke to Bloomberg about the ongoing global trade tensions between the US and its trading partners. Mr. El-Erian notes that despite fears about unpredictability, the negotiations hold the potential to place the global trade system on a more modern and potentiality more sustainable footing.

El-Erian:

“So, it’s very simple. Distinguish between the ‘what’ and the ‘how.’ Everybody agrees on the ‘what.’ Fair and free trade is in the interest of most countries and most people, not everybody. Two, it’s not enough for inclusive capitalism. Three, we have had problems accumulated in terms of non-tariff barriers, and four, we haven’t been able to fix them. People agree on that. Where they’ve disagreed is what do you do about it. So, the old wisdom was ‘this was a cooperative game…’ and you deal through it (with) cooperative negotiations and you don’t impose tariffs and you don’t punish. Along comes the Trump administration and says ‘that hasn’t worked in the past, I’m gonna do something different.’ Initially, the rest of the world said ‘Well… we’re going to retaliate.’ Now, Korea, Mexico, Canada, have realized that maybe this is an opportunity to modernize trade approaches and I suspect that China will do the same. So we may come out of this period of trade conflict with trade relationships that are modernized and less problematic. Is it an overwhelming probability? No, there is still a risk of a trade war. But I think it reflects frustration that the old approach wasn’t working… I think the European’s will follow suit simply because if they engage in a trade war with the US, they lose a lot more, and what the US has shown is a willingness to incur some damage domestically in order to change relations.” 

There is more to the interview, so enjoy it above.

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