Davos 2025: The West Finally Admits The "Rules-Based Order" Was A Lie | Silk and Steel

0:00Tyler Reddick here from 2311 Racing. Another checkered flag for the books. Time to celebrate with Jamba. Jump in at JambaCasino.com. Let's Jamba. No purchase necessary, BTW Group. Boy, we're prohibited by law. CCNC, 21 Plus, sponsored by JambaCasino. Hello and welcome to another episode of the Silk and Steel podcast. I'm your host, Carl Zah. While everyone, we have back on our show, Dr. Warwick Powell from Australia, who is an expert in geopolitics and specialized in China. And we have so many topics to talk about, Dr. Powell, because as you mentioned, it seems like the first, the last time we talked, I think it was only two weeks into the first month of 2026. You already felt like half year have passed. And now it feels like a whole year have passed.

1:00And we're barely through January. Is there anything you'd like to start? Because there's so many to talk about. Look, it might be worthwhile just doing a quick recap of the year that's been, I mean, the four weeks that has been right. And the probably the most significant events and we might kick off from here from when we last caught up is Davos and what happened around Davos. So prior to Davos, Mark Carney, the Prime Minister of Canada made a visit to China. And in some regards, undertook what is a reorientation, a vault phase, a strategic realignment or what have you. But what was probably most important out of that was a recognition by Carney that the environment for Canada had changed so much and so permanently that a fundamental strategic readjustment was needed.

2:03So whatever was going on around Canada was no longer viewed as a temporary issue. It was an issue of structural significance. And that's amazing because the United States, not only has a land border with Canada, a very long land border and one that has been peaceful for a long time, but is also the destination for about 70% of Canadian exports. It's also integrated into complex supply chains, right? So motor vehicles that are assembled in America often have parts that go backwards and forwards as they make their way through production systems in the most efficient way to ultimately become a motor vehicle that drives off the lot. And so untangling all of those things and putting all of those issues on the table in a sense at risk. In a year when the Canadian, American and Mexican paid agreement originally inked by Trump version 1.0,

3:07that's up for re-discussion six years on run. So all of this is in flux and for Mark Carney to take the view and clearly it was an Erasch decision. It was a considered intervention to say, look, we can't go on the way things have been going on. We need to recalibrate our economic relationships. We need to diversify for the long term interests of the Canadian economy. We need to reduce our export dependency and risks on one market alone. And China is going to be important for that. And it's important because Canada has agricultural products to sell. Canada also has energy to sell. So Canadian oil has been growing in terms of its export profile with China. And in the medium term, Canadian LNG is likely to also become available for the global market as the infrastructure is

4:08finalized. On the other hand, Canada clearly is looking to transform its economic foundations with new technologies in particular EVs. So having played along with the United States on tariffing Chinese EVs for a while, that changed as well. Not in a huge huge way. I mean, the quota levels, almost 50,000 vehicles, in a market that takes almost 2 million cars a year. So we're not talking big. But what's important about this is the symbol or the signal that Canada is now open for business and that it wants to talk earnestly and seriously about collaboration, meaning some trade. But in the end, Canada is looking for opportunities to bring Chinese know-how and capital into the Canadian market to build the industries of the future for Canada. I think that that's pretty interesting, right? And then offy trots to Davos.

5:09So he goes from Beijing to Switzerland. And delivers this speech. Now, for people in the West, it was a speech for the ages. Because in some ways, it said what people in the global South have known for decades, right? That the global international order, the liberal rules-based international order, actually only worked in the interests of a small number of countries in the minority of the world's population. And that it was also over. So it was an obituary, firstly. But the second thing was that it was also, it wasn't a mere culper, but it was a recognition that Canada had been a significant beneficiary of what was a Y. So Canada was a beneficiary of a system that hid behind the facade. And the reason why his speech was significant wasn't because suddenly somebody had a revelation about something unknown. It was because someone from inside the club

6:11spelled the cat. Could you imagine somebody who's been a beneficiary of this set of arrangements for decades suddenly breaches the code of silence, the pretence that this club was actually in the interests of everybody, that this liberal international order was good for the world, when, of course, in fact, it was good for some. But not always good for some, and eventually, a breaking point has appeared. So I think that that's interesting that Carnie essentially broke ranks. But I don't think he broke ranks by himself. He didn't break ranks in a way that surprised anyone else. He broke ranks in the context of pressures that had been building not only economically, but geopolitically, around issues like Greenland. So the Greenland issue, I think, was almost like the geopolitical straw that broke the camel's back. That basically said, look, this alliance thing,

7:13it was OK whilst everyone else was the target. It was good to be in the club whilst we were extracting resources and exploiting everyone else. But my goodness, we've now become the target ourselves, and that's not on. So Carnie coordinated this with Macron, with Mertz, with Starmer, and others. And within hours of his speech, the social media from all of these Western capitals was pumping out the message. So I think it was a coordinated response in a way to say to the North Americans to Washington, look, enough's enough. This has just gone too far. Now, the thing is about that, Paul, is that I don't think this is suddenly a eroded Damascus type of conversion amongst the global North, the secondary, the two ICs of the global North.

8:16What it is, though, is a recognition by the two ICs of the global North, the two ICs of the American Imperium, that no matter how much loyalty they display, no matter the fealty and the amount of deadying and all of that, that daddy ultimately could treat them like rubbish when and if daddy felt like it. And that was a shock to the system. And so they now talk about this idea of middle powers. Notice it's not about global multi-polarity and all those things. It's literally the global North sub-imperial to ICs saying, we've got a band together. We've got to hold our nerve now because the country that we basically ran behind all of these years has turned on us. And so whilst I think it is revelatory that someone

9:19from inside the club built the cat, it's not the road to Damascus discovery that perhaps some people would like to think it is. So it's an interesting time, isn't it? Yeah, indeed. And following on, we saw EU, Bounder Lane went to India and EU signed actually a groundbreaking deal, trade deal, with India. Of course, this is everybody understood. This is a response to Trump. And India and the EU that have agreed to broadly lower tariffs, going both directions. And interestingly, you never raised the issue of India's purchasing Russian oil this time. Because whenever they talk about their relationship with China, they always talk about talking down to China. It's like you are a neighbor of Russia.

10:22You are an able of war. And this is why this is a huge impediment of progress between our bilateral relationship because you are enabling our enemy. And at this time, they said nothing of this work because we should be understood. They both Russia, both EU and India has been under enormous pressure under the new Trump terror. And so yeah, in a way, Trump is a shaker maker of this world. He's making a lot of things happening. I think Trump is contributing to globalization 2.0 actually. So rather than contributing to the destruction of globalization, what he's doing is he's accelerating a new chapter of deepening networks, which are actually multipolar or multilateral and sometimes bilateral as well.

11:22So the Canada-China reconfiguration, interestingly, and I can't he didn't talk about China being a great enabler either. So suddenly, all of these things that were impediments one day, are inconvenient, the next and are no longer ever mentioned. It tells us something about the nature of politics. But this EU-India trade deal is very interesting because it's been two decades in the making. It's a serious trade deal in that it didn't just happen over the back of an African. It wasn't the Vondale and Trump meeting in Scotland, which announced big numbers, but actually had nothing to back it up. It was a substantial set of agreements that had been negotiated for a long time at an official level, bureaucratic level. The fact that it had come to pass now is obviously catalyzed by what's going on in terms of transatlantic relationships and disruptions of global trade generally.

12:24The second thing that's interesting about it is that it comes on the back of an agreement that the EU entered into with the South or the Latin American countries only a week or two earlier, just before Christmas. So in the space of a month, as you say, what feels like a year, but in the space of a month, the EU has executed free trade agreements with Latin America and India. So that's that piece. The other thing about this is that India itself has been incredibly reluctant to enter into free trade agreements because of domestic political concerns, mainly in the agricultural space, but also in terms of protecting other industries. So the politics of the effects of trade opening has always weighed heavily on Indian administrations over the course of the last so many decades. So much so that, as you'll recall, sitting there in Southeast Asia, that six years ago when ASEAN pulled together after many years of negotiations,

13:26this regional comprehensive economic partnership, the free trade agreement for the ASEAN member states, plus China, plus Japan, Republic of Korea, New Zealand and Australia to become what was the world's largest free trade agreement. India was actually involved in all of those discussions until the day the signatures would do, and India backed out. It was concerned about the effects of these agreements on Indian agriculture, on Indian farmers, et cetera, et cetera. I get the politics of all of this, handling all of this stuff is difficult. So India's always had a protectionist streak, but there's India signing up, right? India also quietly, about two weeks ago, three weeks ago, dropped restrictions on Chinese companies bidding for Indian government projects. Very quietly, no big deal. Now, those restrictions have been in place for five years, but they got dropped because they needed the capabilities and the know-how of major Chinese

14:28engineering firms basically to come and build infrastructure that India actually needs for its own economic development. So India itself is starting to under some pressure, both domestic and also internationally, to have to find new pathways. And what I think's interesting about what's been going on is how countries that had resisted some of these decisions for quite some time. I think people like you and I might have said, some time ago, they're going to have to deal with this. This is unavoidable. These issues are just going to keep pressuring them. And of course, they ignored it. They didn't want to deal with it. Make the big choices. But force of circumstance is so powerful that in the end, they have to do something. And I guess some people will criticize them for being slow to the party, but at the end of the day, reality is a very powerful force. And it is remarkable that the European Union,

15:32the Brussels leadership and the coterie of national leaders at Baxima, forgot to talk about India buying Russian oil. That Mark Carney didn't mention China's supposed role as the great enabler. And they're all now having to get on with reconfiguring their own positions with themselves. Because this partly goes to the issue who on Earth are we, doesn't it? So suddenly, we were the two IC with the American Imperium. We've now realized that the American Imperium is going to treat us like dirt whenever it feels like it. It was okay when we treated everyone else like dirt whenever we felt like it, but now that it's turned on us, we don't like it. And they're having to reconfigure themselves. This is a very, very fluid moment. Potentially dangerous, but nonetheless, one in which the seeds, I guess, have accelerated multi-polarity globalization 2.0

16:33as I sometimes call it, are well and truly in place. I think you actually have raised the issue that for Europe to achieve true independence, they need to achieve energy independence. And right now, since they have been cut off from cheap Russian energy, they have been increasingly reliant on the very expensive energy import from United States. And so there's a urgent need for Europe to find alternative source of energy. If they're serious about reducing their dependency on the United States, you can't be claimed that you're going to be independent of US when you depend on US for energy, like with the basis of your civilization. Go ahead, sorry. Well, no, look, and this goes to the heart of it because what, three years ago, well, firstly, there was the sanction, so we're going to cut off Russian gas, et cetera, et cetera.

17:35And that's been a slow unfolding process. Then, of course, Nord Stream got blown up. And it really forced the hand of European industry to find alternative sources. And surprise, surprise, one of the major alternatives to Russian gas was American LNG. Now, LNG shipped across the oceans is not cheap. It's a hell of a lot more expensive than LNG shipped by pipe. So it's a more expensive product landed. And that, of course, has flow on effects on industry, on households, et cetera. And we know what they are. But we're now reading reports of all places of financial times and other mainstream Western media publications where European leaders are saying, I think we've become a little bit too dependent and exposed to American LNG. And we're going to need to do something about this. I mean, I don't know whether to laugh or to cry sometimes when you read this sort of stuff, because it's not as if it wasn't predictable.

18:38But in any case, there we are. The European leadership is now coming to grips with a reality that they themselves made. In the name of the Ukraine, Russia, and all those sorts of things, they cut themselves off. They bragged about how they were winning themselves off, Russian gas. That's the politics and how they're going to be independent of that, the Russians, who, despite the fact that they've never cut our gas off, hold us over a barrel. We're now free of that. We're good three years later. The reality of being held to ransom by American LNG is dawning on them. Now, what do they need to do? Well, they ultimately need to have as quick and as low cost of pathway to energy sovereignty as possible. Now, that's going to involve a diverse range of energy sources.

19:39I don't need to bind to the debate about renewables, versus hydrocarbons, and all of that. I don't really care. Bottom line is, is that whatever is engineeringly feasible, and financially viable, basically is what they need to do. And in part, not entirely, but in part, that's going to require fast tracking a massive amount of sovereign energy capability by way of buying renewable energy technologies from China. Surprisingly, not. We now have a number of European states, including the UK, talking about massive wind projects. Ironically, coming off the back of President Trump's speech at Davos, which talked about how the Chinese do nothing but sell wind turbines, but he's never seen one in China anyway. Actually, I can imagine in April when he visits China,

20:40you'll remember that when President Macron visited China a few weeks ago, President Xi took him to Sichuan and showed him the irrigation projects, as an example of Chinese historical interactions with nature. It wouldn't surprise me if a part of President Trump's trip will see some meetings set against the backdrop of wind turbines for a bit of atmosphere. And because I think that the folk-invaging will be concerned that President Trump is under the misapprehension that China only sells wind turbines, but doesn't use them themselves. And I'm sure they would like to ensure that President Trump is not misled by others and their misinformation. So this would be a great way of making sure

21:41that that was the case. So Dr. Powell, we're going to make to do that. But Dr. Powell, how would you respond to the US Commerce Secretary? Let Nick's claim that why would we even need to invest in so-called sustainable energy when the United States, we have plenty of hydrocarbons, we have gas, we have oil, we have everything we need. Why do we need to invest in solar and wind? Well, we already have oil. Well, if I was the Europeans, the first question I would be asking out is the extent to which I can maximize my sovereignty, my energy sovereignty. That's actually the big question. Not whether or not Russia's got lots of gas, or the United States has lots of gas. They both do. But what pathway do I need to forge to ensure that I am in the strongest energy sovereign position I possibly can be?

22:42It doesn't matter what, let Nick says. Let Nick's proposition is contrary to advancing the interests of energy sovereignty in Europe. So they can flick. So yeah, look, let Nick's got plenty of energy. They want to sell lots of it. I get that. But it's inconsistent with a priority around energy sovereignty. So at some point, the oil and the water don't mix, right? So the Europeans, if they want to reduce their dependency on the United States, and they clearly do, right? They clearly have come to the recognition and the realization that that exposure that they now have is far greater than they really want. It actually creates risks. They need to shift. Now they can get LNG from other places, of course. Australia is one of the countries that could sell them some LNG as well. So that's a plug for the Australian LNG industry. But in the end, they also need to invest

23:44in other kinds of technologies. As I said, I don't need to bind to the argument about renewables versus hydrocarbons and all of that. The European engineers and others can make their own decisions on it. But it seems like that one of the critical issues is not only engineering feasibility and financial feasibility, but whether or not, it contributes to energy sovereignty. And if it doesn't contribute to energy sovereignty, you need to have a very, very good reason why you're doing something. And so I think we're going to see, you know, obviously lots of wind, some solar. We'll probably also start to see in Europe. Again, the hastening or the acceleration of projects around some new nuclear capabilities. They would be well advised to speak to folk in China about that as well, given that they're not going to speak to the Russians about anything, right? Take that as a precondition. So they'll speak to the Chinese and, you know,

24:47who are developing some very interesting modularized or small format solar nuclear capabilities. And in the longer term, I think the Europeans are also starting to look at the more pragmatic attitude to bringing Chinese know-how and capabilities to be operational in Europe itself. And so we have murs, for instance, talking about needing or Macron talking about more Chinese investment in Europe, right? So again, reality begins to assert itself. Europeans ultimately, you know, need to have resources and capabilities in their own arena. Some of those knowledges and technologies have to come from elsewhere, work with the people who've got them, build your own capabilities and your sovereign infrastructure and give yourself the best shot. The other interesting one, by the way, again, going to this question of sovereignty is shifts in the information architecture environment, right?

25:49So one of the very interesting things about the AI space is that there's been a massive amount of downloads of Chinese open source AI models in Europe, right? So very significant number. So if you go to hugging phase and look at their data, you'll see that a very large number of downloads have been made from Europe. In other words, European entrepreneurs and others are experimenting a lot using Chinese open source AI. But they're not commercializing them because at the moment, the regulatory arrangements in Europe favor private models, proprietary models, proprietary models, because someone can be held to account for them, whereas open source models you can't be. So the corporations want to be able to essentially push off responsibility to the proprietary model provider. And that at the moment is actually holding the Europeans back from really taking advantage of the downstream potential

26:50of downloading and running Chinese developed AI models. So it's an example of the struggles that the European Union faces as it seeks to become and a power in and of itself, as opposed to being an appendage of a transatlantic power structure. Wow, how the table have turned because the flow of technology and capital used to be the other way from the west to the east. I remember the first nuclear reactor in China was actually set up as a joint venture between France and China in the Pearl River Delta. And now, as you mentioned, China has leapfrog ahead. They have done some great research on the thorium nuclear reactor, which offer great potentials. And same goes for AI, of course. Right now, the only game in town in terms of AI

27:54is really Chinese and American. And by Chinese and American, you have to keep in mind, even in the United States, most of the top AI talent are Chinese. There are also the Chinese, that most of the world's top AI talents are, they're not even Chinese who are born and raising America, but Chinese who graduated from Chinese universities straight out of mainland China. Yeah, and speaker of Energy, EU, and India, I remember there's a viral post that going around X someone was talking about how India has leapfrog ahead on electrification of the country. But what it omits to mention is that it was possible only because the Chinese affordable Chinese solar panels have made it possible for India to gain rapid adaptation.

28:56And it's also because India has a really weak energy infrastructure to begin with, so they now can just more easily switch to embrace the solar-based energy quids. I saw that report, Karl, and it was very interesting because it tried to do two things and look, at a certain level, I think that there's some merit in the story and that it talked about the electrification of India and the electrification of India by way of clean energy. And that's happening. It then compared India's current process and rate of clean energy electrification with China 2012. And it did that on some methodological argument to say, well, that's roughly the comparable economic development levels. But of course, it's the wrong baseline because in 2012, the cost of clean energy systems

29:57was considerably higher than they are today. But be that as it may, it also tells us something about the dynamics of, again, of how India and domestic politics in a sense plays its way out through these sorts of processes because it would actually be much easier in a certain sense for India as a say, look, you know, we actually, again, because we've got issues in our own electricity network, our most effective pathway to electrifying the country is rapid scale micro grids, right? Not big poles and wires, but lots of micro grids, you know, tackling user bases of 20 to 50,000 people or big industrial estates or what have you. And the best way to do that is turn key solutions out of China and that's what we're going to do because the end outcome, right? The end outcome is again, a distributed energy network which is very resilient and enhanced energy sovereignty

31:00for a country. So, but the politics of India means that it kind of just has to do these things on the quiet. I guess that's what it is. But look, if the end result card is that a place like India is able to successfully electrify and deliver stable electricity across vast ways of the country, that's great for people and it's great for industry as well. And if India can accomplish that, it will, you know, help consolidate the processes of global multi-nodal development for multi-polarization. And I think when you're dealing with a country of, you know, 1.4 billion people, now the largest country in the world, many of whom continue to live in poverty, I think we should all be cheering on those efforts. And because those efforts will also spill over

32:03into the economic development of Southeast Asia, Central Asia, and as that process unfolds, it also lays the groundwork for reduction of economic stresses, which contributes to cross-border tensions, and hopefully creates the economic base for a more functional set of security architectures, right? So, we start to intertwine energy, security, and prosperity. A bit like what the SCO is starting to do, by the way. So, the SCO, Shanghai Cooperation Organization, was essentially a security network sharing information, dealing with terrorism, extremism, etc. And at its last meeting, late last year, you know, the famous meeting, in what Tenjin,

33:04they actually announced a whole bunch of collaborations on energy and transport, right? So, you know, because there's an understanding that you piece these things together, and it actually creates a fabric, and a fabric really does tie, you know, the participants together in ways where their interests are co-constituted. And it reduces the reasons for there to be conflicts and reduces the amount of space in which third parties can tie to, niggle away, and create tensions and conflict as well. So, I mean, I certainly hope that India is able to fast track its electrification, and because that is the foundations of its own development. But why would Trump, you know, like a lot of these changes we saw in the first month of the January, January is essentially pushed by Trump policies?

34:05But why would Trump sabotage some of these most important relationships for United States? You know, for example, US-Canadian relationship, which has always been very close and mutually beneficial. US, a lot of US companies have moved production to Canada precisely to take advantage of the cheap Canadian energy. You know, China, Canada has a lot of cheap hydro power, and they also have the tar sand. And why did Trump throw a wrench into that relationship? I mean, like I can't understand Trump's move to work countries like Venezuela, right? Trump's move to Venezuela, and now he's pressuring Mexico to also cut oil shipment to Cuba. It's basically he's trying to star about Cuba, like this is the energy, he's using energy like hostage.

35:08He's taking Cuba hostage by cutting off the two most important source of energy for Cuba. One is Venezuela, one is Mexico. He's trying to star about Cuba, maybe causing regime change, which has always been a policy goal of the United States government for a long time. But why Canada? Why is he going after Canada? Look, there is something very unusual about this in that it defies conventional rational explanation. But it goes back also, remember at the beginning of this second term, President Trump talked very explicitly about absorbing Canada into the United States as the 51st state. He then of course has extended his territorial ambitions north to Greenland, and there is ongoing discussions about American, what is essentially de facto territorial control

36:09over parts of the Latin American continent, particularly those towards the north. So the Trump administration does have a sense of territory as part of its immediate jurisdiction of direct authority. So that's the first thing. I often say it reminds me of a dogmarking its territory line. And I get the sense that there is a little bit of that in all of this. The second thing is that I think President Trump actually has a very clear view about what he believes are the fundamental causes of the problems that America faces today. We can put aside what he thinks the problems are for the time being, but the principal causes are essentially twofold. One is that third party countries have been taking advantage of America, right?

37:13They've been free riders, whether it's Europe in relation to defense, whether it's China, in relation to trade, and whether or not it was Canada and Mexico, also in relation to trade, right? All these American companies took good American jobs and things and took them over the borders. So there's a sense of America being a victim to these countries. And American benevolence has been taken advantage of and Trump's going to put into that as well. Then of course there are the domestic enemies, right? Whether it's cultural Marxism, whether it's wokeism, whether it's this or that, right? But there's whatever it is domestically that aligns with a particular sense of what it is to be genuinely American. And so what's the policy response? So the policy response is largely a violent lashing out and attempt through the imposition of force or the threat of the imposition of force to get your way.

38:14When so many of these things could easily I think have been accomplished without any public displays of force in potential. There wasn't a need to bloat about anything for America to massively increase its presence and de facto control over Greenland, for example. I suspect it could have been accomplished with about two or three phone calls that would have happened very quietly. And all that people would know is that there's just a few more planes flying troops and equipment into Greenland. And that's about it. In other words, you know, I'd say it's could have accomplished all of its so-called strategic objectives really without any of the soft power expenditure that he's had to go through. But look, I tend to think that by and large, President Trump is a reflection of a

39:20a body politic, an elite structure that is experiencing a chronic case of displacement anxiety and that the only tools that they know, because let's not forget, 35 years of American primacy, institutionally strips you of the tools that you need to navigate a more complex environment where bullying your way around is not possible. So there isn't anybody institutionally that actually works at a senior level that was raised professionally in an environment where diplomacy was needed. None, right? I mean, when the Berlin Wall came down and then when the Soviet Union dissolved in 1991, we were talking 35 years ago now. So if you're 65 today, you were 30 at that moment, beginning of a career.

40:22What skills did you develop from the age of 30 to 65? Or if you're not quite retirement, you're 60. You were 25 when all this happened. You were an intern at the State Department. What skills and knowledges and frameworks that you develop in the intervening 35 years? Well, what you developed was a clear sense of American primacy and an ability to boss people around. And from time to time, I believe that your benevolence was being taken advantage of. You didn't learn anything about how to deal with people who weren't your friends, but nonetheless, you had to deal with them. How do you frame interactions with others that you may consider to actually not have interests entirely aligned with yours? None of those skills exist anymore. And so all that they're left with is belligerence.

41:24Can't hear you. That does not bow well for, you know, for America's intermediate future. I mean, in the long term, you know, might be, there might be some process where American can sort itself out. But, you know, in the next three years, at least. Look, it's a human capacity issue, Carl, isn't it, right? Because if you think about the transformation in the industry at the same time and the consequences of what's happened in the American education system, again, I'm not even going near why different people have their own theories. But one thing we do know is that literacy and numeracy levels today are lower than they were 40 years ago, right? We know that American institutions do not graduate anywhere near the number of people in all sorts of knowledge and skills areas that places like China to... Now, China, of course, is four times larger than the United States. But it's graduating not four times more graduates since then,

42:26but about eight times more, nine times more, right? On a per annulment, maybe even more than that now, right? So there's something that has come, that that's lost its bearings in the human cultivation system. And so we see a response to that by way of enabling highly skilled people to migrate. You touched on that earlier, all the Chinese born and educated graduates now working in American AI. And of course, the many people from India with skills who have come to take on many job roles, which of course creates its own political problems, right? Which we've seen. And but you don't turn around a population, skills and knowledge and literacy deficit in three years. This is a 30-year problem now. So we've got a 30-year hollowing out of the diplomatic core. There is no culture of diplomacy.

43:27There is no competency in terms of what it means to be a diplomat as opposed to being essentially a belligerent defender of the realm. There's insufficient number of people with the right levels of technical know-how to really take on the opportunities and the needs in robotics, AI, bio-pharmaceutical research, et cetera, et cetera. There's just not enough. And this will mean that America either has to import more people again. And for that to successfully happen, it's going to need to become a more attractive place again for people from other parts of the world. And at the moment, it's not that attractive. It's a little bit ugly, right? So people are a little bit shy of going to the United States for pretty obvious reasons. So you've got to deal with that in the short term. But the long term is the structural question of,

44:27well, how do we turn this slide of foundational literacy and numeracy around? And you're not going to do that in six months. And you don't do that by abolishing the education department at a federal level either. It's a complex problem because education is very distributed in the United States. And that's a big place. Lots of states, lots of counties. And so education is a big challenge. But rather than being the peace president who bombs 10 countries, President Trump could have left an incredible mark on North America if he became the education president. Right. I'm sorry, I have to laugh. But well, Trump is often be mentioned as a transactional president, like he's described as seeing everything as transactional. He is scheduled to head over to China in April.

45:30Do you think he is possibly looking to work out some sort of a grand deal with President Xi Jinping? He'd like to sell the idea of a grand deal, whether or not it's grand, and whether or not the deal that sticks is going to be a different question. But you can be sure that whatever it is from an announcement's point of view, it will be the biggest and the best thing that's ever happened. But the issues are not in substantial run. There's obviously trade issues. But I think trade is actually a symptom of something else. Trade is often the one that's held out as the big bogeyman. We're being taken advantage of, et cetera, et cetera. But trade's really just a function of the distribution of productive capabilities. And if the United States doesn't sort out its own productive capacity issues, some of which relate to its pool of human capability

46:30and know-how, then rather than trade, yeah, sure, you can get your trade balance down substantially by trading less. That's just a function of math. But that doesn't necessarily mean you're improving the quality of living of your citizens or expanding your capacity domestically. America can't enhance its manufacturing industry, which, incidentally, has seen declining employment over the course of the last 10 months, continuing to and reduced output. Without importing raw materials, intermediate goods and capital equipment from China, it needs to do that. The fact that the US dollars drop 9%, 10% in the last 12 months actually makes that all more expensive. So whilst that theoretically boosts exports and dampens imports, by dampening imports, it's actually making it more expensive for American industry to modernize. You want robotics. A lot of that's going to come from China. And if it's not from China, because you don't want to deal with China, you're going to need to buy it from Japan, Korea, or Germany.

47:32So if the US dollar's falling, all of that's going to cost you more. You want smart stuff going on in your industrial reorganization. You actually need a strong dollar to make that cheaper. So there are some contradictions now in terms of how US monetary policy and foreign exchange policy is working. In the name of all sorts of objectives that don't align, the objectives of closing the trade balance question, the objective of re-industrializing America. People think just by reducing imports, you're going to help re-industrialize America. Well, you're not, you need all these imports to do that. So what does the grand bargain look like? I know people talk about, particularly some recent materials from the National Defense Strategy released by the Department of War and comments made in the last day or two from Elbridge Colby, right?

48:34An Assistant Secretary in the Department of War, which doesn't explicitly talk about Taiwan. So there's a lot of excitement about that. Is this America throwing Taiwan under the bus? You know, the fact that TSMC has agreed to spend more money building more fabs in America, opens the question of, you know, Taiwan's silicon shield being slowly but surely taken away and reducing the economic imperatives for America to be there for Taiwan. But people forget that from mainland China's point of view, Taiwan's not a bargaining chip. It's not a transactional piece. Taiwan's an intrinsic part of the nation. It's not to be bargained with. It is to be re-unified with and it will be re-unified, hopefully peacefully, but in ways that are not compromised by the idea

49:38that it got traded. You don't trade sovereign territories. Certainly not if you're Beijing. So the idea that there'll be a grand bargain around Taiwan I think is deeply misunderstands how Beijing itself would view that proposition. It would see that really as a very insulting idea anyway. So what's left? Does President Trump secure Beijing's commitments to get some of its EV companies, for example, to set up factories in America? So he's talked a bit about this, right? When he was in Detroit during the campaign he talked about the blood bath. If we just let Chinese EVs enter America and therefore, let's get them to set up factories here employing Americans. Well, theoretically, that's not a crazy idea, right? The Europeans are doing it, right? Canada's doing it.

50:38So the idea of doing this isn't mad, but there's so much that President Trump would need to do to give comfort to Chinese investors that they're going to be safe, not just economically, but that the assets are physically safe, that the people will be safe. That Chinese workers who go to help set up the factories will be safe, that there'll be an environment that will be welcoming. Now, all of this is actually very difficult at the moment to deliver. And so I think there's a huge amount of work that needs to be done. So if there is a grand bargain, and this isn't really a prediction, I'm actually hopeless at predictions, right? But if there's a grand bargain, it may look something like the Grand Framework. OK, so please elucidate. Well, and the framework is that these are things that we'll work on.

51:41And we're going to have processes by which we build confidence around things. So yes, in principle, there is an agreement, in principle, to facilitate more Chinese direct investment in North America. But to make that happen, we can't just have a hanker chief deal, right? We're going to need to set up a plan We're going to need to set up working groups. We're going to need to set up high-level working groups that involves Congress, right? Because Congress has so many hawks there that it's always a risk, right? People talk about transactions around reducing the barriers for American technology exports and all of that. Well, China has reached a point where it doesn't see that as a necessity, but it sees it as a matter of principle as well now, which is look, there shouldn't be these sorts of barriers to trade, right? No, that's not what should happen. You know, you complain about our company's not buying enough from you

52:42and yet the things that we would love to buy from you, you've made it impossible for the last six years. To the point where we actually make our own now, so we don't need it, but there should be no barriers there. Just as we can look at removing non-tariff barriers on Chinese exports to North America. You know, there are the sorts of things that you can do that appear a little bit transactional, but what that starts to look like is a free trade agreement, right? And that starts to push Washington back towards this idea of participating in free trade environments. If it does that by lack, and that's difficult to do, right? But China's committed to open trade. So is there is that a deal structure? Difficult, right? People to people, I think, is always easy. And there are things around research and development collaboration where part of the grand framework and deal with, right?

53:42There's so much stuff going on in agricultural research, in science research, in health research, in bio, in nanotechnologies. That should be shared. That should be built collaboratively. But we're going to need better frameworks again, given the treatment of Chinese researchers on the back of the Department of Justice campaigns over the years. So what are those reassurances? How do we make those concrete? So a grand framework creates a pathway, creates intent, and then it needs to have micro steps in the right direction. The trade negotiations over the course of the last eight months, I think, tells us something about a style and a method. But step by step, incremental, do something to prove your sincerity. Make sure you lock that in. Then we revisit things, et cetera, et cetera. And I think that that's probably not a bad outcome

54:43if that could be achieved, whether or not. And by the way, I think that could be sold as a grand deal. But a cynic would say, well, yeah, look, it's not really quite the grand deal. But nonetheless, it's a framework that actually stabilizes things again. But that's still a tall order. They've got a few months to pull it off. Look, I'm not sure, for instance, that threatening to block Iranian oil is necessarily going to help in getting towards the grand bargain. I know there are people who say, well, that'll bring leverage. I think what President Trump should probably realize by now is that that approach to leverage tends not to work with Beijing. And people in Beijing don't respond well. They kind of are. So other styles of approaches are going to be necessary. So let's fingers crossed. I mean, I do hope that we can get a little bit of calm

55:44around all of this. I'm not convinced we will. But let's say, let's focus on China for a moment. China has broken another trade record. It recorded $1.2 trillion of trade surplus. It feels like just yesterday we were talking about China breaking over the $1 trillion trade surplus. And then the Chinese Prime Minister went to Davos and said, China didn't go out to create these trade reserve pluses. China's goal is actually aimed to be the world's largest market. Now, how do you think China could do that to become the world's largest market? Well, it can become the world's largest market by continuing to raise real incomes. And it continues to raise real incomes by having the most productive and efficient industrial sectors in the world.

56:45Because that's the basis upon which you can justify real increases in wages. And when it does that, it will naturally become the world's largest consumer market by virtue of sheer numbers. But you can't be the biggest buyer of staff if you don't have the income. And to get the income, you need to have industry. Because it's from working in industry that you create the productivity that sustains wages. So when, and you'll notice, and we touched on this, I think last time, round of the time before, there's a whole bunch of commentary in the West that focuses solely on this issue of consumption. And China's approach, and you read this, whether it's in Xi Jinping's documents or other documents and comments made by senior government ministers, that this issue of consumption is intimately intertwined with the issue of productivity and production.

57:46You can't have one without the other. You can't have a consumption economy if you don't make things to satisfy the consumption economy. And you can't have a production economy if you don't have the consumption right. So these things are intimately integrated. So when he goes to Davos and says, we want to be the world's biggest market, that's actually a natural consequence of the economic development model. By virtue of the fact that China's 1.4 billion people. So as real wages rise, the sums will lead to a reality that China is the world's largest market. The question then is, is how does the world take advantage of that market? And that's going to require some work because market access into foreign markets is a complex problem. Macro-economists sort of at a certain level of visibility very far from the ground only see how the big numbers move.

58:48But to make that happen, you've got to have products sitting on a shelf that people want. At the price point, the people want. They've got to be attractive. They've got to be interesting. And to get them onto the shelf, you've got to have a transport system. You've got to be able to get them through customs. You can't have them sitting on the wall for three days, four days. You've got to move through customs quickly. For that to happen, they've got to be properly labeled. And the paperwork's got to be in order. Increasingly, for that to happen with China, you've got to digitalize your supply chain systems because China's moving down that path. Who's got that in place? So we're going to need to get that in place. Then you're going to need to make sure the ships can move and that everything in a container is almost pre-approved before it leaves the originating port. That means sharing data across boundaries. That means having to consider issues of commercial sensitivity, data sovereignty, data privacy. How does that sharing actually work? So suddenly, we go from the high level of saying, yep, we've got a lot of people who want to spend money on stuff

59:51too. How do we make that all happen? The upside is that Chinese being the engineering mind and folk that they are have also been working tirelessly on the ground across the world, building that kind of infrastructure. Things to be able to put containers on ships and move them easily. Things to be able to label things properly. Data infrastructure that can begin to share data in credible ways. Digital financial infrastructure to enable payments to happen quickly smoothly, safely and cheaply. So slowly but surely, through the Belt and Road Initiative and other things, this entire ecosystem is emerging that enables China to actually fulfill the promise of being the world's biggest consumer market. When we're about the criticism from mostly angle media that, OK, well, you say you want to be the world's large

1:00:51market, but you have 1.2 trillion trade surpluses. And you aim to make everything yourself. So how where does that leave room for the rest of us? There's nothing that you don't buy anything from us. You only expect us to be a consumer of Chinese goods. How is this sustainable? Well, there's a couple of points. Firstly, China does import stuff, right? So people often forget that. China actually is a big importer of things. Second point is that this explosion of the trade surplus in large part coincides with expansion of trade with the developing world. And much of that relates to China's exports of plant and machinery, semiconductors, renewable energy technologies, solar PVs, sodium and not sodium batteries, lithium ion batteries,

1:01:52and EVs, pretty high-value stuff. But interestingly, when you look at all of that stuff that's being exported, it is technically enabling capabilities, right? You don't export plant and equipment if the recipient isn't planning to make things. So over time, as the productive capacity of companies in these other countries enhances, they will actually start to make things themselves. So that by nature will actually reduce some of the things that they already import from China. The second thing that is happening now is that Chinese companies are setting up factories in other places, and that is likely to accelerate. In part, it's going to accelerate because the R&B valuation is rising, which of course is what some of the critics always want. They literally say that Chinese exports are competitive because the R&B has been undervalued. Well, the US dollar is coming down, the R&B is going up,

1:02:52but the flip side of the R&B going up is actually two things. One is that the things that it does import will become cheaper, which will feed into its supply chain systems anyway. And secondly, it makes it more cost-effective for Chinese companies to invest in things overseas. I personally think that that's a good thing by and large for that to happen because it takes expertise and capacity into other parts of the world. But I can imagine that the same critics who complain about China exporting things will eventually complain about Chinese companies investing in minds and building factories and all those things because they won't employ enough locals. They will ignore environmental or local labor laws. I say this because these are the sort of things that you hear already, and somehow stealing local jobs or what have you. But they'll be a complaint. So in that sense, China can't win anyway. But we're going to see an expansion of domestic productive capacity in all of these places.

1:03:56As a result, so over the next 10 to 15 years, those dynamics will change again. Now, that's the first thing. The second thing though is that there's bunch of stuff that countries across the world do and make available that are actually incredibly attractive to Chinese consumers in China. But also to Chinese consumers who travel, you know? So, you know, the idea of increasing tourism visitations, for example, from a growing Chinese middle class is a great way for countries to effectively own export revenues. That's an export. Education services is another one. It's been a huge part of American exports to China. Tourism, you know, this is prior to the last 12 months. Education, software, films, television, music. There's a whole bunch of stuff, right?

1:04:57So the world's a fluid place. Economic systems are fluid. If people sit there today and say, China doesn't buy anything, it's not true anyway. But secondly, the challenge always is on those who create things. How do I make that attractive to whoever it is that I would like to sell whatever it is I'm selling things to? You know, can I enhance my attractiveness to say Chinese travelers by having visa-free arrangements, by building up a capacity in my tourism and services sector to support and service a group of people who generally won't speak your local language. Kind of helps, right? So these are the kinds of things that I think we will start to see unfold and expand over the next 10 to 15 years. I mean, you're in Southeast Asia. I know when you look at the data that Chinese visitations across Southeast Asia

1:05:59for all sorts of stuff, right? Including whether it's surfing, nature, and things like that. That 20 years ago would never have been on a Chinese traveler's itinerary, right? So your parents and my parents, you know, the idea that that's why you travel, as opposed to just taking a photograph in front of an important monument, right? That you travel for experiences, right? That's not what they did. But the contemporary Chinese traveler is traveling for those sorts of things. Now, the world is replete with incredible experiences for Chinese travelers to experience. And there's great experience in that. So look, I'm not so stressed out or worried about the fact that as Chinese citizens get wealthier and wealthier, they're not going to be spending more and more money on all sorts of things. I saw it in Australia, Carl, where up until the pandemic, Australia began to receive,

1:07:01it just tipped over a million Chinese travelers for the year. And Chinese travelers spent somewhere in the order of about six thousand US dollars per person on average, which was substantially more than any other inbound tourist per capita, so. Well, that has definitely been a very enlightening conversation, as always, with you, Professor Powell. If people, my follower wants to find your work, where would they go? Okay, two places. I'm getting better at this. Substack warwickpow.substack.com and my own little channel, which is quite particular. I tend to speak to other scholars, TIO talks with Warwickpow. And that's, as I said, it's very focused on talking to mainly other academics, but hopefully in not two, academic away. So they're the two places.

1:08:03Well, thank you very much, Dr. Powell, for making the time to speak to us. And thanks everyone for tuning in until next time. Bye bye. Hello, it is Ryan and we could all use an extra bright spot in our day, couldn't we? Just to make up for things like sitting in traffic, doing the dishes, counting your steps, you know, all the mundane stuff. That is why I'm such a big fan of Chamba Casino. Chamba Casino has all your favorite social casino style games that you can play for free anytime, anywhere with daily bonuses. So sign up now at chamba casino.com. That's chamba casino.com. No purchase necessary VGW could avoid for prohibited by law on 21 plus terms and conditions apply. You can play for free anytime, anywhere with daily bonuses. So sign up now at chamba casino.com. That's chamba casino.com.