 Hello and welcome to NewsClick. We are back again on our favorite topic with Rajat Nag, former ADB. I'm going to make it short this time. Trump has been our favorite subject when it comes to the global economy. Now, the trade war is really fully on from what it appears. America has imposed sanctions or at least increased tariffs on a whole bunch of countries, a number of products and some of the countries have now started retaliating, including India. Now, how do you read this? Do you think that we are going further down this path or do you think there is any chance of pulling back from the brink? From America's talks it doesn't appear or Mr. Trump's talk doesn't appear that he has any intention of pulling back what he has done. You recall when we spoke about this a few weeks back that I was hoping that the springmanship will be only that and then people would pull back and better sense would prevail and I remember saying that cooler heads will prevail. I have to confess that I'm very worried now about the trade war which seems to be on. Now, one never knows but it's very unlikely as you said. I just want to interrupt you for the moment. This is not really a trade war. It's an aggression started by the United States against the global economic order. It could be. Even if we just use the word trade wars as a telegraphic symbol for what you are saying. I think what has happened is Mr. Trump has unleashed his words and tirades against many countries. Some of which I have to if the one is rational about it are reasonable points. If expressed reasonably. For example, issues with China about intellectual property rights, about theft of intellectual property, cyber security. I think those are relevant issues which needs to be discussed but cannot be discussed the way it is being done now and my own conversations in Beijing where I was there recently. There are many people there who realize that China also has gained the system for a while and therefore they do run a huge trade surplus with the world at large and then they have to sort of, you know, now start trimming those back. What I feel has happened by Mr. Trump doing what he has done that all those rational people in US, in China, in India and others who want the global trading system to work are now finding that they're totally off the table. Therefore, India has now announced a list of 29 items. Canada has done the same. China has said and rightly so that if you impose this tariffs will do the same and Mr. Trump has said if you impose tariffs in response to what I have said then I'll put more etc etc and that is going to continue and I think as I was talking to you just before coming on the set that I'm very worried about what's going to happen to the global economy because I think a trade war is on. It'll take effect in the next few days and it's very unlikely that anything will change between now and July 6th when the first rounds are supposed to kick off. You know, I don't want to digress too much from this topic but just as an aside when you talk about intellectual property rights theft and so on I would argue well that the whole trips agreement which was put in place was the biggest theft of shall be say knowledge of the world into certain companies. So I don't want to enter into that. My point is just hold on Roger and the second part of it when you come to the cyber security issues the student documents make clear that US has hacked the entire world. So let's also agree that they are actually relatively extraneous issues. The real issue is that there is a trade surplus that a lot of countries have United States and the argument is United States has is able to have a huge deficit because it prints a dollar. My point is that on trips or intellectual property rights or on access or limited access non-tariff barriers the world is far from perfect on the trading issue. That's why the Doha round never sort of materializes. Exactly. But the world at large through the global trading system through the WTO we did come to what I'd say a second or a third best and of course one tries to improve and many of the issues I mean one can have discussions on the trips on the intellectual property rights US's role China's role etc but those cannot be done with a gun at your head. Exactly. And that is why what we are so very different. Yeah. This is those discussions which I think were very important and many in China would agree with that that if you really want to move ahead you need to bring all of those to the table. Those discussions are not possible now. A and B because of what Mr. Trump has done and is doing now many countries are willing to cut their nose to spite their face. And I think it is true that US has the ability to withstand it much better than other countries because its economy is doing very well economy strong. Canada for example. Canada depends so much on the US that in any trade war between these two countries Canada will suffer. But talking to my Canadian friends almost to a person they're saying we are prepared to take that pain. And this means people are moving away from economic rationality to basically something more fundamental pride sense of sort of you know being humiliated by Mr. Trump. And I think you're going to see trade war getting worse before it gets better. And I don't think it's going to get better any time soon. You know I would agree with one proposition that you're making that war is perhaps the last thing we need to settle differences of any kind between countries or economies. So yes taking a hatchet shall be say to even a bad global global trading system is actually worse than trying to settle those differences and move towards a different direction. The important thing for Trump and the United States today and I really have to accept is the United States today because the president that it seems to be arguing that global trading system as long as suited us we gained out of it was rule based. Now it doesn't suit us. So forget the rules that you might we might have agreed to or we might have actually helped to build. Now the rule is simply whatever I say is the rule. Now is that a viable global system at all. It is not and it's unacceptable because you're not dealing with sovereign states and sovereign states come together to negotiate but with some fundamental assumptions the sovereignty has to be respected. Take NAFTA for example three sovereign states came together and actually U.S. contrary to what Mr. Trump says actually benefited significantly from NAFTA and so did Canada so did Mexico and that's the whole point of global trade that it can be a win-win proposition not equally. That's the whole point that you know global trade actually caused prosperity global trade benefited globally but there were losers within the countries and between countries. Mr. Trump seems to look at it as a zero sum game. Absolutely. And in the process he's actually moving the sort of you know levels much lower in which my own feeling is and it's not just my personal feeling I think even the IMF recently has come out and said it that even the U.S. will lose. Now U.S. can bear the burden better A because it's a larger economy B it is a stronger economy at the moment but the countries say China or Canada or India they are very smart they are actually picking those products which hurt Mr. Trump's water base say in agriculture or say in some manufactured products etc. So I don't think even the U.S. is going to come out of it unscathed. For a while Mr. Trump will probably be able to say to his base that I stood up to all of these people who took advantage of us but ultimately quite frankly I don't see any winners in this actually going to be losers on all sides. You know Rajat we have to also think about the rationality of the irrational people as well assuming that there is some rationality what is the rationality here A the story of victimhood if we are not doing well it's only because others are taking advantage of us. So essentially the fact that America is losing its economic dominance over the world the hegemony if you will of the world which was the quote unquote unipolar system after the 1990s of all of the Soviet Union and so on that is actually weakening this hegemony is weakening and manifests itself politically as well as economically. I think in the 60s various gaming exercises modeling exercises were done and Americans realized by 2040 or 2050 China would be the world's biggest economy which is what we are seeing slowly happen. Do you think that the irrationality of what appears to be rational of Trump's action really is stemmed from the fact they want to reverse this by some method or the other? I'm not sure that Mr. Trump has thought it through in a sort of global way in a rational way but he certainly looks at it from the prism of his base and his base I think if one looks at things rationally and fairly have lost in the so-called war of globalization they are the ones who lost the jobs they are the ones who sort of you know suffered because of the steel prices collapsing etc. What I think Mr. Trump and his base missed that it is not because of global trade that it happened that was a part of it but because of robotics because of the manufacturing sort of in a productivity automation automation etc. But it is true that globalization has its discontents globalization has its victims how the system within the country manages the redistribution is a challenge which say people in the rust belt in the US feel was not done equitably and for them the enemy therefore is the world out there and Mr. Trump has I think brilliantly exploited that feeling but if I look at it from Asia's point of view the point that you were alluding to about USA losing it sort of in a global dominance I've said before that the 21st century could if not the Asian century it will certainly be a multipolar century in which Asia will be much more dominant than it was Mr. Trump has just hastened that process so in that sense Asia should feel actually good that the withdrawal or if not withdrawal certainly the backing off of USA that we were talking about has probably been hastened and that space will be taken by China for sure and India so you probably see the center of gravity of the world economy moving eastwards even more rapidly than sort of we had thought a few years back what you're saying is that instead of retarding this tendency of shall we say the unipolar world giving away this is actually going to accelerate it but at the same time it's going to have pains for everybody yes and if Mr. Trump thinks that he will inflict more pain on others and therefore gain because he inflicts less pain on the United States economy that's not good to happen that's right I think he probably thinks there'll be no pain on the US economy what I think he is probably right in thinking there will be pain elsewhere but they'll also be pain and I think increasing pain on the US as well including and maybe particularly his own base last question do you think that impacts the dollar as a national currency because one of the ways US has been able to dominate a global shall we say economic rules is the fact that it can print essentially the reserve currency of the world do you think this is going to now break up not in the near future and that is not because US's domination will sort of in a continue to increase as a matter of fact it'll decrease but because the euro and the n haven't been able to become as strong as one would have thought possible particularly now with the Brexit the Chinese remnant be certainly is now a currency in the SDR basket and will increasing importance but I don't see global settlements really happening in any currency other than the dollar in the near future but I do see over time again a multipolar basket in which the dollar will remain dominant I think for the foreseeable future next few decades irrespective of what happens to the Chinese economy US dollar will remain dominant but not exclusive I see the Chinese remnant be increasing in importance because China is starting to tell many of its trading partners that they're willing to settle bilaterally so you don't have to go through the US market so I think to answer your question the dollar will remain important but it'll have contenders certainly the Chinese remnant be in the decades to come you know completely as an aside the fact that you impose sanctions in Iran impose sanctions and Venezuela you also are forcing the other part of the global currency scenario the energy market which is again picked to the dollar to move away from the dollar because if Iran is under sanctions Venezuela and the sanctions they will have to find alternative ways to settle the market as you know India at the moment can't buy is thinking of not being able to buy from Iran because of the sanctions and of course they don't want to go to the remin by route but that seems to be the only one left for others and and I think you will probably see the Europeans being a partner to this process because the Europeans who certainly were very much against you know Mr. Trump withdrawing from the Iran Accord felt that their companies will also suffer through the secondary process of sanctions so they themselves are actually seeing or looking for ways in which the financial global financial system which is so dominated by the dollar can find alternatives so and I think what you will see in the next few decades is also the evolution of a global financial architecture which doesn't depend exclusively on the US at the moment all roads lead to New York I think you will probably see a bit of a dilution of that thank you very much Roger this is all the time we have today for discussing this issue I don't think Mr. Trump is going to go away or Mr. Trump's policy of breaking the global order is going to go away soon so hope that we can continue this discussion further as these issues develop thank you for watching news click and do keep watching our YouTube channel and our website