Multipolarity: Episode 2

The WTO Crumbling, Mining's Green Moment, China Goes Gaucho

 

Collingwood: Multipolarity charting the rise of the new Multipolar world order. Coming up this week, a new report suggests that the Chinese might be about to bankroll a naval base in Argentina as the Green Revolution takes hold. Can we even build the supply lines for the huge quantities of metals and minerals?

We'll need is the World Trade Organization cr. The Wall Street Journal this week had a very instructive article, I thought, because it's in the Wall Street Journal, and it was written by the chief economics commentator of the Wall Street Journal. This article argued that the W T O, the World Trade Organization is crumbling as an arbiter of free trade.

Most people know that the WTO sets the rules for free trade, but it also acts as a dispute resolution mechanism. So when two. Have an argument about what's fair within the system. The W T O can resolve that. Last month, the W T O ruled against the us not once, but twice, and the US has simply swatted aside these rulings.

The first one was about Trump era tariffs on steel and aluminum, and the second one was a US require. That products made in Hong Kong had to be marked as made in China, and the W T O ruled against the US on both of those counts said that it had violated its obligations within trade agreements.

Now, the Wall Street Journal tried to kind of pin this on China, tried to say, ultimately this is China's fault because for ages now they've been gaming the system. I would argue though that that's something of a cannot. Okay. Because. The US has been quite happy for China to undertaken these practice, these restrictive and preferential practices for decades now, it's been well known what the Chinese do in terms of trade, but America's been perfectly happy at that because it supposedly believes in free trade.

Now, however, that the US has decided that China is a geopolitical threat, all of a sudden these trade practices become a problem and. Wall Street Journal claims the US has lost patients with the WTO O'S ability to tame China and bring it into and bring it into the system. I don't think so at all. I think that this is another chess piece that's being played in the geopolitical game at the moment.

I'm not sure how you feel about that, Philip. 

Pilkington: Yeah, I mean, my understanding is that there's been trouble at the world of trade organization since Trump was elected to office, and I suppose that's when kind of the trade drama. I think the China actually won an arbitration against the US on some of the Trump.

Policies. I, I think it's, as you say, I mean these complaints against China, which we've been hearing since the Trump era, they've always been a little bit thin, I think. I mean, not, not, not to say that the sentiment behind them isn't real. I think there are obvious reasons why an American would be concerned about losing a great deal of their manufacturing base to.

But that wasn't really China's fault. That was the fault of free trade agreements signed by America. That was a, a policy choice by American leaders. And I think during the Trump administration, there was an increasing tendency to kind of spin it as if it was China's fault. And I always thought that was very unproductive because the, when Trump shifted the debates, I thought there was actually a very good opportunity for America to look at.

In the mirror and say, would we potentially have a constructive industrial policy? Would we, would we try and reshore some of this manufacturing? I, I thought the same thing during Brexit and Britain as well. But it did deteriorate, I think, over time, partly due to Trump's personality. I, I'd say, but also for other reasons.

And it deteriorated into kind of this blame game. But the fact of the matter is that currency manipulation and so on, it's, it's always a, an unusual. Thing to kind of classify, there's always currency pegs, there's always currency interventions. There was famously in the 1980s, there was the Plaza Accord and the Counter Plaza accord with China.

This didn't violate any World Trade organization principles with Japan. Right. So, excuse me, sorry. With Japan. With Japan. So it, it really seems to me that the, the things that the US are now doing, I mean, the most obvious being the recent chip. These are kind of blatant acts of economic warfare. Now, whatever the trade organization, the World Trade Organization allows it is certainly there to stop and prevent trade wars because when it was put into place by the Americans, mainly in the form of G A T T after World War ii it was explicitly put in place to stop the protectionist trade wars of the sword.

That, that we saw in the 1930s and that contributed to, and or caused the Great Depression. So I think we really are moving toward those type of policies now with the US taking the lead on pursuing them. And so I think this kind of, this kind of false equivalence that maybe Greg I and the Wall Street Journal is putting forward is just that.

I mean it's, it's, it's comparing apples and oranges, I think. Yeah, I think this 

Collingwood: fairly clear that. This is an example of geopolitics driving economics and trade relations. It's a point that you've made many times, Philip, that far more economics is driven by geopolitics these days than it is by economic policy per se.

I think, as I said before, the US was perfectly happy for decades with these practices, with the arrangements that it had with, with China. They might have been a bit of gr. There was often a bit of grumbling on, you know, from places like the Bernie Sanders right. Earth left, or the, the Pat Buchanan Right.

For example. But generally the, the Washington consensus was that free trade was good, and ultimately it was so profitable that it was, you know, the downs, the, the certain side effects were worth putting up with. That view has only changed once Washington has identified China as a geopolitical threat. Now it becomes a problem.

The US must take, it matters into its own hands. The WT O isn't enough. You know, the W T O hasn't managed to tame China, as Greg IPP put it in his article, but I think there's something broader at stake here. Free Trade and America has been a uh uh, or. Globalization has been a long-standing goal of Americas people, as you did mention, the G A W T or G A T T after the war, which was the WT O'S success predecessor organization.

I think it goes even farther back than that. If you look at the. During the First World War, when America was considering entering and especially Woodrow Wilson was making the argument for entering, one of the reasons that he wanted to impose a new global system on the west to move away from a balance of power diplomacy towards a more open system was that Wilson understood that the United States, because of.

Geographical and resource endowments wasn't reliant on conquest or geographical expansion for security in the same way that some European countries were, but. It did need for its capital and its goods to be able to flow freely across borders and especially imperial borders, which at the time there was quite often imperial preference trading systems.

So I see this as, you know, free trade as being a really longstanding goal of the US and after the war, of course, when it became. Clear that the Soviet Union was a, a potential regional hegemon in, in on the Eurasian land mass. And it became clear that the US was going to have to counter the Soviet Union, the the US.

Put a great deal of effort also into building a, a, a global order that would be aligned with its own aims and free trade and, and globalization to a certain degree. Were part of that. However, now that we've passed that time and, and we've passed the. Hubristic period after the Cold War, when the neocons and the project for the new American century decided they wanted to, wanted to remake the whole world in America's image and free trade and globalization and, and, and the liberalization of economies was crucial to that.

Now that we've passed that period, and now that, well, America's been de-industrialized to a certain degree, you know, industry as a percentage of non-farm pre roles in America has dropped. 16% in 1990, in half, down to 8% now which is causing all sorts of problems for wage stagnation for America's productive capacity.

Its own security. Indeed. It, it simply jettisoning the World Trade Organization and indeed free trade. It's decided that this isn't good for it anymore. It's nothing to do with China not playing by the rules. It's because America's decided that, eh, , this isn't working for us anymore. We're gonna move on to something 

Pilkington: else.

Yeah, I think so. And, and then that raises the question of the chicken and the egg. Have. Have they decided to wind back on free trade because they've realized China's threat? Or have they realized China's a threat because they want to wind back on free trade? I'm not sure the answer to that question, but it's certainly one worth raising.

Maybe it's a bit of both. The problem I think, is as you raise it, it's as it's always said, the business of America is business. Right. And I'm not really clear what a global, a global America would look like if it's putting up the protectionist tariffs before it came out of its shell In the 20th century, it was quite a protectionist place, but it was a very, very different country then.

Small landholders didn't have much huge business. When the big businesses started to develop is when they started to get, as you said, the Sian idea into their head of trading with the rest of the world and, and the desire to take apart the British imperial system and so on to be able to. . So I don't know how America would define.

In a world where it wasn't able to deploy the clear business acumen that the American people have. I'm not, I'm not convinced by it as a strategy at all. And the other, the other problem I think is America's not the world. Uh, The world has learned a great deal from America in the 20th century, especially in the in the past 30 or 40 years.

And a lot of the world has, has learned how to, how to trade like America, how to do business like America. I. Think especially of China, but also of Japan, Germany, and so on. And just because America has decided it's no longer in its interest to engage in, if not free trade, relatively free trade. Does that mean that all these countries are just gonna stop?

I don't see any reason why China wouldn't just continue to trade. I think that's exactly what they want to do. And if you give me, on the one hand, a country that's throwing up tariff barriers and protectionist barriers and so on. With the rest of the world. And another, on the other hand by the way, which has had declining manufacturing share and some of the problems with its economy that you've highlighted.

And then on the other hand, you have this upstart power that's only seems to be expanding in these areas and at the same time is looking outwards and is willing to engage in trade with basically anybody who turns up at the doorstep. I can't really see the first. Power winning out in that scenario.

So I think a, again, I'm not a dogmatic free trader by any sense. I think there's been enormous problems with globalization. I'm very sympathetic to people who talk about industrial policy and, and some aspects of reassuring, but I just, I'm not convinced that this is the way to go about it. 

Collingwood: I think to be fair to Greg Ape, Or, or perhaps that's the wrong way to put it, to be fair to the sources from whom Greg Ippo was getting his information, they see the world developing.

Not in terms of drawing up the tariff barriers, but trade continuing to be free. You know, globalization, continuing to be a thing, but for it to be much more a la carte. So, Individual states to be able to choose with whom they trade rather than, you know, the WTO rules where things are equalized, you know, across a, a range of different product services and nations as well.

And the feeling is that the United States can trade much better with countries like it countries with with similar outlooks than it can with say China, for example. I'm not sure whether that's true. I think. That's a matter of internal policy. I think Germany, for example, is quite a lot like America.

It's a, it's a liberal democracy. It's it's got a, of course, it's a slightly different culture, but not as much as the difference in culture between, say, the United States and China. And yet it's done extremely well out of liberalizing its trade right. You know, Germany's become the preeminent power in Europe again.

Likewise with Japan. That's a very different culture again, but it's still a, a liberal democracy and it seems to me that Japan has done well about in trade as well. I think the big difference is internal policy. And I see all of this, all of these issues related to the WTO as being driven by geopolitics, not driven by trade, otherwise.

You know, this would've happened when these things were obviously a problem 20, 30 years ago. It wouldn't have taken them a quarter of a century to come to terms with them and do something about it. . I mean, 

Pilkington: maybe, but ultimately trade. I know obviously trade and geopolitics is interrelated, hence the podcast.

But ultimately it is a kind of a separate thing. If you want to pick and choose who you do business with based on your friends and or your enemies, you're not gonna do as good business as the guy who's non-discriminatory. I mean, what you're talking about is a form of discrimination. I don't mean that in some pejorative sense to beat up.

A country that wants to engage in it. I just mean that is the way to think about it. And if you have two little villages and one of them engages in discriminatory commercial practices and the other has an open, relatively open market, the one with the relatively open market is going to do better. So this is again, the, the problem of obviously you want to take economics into account when you're engaging in geopolitical calculations.

But if you allow geopolitical calculations to completely override economics, you'll get very, very bad economic outcomes. And by the way, vice versa, because we're, we're re correcting from the opposite vice, which is to allow economics to overly dominate your geopolitics. But if you were to put a gun to my head and say, which is worse, letting economics override your geopolitics or letting geopolitics override your economics, it's, it's the.

I'm almost certain it's the latter. I think you can live with, with too much economics, overriding your geopolitics if you really go heavy on trying to control economic trade and all that kind of thing. In line with strict geopolitical goals, I think the law of unintended consequences is gonna jump out from every corner.

All the glitters is green. 

Collingwood: Well, it's interesting you should say that, but because I was also reading an article in two articles in a week, you'll be amazed to hear that somebody born in T side can manage that Philip. But I was reading an article in Foreign Affairs magazine, which is essentially the, you know, the US foreign policy establishments in-house.

It was pointing out that the Biden ad administration has now made several commitments in relation to the environments in climate change, in areas such as electric vehicles, in renewable energy, and becoming much more involved in the COP conferences. It also pointed out that the European Union, Japan, South Korea, and even China have.

Varying degrees of similar commitments. However, the problem with that is even if we some of our listeners might disagree, some of our listeners might agree, but let's just say that at the moment for the purposes of this argument, That climate change is real. It's anthropogenic in nature, and there is something that mankind can do to change it or curtail it or reverse it.

Let's accept those points for now. Even if we believe in all of those points. The essay in Foreign Policy Magazine was saying that the infrastructure needed for all of this electrification and greenification of the electricity and energy system would require four times. The critical minerals in the next 17 years, so that's between now and 2040.

We would need to mine and refine and then and then package and make usable four times the volume of critical minerals that have been mined in the entirety of human history. So this includes things like copper, nickel, cobalt, lithium. It's a, it's a pretty big ask for us to be able to identify sources of this build up Mines set up the refining process, which for a lot of these things isn't easy.

And the article was, Basically looking at what that would mean for us foreign policy in relation to countries like the Democratic Republic of Congo, Zambia countries in South America, like Peru and Chile. So I, I, I think this is something else that's going to tie into US trade and foreign policy as well.

Pilkington: Philip? Yeah, I mean, I definitely share your skepticism about this. Very rapid PI pivot to Electrical vehicles especially. I mean, this is a very new technology actually. It's, it's a very old technology. Electric vehicles have been around for, for almost as long as as fossil fuel vehicles, but they've just always kind of failed.

Edison built one, it was perfectly functional. , but the batteries tended to catch fire and blow up or I, I can't remember what it was, but the batteries was, the batteries were always the problem in these things. But having the functional ones that we have now, the, the Teslas that you've probably seen outside your door, they are relatively new.

Ha. Having e EVs used at this scale is relatively new. I mean, how long long's it been around for? 10 to 15 years. I mean, really Tesla's in terms of seeing them drive around. Tesla's only been on my radar for maybe six years. Probably if you're in America, that might be 10. I don't know. But they're relatively new and, and we seem to be kind of betting the farm on this technology.

I'm not saying the technology itself doesn't work, although there are still questions about EVs. One question is their depreciation rate, for example how long do they really last relative to a petrol vehicle? , which is an important question. And how, how much are they worth? After a few years? These could be exorbitantly, expansive vehicles that find it very difficult to be commercially viable unless their luxury we'll see again, the cheaper ones are only making, making their way out.

Now, if those only last five years than, you know, could be a bit of a problem. But you, you're right. I mean, and, and now the, the plan apparently is to completely recenter our economy around digging these metals out of the ground and processing them and trying to figure out ways to secure them. I mean, the first step will probably be, as you say, Do the metals exist?

Is there enough productive capacity to put them in place? Can we imagine engaging in an industrial policy of that scale? It's, it's not a domestic industrial policy. It's like an international one. It's very daunting. At the very least, when cars came on the scene, you know there were probably new components.

Well, certainly one of the things that was needed that wasn't needed before. Petroleum in, in large quantities, and we didn't really plan it. We didn't say, okay, we're going to retire all the horse and carts and we're going to engage in this big plan to extract the petroleum. I mean, we, it kind of grew up organically and, but we're not talking about it like that.

We're talking about it as if we have an almost kind of gauze plan style communist plan to get rid of this stuff by a certain date. and that we're going to completely change the productive systems away from, you know, petroleum extraction and so on into these metals and that there's definitely enough of these metals.

We can definitely get them out. We can definitely process them. I mean, it's a lot and it's a lot of eggs to put in one basket. I, I dunno what you make of it. Well, yeah, I'm 

Collingwood: very interested in what it means geopolitically as well, so. You know, let's put, put ourselves in a position by say, 20 40, 20 50 when we should.

A fair way. I mean, even we're a bit late compared to the, the Goss plan. As Goss plans usually were we we're still gonna be at that stage tremendously reliant on electricity and on batteries for short-term electricity storage, and perhaps hydrogen or, or liquified air for grid scale storage.

We're gonna have mostly renewable energy. We're gonna. Millions of kilometers of copper wiring in, you know, even small countries because everything's going to be electrical. What does that mean for foreign policy? And we were tremendously reliant on the Middle East for much of the second half of the 20th century.

And in fact, in 1973 with the Yom Kippur War in retaliation for us and Western support for Israel during that war. They went a long way to hammering Western economies. They caused a tremendous inflation. They caused economic hardship within the system by forming a cartel and ramping up the price of oil and gas.

Is it possible that we have Nickel producers or copper producers or, or, or, or producers of you know green energy related things. I mean, we britain's planning a huge solar farm in Morocco, I believe at the moment, and is planning to, you know, build an interconnector from Morocco through the Atlantic, I guess across the Bay of Bisque, all the way to Britain to draw energy from this.

That kind of makes us reliant. And I, I, I don't see why. What happened with oil in the second half of the 20th century can't happen with these metals and, you know, certain key components. Rare earths, for example, in the middle and the second half of the 21st century. And I could imagine a situation where there were similar outcomes essentially.

Pilkington: Yeah. But I'll, I'll tell you one thing that's very, very different. It's kind of related to my last comment that this, prior to this, when we transferred from, you know, horses effectively to petroleum vehicles, it was an organic development and the geopolitics followed the economics as the petroleum became clearly more important because there was more demand for.

Then the geopolitics pivoted to take an interest in these oil rich regions. I think the real danger here is actually foreign policy people reading foreign policy magazines, because Foreign Policy Magazine is telling us what's gonna happen in the future. They're telling us that the EV revolution and that the Green Revolution is definitely gonna work.

It's a hundred percent gonna work. It's not just gonna work for us. It's also gonna work for China. It's also gonna work for Russia. And that basically kind of the implication that you draw from this is that you'd go and you'd, you'd try and pivot, I suppose, your foreign policy toward the the regions that have the, the metals and the rare earth materials that you, you're talking about.

Well, okay. Let's say you spend the next 10 years doing it. And none of it works out. , you, you see tho, tho, tho those are the dangers in making predictions like this a lot of the time. You know, if you're back in the 1960s and you see, you know, the Jetsons and all that and, and everyone kind of thinks we'll be living will of moon bases by 1985 or whatever date they put on it.

I mean, people really did think that. And we kind of snicker at it now, but it wasn't that absurd. I mean, a man had just gone into space. They just landed a man on the moon a few years later. I mean, maybe you could have. These colonies or whatever, but it didn't work out that way. And 

Collingwood: yeah, I'm still waiting for my hoverboard from Back to the Future to Right.

Pilkington: I, I mean, I remember David Grayer, the anthropologist used to say, where's my flying car? I mean, we'll, I mean, it's all well and good to have these ideas in your head, but a lot of the time they don't work out. Now imagine if we'd we'd made Cold War policy. Based on the idea that we were definitely not maybe definitely going to have colonies on the moon.

So we started retooling our military structures so that they'd be moon capable. So like everyone would watch Moonraker and they'd say, okay, that's exactly what we need to do in foreign policy terms. I think the Cold War would've had a very different outcome if, if the democratic notions have done that.

So I do kind of worry that. The people might be making predictions that might be slightly too big for their boots here. China's GTO adventure, the Argentinian currency swap with China's back in the news. They've renewed it again and it's got a lot more fanfare this time. Actually, I think it kind of, it flew under the radar before the, the currency swaps between Argentina and China.

Go back to 2011 actually when Christina Kirchner was, was president. So far as I can tell. Back then, they were mainly they were mainly to do with with you know, easing the easing trade between China and Argentina because Argentina's obviously an enormous soy producer, soybean producer. And the Chinese eat a lot of soy.

Last time it was renewed was in February, 2022 last year. It was coupled with a large um, spate of belt and road investments. So it, it, it kind of had a kind of conditionality attached to it. The interesting thing to ask about this, and I say ask because I don't know, no matter how much I read up about it, I, I can't tell is, is this a normal currency swap or is it some sort of subsidy from the Chinese to the Argentinians?

So just to get a little bit boring here, the way a currency swap usually works, currency swap lines between central banks or state actors. Is that a central bank? Let's. The United States Federal Reserve will open up a swap line of dollars with the European Central Bank, and they will then, that will be a completely liquid stream of dollars that can be bought in with euros from the E c B at the market rate.

Right now, what's important about that swap line is it doesn't impact the, the currency itself. So if the ecb print up lots of euros and buy lots of dollars, in the swap line, that should, in theory, drive down the price of the Euro and raise the price of the dollar. So that's usually the way a swap line works.

And usually it's just for liquidity provision, right? It's just to ensure that there is a, a deep enough market. But all of the reports that I've seen around the Yuan peso swap seem to suggest both the Chinese and the Argentinians officials seem to be suggesting that this will. Prop up the ur the peso.

And they also see it as a way of building their ever dwindling foreign exchange reserves. Their foreign exchange reserves are constantly dwindling because the peso is constantly falling, and so they have to intervene in the market. So usually a currency swap arrangement shouldn't be kind of a a, a subsidy shouldn't be an attempt by.

The Chinese to prop up the pay. So usually a loan would be used, but for that, you know, a hard currency loan or something like that. But every, all the news reports around this seem to suggest it is some sort of subsidy. So I don't know if it is or not. The, but it seems from the reporting that it is, in which case it is kind of Charitable giving on the part of the Chinese, so why would they do it?

I mean, that's kind of the question. I, I found some Chinese reports on this and they seem to be suggesting that the ccp, the, the Chinese Communist Party see Argentina as a test case for getting Yuan to be held as an FX reserve. It's been a long-term test case. They, they've obviously identified Argentina because it's a large trade partner because of the soy exports to China.

It's got a highly unstable currency, so they constantly need to build up these FX reserves. So it would actually be very logical to go in and use this as a test case to build up yuan as, as an FX reserve. Of course, at the same time, now Russia for very different reasons is also building its yuan foreign exchange reserve.

So it's definitely interesting times. Yeah, absolutely. , 

Collingwood: one thing I'm interested in is the fact that Argentina is one of that group of countries which you call bricks. Curious, shall we say. So they have, I believe, either applied formally or certainly indicated that they would like to apply for bricks membership.

Bricks is the Brazil Russia, India, China, and south, South Africa five countries, which at the time had quite similar economies and, and worked together for economic cooperation. And this is something that we spoke about for some months now or. Maybe almost a year now, potentially expanding to include other countries, even countries like for instance, Saudi Arabia.

So how do you think this sort of thing might fit in with bricks? Because it sounds to me like these countries are, at the very least, what they're doing is increasing bilateral. Cooperation. That might be something quite different from increasing cooperation through a kind of a super structure like bricks though.

So I, I, I mean, how do you 

Pilkington: see that fitting in? I think this is what we discussed last time, that if there is a transition from one currency to another, it won't actually be some sort of a coherent plan. It'll be a kind of an evolutionary. Development from one pl, from point A to point B. And I think the Chinese, I mean, from what I can tell from their news reports, as I said, they see this as kind of a test case.

So I think what could be happening here is that they are, they are seeing opportunistic moments to kind of intervene in these, in, in these countries or in these markets in order to test viability for, in this case, foreign exchange reserves for the yuon. And then see how that develops from there.

All the stuff that's going on right now from the, the gold purchases we saw last week to an aggressive attempt to get the UN accepted as a foreign exchange reserve. All of this seems to be part, not of a plan, but of a broad kind of march. I, I, I'd say it, it represents the, the desire on the part of these comp countries to move away from the, the current system.

And so we'll see a kind of gradual step by. 

Collingwood: Yeah. One of the things that I thought was interesting as well was simultaneously this week or or, or perhaps at the end of last week, there was a report that the United States was getting very nervous about the Argentinians buying Chinese fighter jets because the, the Chinese wanted in order to sell the Argentinians, these fighter jets, these quite modern fighter.

They wanted to build a naval base on the southern tip of Argentina, that that kind of point where it meets Chile right at the bottom and below that you've got an Antarctica, which indeed is the reason that China wants to build a naval base there as access to an A Antarctica. The Americans had apparently approached the Brit.

And asked if it was okay to sell the Argentinians f sixteens because of course, Britain tries to ensure that no modern mini military equipment can be sold to Argentina because of their continuing desire to retake the folk. I shouldn't say retake, I should say take the Falcon Diamonds, which is Sovereign British territory.

The US have said, well, look, if they don't buy F sixteens, or first they will. Chinese fighter jets and in addition to that, the Chinese will get a naval base for that. And I thought that was quite interesting. Cause I've, I, I've long thought that as Britain seems to try to, or, or seems to want to be the fifth wheel of the American wagon all the time no matter what America does, whatever interventions and foreign adventures it gets involved in, Britain seems to want to be involved.

It wants to please its imperial overload, I suppose. And I've often thought that for a small country, I mean, America has, you know, has got a fair bit of weight and heft and military and economic power to strike back if, if a country tries to signal its displeasure with the United States, but Britain's far more vulnerable and one of its vulnerable spots is the Falkland Islands.

Right. So I've, I've often thought that if, if Russia or China wants to punish Britain, Britain's involvement in US machinations in the South China Sea, for example. One of the easiest things to do would just be to give the Argentinians a whole bunch of free armaments. I mean, Britain has far greater defenses on the Falkland Islands now than it did have in 1982 before the invasion, where there was very little there.

I mean, we have a battalion. We've built a, we've built a a, a long airfield. We have early warning radars. We have anti. Assets there, I believe as well. But you know, that's not the point that, you know, the point is if you keep arming Argentina, the cost of holding onto the Falkland Island of Britain, the cost of providing a credible deterrent goes up and up and up and up.

And I guess eventually the hope would be that Britain thinks it's not worth anymore. So I think all of these things with Argentina are interesting and it even has an effect on Britain as well. 

Pilkington: Yeah, I saw some further reports this week. They, they weren't terribly well sourced, but they were about the naval base as well.

And they were discussing, I think it was in the Express here in London. They were discussing a prominent Chinese businessman lo lobbying local officials in the Tiara Delph Wago district for this Chinese base. I guess that's the southernmost tip one. I guess that would be the logical place to put it.

So, I, I don't, I mean, if, if they're talking to local officials at this stage, it probably isn't at any you know, Serious point. But I suppose there, there, from what you're, from what you're hearing and from what these reports are saying, there does seem to be some logic to it. I I can certainly see what you're saying about the LANs.

It, it would be it would be a a good way to trial Britain, as it were. But I, I, I wonder, I mean, you're usually better on this than me. I wonder. Do you think that's the only reason? I mean, surely there's, there's good Military strategic regions for reasons for them to want a naval base in that region, right?

Collingwood: Not really. Not since the Panama Canal was built, has that been an important naval choke point? So the Cape of Good Hope on the bottom of Africa is still a naval choke point because you know, the, the, the largest size of oil tankers still can't get through the Suez Canal. You have these like Suez Max Oil Tank or Suez Max tankers in general, and bigger than that, which some are, they can't get through the Panama Canals.

So the Cape of Good Hope on the southern tip of Africa is still, to a certain degree, a naval choke point. But I believe I'm right. I'm, I'm correct in saying that. The, the, the southern tip of South America isn't a naval choke point to the same degree. And I think anyway, you know, in coming decades you might see a kind of northern corridor emerge as well.

I mean, I, I think the main reason for the Chinese to want a naval base there in particular would be for access to the Antarctic, which they don't have to the same extent as most of the Western power. And there might be, you know, resources and science and all of this sort of thing that China would want to be involved in, in the an Antarctic, especially if that ice shelf starts to melt a little bit.

So that would be the reason for having a naval base. It might also, it might also be a test of the Monroe Doctrine. Okay. Monroe Doctrine very clearly says that no power, you know, no power shall have military bases in the Western Hemisphere, so it'll be a test of the Monroe Doctrine. I mean, America spent much of the last year saying that they no longer believe in spheres of influence.

Well, do they believe in spheres of influence and the Monroe doctrine, which is explicitly a sphere of influence. So I I, I think that's far more likely than any kind of strategic need to kind of control a, a, a, a choke point. For instance, the, the base that they have in Jibouti on the Horn of Africa, that is very much a, a, a, a choke point for a maritime choke point.

But this wouldn't be. 

Pilkington: Yeah, that's interesting. I, I, I wonder what America would make of it. I've been commenting a lot that America seems to have lost a lot of interest in Latin America. I suppose that goes to what you were saying about losing interest in this kind of spheres of interest, spheres of influence kind of framework.

But it probably, it does seem like it's making a come. I, I would make a comment on it that I don't think that the, that the foreign exchange reserves and so on, and China's clear desire. To at least increase trade, if not actually form an nav base in Argentina are unrelated. And I think this just for some humble bragging rights, I think this does give a lot of credibility to what we're saying that these, these economic developments that we're seeing between the bricks plus countries, Could be very real.

I, I think, I think they're often dismissed as kind of like, oh, well these countries have too many squabbles and disagreements. They'll never be able to form a coherent alliance. And there's a lot of arguments against that. But one of them is just quite clearly, I think, I think, I think. The way I envisage the bricks plus thing or something similar emerging, what we call a mult multipolar world, is that bilateral relations will occur first and they'll occur on, on very specific points of interest between the two countries, and then those might form into a network of their own.

I don't see it as kind of a top down. Formation of a block like the Soviets did and the, and the Democratic countries did after World War ii. But the fact that, that they, that they are ramping up this peso yuan arrangement at the same time as they're exploring a, a naval base, I think, I think speaks volumes.

I agree 

Collingwood: a hundred percent. And I suppose that brings us back to our very first story about the wto. That one of the solutions that Greg IP of the Wall Street Journal suggested or suggested that he had heard from US officials was. They were going to go for more of an a la carte option in terms of trade trading with countries that they feel more comfortable with.

And here we are now as well. The bricks countries are also starting to form bilateral arrangements as well. It, it seems to me very much that we could slip back into a kind of you know, the, the world's, well, the world's becoming multipolar in, in a single word, I suppose. 

Pilkington: Yeah, I, I still would distinguish that the bricks certainly are investing heavily in these, in these bilateral A agreements, but they are not, they are not burning down the house before they engage in them.

I think that's the fundamental difference from what seems to be developing in the West and what's developing in the rest of the world. The rest of the world is perfectly happy for trade to go on as normal now and to. Better relations between themselves. So it's a, it's what I'd call a competitive approach.

Whereas our approach is what I'd call a monopolistic approach. It's an approach where we already have this kind of friend base or, you know, alliance system or whatever. We're currently trading with the world pretty much openly, not now. Russia obviously, and, and Iran's Rand's been out of the game for a long time and obviously North Korea, but the, the so-called pariah pariah states have, Up until the Russian sanctions fair, fairly minor players, but now we're kind of saying, oh no, we're going to pick and choose, and we feel like we can pick and choose because we're the incumbent, we're the monopoly, we're the incumbent.

And I, I, again, I, I just, I'm very skeptical of that approach. I think the best approach is effectively what the Chinese are doing. They're saying, okay, we're open to business. Our doors are open for business, but we're gonna compete really, really hard to get your. And that's what America used to do very well.

And I hope, I hope we don't lose it. Well, I think 

Collingwood: we are already and have lost it. I think that trade in general has been very foolishly undertaken. If you look at the Southeast Asian economies, which have done extremely well, they thought very hard about how they could pay their way in the world, how, how they could gain competitive advantage in this world.

You know, we don't have to look at countries like China, which. Far more controversial in the way that they went about it. But countries like Japan and South Korea and Singapore, their governments were not indifferent in the way that our governments were indifferent about what was made by whom and by where, where their competitive advantages were going to come from, how they were going to create jobs, how they were going to climb technology ladders and create value within the.

They thought very carefully about that, and they were very effective in enacting policies that would allow them to be successful in the free trade world. We, on the other hand, have been utterly indifferent and, and, and just assumed that free trade would be a good in and of itself, and which had just let it rip.

And we've seen our industrial base collapse. I mentioned numbers earlier on with the United States. , you know, industries used to be 16% of non non-farm payrolls in the United States, and now it's only about 8%. We've seen wages stagnate for the benefit of the Southeast Asian countries, which we've seen tremendous growth because they've actually thought about it.

And I think we're really slipping from the, the sublime to the ridiculous. Here. We, we've gone from this kind of ind. It's almost a, it's not really indifference, but it's another, it, it, it's the flip side of the same coin where now we're just, you know, thinking about pulling up the Terra falls because we don't like your government in effect.

And again, this is the wrong way of going about it. Exactly as you say, like the, it seems to me that some of the bricks countries are actually thinking about this, saying, okay, we're going to, in the same way that we built up our industries and then took advantage of free. Now we're going to build up bilateral relations, and then maybe we can talk about things going into a, you know, degenerating into trade blocks, whereas we're, we're just pulling up the drawbridge.

Right? 

Pilkington: Yeah. I think, I think the best way to phrase it will be we've gone from indifference to frustration and now we're acting out. Our frustration will ask anyone who's become frustrated before, if. If they engaged in proto productive activity while frustrated you probably don't, you probably want to go and take a breather and cool off and see where you're, where you can fix the situation and see where you can't and make some, some more rational decisions.

I, I, I'd hope that's where we go.

Collingwood: You've been listening to Multipolarity Subscriber Follow for Fresh episodes every week.