The Future of Global Trade with Martin Wolf

Speaker A: When I look at things now, my conclusion is unless something very big happens, uh, trade will continue in all its various forms. Movement of people will probably continue in all its various forms, but it will be distorted in various ways and probably quite unpredictable ways. In other words, it's going to go on, but it'll be messy.

Speaker B: I'm Paul ladacena, Chairman emeritus of Carney and founder of its Global Business Policy Council, and this is reimagining the envisioning what's Next. In June, Carney's Global Business Policy council convened its 2026 CEO retreat in Bangkok, Thailand. The forum brought together more than 70 leaders from around the world for rich conversations about major trends in geopolitics, economics and technology and their implications for business. In Bangkok, the leaders around the room spent two days asking the question, what next? Our conversations followed Chatham House Rules and any excerpted conversations on this podcast are being released with permission. The final conversation in Bangkok was with Martin Wolff, one of the world's most respected economic thought leaders. We've been fortunate to have Martin join us at many of our CEO retreats through the years, going all the way back to 1995. Martin is chief economics commentator at the Financial Times and the author of many important books, including the Crisis of Democratic Capitalism. Earlier this year, he wrote a powerful column about the dangerous triumph of Neo Mercantilism. The underlying belief of mercantilism is that international economic power is a tool of state power. And on that basis, China and the United States have been engaged in what has been called Neo Mercantilism. With China trying to protect its industry and the United States retaliating, international economics becomes a zero sum game. If you win, I lose. So I began by asking Martin, where is all of this leading and what are the consequences of the current economic policies?

Speaker A: We're seeing something incredibly big happened in the course of the last 20 years. We all know that the rise of China, but this crucially created a world that in the pre First World War period was limited, as it were, to Europe. The first half of the 20th century could be seen as the struggle for domination of Europe because, uh, Europe was the core then of the world system and the great powers of Europe thought this was an incredibly important struggle and whoever won would in some sense win the world. And this, what interests me is that this was an absolutely clear and definitive categorical error. Because the great power of the world by 1900 was the United States. And it didn't matter what happened in Europe. So what on earth would the Germans, French and British fighting Over. But this time is different because now we have, with the rise of China, two really rather equal, though different great powers superpowers, uh, uh, if you look at gdp, technological levels and so forth. And so we have a genuine struggle, uh, for the world domination between two powers that actually instinctively think in those terms, in my view. And inevitably that affects trade policy because trade and economic policy have always been part of the arsenal and of great powers. Uh, and that, in a sense, very crudely, is what mercantilism is about. It's about power. Now the question then is how that fits in within a, uh, world economic system, which is again, it's about as integrated as it can get by historical standards. And that's partly because of the policies we pursued by over the last half century or so, 70 years, but even more because, of course, of technology. Because the one thing technology has done is lower the costs of transport and communications. It collapses barriers. So we have two genuine superpowers, an economic giant which is not a superpower, Europe and technology pushing us in this direction. And that ends up with a very, very messy world because the technological forces are pushing us pretty obviously in the direction of integration very broadly. To give you just one example, mass migration, well, we've made transport of human beings incredibly much easier than it ever was before. What do you expect to happen? They will move. So this is where we are, and the question is, uh, what happens now? Uh, the lessons that I think we should draw from where we are now, it's very, very hard to stop this, namely the integration process. And the striking thing is we're in a tariff war. But if you looked at the data, ah, you noticed some trade diversion, very significant. But trade has gone on as if nothing had happened. And because it's sort of unstoppable unless you really try. Meanwhile, trade in services explodes because so much of it is now convertible into bits. And, uh, well, bits move very, very easily. So all that continues. And then if you look at the Chinese side of they're not trying to stop trade, they're trying to increase it. Because they're pursuing the classic mercantilist strategy, solving domestic demand problems. It's also domestic development problem by generating vast net surpluses. Absolutely classic mechanical. So when I look at things now, my conclusion is unless, um, something very big happens, a, uh, major war or something like that, trade will continue in all its various forms. Movement of people will probably continue in all its various forms, but it will be distorted in various ways and probably quite unpredictable ways. And people will then find brilliant ways around it, and, and people will notice the brilliant ways they're finding around it and try to stop that, but nobody's consistent or systematic enough to stop it altogether. In other words, it's gonna go on, but it'll be messy.

Speaker B: So, Mark, barring a war, I mean, I hear glimmers of optimism, uh, coming from you.

Speaker A: It feels very unnatural.

Speaker B: Is it un.

Speaker A: No, no, no, no. That's complete mistake. I believe passionately in the profit motive, since the trade we're talking about is profitable. Consumers, uh, want it, the concerns of producers matter, but they don't matter quite that much. And if they want Japanese cars in the 80s or Chinese vehicles now, I guess they will have it. Now, this doesn't mean there aren't some very big strategic issues here, um, strategic autonomy and all the rest of it, which will become very significant. But the policies we're seeing now up to now don't stop the basic structure of the world economy continuing because profit motives continue to be so powerful. And as I've already stressed, I think this is incredibly important. Technology is simply so powerful.

Speaker B: So I asked Martin, are you suggesting, in the words of another council thought leader we have with us at last year's retreat, Bob Kagan, that the jungle doesn't grow back in international economics.

Speaker A: The jungle doesn't grow back in international economics as long as relations among the powers remain well short of war. Uh, that's the experience. So when things, you know, Europe was highly integrated economically, despite protectionism up to the first World War. And if you have two world wars and a great depression in between, everything goes to hell. So ultimately this depends on geopolitical stability.

Speaker B: As we continue, Martin explored potential antidotes to neo mercantilism, starting with global cooperation.

Speaker A: Well, we really don't want to get back into what happened after, uh, the first World War. So that's an unthinkable world. And that means that the major powers have to cooperate to avoid this. And if the weaponry available in the system, both privately and publicly is frightening enough, they will do so. And, uh, this brings me back to sort of what's happened with nuclear weapons. Um, I'm old enough to remember the debate in the 60s, and we sort of took it for granted there would be a nuclear war. But in fact, we've done an incredibly good job, not perfect, by many means of managing proliferation, and we haven't had a nuclear war. Nuclear weapons have not been used in Angus, thank heavens, since, uh, Hiroshima and Nagasaki catastrophes. So, um, that suggests that if things are frightening enough, governments can cooperate Even if they really hate each other and they can't to some extent. Kissinger's detente policy, which I think is one of the great successes of my lifetime, was partly originated out of that precisely as a reaction to the Cuban missile crisis. So I think there's nothing like having shared terror. And, uh, uh, if AI Adds to the terror, which I think it is, um, that is another reason why I'm becoming quite unnaturally optimistic.

Speaker B: So if we dial back in history and you as a, um, student of history, looking at the mercantilist policies of the 16th through the 18th century, how some of them resulted in conflict, what's the end game of this period of neo mercantilism?

Speaker A: The obligation on the present superpowers is to fight this conflict or whatever, this battle for supremacy, short, uh, of outright conflict, because outright conflict is unthinkable. And that's what they're doing. And the result will be, for business, messy, unpredictable. I think predominantly peaceful. And the economic policies will be used, uh, without any doubt, in different ways to promote what the superpowers think are their vital economic and security interests, which will include obviously trying to protect, however coherently, their, huh, technological advantages. Trying to undermine the technological advantages of the other side. Trying to achieve security through having huge current account surpluses and net credit or managing liabilities. I mean, if you think what are stablecoins a.

Speaker B: About?

Speaker A: Stablecoins are a way of managing the debt problems of a country which, uh, has huge foreign liabilities and by ensuring that how they finance it is, uh, completely under their control. That's a fascinatingly mercantilist policy, different from most, I think. In other words, economics becomes part of statecraft short of war. Uh, uh, and I think we. We must assume that's the sort of world we are going to be in for the indefinite future. And we have to do everything we can to make sure that it remains short of war and in the process manage some of the areas where conflicts are likely and risks are likely. Like, that's why I stress AI but, uh, it's very easy to see that anxiety about Chinese manufacturing domination linked to both their technological achievements and their very unbalanced economy is going to grow. I don't see how it diminishes. And somehow or other we're going to have to find a way of managing it. So it's managing tensions and conflict short of war. That's the next 30 years. I will.

Speaker B: So, Martin, if you were a corporate strategist or a CEO, now what do you do to successfully manage through These shoals.

Speaker A: Well, I suppose there are two answers. First of all, you really, really have to understand your risks and your opportunities. Every business is going to have unique characteristics about who its competitors are, where its markets lie, where the prospects and where the risks are. So you have to be aware of your risks and who your competitors are. And then you have to be sort of reasonably clear about what the players, the main players are likely to want to do. Which basically first of all includes obviously the us, China, but also other major players, Europe and how that's likely to affect you. What has I think gone if the big attempt after the Second World War of the Americans then overwhelmingly dominant with the Soviets out of it, was to create an ordered world in which the US would by and large, I'm um, oversimplifying, by and large said we are going to live by the rules to make sure that all of the other guys live by the rules and you've got some stability in your markets and all the rest of it. That didn't look quite so right in 1971 with the Nixon shock. But by and large that was true. That world is gone. So you have to operate, it seems to me in uh, an unpredictable geopolitical environment which is not necessarily a catastrophic one, but ah, one in which you have to think how vulnerable are uh, we if trade policy changes radically, if there is another major international financial crisis, you have to think about that. So it's just more complicated.

Speaker B: Thank you to Martin Wolff for joining us and sharing his insights over three decades. We'll share more insights from the 2026 CEO, uh, retreat in Bangkok over the next few weeks.

Speaker C: This podcast is produced by the Global Business Policy Council, a specialised think tank within the global management consulting firm Carney. For more than 30 years the council has been a strategic service for the world's top executives, policy figures and um, business minded thought leaders. The Council is dedicated to helping CEOs and government leaders leaders anticipate and plan for the future. Learn more about the Global Business Policy Council@carney.com GBPC.