352. Can This Man Stop a Trade War?

The World Trade Organization is the referee for 164 trading partners, each with their own political and economic agendas. Lately, those agendas have gotten more complicated — especially with President Trump’s tariff blitz. Roberto Azevêdo, head of the W. T. O., tells us why it’s so hard to balance protectionism and globalism; what’s really behind the loss of jobs; and what he’d say to Trump (if he ever gets the chance).

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Stephen J. Dubner?

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• 0:33Stephen J. Dubner?

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• 1:04Stephen J. Dubner?

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• 1:48Stephen J. Dubner?

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• 2:33Stephen J. Dubner?

  Hey there, podcast listeners. It's Stephen Dubner. Before we get on to today's show, how would you like to come see some Freakonomics Radio in person, live on stage? We'll be taping four episodes of our live journalism game show, Tell Me Something I Don't Know, in New York City on October 19th and 20th at Joe's Pub. Every show is different, so feel free to come to all four. We've got an amazing lineup of co-hosts and fact-checkers, including Angela Duckworth, Alex Gornashelley, Christian Finnegan, Manoush Zamirodi, A.J. Jacobs, Mike Maughn, and Alexandra Petry. Guests from the audience will come onstage and try to wow us with some fascinating Freakonomical information. We guarantee you'll learn a lot and laugh even more.

• 3:15Stephen J. Dubner?

  For tickets and more information, go to Freakonomics.com/TMSIDK. That stands for Tell Me Something I Don't Know. Again, it's Freakonomics.com/TMSIDK. Hope to see you there. Okay, on to today's episode.

• 3:42Stephen J. Dubner?

  So are we in a trade war yet?

• 3:43Speaker 01

  Well, define a trade war and I'll give you that answer.

• 3:47Stephen J. Dubner?

  Yeah. For the past several months, the United States has been trying to gain some leverage with its trading partners. The president slapping new tariffs on steel and aluminum imports from America's closest neighbors and allies. Sometimes, it gets a bit rough. Canadians, we're polite, we're reasonable, but we also will not be pushed around. Just this week, a new trade deal was struck with our polite Canadian friends and with Mexico.

• 4:13Speaker 02

  We have successfully completed negotiations on a brand-new deal to terminate and replace NAFTA and the NAFTA trade agreements with an incredible new US-Mexico-Canada agreement called USMCA. It sort of just works. MCA.

• 4:35Stephen J. Dubner?

  But the aggressive trade renegotiations have continued, especially with America's biggest frenemy.

• 4:42Speaker 02

  We can't continue to allow China to rape our country, and that's what they're doing. It's the greatest theft in the history of the world.

• 4:51Speaker 03

  China is imposing new tariffs on US goods today after President Trump put tariffs on $200 billion worth of Chinese imports.

• 5:00Stephen J. Dubner?

  Here's what a Chinese trade negotiator said. It's hard to negotiate with someone when he puts a knife on your neck. I'm no expert, but that kind of sounds like a trade war.

• 5:12Speaker 01

  Regardless of whether or not we are in a full-blown trade war, I think, not a full-blown trade war, I think the first shots have been fired, clearly.

• 5:22Stephen J. Dubner?

  The modern global economy requires a delicate balance in which countries collaborate on trade while simultaneously competing against one another. This competition often requires a referee to make sure everyone's following the rules. And that referee is this man.

• 5:40Speaker 01

  My name is Roberto Acevedo. I am the Director General of the World Trade Organization since 2013.

• 5:49Stephen J. Dubner?

  And would you describe the Director General role of the WTO as essentially a diplomatic role?

• 5:56Speaker 01

  The diplomatic role of the Director General is the one that he has to perform as a builder of bridges. He has to approximate positions. You have 164 members now to guide, and they have very different perspectives of everything, on everything, on politics, economics.

• 6:22Stephen J. Dubner?

  Today on Freakonomics Radio, a conversation with the WTO's Roberto Acevedo about what makes for a successful negotiation.

• 6:30Speaker 01

  I know some people think that everything you need to know you learn in kindergarten.

• 6:35Stephen J. Dubner?

  We talk about whether the global economy is doing as well as the current numbers indicate.

• 6:40Speaker 01

  It's amazing that I still hear people saying, oh, but the economy is great. Of course, it's great. It hasn't been affected yet.

• 6:47Stephen J. Dubner?

  And which came first? The president or the tariffs?

• 6:51Speaker 01

  President Trump didn't just happen. You know, he didn't just fall from the skies.

• 7:09Speaker 04

  From Stitcher and Dubner Productions, this is Freakonomics Radio, the podcast that explores the hidden side of everything. Here's your host, Stephen Dubner.

• 7:27Stephen J. Dubner?

  The World Trade Organization was founded only in 1995, but has its roots in the Bretton Woods Conference in 1944, which also gave rise to the World Bank and the International Monetary Fund. These institutions were set up to help resuscitate and grow the post-war global economy. But the political timing wasn't right for a global trade organization. Instead, an agreement between 23 countries, called the General Agreement on Tariffs and Trade, was signed in 1947. When the number of signatory countries reached 123, the agreement was formalized and given more teeth with the establishment of the WTO. Its mission is

• 8:09Stephen J. Dubner?

  to, quote, "ensure that trade flows as smoothly, predictably, and freely as possible." But in recent months, global trade has become quite a bit less smooth and much less predictable, with the US threatening or enacting massive tariffs against a variety of countries and industries, with retaliatory tariffs quickly following. That's where we begin the conversation with Roberto Azaveto. We spoke a few weeks ago. I was in New York, and Azaveto was at WTO headquarters in Geneva. So we are in a particularly noisy trade environment at the moment. It's in the headlines all the time. Considering the threatened and actual tariffs emanating from the US,

• 8:53Stephen J. Dubner?

  and considering the US role in the global economy, what share of your time currently is taken with issues that concern directly or indirectly the US?

• 9:07Speaker 01

  Well, you're talking about the largest economy in the world. So it's natural that a lot of my time will have some kind of relationship with actions taken by the United States. Also because an action that is taken by the United States has repercussions everywhere, across the world. So anything that the US does will have a global systemic effect. So, of course, a lot of my time has to do with that. But what is important also, you have to realize that President Trump didn't just happen. You know, he didn't just, you know, fall from the skies in an ambient that was not ripe and then found traction.

• 9:50Speaker 01

  That didn't, that was not the, he is the result of a very real situation in American society and in the American economy. And if you don't understand the forces that put him there, I think that's part of getting the wrong diagnosis. And I have to tell you, there is a lot of sympathy for some things that are said on the part of the United States and that are welcome in other areas of the world, but not everything, of course.

• 10:19Stephen J. Dubner?

  When you say there are things that other people around the world hear and they agree with what Trump is saying, what are you talking about specifically? I gather you're talking about maybe the notion that China doesn't play fair. Is that what you're referring to?

• 10:33Speaker 01

  It's more general. For example, governments have a tendency to help their domestic producers, their economy, and sometimes they adopt measures which are distorted. China has been cited, yes, but others have too. The situation on steel is not to be ignored. There is, in fact, a glut in steel and aluminum production. And that is a result of overcapacity. There is no doubt, and I think everybody agrees. But everybody blames somebody else for the overcapacity. So the only way to figure this out is to sit down and try to find a common way forward.

• 11:15Stephen J. Dubner?

  The WTO is opposed to tariffs generally, and most economists agree that tariffs are a really distortive way to do trade. But it strikes me that there are a lot of instances where a tariff exists under a different name. One of the US's biggest complaints is that China, for instance, doesn't honor intellectual property, that rather than being bought or licensed, the property is copied. So that would essentially be a tariff on the imported version. Then there are governments that subsidize their airline industries or their agricultural industries, their oil and gas and sugar. Do you, the WTO, have any ability to directly request

• 11:56Stephen J. Dubner?

  or command that these tariffs, not by name, but in essence, be eliminated?

• 12:04Speaker 01

  Absolutely. It happens all the time. Industries like protection. They want to be supported by the governments. They want to get help. And they are now seeing this uprise in what we call behind-the-border protection. And that happens in the form of technical barriers. It happens in the form of insufficient enforcement of certain rules, like you mentioned, intellectual property. And that's much more difficult to assess because tariffs you can measure. Tariffs you include on your spreadsheet, and you prepare to pay that additional cost. A behind-the-border measure, you don't know when they come. You don't know what form they would take. So it's tough.

• 12:49Speaker 01

  We have committees here in the WTO who discuss exactly that.

• 12:54Stephen J. Dubner?

  Do you have any sense, if you had to estimate the size of those un-tariffs, what they would be compared to the official tariff rates?

• 13:03Speaker 01

  Not really, also because some of those are perfectly legal. You would see some countries put in place technical barriers or technical standards that are more demanding than what other countries apply. And that could be for the protection of the consumer. It could be for preventive measures. And those things are difficult to measure. But they can be very significant, definitely. In several situations, they just stop trade altogether. So that's whatever, an infinite tariff at the border, how do you measure that?

• 13:46Stephen J. Dubner?

  The WTO says the average tariff rate among its members fell by 15% between the organization's founding in 1995 and 2013. There are, however, many caveats. Tariff rules are less stringent for developing countries, for instance. Furthermore, trade deals negotiated in good faith by one country's administration can be deemed by a later administration to be unfair or just unpalatable. NAFTA, the U.S.-Canada-Mexico Free Trade Treaty, was signed a year before the WTO came into existence. President Trump was not a fan of NAFTA.

• 14:22Speaker 02

  I have long contended that NAFTA was perhaps the worst trade deal ever made.

• 14:28Stephen J. Dubner?

  So he decided to tear it apart and put it back together again. The new terms, which address the auto, dairy, and other industries, are more to his liking.

• 14:37Speaker 02

  Throughout the campaign, I promised to renegotiate NAFTA. And today, we have kept that promise.

• 14:44Stephen J. Dubner?

  But when it comes to the trade deals under which the WTO operates, Roberto Azvedo defends the terms and the logic.

• 14:52Speaker 01

  I understand, I think, a lot of the concerns that have been expressed by the president and others, particularly if you don't follow the evolution of the global trading system. For example, it is a fair question to ask, why?

• 15:16Speaker 01

  Does my country charge 2% when I'm importing a particular product? And I want to export the same product to somebody else, I have to pay 10 or 15%. Uh, where's the fairness in this? This is, I, it's a legitimate question, I think. But it's much more complex than that. Uh, these tariffs are there because they were negotiated over 80 years. If you talk about industrial tariffs only, you're talking about more than 10,000 lines, 10,000 duties. And that's industrial only. Now, you have to add to that the agricultural side. You have to add to that, uh, deals on services as well.

• 16:00Speaker 01

  And it's impossible to negotiate line by line. And it's also impossible to apply a different tariff to a different country. Imagine a situation when you apply the very same tariff as the others apply to you. You have 164 countries. And then you apply a different tariff for that product for 164? And then they apply the same as yours? How do you square that circle? It's absolutely impossible. So these negotiations were done on a package. So there is a balance, uh, which is not mathematical. It is essentially a political balance, uh, that is struck.

• 16:42Speaker 01

  Now, what I understand as the American position at this point in time is that we have to revise this. Uh, you know, these were bad deals. So I'm simplifying, of course, um, a very complex, uh, scenario. But it's just to say that we can understand, uh, the legitimacy and the perplexity of some situations. But those situations are not there by accident. Uh, they are there because there was, there's a history behind them. And this is why we got to these tariffs and these commitments negotiated in the WTO.

• 17:17Stephen J. Dubner?

  Well, let me ask you this. Trump's methodology, in addition to actually enacting tariffs that are larger and more dramatic than we've seen in the past, his methodology is different in that he communicates directly to the world, primarily via Twitter. The trade negotiations the WTO works on are multi-year, considered, done around a table with a lot of negotiators and arbitrators, and they're kind of the opposite of a 280-character political message. And I'm really curious about the degree to which those proclamations are essentially effective as bargaining statements, and the degree to which they are chaotic.

• 18:02Speaker 01

  I think the problem you have with short, but very strong, concise and clear messages sometime, is that you get the concern, you get what the problem is, or what is annoying that party, but what you don't get is clarity about, okay, so how do we fix this? Sometimes the answer to this question is very broad in nature and asks for things that clearly are impossible to do. So the option on the other side is to either live with this uncertainty, or take action that assumes the worst. And that, I think, is not the best way to proceed.

• 18:47Speaker 01

  I think what we need is not only to understand the concern, what they need to understand now is, so what? What do we do now? What are the things that we need to do, reasonably speaking, that can be done? How to actually, you know, roll up the sleeves, work and figure something out that is acceptable to everyone, that's a big challenge.

• 19:11Stephen J. Dubner?

  So are those challenges being met? Are those long and hard conversations actually happening? Or are we in more of a kind of stormy holding pattern at the moment?

• 19:23Speaker 01

  I think we are progressively moving forward and making progress. I remember maybe a couple of years ago, there was a G20 meeting in Hangzhou in China. And I made a presentation and I explained the situation of technology and the impact that it had in the labor market. And I gave this figure, you know, 80% of the jobs lost are lost to new technologies. Everybody was surprised at what, and that was just two years ago. And some people came to me right there when we broke for coffee and said, where did you get those numbers? How did you get this information? I said, it's out there. We're just not looking for it.

• 20:04Speaker 01

  We're not looking for the causes of all this, but if we do, the causes are pretty evident. In two years' time, everybody's talking about this now. This is no news any longer. And some have already begun to talk about reforming the system, reforming the WTO. They realize that some of these concerns have roots in shortcomings of the system. And unless we address this, these kind of tensions that we see today in terms of trade are only going to increase. So recently, I think President Trump and President Juncker of the EU said that a WTO reform was in need.

• 20:47Speaker 01

  The EU and China are working on a joint working group on WTO reform. There is a conversation between the US, the EU and Japan about WTO reform. Canada has called a ministerial meeting on these issues. All this is still in the early stages. I know the question will be, so what will be the reform? I don't know what the reform is going to be. There is a long way to go.

• 21:16Stephen J. Dubner?

  In addition to President Trump critiquing the WTO itself, calling it a disaster, saying if they don't shape up, I will withdraw, and his tariff activity, the US has also been blocking the appointment of a WTO appeals judge, without whom the organization could really be stymied to some large degree. I'm curious if you could talk about what you are doing to try to keep the WTO from being paralyzed or stymied?

• 21:49Speaker 01

  We have to fix the situation as soon as we can. By the end of next year, we may reach a critical moment when we have less than three appellate body members. That means that with less than three, we cannot hear an appeal. And therefore, basically, the system of dispute settlement collapses. But having said that, members are looking at alternatives. The first option, of course, is to get a conversation going. The misgivings of the US administration with the dispute settlement mechanism of the WTO is not new. I myself had heard it before from previous administrations.

• 22:31Speaker 01

  People have been asking, so if you're not happy with the system, what do you think needs to change? How do we fix the problems you have? Of course, some things are not negotiable. The system will have to continue to be independent. It will have to continue to be impartial, but it can function better. What is also a bit peculiar is that the United States has been bringing cases to the WTO. They just brought five a few weeks ago.

• 23:02Stephen J. Dubner?

  Can you give an example where another country, a single country, held something up? And what was the resolution?

• 23:08Speaker 01

  Well, I don't like to be finger pointing and saying, this is this country did this, and this country did that. It's not my role, and it's never helpful. But there are, look, if I sit down here for two minutes, I would think of 10 different examples of things that happen of a similar nature. We get these kind of blockages all the time. But this, I would say, is different because of the sensitivity of the issue. And the fact that we are still, you know, spinning wheels in trying to understand what to do to overcome this.

• 23:41Stephen J. Dubner?

  So have you, Director General Azvedo, had direct conversations ever with President Trump, whether about the blocking the appointment of the judge or trade itself generally or anything? Have you had face-to-face or direct conversations with him?

• 23:57Speaker 01

  Not directly, no. I do have open contacts, of course, with Robert Lighthizer, the USTR. I sometimes have conversations in different scenarios with other ministers as well, but not directly with President Trump, no.

• 24:15Stephen J. Dubner?

  Have you had direct conversations with the leaders of other large countries?

• 24:21Speaker 01

  Yes, quite frequently. I met recently with President Macron from France, and he was very concerned with all this, and we had a very, very good conversation. He was very much on top of what's happening. That's surprising because a while back, whenever I talked to leaders, it took me a while to explain to them what was going on. This was not the case now. I talked to him, I talked to Prime Minister May. I'm going to be next month in Germany to talk with Chancellor Merkel. I recently was in Japan, I talked to Prime Minister Abe.

• 25:04Speaker 01

  I've been covering a lot of ground, and we've been talking, and they're all concerned.

• 25:09Stephen J. Dubner?

  There is recent news that the leaders of Russia and China have gotten together and boosted their newfound strategic partnership.

• 25:26Stephen J. Dubner?

  I'm curious how you think about, you know, the WTO has positioned itself to be theoretically a friend to all, or at least a referee to all. But when there is something proactive and maybe unilateral, like US tariffs, and other countries respond by making their own deals, I'm curious how that makes you feel as Director General of the WTO. Do you feel excluded? Do you try to get involved in those discussions and make sure they fall within the proper parameters of WTO behavior?

• 26:05Speaker 01

  To be frank with you, I don't have to try very hard. They reach out for me very quickly. Sometimes I try to discourage some courses of action. But I also have to understand the political sensitivities in many of these players. We have, I'm happy to say, conversations which are, you know, very open, very frank. And of course, I can't share with you and the listeners the content of those conversations. But they are very, very frank. And we explore all kinds of options before us. I tell them about the importance of the system

• 26:50Speaker 01

  and not to compromise the system. And I would say that pretty much everybody I talk to tells me that the system must be preserved, even strengthened. But it's not easy under these circumstances to be, you know, toeing the line when others aren't.

• 27:15Stephen J. Dubner?

  Coming up after the break. With the head of the WTO on our show, of course, we're going to ask him to make some predictions about trade and the economy.

• 27:24Speaker 01

  My crystal ball doesn't allow me to go that far.

• 27:27Stephen J. Dubner?

  Oh, well. But don't worry. Roberto Azvedo has plenty more to say, and we'll hear it after the break. If you want to hear more conversations like this one, let me recommend a couple of episodes from our podcast archive. One is called Not Your Grandmother's IMF, an interview with the head of the International Monetary Fund, Christine Lagarde. The other is called Hacking the World Bank with Jim Young Kim, president of the World Bank. We will be right back after this.

• 28:01Stephen J. Dubner?

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• 28:42Stephen J. Dubner?

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• 29:03Stephen J. Dubner?

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• 29:27Stephen J. Dubner?

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• 30:11Stephen J. Dubner?

  There's no hiding how convenient Southern New Hampshire University makes college. They offer over 80 career-focused graduate programs online. Classes have no set meeting times, so you can balance life and learning, and online tuition rates are some of the lowest in the country, making it all a little more manageable. A school this willing to work with you is worth the investment. Visit s n h u dot edu slash Freakonomics to learn more. Roberto Azvedo, Director General of the World Trade Organization, was appointed to the post in 2013, when the trade waters were considerably less choppy than they are today.

• 30:55Stephen J. Dubner?

  So you are from Brazil, and you studied electrical engineering before becoming a diplomat. I'd like to just very quickly hear how those three factors—Brazilian, engineering, and being a career diplomat—how they inform your role as Director General of the WTO.

• 31:13Speaker 01

  Brazilian. Well, the good thing about being a Brazilian is that it gives me a very diverse perspective. Brazil is a big economy. It's a big country with several ethnicities, a very diverse cultural background, and it has aspects of a developed nation, a very sophisticated industry, but also has important aspects of a developing country, various social challenges. And that gives me this different perspective. Engineer.

• 31:50Speaker 01

  I was always good with numbers and I think it was natural for me to become an engineer and it was until I met my wife. Uh, and she decided to get into the diplomatic career. And at that point in time, I had to decide, you know, what would I do? An engineer married to a diplomat was going to be pretty challenging, especially when she was posted abroad. So I thought, you know what, let's, let's work for the family. So I took the the exams and I passed the exams and I joined the diplomatic career. I think that was a love story in its own rights.

• 32:29Stephen J. Dubner?

  Can you give me a quick example of an engineering like solution to a trade or economic problem?

• 32:36Speaker 01

  So when I'm in a meeting or something like that, I try to understand the basic motivations and, and then figure out a way to make those motivations work together. And that's something I think that engineers do. They try to get very complex situations and problems. Try to reduce them to their elemental constitutive parts and figure out a way to make them work. Personal chemistry is very important as well, even between negotiators. I know some people think that everything you need to know, you're learning kindergarten and I think that's, that's quite accurate, but I, I found out that you're forever learning how to relate to people,

• 33:21Speaker 01

  how to take into account the diverse personalities, cultures, objectives.

• 33:28Stephen J. Dubner?

  So as long as the world still has independent nations, and it seems that'll be the case for at least another few decades, that we're not becoming one big global nation. It strikes me that there is an inherent friction around trade in which every country has to strike a balance between protectionism and globalism. And so I'm curious whether you agree or disagree with this notion and however you answer, what's to be done about that?

• 33:57Speaker 01

  This tension that exists even today with regard to trade, it always existed. Countries that do trade and that have a cooperative relationship with the other partners, they essentially gain from that. But it is also a reality that when you trade, some sectors in the domestic economy will lose. Many gain, many are better off with a trading relationship, but some lose in the sense that they're not competitive enough. Sometimes the factories close in particular sector, and you cannot ignore that.

• 34:39Speaker 01

  I think what you see today is something different from this very traditional, very historic tension. Today, we are seeing a transformation of the economic structure of the global economy. We're producing things differently, we're producing things faster, we don't require as much human input as we did before, and this is increasing. Now, clearly, even for governments and for politicians, it is easier to blame, you know, the foreign for these problems which are happening inside their own economies.

• 35:18Speaker 01

  It's easier to blame the imports for the loss of jobs when they are, they have a role, of course, but they are minor in this structural change. And I think if we don't realize that and if we don't try to find a solution for this, we will be hurting much more than help it.

• 35:37Stephen J. Dubner?

  Okay, so you've just described, I would argue beautifully and succinctly, a big problem that, of course, a lot of economists and some others have described, but you're right, that's not the political rhetoric. So it's easy to think of what's the wrong medicine. How involved is the WTO in trying to discover and administer the right medicine?

• 35:58Speaker 01

  I think the WTO is already at least trying to help governments and public opinion to understand the situation and reach the right diagnosis. If we get the wrong diagnosis, you get definitely the wrong medicine. The important thing to understand is that whatever medicine we choose, it's not going to work overnight. There is no quick fix for this. This is essentially something akin to the Industrial Revolution. So there will be a need to rethink the whole educational system in countries. How to support the displaced people? Those who lost their jobs but cannot find a job somewhere else in the economy?

• 36:39Speaker 01

  How do you help them find another economic activity that will work for them? And will help them support their family? And the state, of course, and I understand that people don't want this. I myself have very strong reservations against a big state. But the state at least has to think about this and think about the mechanisms that will allow us to handle these displaced masses of workers.

• 37:06Stephen J. Dubner?

  You've said that if you want the truth in trade, you have to get into the numbers, which a political discussion almost inevitably doesn't. Can you talk about that for a moment? And maybe give a particular example of where the political discussion on trade is just wrong or shallow or only partially true? And what needs to be done to address that?

• 37:25Speaker 01

  One of the big problems we have is that politicians are looking at the electoral cycle. They're looking at the next elections. So proposing solutions that will last 10, 15, 20 years, or that would take 10, 15, 20 years to come about is no good. The voter doesn't want to hear any of that. They want immediate... It's amazing that I still hear people saying, "Oh, but the economy is great." Of course, it's great. It hasn't been affected yet. There is, I would call it, I don't know, maybe an incubation period that you have to go through. And politicians, I think it's easier for them to say, "Don't worry. You know, what we're doing is okay. See, the economy is fine. Nothing happened."

• 38:11Stephen J. Dubner?

  You mentioned that most people assume that job loss, especially in manufacturing, is due to trade issues, whereas, in fact, technology is behind an awful lot of job loss. And we've discussed that on this program before. We discussed that with Christine Lagarde, who made the point that that perception, or maybe misperception, was and remains really a big part of a lot of the political movements in Europe and elsewhere, including Brexit. As you've mentioned, people like to look for the villain. I'd like you to talk about Brexit for a moment. I'd like you to talk about what you feel were the legitimate and maybe illegitimate factors that produced it

• 38:55Stephen J. Dubner?

  and where the WTO stands on it now, what you're trying to accomplish.

• 39:01Speaker 01

  Well, the first thing to say about Brexit in particular is that it tends to be bunched together with all of these other phenomena that you see happening in the world, particularly in terms of protectionism. And I would say Brexit is somewhat different. Brexit was more a child of migration policies and sovereignty issues. Of course, these things are difficult to quantify, but I would say they played a much bigger role than any kind of tension introduced by trade. So that's the first distinction, I would say.

• 39:44Speaker 01

  Brexit, again, is part of these transformative structural changes that we see out there. A lot of, a very significant part of the population feels left behind and they feel, somebody has to look at me. Something has to happen and nobody's doing that. It was more like an anti-establishment kind of vote rather than a vote for a certain political alternative. It was more the kind of vote of, no more. We need to change and people had better listen rather than having a clear, well-formulated agenda for either social or political policies.

• 40:30Stephen J. Dubner?

  Have you had any conversations with government officials anywhere in the world about universal basic income and the viability thereof?

• 40:40Speaker 01

  There were a few conversations, not specifically about this, but this is something that came up in a few of those conversations. As you can imagine, it's a very contentious issue. Some see it as, you know, as a possible way forward. Some say that it's already there, that the state is already providing that in some shape or form, either by providing, you know, social assistance or by providing minimum income salaries, you know, and things like that. But it varies from country to country, but clearly, this is part of the conversation.

• 41:23Stephen J. Dubner?

  So, as everyone knows, predicting the future of economics and politics and so on is really hard. To me, one of the least predicted developments that very much affects global trade is the rise of the US as an oil exporter. So it's estimated that next year, the US will surpass Saudi Arabia to become the number one exporter in the world, in large part because of fracking and other technologies. I'm really curious to hear your thoughts on this, considering that importing oil has for so long been a major part of not only the US economy, but also US political concerns.

• 41:59Speaker 01

  I think it will change things considerably, even in terms of geopolitics. And I would say that what we're seeing, this phenomenon that we're seeing with the shale oil, is just the tip of the iceberg. Every scientist, every economist that has been digging into this tells me that we are on the verge of major breakthroughs in the energy field and that the cost of energy may go down very, very significantly. And that includes electric energy. So, for example, the combustion engine for the automobile industry, some say is in the last stages. I don't know, my crystal ball doesn't allow me to go that far.

• 42:47Stephen J. Dubner?

  The economist and law professor Jagdish Bhagwati at Columbia has said this about the world trading system. He said, "It's characterized by a chaotic crisscrossing of preferences with a plethora of different trade barriers applying to products depending on which countries they originate from. This is a fool's way of doing trade." It sounds as though you largely agree that we get to where we get through a strange brew of evolution and history and best efforts and things changing over time. So let me just leave you with this final question. If you, as Director General of the WTO, had for a day or a week some kind of magic wand

• 43:32Stephen J. Dubner?

  to make things more equitable, more transparent, tell me a few things that you would do to help make a little bit more order and equity out of this chaos.

• 43:46Speaker 01

  I think the biggest challenge for us is to have a conversation. I would try to make sure that we give space for more discussions. Whenever you sit, if the two sides, or three, or four, or how many sides, want a solution, a solution will come. I will give you one anecdote, something that happened with me, actually. I was at a negotiating table, and we all had very significant political problems at home, right? And we were struggling with the language of a provision. It was a very important provision for everyone.

• 44:28Speaker 01

  And in the middle of the conversation, somebody said, "Why don't we write this down like this?" And he gave a, you know, he drafted a sentence. And I said, "What the hell does that mean? I don't understand this sentence." And the other said, "I don't either." And nobody understood the sentence. They said, "Okay, so let's take it."

• 44:54Speaker 01

  Nobody knew what it meant, but it worked for everyone precisely because nobody knew what it meant. And then we got an agreement. So when you want things done, you can find a way, but you have to sit down and be determined that you want a solution.

• 45:08Stephen J. Dubner?

  I appreciate the call for conversation. I assume if President Trump were to hear this conversation and call you, you'd be happy to go visit and try to sit down and work some things out, yes?

• 45:19Speaker 01

  Oh, I'm always available. I'm always available.

• 45:29Stephen J. Dubner?

  Coming up next time on Freakonomics Radio.

• 45:32Speaker 05

  I apologize first, and most importantly, to my family.

• 45:36Speaker 06

  I want to apologize to everybody for the wrong that I've done.

• 45:41Speaker 05

  And that was a big mistake. And it was my mistake. And I'm sorry.

• 45:45Speaker 07

  I did take a banned substance. And, you know, for that, I'm very sorry.

• 45:52Speaker 06

  I humbly apologize.

• 45:54Speaker 08

  I think you know in life, pretty much, what's a good thing to do and what's a bad thing. And I did a bad thing.

• 46:01Speaker 09

  I want to ask for your forgiveness for my actions.

• 46:05Speaker 10

  It is important to me that everybody who has been hurt know that the sorrow I feel is genuine.

• 46:13Stephen J. Dubner?

  The economics of apologies. The idea here is that an apology is basically like signing a contract. Why some apologies are successful and some aren't.

• 46:23Speaker 11

  We don't care, Roseanne Barr, if you were on Ambien.

• 46:26Stephen J. Dubner?

  So should we even bother? You really have to squint hard to make the case that apologies by themselves work. That's next time on Freakonomics Radio.

• 46:47Stephen J. Dubner?

  Freakonomics Radio is produced by Stitcher and Dubner Productions. This episode was produced by Zach Lipinski. Our staff also includes Alison Kreglo, Greg Rippon, Greg Rosalsky, Alvin Melathe, Harry Huggins, and Andy Meisenheimer. The music you hear throughout our episodes was composed by Luis Guerra. Freakonomics Radio can be found on Apple Podcasts or wherever you get your podcasts. Our entire archive is available on the Stitcher app or at Freakonomics.com, where we also publish transcripts and show notes. And at Stitcher Premium, you will find the entire archive ad-free, as well as lots of bonus episodes. Just go to stitcherpremium.com/freakonomics. We can also be found on NPR

• 47:28Stephen J. Dubner?

  stations across the country. Check your local station for the schedule. Also on Twitter, Facebook, LinkedIn, or via email at [email protected]. Thanks for listening.

• 47:53Stephen J. Dubner?

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• 48:23Stephen J. Dubner?

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• 48:56Stephen J. Dubner?

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• 49:33Speaker 12

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