Belt and Road update
In this episode we cover Cambodia's Techo Funan Canal and China's involvement and investment attitude as well as a update on risks to the Belt and Road in West Asia, Red Sea, Mediterranean and Africa.
Check out my Multipolar Peace friends on YouTube below.
https://teacup.media/chinahistorypodcast
Transcript
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welcome to the chair i'm your host dr digby james wren today is friday the 13th of
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december 2024 a most auspicious date to end my hiatus for the last two months and
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to start broadcasting again streaming
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to all of my subscribers and followers.
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And I'm pleased to announce that the chair has roughly 4,000 subscribers and we go
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out to about 200,000 on our newsletter,
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200,000 a day.
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We've had a TikTok with one million views.
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So that's starting to build.
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And so I thought I'd better get back into action and start talking about what is
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important in the world for all of those that follow geopolitical risk
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global trade and investment,
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political economy,
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and also public diplomacy,
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because basically I have two specializations.
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One is IR,
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but specifically on Belt and Road and global political economy,
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and the other one is media and communications,
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where I've had a 40-year career.
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But that's been very exciting.
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I've been very fortunate.
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I've been getting a lot of coverage on Bloomberg and on CNA in Singapore and all
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sorts of other channels all over the world.
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Plus,
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of course,
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contributing to China Daily,
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Khmer Times here in Phnom Penh and other papers and journals,
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especially journals related to global political economy and the Belt and Road.
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And that's what I want to talk to you about today is the Belt and Road.
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And specifically here in Cambodia,
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the recent meeting between the former Prime Minister and father of the current
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Prime Minister.
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Hun Manet is the current Prime Minister.
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His father is Hun Sen.
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Everybody knows who that is, I think.
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And I had the honor of being the English editor for his official biography last year,
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which was a really...
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I jumped at the opportunity,
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not just because it was Hun Sen,
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although I feel that many people don't really understand how successful Hun Sen
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really has been.
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He's been demonized enormously in the press,
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especially Western press,
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non-caring dictator who will do anything for power and won't allow any opposition
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parties and so forth and so on.
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But most of that is
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narrative generated by the United States and sometimes Europe.
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But what Hun Sen really has brought to Cambodia is stability.
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And that has enabled Cambodia to have extraordinary economic growth over the last 10 years.
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Now in 2012 Cambodia started to have some real economic growth.
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that just coincided of course with the launch of the belt and road xi jinping's
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ascension to power in china and of course china and cambodia have a very close
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relationship ironclad relationship although i would say that this meeting that they
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recently had hun sen who's now the president of the senate and xi jinping last week
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in beijing and in that meeting
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the readouts from that meeting were not particularly detailed.
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And the reason is because there is trouble over what's called the Phunan-Tekho Canal,
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which is a means by...
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It's an existing canal,
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in fact,
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about 100 kilometres long,
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and it goes from the Mekong down to the Gulf of Thailand just before the Vietnamese
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border and comes out in Khom Pot,
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which is a relatively small port.
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And it enables Cambodia to free itself of the stranglehold that Vietnam has on its
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riverine transport networks.
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In other words,
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all the shipping out of the hinterland of Cambodia is shipped down the Mekong and
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to Vietnam.
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It's about 1.2 billion,
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which is not a lot because really all they're doing is widening and deepening the
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existing canal,
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which is not that expensive.
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And that will also enable seven more ports to be built up in the upper reaches of
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the Mekong in Cambodia,
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which completely would open the hinterland to all of the agriculture and mining and
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all sorts of other things.
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The problem with that of course for Cambodia is that they are dependent on Vietnam
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and so this is a way of breaking that stranglehold.
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Now originally China had agreed to invest in that and then there was some opposition,
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a lot of opposition to that especially by Vietnam.
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China is also working quite closely with Vietnam now with the rail networks.
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Xi Jinping visited Vietnam
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to launch that and so that's going ahead so now Hun Sen has vowed to have the canal
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built regardless so it's 51% owned by the Cambodians and so it's a Cambodian
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project in real terms these days but the thing is that we're in the visit last week
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there was no comment about the canal.
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It was definitely discussed, but in the readouts, it wasn't mentioned at all.
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And so the concentration in the readout was about cooperation,
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existing cooperation,
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strategic cooperation,
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economic cooperation,
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but more importantly than anything else from the Chinese side was an alignment with
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the Belt and Road.
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What is the Belt and Road?
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And everybody,
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Many people think they know what that is but I've been studying the Belt and Road
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since 2012 when it started and I was in China when that happened and I had access
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to a lot of the original documents and documentation about the Belt and Road.
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Now the road is the part that most people understand.
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It's a bit confusing because it's not just roads obviously.
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And so people are confused about that.
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But it's clearly what it is is linkages between A and B. So port to port.
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Now those ports are all kinds of ports.
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Sea ports, river ports, rail ports, land ports, dry ports.
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And so anywhere basically where there's going to be transfer of goods
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onto transport of any kind.
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But it also includes pipelines, electricity, gas, internet.
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So the hard part.
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So what I'm saying is the physical infrastructure.
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So those are all
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road projects.
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In other words, they connect A to B with some kind of power or transport or something like that.
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And so that's global.
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But what is perhaps more interesting is the belt part, which is basically economic belts.
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And so what that means is supply chains.
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An economic belt is basically the attempt
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to construct complete supply chains between,
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say,
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two cities or between A and B.
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A good example of that would be a car manufacturer or aeronautic manufacturer in
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China between Chongqing and Chengdu,
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which are two cities,
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about 300 kilometers apart,
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but with high-speed rail at 400 kilometers an hour,
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it takes less than one hour.
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I think it's 35 to 40 minutes now between Chengdu and Chongqing, and that has now become the largest
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urban agglomeration in the world with a population of well over 100 million.
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In those belts you also have universities,
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research and design and at the other end you have marketing,
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retail,
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sales,
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marketing and that's where the money is.
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The money is not in manufacture, it's a parabola.
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And at the bottom is the manufacturer.
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And that is the lesser part, usually something like 6% of the totality.
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The real money is made in the research and development because you own the patents
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or you own the design or the product.
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And at the other end, you have the marketing and sales where there's money in that too, of course.
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So that's where the profit centers really are.
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And you can see that in what Apple does.
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So you've got third-party manufacturers for pretty well all of Apple's stuff.
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But Apple controls very, very tightly the design, the research, the development.
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And they also control very, very tightly the marketing and the sales at the other end.
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And so that's where they draw all their profits.
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And increasingly,
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it's from the services that they provide for the hard product,
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which is the phone,
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right?
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So the apps and all of those things, the music and cloud and all that sort of thing.
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So that is all part of the belt.
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That is built into the belt, not the road, if you see what I mean.
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That part of it is substructure.
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That's what I call in the Belt and Road, you have a substructure.
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And that substructure is all of that hard stuff, pipelines, roads,
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ships transport ports and then there's the soft and so that's the superstructure
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and this is all of the services that run along the belt and road and so that's
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e-commerce that's all of the services that are provided in relation to customs to
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taxation
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to legal requirements to standards many of those are services and one needs to
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understand that it's the united states that dominates in services globally and
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that's where most of the surplus trade
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surplus of the US has because you know you we often say oh the US doesn't have a
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trade service but it does it has a trade services in good in services not in goods
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but in services a huge trade surplus in services every year and and of course we're
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talking about Apple Facebook
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Amazon, Nvidia, Oracle, any of those companies, you all know who they are.
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So those are all services that they provide and the US dominates in that area.
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But they also dominate in legal and accounting practices in the registration and
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the standardization approval processes for aircraft approval for pharmaceuticals.
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any kind of standardization or integration that requires legal or official standards.
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And so US standards,
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because that's the largest import market,
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or it was the largest import market,
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China is now the largest import market,
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I think.
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But so those standards, the US has controlled those.
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And of course, that's where they make their money.
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And so that's why they've not really ever been too much concern about exports of goods.
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They're all the second largest exporter of goods,
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but they are by far the world's largest exporter of services.
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And this is where the real action is.
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So because Donald Trump, for example, is going to introduce all of these tariffs,
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i mean there's of course all the sanctions that are already in place national
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security is a word that's used at the end of every sentence now in american
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political life but that's what the u.s is protect protecting more than anything
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else it's protecting its services surplus globally and because clearly if the the
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largest car market in the world is china so who's setting the standards in cars
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EVs.
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It's China.
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And of course, the US doesn't like that.
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And neither does Europe, because they have dominated the standards for so long.
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And,
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you know,
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just think about,
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you know,
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everybody wanted a Mercedes or a BMW or a Jeep or something like that.
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But those are no longer the top standards.
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The top standards in cars are now batteries and EVs made and designed and produced in China.
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And one can see that there's a real problem with the services that follow that.
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And all of the services that follow that specifically because it's all electronic, it's all digital.
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The mapping,
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all of the data that's going to be,
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that drives big data that comes from every single EV on the road.
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And of course that's used as a national security problem.
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And you can see that large exporters of pharmaceuticals like India are also very
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interested to have control over the standardization and approval of drugs and pharmaceuticals.
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And you can see that China is making headways as it moves up the value chain.
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It means that it's also moving to services.
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And as the domestic market really drives the export, because
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That is the most competitive domestic market in the world now.
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Just think about phones or EVs.
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China is by far the most dynamic market.
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Now, this just mirrors what happened 40 years ago in Japan.
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In the 1980s in Japan, in the 1970s, late 70s and 80s, Japan also
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was really setting the trend in their domestic market for cars and for technology.
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Just think about Walkman and PlayStation and so forth.
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China is really only just mirroring that, but at a much larger scale.
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A scale that has never been achieved before.
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Because the US was big, and it is big, still is big, but it's not the biggest.
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The desire by the Americans to maintain
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control of these markets.
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So decoupling supply chains
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trying to take China out of these supply chains is also a way of trying to protect
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all of those services that run in the superstructure of the international connectivity.
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Now, Belt and Road has connected more than 136 countries.
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Now, the United States was never able to do this.
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The United States owns so few ports around the world,
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and it's relied on the mere fact that it is the largest market
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And therefore it's the largest producer of technology.
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And so it's exported that and then it set all the standards.
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And so that means everybody had to apply those standards in their own markets and
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therefore they needed more US products and so forth and so on.
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But now China has been able to break into that.
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Now we can clearly see that the EU has never been able to do that.
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There's no large social media company in the EU.
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There's no really big tech companies except perhaps for the German SAP and a few others.
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But the car industry in Europe dominated globally along with the Japanese.
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But that was because they were exporting into the US.
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They had dynamic markets at home and then they were able to export cutting edge
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products to the US and also to China.
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But that, of course, has now changed.
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The shoe is on the other foot.
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And so what we can see here is that the Belt and Road has really fundamentally
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changed the balance of trade infrastructure globally.
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And now that the pipelines and the ports and this new port that's just opened in Peru
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is a good example of this.
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That means that the very,
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very large container ships are no longer going to go to Los Angeles for transshipment.
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They will go straight to Peru and then be transshipped out of there.
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Now that's much shorter, therefore cheaper, more efficient.
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And Long Beach, of course, you know, U.S.
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ports are amongst the worst performing ports in terms of efficiency.
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So it's not just about trying to cut out the U.S.,
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it's about trying to cut out inefficiencies which raise the prices.
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And so that's inflationary in a real sense, I suppose.
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And so therefore, there's real logic behind
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opening these ports on the east coast of South America.
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Now, the Belt and Road is not closed to anybody.
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I mean, anybody can use these.
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These ports are not closed.
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It's not as if American ships can't go to these ports.
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They do, and they can.
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Just as a sideline here, just a very small digression.
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I just remember this morning somebody saying,
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you know,
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the US was talking about sanctioning Russian shadow fleet.
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for oil transport well of course it's not a shadow fleet it's just a fleet it's not
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illegal in any way it's just the russian ships and they're called shadow but but
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it's not at all they're just russian ships doing selling russian oil and gas so
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it's not a shadow fleet there's not some illegality in doing that it's not illegal
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to sell your oil or to sell your products
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sell your corn or your rice or your soybeans or your oil or anything else.
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Why?
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It's just a silly notion.
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And so this is kind of what,
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you know,
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the public diplomacy part of what I was trying to talk about before.
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The narratives are not factual.
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And so,
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so many people are misled into what really is happening in the global political
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economy and how that underpins global political problems.
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Regime change, colour revolutions, all of those things.
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Those colour revolutions are supported by Obama and also the pivot to Asia.
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Washington may be a swamp,
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as Donald Trump says,
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and he's cleaning it up,
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but there's still very,
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very smart people in Washington and they saw
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A long time ago, just like I did, that China was rising no matter what.
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And when Xi Jinping came to power and launched the Belt and Road,
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people in Washington were instantly worried about this.
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Very, very worried.
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And this is why.
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the Americans said, OK, now we have to pivot to Asia Pacific.
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They've realized, of course, that a land war in Asia is unwinnable.
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We all know that.
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And just look at the Ukraine.
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It's impossible to win a land war in Asia.
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But now what is happening in Syria and Iraq is that the land route, the westward land route, Belvin Road,
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goes through Iran into Iraq, into Syria, Jordan, Israel, the Suez Canal, and the Eastern Mediterranean.
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And what's happening here is that last trade route,
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land trade route,
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that connects through the Eastern Mediterranean into Africa,
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and the Suez and the Red Sea.
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That is all being contested right now.
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And you don't want to be fooling yourself thinking,
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oh,
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this is all just about evil regimes and toppling governments.
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So much of this is about trade routes because that's where the money comes from.
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And the Eastern Mediterranean, Turkey, Lebanon, Israel, Gaza,
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jordan iraq syria that is the gateway that's a three-way gateway so east west north
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south but also middle east to africa so so that is a you know three directions of
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trade routes going on there so that is a fulcrum and this is one of the major
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reasons that this is being for don't know
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It's not just about the ideological and human rights and political parties,
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socialist political parties or authoritarian governments,
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etc.
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Because the Americans back authoritarian governments all the time when they wanted them,
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when they need them.
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So it's not just about that at all.
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It's so much about the basic economics that underlie that.
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And that trade route,
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that's the last major trade route that goes from Central Asia,
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so all the way from Shanghai,
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really,
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or even from Tokyo,
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all the way across Eurasia and gets to the Eastern Mediterranean,
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the Suez.
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And so that's being blocked.
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So blocking Iraq, Syria, Jordan, Israel, Lebanon.
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That blocks that trade route.
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And Israel, by the way, had signed up and Haifa port was expanded.
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The rail route to Jordan has been built.
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Just Iraq and Syria blocking it in real terms.
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And of course trying to block Iran as well because Iran is pivotal in that area and
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it's a well-educated population and has a long civilizational four or five thousand
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year history.
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And it's not going away anytime soon.
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And it's much more about controlling that.
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And it's also the soft underbelly of Russia.
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And that needs to be taken into consideration as well.
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And so this is where the Belt and Road has run into American problems.
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So the Americans are blocking it in real terms.
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They don't want that to happen.
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They don't want Iran to become richer, which would make all of the other countries around Iran richer.
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And they don't want them trading into the eastern Mediterranean,
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having access into Suez and into North Africa.
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They don't want that.
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But we know what's going on in North Africa already.
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The French have been kicked out and all of those minerals and resources.
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So that's colonialism.
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The French colonialism is still active.
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And so now, in real terms, the Red Sea is basically
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blocked in many ways and so trade is going around Africa and it's very expensive.
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How is the Red Sea going to be opened again?
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So this is a real struggle from a political economy point of view and definitely
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from a Belt and Road point of view.
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And of course the Belt and Road was originally just a westward thing because they
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were blocked in the Pacific by the Americans so it was decided that they had to go
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west and into Central Asia and have a very,
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very good relationship with Vladimir Putin and Xi Jinping and that's allowed this
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all to happen.
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Russia obviously benefits from this enormously and you can see that
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during the conflict in Ukraine that this has happened.
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And while we're on the topic of Ukraine,
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and I'll just,
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I think,
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finish up for today on the Ukraine,
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one needs to remember that the Ukraine is an borderland and a transit state.
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And it was always that.
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And thousands of years of its history,
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if you want to read about its history,
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then you'll realize that basically it's open spaces,
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vast open spaces.
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You know, Ukraine does not have a large population.
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And the western part of the Russian side where Russian is spoken, that's the richer part.
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It was the western part that was always the poorer part of the Ukraine west of the Dnieper.
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And so that was always fought over by Germans and the Lithuanians and the Poles and the Moldavians.
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And I think you're going to be finding them squabbling about it again.
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And I think Hungary would very much like that not to happen.
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And so you can see that Viktor Orban has become quite important.
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He just had a meeting with Trump and they're now trying to see what they can do,
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what Trump can do to stop the Ukraine conflict.
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But look, that is also about blocking trade routes.
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That is also about, you know, we talk about regime change in Russia and everything else.
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But to get there, you need to block their trade.
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So they can't make money.
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So that's what the purpose of all these sanctions are,
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but also physically,
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geographical,
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topographically,
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blocking land routes and destroying pipelines.
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Nord Stream 2,
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closing the pipelines that go across Ukraine,
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for example,
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electricity generation,
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gas,
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internet,
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all that sort of thing,
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flight paths,
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all of that,
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that's all Belden Road stuff.
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And that's being blocked in the Ukraine.
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So now there's other routes around that.
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So that's beneficial for NATO member Turkey.
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They have pipeline and it benefits them greatly.
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And it also benefits the United States greatly because,
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of course,
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now Europe has to buy their gas and energy from the United States far more
(00:24:49):
expensive than they ever did from Russia.
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And so look what's happened to Germany's economy.
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And you can see that this is really a repeat of what happened to Japan.
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uh 30 years 40 years ago when the miracle the japanese miracle just disappeared
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after the plaza accords and they had to revalue their currency because their
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exports were just too good and so what's happening to china so don't you know i
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don't be thinking this is all new it's not new there's a myriad of examples of
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where this has happened before what's different is that china is very very big
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It's the largest economy in the world in PPP terms, by far.
(00:25:29):
And that's why,
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of course,
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we don't really concentrate on GDP because if you just change everything into dollars,
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well then,
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of course,
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the United States is always going to look richer.
(00:25:39):
But because of currencies, it's a different matter.
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So, as Elon Musk said, currency is really only the database for the transaction of goods and services.
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And that's what the Belt and Road does.
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It facilitates goods and services.
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And the real threat in there is not so much the goods,
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it's the services that's where the danger is to the u.s economy it imports enormous
(00:26:06):
amounts of goods from china and from everywhere else from vietnam and from japan
(00:26:11):
and from germany and everywhere else and trump's going to change that but the real
(00:26:15):
problem is the services because as as all the belt and road countries the bricks
(00:26:24):
start moving their services away.
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And so, you know, stock markets, for example, financial, that's services, and that's huge.
(00:26:33):
Now, look what's happened to London.
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You know,
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they've lost so many of their financial services,
(00:26:38):
and so they've got a shrinking economy line,
(00:26:40):
right?
(00:26:40):
So that's also going to be shifting to Shanghai, to Beijing, to Singapore, and into ASEAN.
(00:26:50):
And I think next time,
(00:26:51):
so I hope that's been a helpful small discussion and next time I think we'll
(00:26:56):
probably talk about ASEAN and China and that relationship and what's going to
(00:27:00):
happen when Trump comes into power,
(00:27:03):
tariffs,
(00:27:04):
sanctions,
(00:27:05):
security, South China Sea, Taiwan, all of those things are really well worth talking about.
(00:27:10):
And so I've just shot this with the green screen and then now I'm going to add all the stuff.
(00:27:15):
You'll have seen that I've added all the graphics and everything and I hope it looks really great.
(00:27:19):
But this is just the first attempt.
(00:27:20):
This is the first time that I've really tried to use the home studio to do this.
(00:27:24):
My friend, the China History Podcast, Laszlo Montgomery, he was the first one to use my studio.
(00:27:30):
He did his third, I think, episode three on Singapore.
(00:27:34):
So I'll put a link to him as well.
(00:27:36):
And if you can,
(00:27:38):
check out my multipolar piece friends,
(00:27:41):
Pascal Lotez,
(00:27:43):
David Oh in Austin,
(00:27:44):
Texas,
(00:27:46):
Warwick Powell.
(00:27:48):
in brisbane australia uh ina tangan in beijing mr media and so many others that i
(00:27:55):
haven't mentioned but you're going to see them on this channel and and i've been on
(00:28:00):
their channels and i haven't been able to get them on my channels and so it's a
(00:28:03):
little bit of an apology while i was setting everything up and they've been very
(00:28:06):
patient and they'll be joining me so i'm going to do you know we we have uh eight
(00:28:11):
sub stacks all together that i'm involved in and they all have different uh
(00:28:16):
specialities.
(00:28:17):
So the Mekong, six Mekong countries, that's one.
(00:28:21):
We also do ASEAN, that's called the ASEAN Chair.
(00:28:24):
We also have global polarity, which is multi polarities and all of that.
(00:28:30):
I've got an entertainment one called Gala, Gala Live.
(00:28:33):
And we've done a deal with China Media Group and we'll be able to get
(00:28:39):
lots of things from China media dubbed into Khmer language if you're in Cambodia
(00:28:44):
but also into other languages and of course the spring festival that's available so
(00:28:49):
we'll look out for that I'll give a link to that as well and the young minds which
(00:28:53):
is a pet project to promote students university students and so
(00:29:02):
Keep enjoying, keep watching and I'll be with you very, very soon.
(00:29:07):
Thanks very much.
(00:29:09):
See you again very soon.
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