As the recession takes hold, I am unashamed to say that I am going to ‘staycation’ in England this Summer and have already spent an increasing number of nights within the four walls of the shoebox that is my flat. On many evenings, I have sat in front of the idiot box; one show (besides Justin’s numerous television appearances of course!) has particularly caught my attention. I have enjoyed watching Conor Woodman’s fortunes and misfortunes (of which there have been many) in ‘Around the World in 80 Trades’ on Channel 4. For those of you who have not had the pleasure, the show follows an ex-City trader who threw it all in to travel and trade his way, solo, across the planet, buying local products in one country and selling them at a profit in another. He fails miserably when trying to buy Camels in the Sudan. His best trade appeared to be buying inflatable surfing boards in China and selling them in Mexico but I wondered whether he’d heard of taking coals to Newcastle when he intended to sell chilli sauce in India. Bizarrely, it proved successful!

Watching Conor, I was struck with two particular thoughts. First – why didn’t I think of doing this?! And second – this show is astonishingly timely, highlighting the importance of open borders and trade at a time when the World Trade Organisation (WTO) is forecasting world trade to shrink by 9% during 2009. It would be the biggest drop in trade since World War II, with the developed nations set to experience up to 10% falls. Although the deepening recession has led to a dampening of demand, and reduced availability of trade finance, and thus less movement of goods across countries, the downturn in global growth has also been accompanied with an alarming increase of protectionist rhetoric.

In contrast, it is precisely during these times of economic doom and gloom that trade should provide a valuable tool for recovery. As Conor so wisely puts it – ‘money and the pursuit of money makes the world go round.’ (Really? Stop the press, this man is a genius!). In economic theory, persons or a country can make gains in income (i.e. money) by specialising in the good which can be produced at the lowest marginal cost and trading that good for another.

The Western world has largely achieved its ‘developed’ status through the production efficiencies gained during the industrial revolution. By being powerhouses of manufacturing and exporting, the UK and US were able to gain astounding riches. The reflex action during a time of crisis such as this can be to protect those industries by introducing tariffs and employing subsidies. But history tells us that although this may offer immediate relief, like a drug, a prolonged pain becomes inevitable. In 1929, customs duties invoked by the US government of more than 60% on imported products led to a fall in imports – by $3.1billion over a 3 year period. Crucially, the playground tactics of the world’s economies (an eye for eye and all that) led to a 69% decrease in US exports and at the depths of the Great Depression one American in every four was unemployed.

Unfortunately, we currently find history repeating itself and the world in much the same predicament – half blind! America, for all its prize winning economists, has passed a stimulus bill through Congress with a ‘Buy American’ clause, which limits the purchase of foreign raw materials for the building of infrastructure. The Europeans and Chinese have been arguing about bras and other items of clothing for years but these relations are being strained even more right now. The World Bank reports that the developed G20 countries are relying on industry subsidies (such as those lavished on the auto sector) and the developing countries are using a mix of measures including a hike in tariffs. New anti-dumping cases have also risen by 15% this year. Come now, surely there is enough sand in our global sand box. Can’t we all play nicely?

American and European companies should be angling for a piece of the pie that is the monstrous Chinese fiscal stimulus package. No-one can dispute the manufacturer of the world that China has become, but there are comparative advantages that are to be had by other countries too. Conor, in his travels finds that the Chinese are partial to a nice bottle of wine. Let’s ship them over a few thousand bottles and drink to a better future.

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And finally…..tourists who were enjoying a day of sightseeing at Windsor Castle were treated to an eyeful of something else too. A couple selected a spot near the castle’s Garter Tower and stripped off to engage in activity of the sexual kind. Perhaps it was by royal appointment only!

Have a good week.

Aparna Ram

Research Analyst