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Subject to change. Hello and welcome to World Business Report from the BBC World Service.
I'm Roger Hearing and on this edition, Donald Trump sets out his vision for US trade to the assembled leaders at the World Economic Summit.
So how will his policies affect countries with important US trade links and nowhere else to go?
We're going to hear from Ireland.
Also, a $7 billion deal to compensate those devastated by the US opioid epidemic.
But will those who caused it really pay the price?
The Sackler family is worth somewhere between $11 billion and $13 billion.
So even after they pay out this money, they'll be billionaires.
And how much should you be charged to climb the world's highest mountain?
Now, if anyone had any doubts about the way Donald Trump's going to deal with the global economy, his address to the national and business leaders gathered at the World Economic Forum in Davos left really no confusion.
Speaking from Washington, he said businesses should make their products in the United States if they wanted to avoid facing tariffs.
He promised manufacturers the lowest taxes of any nation on earth if they produce goods in America.
But he warned that if they didn't, they'd have to pay.
He also criticized what he sees as unfair treatment by the European Union.
I'm trying to be constructive because I love Europe.
I love the countries of Europe, but the process is a very cumbersome one.
And they do treat the United States of America very, very unfairly with the VAT taxes and all of the other taxes they impose.
Well, all this hasn't gone down well with everybody in Davos.
The head of the World Trade Organization said any tit -for -tat imposition of tariffs could have catastrophic consequences for the global economy.
Ngozi Okonjo -Iweala said poor countries were most at risk of being affected by trade wars.
If we have tit -for -tat retaliation, whether it's 25%, tariffs 60%, and we go to where we were in the 1930s, we're going to see double -digit global GDP losses.
That's catastrophic.
Everyone will pay. Everyone.
And the poor countries will pay even more.
So is this a catastrophic move?
I'm joined now by Dmitri Grzesbinski, who's a former trade negotiator for Australia and author of the book, Why Politicians Lie About Trade.
Dmitri, thanks for being with us.
I mean, it is, you know, the language is strong on both sides.
Is this likely to be catastrophic for a lot of countries trying to sell their goods in the US?
It certainly has the potential to be, but I think what's really important to understand is at the moment, Donald Trump hasn't done anything on trade yet in this term.
He has ordered several US government agencies to begin thinking towards what could be done, and he certainly laid out a philosophy that is very attracted to tariffs as a tool and that lays out a number of objectives and grievances.
But at the moment, we are talking about potential and uncertainty, which is bad in and of itself, but is not yet action.
So who will be looking at this with greatest concern, really?
I mean, is it the big trade blocs like the EU?
Is it countries like the UK?
Is it countries like Australia?
I mean, who has most to lose?
First and foremost, it's not countries, it's individual businesses.
It's anyone who is trying to make long -term decisions about where they buy their inputs from, where they position their factories, and where they make investments.
If you are trying to build a supply chain and you're making investments in a factory that might not pay out on what you've put into it for many, many years, this is the kind of uncertainty that absolutely keeps you up at night.
And I think secondly, it will be developing countries who, especially those that are smaller, that know that if it comes down to an all out brawl, they lack the economic muscle to go punch for punch and to meaningfully scare off a large aggressor.
So this kind of fig leaf in a way, or I suppose you might say an olive branch in a way that Donald Trump has, which is to say, look, if you come and build your factories in the US, then you'll have a very low tax environment.
I mean, are the companies you're talking about, are they going to be tempted by that?
I mean, certainly, certainly some are.
And it should be said that, you know, US manufacturing growth and investment in the US has been strong for a number of years now.
The U .S. has a decent amount going for it as a place to build a factory, and the Biden administration certainly prioritized encouraging that kind of inward investment and domestic investment through things like the Inflation Reduction Act, rather.
So that's already happening.
The problem is that the one thing we know about the global economy is you can't make absolutely everything in the world in the United States.
Every additional factory you build after the first one is competing for more of those skilled workers, more of that prime land, more of that space on your infrastructure, which is the whole reason why we kind of all specialize in what we're good at and we spread out manufacturing around the world.
And U .S. exporters are likely to face tariffs in retaliation, aren't they?
Absolutely. And that's more of that uncertainty.
No one knows exactly what Trump will do.
No one knows exactly what the retaliation to Trump will be, and no one knows what Trump's reaction to the retaliation will be.
So there's a great deal of uncertainty and, as you said, potential challenges to US exports as well.
Dmitry, thanks for being with us.
Dmitry Grozubinski there, former trade negotiator for Australia and author of the book Why Politicians Lie About Trade.
So is US protectionism what we might call the new normal?
I asked Eric Guzik, who's professor of management at the University of Montana.
I think it could be, especially the way that he's explaining how he plans to use tariff policy.
And I think it's probably informative to look a little bit about how U .S.
policy has been using tariffs in the past and how that may be a little bit different than how Donald Trump plans on using tariffs.
So if we look back a little bit in the history of tariffs in the United States, It's a history of oscillation between free trade and tariff policy.
So the United States really begins as a free trade nation.
I'm not sure you could plan for a more free trade nation than the United States when it achieved its independence in 1783.
And I'll just give you one indication of just how ingrained this was, right, in the culture of the time.
So Patrick Henry, who we know for his famous phrase, give me liberty or give me death, he said the following during his time.
Fed or not, commerce, sir, let her be as free as the air.
She will range the whole creation and return on the wings of the four winds of heaven to bless the land with plenty.
So I did read that.
I don't memorize quotes from Patrick Henry.
That would be a little bit weird.
But it shows that this belief in the benefits of free trade was wide ranging during that time.
And that lasted about four years until about 1787.
And then for a variety of reasons, U .S.
policymakers begin to decide to change trade policy pretty dramatically.
And that's led primarily by Alexander Hamilton, of course.
And you may have seen the play.
Apparently, he liked to sing.
He liked to dance. But he was also a master architect of policy and a master of economic theory.
So he's someone who had studied Adam Smith.
He knew the origins of Adam Smith's ideas.
He understood the logic of Adam Smith's ideas.
And he was extremely adept at developing counter arguments to Adam Smith's beliefs of the benefits of trade specialization, what would become later known as comparative advantage in the work of David Ricardo.
So I tell you all this because the origin of the use of trade policy and tariff policy in the United States is really with Hamilton's plan to encourage new industry in this new nation of the United States.
So the first Tariff Act is enacted in 1789, and it was designed specifically by Hamilton to be a revenue -generating tariff.
Now, it was designed to encourage industry, so that was one side effect that Hamilton did see with the tariff policy.
But the underlying goal was to transform an agricultural nation into an industrial nation, essentially turn the United States into a new form of Great Britain.
So at the beginning, tariff policy in the United States is revenue generating.
It's designed to encourage new industry.
And it's really seen by Hamilton and others at that time to be a force behind innovation, which they believed would be needed in order to compete with the Great Britons of the world.
Things have changed in a way.
I mean, just coming forward from that to the point where it's becoming the subject is much more in focus, really.
The rhetoric certainly changed from Patrick Henry to Donald Trump.
The policies are very different.
But I mean, are we still talking in a way about an idea of mercantilism, essentially a way of dealing with a global economy, mainly by using what goes in, what comes out, zero sum calculation?
Well, I think that's part of the calculation that the Trump administration is now looking at.
So after we begin to introduce protections in the United States, it does really become protectionist.
It grows. The rates, you know, they get higher and higher.
So in 1816, the rates were raised to 20 percent.
By 1828, the rates were raised to 50 percent.
So that's when protectionism really takes hold in the United States.
And that was an era of the industrial revolution in the United States.
So in terms of where we started with tariff policy in the United States, most of our history is embedded with this idea that tariffs create or at least protect existing industry.
That changes dramatically, of course, with the Great Depression, the Smoot -Hawley Tariff.
And at that point, there's really a dramatic shift back to free trade, right, and trade liberalization.
And in terms of policy, that becomes the dominant policy pursued by policy states.
And that was an era of the Industrial Revolution in the United States.
So in terms of where we started with tariff policy in the United States, most of our history is embedded with this idea that tariffs create or at least protect existing industry.
That changed dramatically, of course, with the Great Depression, the Smoot -Hawley tariff.
And at that point, there's really a dramatic shift back to free trade, right, and trade civilization.
And in terms of policy, that becomes the dominant policy pursued by policymakers between 1941 until the current era.
So that's really why we see such a dramatic shift right now and why this is such an important topic.
Professor Eric Guzik there on some of the history behind all this.
But what about the effect now?
Let's take one country that could be in the firing line over the U .S.
protectionism of 2025.
I'm talking about Ireland.
Bobby McDonagh is a former Irish ambassador to London, Rome and to the EU, joins me now.
Thanks for being with us, Bobby.
I mean, Ireland has a length...
Obviously, it's part of the EU, part of that trading block, but it has a long relationship with the US.
It exports quite a lot to the US.
How is it like to fare in this environment?
Well, we have a new government today in Ireland, and it's an experienced, centrist, pro -European government, and it'll be here for five years, So that's a pretty stable factor in an increasingly unstable world.
And our prime minister today and is speaking to the parliament said that Ireland is going to seek to strengthen its three relationships, first of all, with the European Union, which is probably the most important one because we're part of the European Union.
Secondly, the United States and thirdly, the United Kingdom.
So we work in different ways to do what we can in the rather unpredictable circumstances.
But I think we're in a pretty strong position.
That isn't to say that there isn't a real threat to us as there is to others, but we will approach the challenges without panic or catastrophizing because, as I say, we have a new stable government for five years, we have a strong economy, we have a budget surplus, and we have a good investment offering
to the US and other companies, which isn't only based on tax.
So I think rational optimism is the only way to approach these things.
I hear your optimism, but let me point out that part of what you mentioned there with tax is you have some pretty big American -based multinationals in Ireland, mainly because it's a pretty friendly tax environment.
This could shake all that up.
I would say they're certainly here partly because of the tax environment.
They're also here because we have an educated English -speaking workforce and because we're business friendly.
But that's not to say that the tax issue isn't an important one.
But, you know, we didn't force these U .S.
companies to come here.
They came here to do business because they know it's a good place to do business, not least because it gives them access to the European market.
And they will tend to think in the long term about their bottom line.
So, you know, it's a very challenging environment, and we don't know what Trump is going to do, and he's likely to impose tariffs.
But as your previous interviewee said, no one knows exactly what's going to happen.
And Trump has said in his inaugural address that he was going to impose tariffs to enrich U .S.
citizens. but of course imposing tariffs is more likely to impoverish them so there's a certain amount of debate that needs to go on in the US administration and I'm sure it is going on at the moment.
But what about Irish companies saying okay well if there's going to be a good tax environment for us in the US we'll move over there so we escape the problem of tariffs.
Do you see many Irish companies thinking about that?
Well look nobody can predict the future and I'm not saying that there's there isn't a challenge but I suppose the first thing to say is that there's a huge amount of Irish investment in the U .S.
already. I mean, if you like domestic Irish firms investing in America, I think we hover between being the seventh and the ninth largest investor in the United States and have created hundreds of thousands of jobs.
It is possible that some companies, some American companies who use Dublin as their European headquarters may take other decisions, but they've been here a long time.
They came here because they wanted to come here.
and i i just heard today that trump announced in davos that he was going to reduce the u .s corporation tax rate to 15 and that just happens to be the minimum tax rate set out in the oecd agreement and also happens to be the irish tax rate so it's it's not really straightforward and and i think we have to
move forward with real caution but also without any catastrophizing but also of course as you mentioned as i mentioned you are a member of the european community the European Union are you confident are Irish people pretty confident the Irish government pretty confident that the EU as a trading pact
can actually make very strong moves to to deal with the US I mean do you believe in what you're part of in tackling all this yes absolutely absolutely that's why I said earlier that by far our most important relationship is with the European Union because we're not part of the UK we're not part of the US
we never will be and you know Ireland has not just the general experience of the EU operating effectively as it did for example in relation to covid but the very specific experience recently on brexit where the european union was immensely supportive of the irish government's efforts to ensure that there
wouldn't be a new hard border on the island of ireland of course the eu you can't predict the future you can't predict that trump will make the us more wealthy you certainly can't predict that likewise you can't predict how damaged the european union might be but you can predict that the european union is an extremely
experienced negotiator that it will operate together that That's one of the most important markets in the world and that the interests of Ireland and other member states will be taken into account.
We will see how there's Bobby McDonough there.
A reminder that you're with World Business Report from the BBC World Service.
Now, for almost three decades, the US has been caught up in what's called the opioid epidemic.
Around 645 ,000 Americans died from overdoses of addictive prescription painkillers.
Whole communities were devastated and families destroyed.
And one particular company, Purdue Pharma, was blamed by many health officials for knowingly selling the drugs that did much of the damage.
Well, now the latest stage has been reached in the long legal battle to get compensation from Purdue and from the Sackler family that founded it, an agreement to pay $7 .4 billion.
This latest agreement, which still needs bankruptcy court approval, is $1 .4 billion bigger than a previous deal that was struck between the parties.
That deal fell apart.
The new settlement was agreed between more than a dozen U .S.
states and other individuals who'd filed cases against the company.
Marty Sladen, senior reporter for the Ohio Capital Journal, told me what's different about this deal.
Well, the one that the court knocked down before, they did so because that settlement would immunise the Sackler family going forward, where in this case, it's a bit more money, but it doesn't immunise the Sacklers.
However, it does build in an $800 million legal defense fund for them.
Right. So is it potential still that this deal could in fact fall apart before it comes into action?
Or is that it? Is it done?
No, there's great potential for it to fall apart.
Only so far, I think it's like 15 attorneys general, state attorneys general have signed on to it.
A lot more still need to.
Um, this everything about these cases can be extremely complex and unwieldy.
And this has been going on a really long time, hasn't it?
Oh, yeah. I used to work for the Columbus Dispatch.
And Ohio is one of the states that's been most ravaged by the opioid epidemic.
And this litigation was starting when I got there in 2017, maybe even before.
And, Will, you know, the families who've been affected by this – I mean, it's a hugely tragic story what's happened with the opioid epidemic.
Are they likely to see any of this money any time soon?
I think there have been payouts to the families, but a lot of this money is going to remediate the damage done because this has also cost local governments a lot.
You know, we've also had, of course, really expand drug treatment and that sort of thing.
And I don't know that kid they sent him to rehab in Florida and he ran away from the place and they found him dead in the surf.
You know, if you're a parent, how do you come back from something like that?
It is extraordinary.
And is there a feeling amongst those people who have suffered like that?
I don't know, of course, as you say, local authorities as well, that this will be justice.
Seven point four billion is a lot of money.
Well, but there's another way of looking at it.
According to my Google research, the Sackler family is worth somewhere between 11 billion and 13 billion dollars.
So even after they pay out this money, they'll be billionaires.
They'll still be billionaires, I should say.
And so I think there's a strong undercurrent here that the rich and the powerful never have to pay the way, first of all, the families of the people who died have.
But even, you know, the doctors who are running pill mills there, a lot of them are in prison.
You know, I think all many, many have lost their medical licenses.
So it's like, you know, the the severest consequences of all manifested farther down the economic and power ladder.
Marty Schleben there of the Ohio Capital Journal let's have a look at what's been going on on the share markets Kerry Leahy, economist at Columbia University with me once again Kerry, thanks for being with us another record high for the S &P It really is another example of today we really believe in America and exceptionalism
today and so you hit a new high on the S &P and it seems like happy days are here again almost every day Trump makes an announcement Yeah, it's interesting too because so many economists are saying, well, yes, you know, he talks a lot about tariffs particularly.
That could add to inflation pressures.
The Fed is calculating its interest rate situation.
You know, this could all cause major problems for inflation and everything else.
Is it still something that people on Wall Street support?
They understand that that could happen in sort of a worst case scenario, but they are basically taking the most Panglossian view about what's going on And that much of what Trump's saying that would normally be very bad for the market, like inflation, is just a club he's using to get the kinds of deals
he wants to make without actually having to do all the bad things they worry about, which may be inflationary like tariffs and deportations.
So currently, the people, the sort of people I suppose in tech, particularly, of course, we saw at the inauguration, they're very much on the Trump train.
Yes. Well, the whole idea of the Republicans like reduced regulation is certainly the case with Trump.
And in particular, he's interested in a lot of the stuff they're interested in, particularly in technology.
And he likes talking to other billionaires, being a billionaire himself.
And so they're really just enjoying the fact that this administration may help their group more than any other group in America over the next couple of years.
And one, I suppose, fly in the ointment at the moment, Boeing.
They warned their fourth quarter loss was being unexpected because they've been dealing with a strike.
That's a company that's still having trouble.
Yes, and no one seems to have any easy, not easy or even a hard way out for the company.
And they just have months and quarters, if not years, of time to fix the problem.
Thanks very much, Kerry.
Kerry Leahy, their economist at Columbia University, joining us here on World Business Report.
Now, climbing the world's highest mountain used to be a dream of mankind.
In recent years, it's become almost routine, with several hundred people climbing Everest every year.
But for Nepal, while the steady flow of climbers has become a vital source of income, there is a downside.
Mount Everest has become littered with rubbish, while overcrowding has led to climbers being forced to queue in dangerous conditions close to the summit.
Now, Nepal has decided to increase the cost of climbing permits from $11 ,000 to $15 ,000.
Dr Shona Burke was just the second Canadian woman to get to the summit of Everest.
So I asked her if she thought the price hike is a good thing.
Well, I have to say I don't think it comes as a surprise to the climbing community.
I think it's the first time in nearly a decade that there has been an increase.
The income from permit fees is a key source of revenue for Nepal.
The mountain trekking and climbing really makes a significant contribution to the country's economy.
Having said that, I think I would be surprised if the price increase will actually slow the demand of climbers on the mountain.
I know, Nepal, the government has very much been criticised for allowing too many climbers on the mountain.
But I think this increase in permit fees is unlikely to discourage climbers.
Yeah, it's two things in a way, isn't it?
Obviously, as you say, to bring in income.
But also, I mean, do you think there are too many people going up and down Everest?
I think the mountain has become overcrowded.
Which is extraordinary, considering it's the tallest mountain or highest mountain, I should get my terms right, on the planet.
I mean, that is bizarre, isn't it, really, that now it becomes, I think, something like 800 people a year climbing it.
That's correct. There's about 300 permits that are issued by the government per year, which means that there's a lot of climbers on the mountain, and overcrowding can lead to very dangerous conditions on the mountain.
and I think that is one of the issues that is a concern for the climbing community, is that there are too many climbers on the mountain and often a lot of those climbers are inexperienced.
So too many, meaning that it's just wearing things out or is it to do with the amount of rubbish that's left behind?
It's a combination of factors.
People a year climbing it?
That's correct. There's about 300 permits that are issued by the government per year, which means that there's a lot of climbers on the mountain and overcrowding can lead to very dangerous conditions on the mountain and I think that is one of the issues that is a concern for the climbing community is that there
are too many climbers on the mountain and often a lot of those climbers are inexperienced.
So too many meaning that it's just wearing things out or is it to do with the amount of rubbish that's left behind?
It's a combination of factors so rubbish is a key issue.
We are seeing that the mountain in particular is becoming polluted, and that is very much a concern.
I think as well what you do see on the mountain is what's called bottlenecks.
So for example, when climbers are climbing to the summit and they're going for the summit push, if there's too many climbers on the mountain at the same time, it can create these bottlenecks on the mountain where it will take hours for climbers to be able to get through certain sections on the mountain,
which means that getting to the summit in that window of time when they need to get to the top before bad weather can come in or before darkness sets in becomes very difficult.
So if there are too many climbers on the mountain, it can become dangerous.
So is the answer then, do you think, actually to put the fee up much, much more so that it will limit the numbers of people there, both to obviously avoid wearing things out, but also for safety and also to stop pollution?
Well, I guess the key question really is how is the extra revenue that's going to be generated by these permits, how is it going to be used by the government and to me there are two key issues and I think the first one is very much around protecting the environment and I think the second one is around
improving the safety of climbers so I think ultimately it's how that revenue is going to be used.
And is the revenue they get at the moment being used in the right way?
Well there has been an improvement in terms of trying to improve the pollution that is on the mountain and all the trash so I know in 2019 the Nepalese army actually began conducting an annual cleanup of the mountain.
Although there are still 200 bodies that remain on the mountain, I know a number of corpses have been collected.
I know hundreds of tons of rubbish have been taken off the mountain.
The government as well, it was in 1991, set up the Sagamarta Pollution Control Committee to help keep the whole Khumbu region, where Everest is located, to help keep it clean.
But more still needs to be done.
We need to see more efforts.
Dr Shauna Burke there, who climbed Everest, in fact the second Canadian woman to do it telling us why, well perhaps they should charge even a little bit more to climb that mountain.
That's it from World Business Report.
