N. Korea Has Potential, OECD Sec.-General Says

Bloomberg dot Com, and of course, on the Bloomberg. The main event then the United States and North Korea agreeing to seek complete denuclearization of the Korean peninsula following a historic summit between President Donald Trump and Kim John arn Yet the accord set no deadline and left the path to disarm and undefined. The details are light, the headlines impressive. Bloomberg Managing editor Dan ten k George's now from Singapore. Dan.

The theatrics, the pictures, the photographs, the videos, they're all theatric called it's what you expected. The details thought, what is the detail of this agreement down, Well, there's there's not much in terms of substance in this agreement. Most of what we saw today we've seen before, and in fact it was a lot lighter than even skeptics we're

hoping for. Um. Complete denuclearization is a term that North Korea uses to suggest not only the removal of its own nuclear weapons, but also the nuclear weapons that the United States has in the region to protect allies South Korea and Japan. UM, so that alone, um to just that Trump didn't get too much going into it. They kept talking about complete, verifiable, irreversible denuclearization, which is considered the gold standard among arms control experts, and that did

not appear in the document that was signed. Do we have an accepted definition of what the complete denuclearization of the Korean Peninsula means for the Koreans and for what it ultimately means for the United States as well? Because coming against the sum there were two different definitions of that phrase. If we have got have we got in a great definition of that phrase now? And uh no,

we don't. We just have that vague term. So really, um, what's going to happen in the next few weeks is Suctoria State, Mike Pompeo is going to continue these negotiations and um, you know, it's it's that where they're apparently going to have to figure out what exactly is this process where you're gonna have inspectors go in and dismantle

this nuclear program. Right now, we still have no visibility on that based on what we saw today within the ballet, what did you observe in Singapore, I mean media, all of it choreographed. It was amazing how the handshake came off so smoothly and all. Oh, then the day to day grind of your Singapore. How did this summit go? It was very smooth. I mean they didn't do much

at all on Monday. And and the big surprise event was really Kim Jongoon taking an evening stroll around the harbor front and sing before going to the rooftop of the Marina based and um, there were crowds of onlookers taking photos with them. This was all very spontaneous and it made him He's taking selfies with the Singapore Foreign Minister. Um. You know, this makes him look like a normal leader who received applause. He received a warm welcome all around.

So from that perspective, this was a big win for Kim managing. It's a dan ten kg jointing us from Singapore. I'm Tommy. You'd have to say, now, compared to where we were a year ago, whether the President gave up too much, received very little, we're in a much better place than we were about six or twelve months ago.

And that's for sure. There's no question about that. I will state is he is on Air Force one at heading the Guam and across to Hawaii and then back on home, that it appears he will be greeted John Farrell by a firestorm of discussion over these military exercises. He treated them is quote unquote war games. But we have heard on this program in this studio, among others, Admirald James Travitis go over the importance, the tactical physical importance of these military has to some too happy parties

about the ending of those military exercises. One of them things the North Korea, the other thing the Chinese. This is probably exactly what the Chinese would have liked to have seen, and they're getting it. Um. You know, I mentioned the going out of television, the tweet just by Overland's Richard Hass where Ambassador Hass was gracious about the moment,

but then really centered in again on these military exercises. Again, if you're just joining us and you saw the handshake last night about nine pm, John beautifully choreographed, I thought, uh, the the idea of um of just stating in a seventy minute press conference that the war games will end. That that pretty much John came out of the blue from what I could do. Okay, there, what do you want? I'm good? Are you are? Are you are working on your World Cup? Feed over there? No no. Lisa Collins

joining us NOW Center for Strategic and International Studies Career Chair, UM. Lisa, Welcome to the program. Let's begin with this historic summit that we've had overnight. How much is the president given up and how significant is it? Well, I think it's a very significant concession that he's given up by agreeing

to suspend the US South Korean military exercises. That's something that the South the North Koreans have been asking for for decades, something they consistently raised in previous negotiations like at the Six Party talks or even a great framework factor in Clinton era. UM, and I think that this is something that previous US administrations have known is not something that should be bargained away or should be used as a political tool for you know, for bargaining with

the North Koreans. The military exercises are um and necessary part of maintaining military readiness for our forces in the region and for protecting our South Korean allies and Japanese allies in the region, and so I think this is a huge concession that maybe Trump didn't even realize he was getting up. Lisa Collins with us, and we will continue thrilled to have her with us through the morning with the Center for Strategic and International Studies in uh

in Washington. We're enjoying shop jolliness with us with Credit Suite is. Yes, we have international relations of politics of Singapore. Thank you Lisa Collins for joining us there with terse comments off of what we heard from President Trump. But also the backdrop is a LIPUS paper of the system, which is foreign Exchange Shop. Is that still true that you know I learned in my textbooks at Foreign Exchange is the is the chemistry is a litmus paper of

the global financial system. Is that as true today as it was years ago? I think it's it's still true.

What's different now maybe is that we have so much constant news flow that the market can react and pricing events very efficiently, perhaps more efficiently than it could back then, And therefore the reaction to events like for example, this summit in Singapore can sometimes be somewhat muted because we've had so much time to think about it and understand all the different implications that could arise, and when nothing particularly surprising happens, you don't get much of a reaction.

So I think that's that's why you get this type of price action compared to me. I mean, John, it's almost like there's almost no news out there now. Yeah, so dollar drifts is drifted. We just we just focus on the theatrics all the time of foreign policy, and sometimes we missed the data point. I would say more important this morning for investors was just to look at the small business Optimism survey here in the United State, the set can hirest index reading and it's forty five

year history. Does that sound like American businesses worried. No, but we've heard that. I mean Drew Marters yesterday, I got a huge response. But the fact of the matter is, whatever you think about these international events right now, schaha. But it just seems to me that here in the United States, domestically speaking, which is why we're talking about small companies, not big caps, exposed to the international story, but domestically speaking, it looks like the United States is

the best house on the street. That's still the case. And you know, even the political risk in the US, despite President Trump apparing to some to be a liability on that front, it's still muted compared to most other major economies out there. So for example, the UK you

have the Brexit debate. Europe just delivered the Italy story, which was a surprise for many actually um and you know clearly in emerging markets, you've got all kinds of different political uncertainties out there right now, which which do spill over into the economy. So that's why I think the US at this point looks looks better than the rest.

Banks for America, Mary Lynch come out with that monthly survey that a lot of people look at the fund manager survey, and in that survey this month, the theme is pretty clear. It's decoupling once again the United States. People get an exposure to the US and trimming exposure

to Europe and emerging markets. Are we decoupling here in the United States from the rest of the world, and we're moving from global synchronized growth to a world that's quite familiar several years ago, which is the US doing great with struggles our swhere. It doesn't have to be that. If you go back just a couple of months. In fact,

many market participants expected a synchronized global recovery. In fact, they expected, for example, Europe to perform so well that the euros should go higher against the US dollar even with the US is yield differential advantage that it has at this point in time. So there was a surprise factor there where suddenly the numbers came off in places like Europe and other parts of the world. And actually, I think many economists still expect to bounce back in

those numbers. So this desynchronized growth outlooked at we have at this point in time need not necessarily persisted. But the heart of all of this analysis is gaming central banks. And the central banks are gaming inflation and the vector, the first and second derivatives of inflation. What are they right now? I mean, what what is Mr Powell's summary. He's sitting at his desk, He's got his Bloomberg next

to him. We know that John Sherman pulse constantly on his Bloomberg looking at the dots, But what is a single sheet of paper on his desk about inflation? Actually say, well, look, I think I think the bigger issue there is that although the inflation level is at an acceptable level, and certainly much higher than let's say europe A Japan's inflation level.

The flattening yield curve is sending a different message, which is that the level of rates is that's priced in right now, so let's send next to the end of next year, is already high enough, you know, given the longer term decline in potentially you know, potential growth and other factors of the market is concerned about. So I think that's that's the issue here. It's not really where is inflation right now? It's what level of rates can the market tolerate before it starts to worry about more

disinflation in the future. That's we're doing central bank analysis by gas by forecast right well. I think even the Central Bank Franction is doing that. If you think about the debate that's ongoing at this point around what is the real neutral rate at this point in time, how much has that changed, how high above it can you go before you risk a de leveraging concern in the global economy. These are all things that being debated constantly, and I don't think it's gonna be an answer to

that quick. We're talking about Panama yesterday in the world Cup as it Rain got a chance, I think so. I think, you know it's based on the very low pal is that that the market is subscribing first game Friday, if less the city can win the Premier League. I think there's what's the first game Friday? Morocco? Yes, Morocco exactly came on Friday. So what happens does you have when when kickoffs? What eleven eleven am on Friday? Yeah, you know I've got this credit dis credit space to

lose their effort. I've also got to watch England on Monday's. It's the problem with your foot in multiple you mentioned earlier Spain is going to do better. I mean you know that that's just the gut feel. To be honest with you, Why is Spain gonna do better? We're gonna cover this in detail, full team coverage in about seven minutes, folks. Yeah, I actually don't think any particular country has a standout

strong team this time. Yeah, I would go with that. Yeah, So that's why I'm just going with my gut feel, which is Spain. I can't there's no analysis involved there. My gut feel is the United States of America's not in it. And I thought it's Nigeria. I thought that

was your No. I'm supporting Nigeria because I have a memory from eight or twelve years ago that it was fun watching them, you know, for an America now because it is fun watching but come on there, like the Washington Capitals to come down the ice and they shoot the puck. Nigeria, there's none of this pussy footing around. Nigeria comes down the field and they kicked the ball. That's what Americans want right to see this summer. So I'm gonna get you the excuse me to get it's

a kid. Well, I just say, I'm speaking in your land a kid, but I'm going to get you the shirt. Okay, call it the shirt. I'm going to get the Nigeria shirt. I can't see you fully kidded out with the socks, shorts and jersey as well. We have had some terrific guests that we hope are giving you perspective away from the basics of Korea, and one of them is Catherine interest Moon uh Senior Fellow for Foreign Policy the Center

for East Asia Policy Studies as well. Catherine, thank you so much for being with us on a busy day. Let me begin with what we've seen through the morning and what our audience has heard through the morning. With what this moment means for South Korea, we've heard too little about it. How does Soul respond to what we've seen? Well? President Muon Jayne of South Korea has declared that he's very, very happy and and considers the summit so far a success.

Um I think the South Korean public will feel good about it, accept there's a problems. President Trump offered to see joint military exercises, training exercises that are held regularly throughout the year with South Korea as part of the alliance. This was a unilaterally yeah made statement and this has surprised the d D in the US as well as South Korea. The government is basically saying they're going to have to get clarity from the US about the statement.

So that is really unexpected and um way too much. Written to Mr Kim, I mean, you came out of the Smith College, Princeton, Combine, you're teaching up at Wellesley. Now you're going to walk into your class tomorrow and within your international relations you have to bring in the

military of the United States of America. How will the Pentagon respond to what the president, it seems almost ad hoc said within his press conference, Well, I have a simple answer to that, which is that the Pentagon, as far as the US Military Command in South Korea goes, the spokesperson already said very very clearly and early on that day, will proceed as usually, have gotten no command and so they're training to get ready for the August

military exercise. I mean, this is a professor bon. This is absolutely critical in that we have heard this from Admirals Torvinis and others over he's at the school north northeast of Wellesley called tufts Um and Admiral Stevidis has said very simply, uh that this these are command orders, aren't they right? Right now? This is this is um.

It's a bit commity. This is a little nuts frankly um and uh, the Defense Minister Matis on a Monday, the eve of the summit, had already said the military exercises are not on the table for negotiations, and then President Trump just offered it up, Kathy, are we in a beneposition now on the peninsula And then we were twolve months ago, Uh, well yes, if we don't want war. This is a very very good development relative to war or fire and fury and other kind of rhetorics like that.

So the big pictures death. However, Uh, there isn't much there there in the joint statement. And for example, the US promises um to goose North Korea security assurances and etcetera. But North Korea promises to proceed with the declared de nuclearization intention of April when Kim meant with Moon. However, North Koreans have not even presented a recommitment to continuing cruise on nuclear testing and missile testing. I mean, we could have a minimum gotten that. Would you say the

world is more secure now than twelve months ago? I would say we are not on a road to war, so therefore secure but quite insecure. In terms of what is to come after this meeting, Well, what's what's the greeting the president is going to get back in Washington? I mean, we mentioned Pentagon earlier, but you know, you see the back and forth between any executive branch officer in the legislative branch. How will this be received in Washington?

I think the members of Congress will want to get clarification, like many people around the world, because it's so vague. What happened is so vague, and the U s seems to have offered more, at least verbally. Um. The other reality, though, is that the joint statement is not a bagally binding statement, so it comes up and have to abide by any of it, and neither does Kim. You know one thing

I want to bring up as China. I found it really striking that when Trump was taking questions from the media, Um, he sanks Presidents She and all the other dignitaries of East Asian countries are relevant there. But he said that he is grateful to President She for having enforced so tightly the sanctions, and then he says, but not so much in the last two months, But that's okay, that's

what he says. But that's okay. So I was stunned that he is signaling to China and other countries that loosening up sanctions that not abiding by them uh is okay, and that the US doesn't have much leverage m accept the sanctions that the Chinese can employ. Well, Kathy, let's

talk about the Chinese role in all of this. Do you think the Chinese and President changing thing will be happy with the outcome of the summit Oh yeah, I think for now, because the Chinese wanted exactly what Trump offered, which is too ceased US military exercises in South Korea in return for a freeze of nuclear and missile testing, etcetera. Um.

But in some ways China got what it wanted. The North Korean's got so much just meeting Trump, getting the coverage worldwide and not having to commit to anything specific. Canthey has been incredibly difficult to make a judgment cool after once summit, with a lot of theatrics. This is going to take months, maybe even years for this to play out. But as you see things at the moment, your base case, the swear of influence that the North Koreans fall into, is it towards the South, towards the

United States, or is it towards China. Oh, I think it's none of the above. North Korea does not dance to other countries, tune it's dances to its song. So right now, I think North Korea Kim is doing a really superb job doing the diplomacy politics with the South Koreans, with the Chinese, with the Americans. Uh, He's willing to dance with everybody right now, and with the Russians, and I'm sure he's going to extend that dance card to

the Japanese as well. Kathy, really thoughtful stuff, and we really appreciate your time on this program from the Brookings Institution Center for East Asia Policy Studies. Um, Kathy Moon, We've got a fantastic interview coming to us from Berlin. Tom Keene unexpected and Gal Guria, the o ECG Secretary General, just popping into the Berlin studio and he joined us from Berlin, Germany. And good morning to your sir, Good afternoon to you over there, and thank you very much

for joining us. Let's just talk about your meeting with a Chancellor Merkel in Berlin. Huge reversal seemingly in US German relations over the last year. Just what kind of position is Chancellor Merkel in and what had she told you? Well, Chancellor Merkel is always at VISTIQ and she's always pragmatic,

and she's always working towards a greater cooperation. So I think we what we did together with the heads of the i m F, together with the head of the World Bank, of the International Labor Organization and the World Trade Organization myself, we all talked about UH in each of our domains, how we could work with multilateralism and how we could promote globalization. And at the same time we had the head of the African Development Bank, so

we focused a lot on cooperation with Africa. The domain of Mexico is something that you have grown up with and you have now seen the tests by the domain of Trump, whether it's NAFTA, Mexico, what we've seen with Canada coming out of Quebec and a course with your conversation with Chancellor Miracle today, these domains are under attack from a unique president. How should they respond to Donald Trump? Well,

I think that these are different circumstances. In the case of Mexico, which you mentioned, what we're going to have an election on the first of July UH and there's still so there's still you know, three weeks of campaigning to do um and the questions in Visa v. The United States depend a lot on UH NAFTA, How will NAFTA uh it developed, How will NAFTA end up in terms of the negotiations, But they also issues of security, issues of migration, there are issues of you know, the

not not not just a trade but also the dealing of drugs and arms that come from the South and go into consumption in the United States, and then the arms flow coming from the United States into Mexico. So there are a number of issues that the bilateral relationship requires when it comes to well, for example, the G seven meeting, of course, that was mostly a an issue

that was brought up in terms of the communicate. At the end, it was mostly about trade to some extent climate and then and then last but not least in the case in the particular case about Canada, well, it was about whatever this encounter happened because of the communicate, And in some ways in Europe there is a protectionist wall creating barriers to entry for for many people to get into the European market, the auto market being one

of them. The Europeans realizing that they need to remove some of those tariffs on on auto imports in order to appease the president Here in the United States, I don't think that anybody is doing anything to appease anybody else. But I think the question is that you realize that more and more the barriers of trade have to come

down in order for everybody to capture the ifits of trade. Yeah, and I think it's an important question I got, But I just wonder whether the Europeans themselves are aware that that's got to happen, and they themselves have barriers to entry that need to come down. I I think that more and more there is a common understanding that this has to happen, and then there is a question of uh A time and speed, and then the specificity about

which and where and what sectors. But my my, as I said before, my impression is this is a world in which these tires have to come down, continue to come down, eventually disappear. They're already very low, right, They're already very low, and they're coming down further all the time. And now, with your experience at O E c D and the other public service tasks you've taken for your

nation of Mexico, you visited South Korea many times. How the South Koreans respond to what we saw in the last twenty four hours in Singapore, it has to be good,

it has to be positive. I have myself been in uh the in the Special Economic zone you know, on the on the North Um, and I can only tell you that the potential there for complementarity, the potential there for uh, you know, transforming in North Korea into a very important uh you know, complement to the capacity not only of South Korea but also of the whole of the world is very great. So I think whatever happened to day, it's not it's good not only for security

issues but for the future of the world. And Algaria, thank you so much from our studios in Berlin is the fifth Secretary General of the Organization for Economic Cooperation and Development. Of course out of Paris is well, John, That's one of the big Bloomberg advantages out of the blue. Yeah, and on blocks of violence accountlement. He wants to come out and we're thrilled by that, and that's wants it worked by our team over the but that that's wonderfully

here frommed there's just so much new song. We could spend an hour there alone. In Mexico and the elections coming up. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keane Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio