Trade Nerds = Nerds

Asteroids, football and interstellar travel

The intersection between sci-fi/fantasy nerds and trade nerds looks something like this:

Or rather, while not all sci-fi/fantasy nerds are trade nerds, a suspiciously large proportion of trade wonks are sci-fi/fantasy nerds.

I’m not even at the extreme end — glances nervously at the weekly trade D&D group — yet I still bloody love it.

This is all to say, that when given an opportunity, any self-respecting trade nerd will LEAP at the opportunity to merge these two interests.

The perhaps most famous example of this is Paul Krugman’s 1978 “Theory of Interstellar Trade”.

Here’s the abstract:

The paper is mainly about how to calculate the financing costs of trading goods over interstellar distances, assuming the exporter finances production upfront and is only paid once the goods arrive. Because the goods travel at relativistic speeds, the people on the spacecraft and the people on the planets experience different amounts of time, so the key question is which “clock” should be used when discounting future payments.

Krugman shows that the correct discounting rule is consistent despite relativity, but also illustrates that if journeys take decades or centuries, even modest interest rates can make the financing costs enormous. That doesn’t mean interstellar trade is impossible, but it does suggest that long travel times would make many trades uneconomic unless the goods were sufficiently valuable or capital were very cheap.

Anyway, it’s worth reading in full mainly for lines such as this:

Readers may, however, wish to use general relativity to extend the analysis to trade between planets with large relative motion. This extension is left as an exercise for interested readers because the author does not understand the theory of general relativity, and therefore cannot do it himself.

Thankfully, the trade questions facing us today are slightly less exotic.

As part of my employer’s new Frontiers of Trade series, George Riddell and I have written a piece about one particular question raised by the recent heightened desire to mine all the asteroids in our solar system: for customs purposes, where does the ingot mined from an asteroid actually come from?

(Yes, yes … more rules of origin chat.)

The short answer: we’ve not really decided on this yet, although US customs has introduced provisions covering goods “taken from out of space” by a US national.

Anyhow, we reckon the answer may, in the end, be found in … fish. (But not the number 42.)

See:

For example, under the EU’s free trade agreements, fish caught outside of territorial water only qualify for preferential tariff treatment if either the vessel that caught them is:

1. Registered in an EU member state or the FTA partner;

2. Sails under the flag of an EU member state or FTA partner; and

3. Meets one of the following conditions:

   1. Is at least 50% owned by nationals of a member state or the FTA partner; or

   2. Is owned by legal persons that have their head office and main place of business in the EU or the FTA partner; and are at least 50% owned by public entities, nationals or legal persons of a member state or the FTA partners

Even once you've worked out origin, the really fun questions begin. How do data adequacy decisions apply to data stored in data centres orbiting Earth? Would governments deploy anti-dumping or anti-subsidy duties against extra-terrestrial competitors? At what point does customs cooperation become interplanetary?

Anyhow, do me a favour and read the full piece HERE.

---

Trade in football

On the subject of trade nerds ruining everything that is fun, DG Trade’s Lucian Cernat decided to break down the World Cup by modes of supply:

---

How to negotiate with Trump

The State Bank of India’s research department has published a paper setting out how India should approach any negotiations with the US. And it’s … unusually direct! [Emphasis added]:

India sits between NATO allies and China. It does not have China’s concentrated chokehold, but it has meaningful leverage: market scale, technology talent, pharmaceuticals, defense procurement, energy optionality, diaspora influence and Indo-Pacific value. India’s best strategy say to get the best trade deal is to wear down the opening position, not the relationship. Keep the conversation warm, avoid public escalation, make limited and reversible offers, and wait for US Administration first demand to run into U.S. market costs, China-balancing needs and alliance fatigue. Then bargain late, when Washington’s reservation price is clearer and India’s value as a market, technology partner, defense buyer and Indo-Pacific counterweight is more visible. India’s strategy should be to test the resolve of the US Administration and potentially accept a high cost follow through in short run and signal that India stands its ground for the long game…. Dive sideways and test the resolve…..India will win...

Worth reading in full … HERE.

---

Chart of the week

From the good folk at Global Trade Alert (sign up to their newsletter, I can’t find it on their website):

---

Best,

Sam