Interview with PIIE senior fellow Jeffrey Schott

Jeffrey Schott, a former U.S. treasury department official and senior fellow at the Peterson Institute for International Economics is here in Seoul for the World Knowledge Forum and a special lecture organized by the Institute of Global Economics.
Our business correspondent Kim Hyesung sat down with him for his insight on global trade and the economic outlook.
Let's take a look.
The protracted U.S.-China trade spat has not only resulted in each side applying tariffs on billions of dollars of goods, it's also weighing on global growth.
The IMF says the tariffs imposed by Washington and Beijing could drive down global GDP by point-eight percent for next year, and the U.S. Fed says the drop in global GDP could be as high as one percent, or 850 billion U.S. dollars.
"The tariffs have an impact. But I think less well understood and much greater impact is on the perception of what future growth is going to be to investors who have to make the decisions whether to invest in new plant and equipment, whether to change their supplier relationships...All of these actions are inefficient and they waste resources that we could otherwise be used more productively. That will have a drag down on growth. .
We are seeing warnings of a possible global recession, what's your take on the global economic outlook?
I'd say take what the IMF estimates and deduct a few tenths of a point for all the major countries. The trend seems to be weakening. Forces weakening growth in major economies are reinforcing each other. When you have an impending election like we have in the U.S. coming up, it can lead to a lot of hot rhetoric that obviously roils the markets, creates much more volatility. So I think not a serious crisis, like we had ten years ago, but a significant weakening in global economic growth. That's not good news for the U.S. or for Korea.
2. With low interest rate, low growth and low inflation, some economists even say Korea could face a long-term economic slowdown, like Japan's Lost Decades. What's your take on this?
I think just as Prime Minsiter Abe had a third arrow of Abenomics with structural reforms. There's still a lot of room for Korea for domestic reforms that can boost productivity. The resources of the Korean people are very very large, very important .They can be better used. So while the international climate is weakening, there's still the opportunity to pursue domestic initiatives that will unlock some of the productivity gains that have been held back.
Dr. Schott added that encouraging productive investment and having a more efficient utilization of services in the whole economy, not just the manufacturing sector, will be key.
Kim Hyesung, Arirang News.