Berkshire Hathaway 2018 Annual Meeting Audience Question # 3

It is a win-win situation when the world trades

Warren Buffett:

OK, now we will go to the shareholder in Station 1. I believe that’s probably up here to my right.

Audience Member:

Hello. This is Chao from Wuxi, China, (the sound in this part of the video is inaudible) Capital. I’ve been to the meeting for 12 years. Wish you and Charlie good health, so we could see you both from meeting for 12 more years.

Warren Buffett:

Thank you.

Audience Member:

Quick question. We know both you and China delegations… U.S. and China delegations… are in China for intense discussion, also called a trade war.

Let’s go one step beyond the trade war. Do you think there’s a win-win situation for both countries or the world is just too small for both to win and we have to revisit your 1942 chart again? Thank you.

Warren Buffett:

Thank you. I’d like to just mention one thing. In August, I’m going to be 88, and that will be the eighth month of the year, and it’s a year that ends with an eight.

And as you and I both know, eight is a very lucky number in China. So if you find anything over there for me, this is the time we should be acquiring something. All those eights.

Audience Member:

Will do.

Warren Buffett:

The United States and China are going to be the two superpowers of the world, economically and in other ways, for a long, long, long time.

We have a lot of common interests, and like any two big economic entities, there are times when there’ll be tensions.

But it is a win-win situation when the world trades, basically. And China and the U.S. are the two big factors in that, but there’s plenty of other citizens of the world that are involved in how this comes out. And there is no question…

The nice thing about in this country I think is that both Democrats and Republicans basically, on balance, believe in the benefits of free trade.

And we will have disagreements with each other. We’ll have disagreements with other countries on trade.

But it’s just too big and too obvious for… that the benefits are huge, and the world’s dependent on it in a major way for its progress, that two intelligent countries will do something extremely foolish.

We both may do things that are mildly foolish from time to time, and there is some give and take, obviously, involved.

But U.S. exports in 1970 and U.S. imports in 1970 were both about 5 percent of GDP. I mean, here we we were, selling 5 percent of our GDP and buying up 5 percent of our GDP, basically.

Now people think we don’t export a lot of things. Our exports are 11 and a fraction percent of GDP. They’ve more than doubled as a share of this rising GDP. But the imports are about 14 1/2 percent, so there’s a gap of three percent or thereabouts.

And I would not like that gap to get too wide. But when you think about it, it’s really not the worst thing in the world to have somebody send you a lot of goods that you want and hand them little pieces of paper.

I mean, because the balancing item is, if you have a surplus or deficit in your trade, you’re going to have a surplus in investment.

And so the world is getting more claim checks on the United States, and they… to some extent they buy our government securities, they can buy businesses.

And over time, you don’t want the gap to get to be too wide because the amount of claim checks you are giving out to the rest of the world could get a little unpleasant under some circumstances.

But we’ve done remarkably well with trade. China’s done remarkably well with trade. The countries of the world have done remarkably well with trade. So it is a win-win situation.

And the only problem gets to be when one side or the other may want to win a little bit too much, and then you have a certain amount of tension.

But we will not sacrifice… the world, I mean… will not sacrifice world prosperity based on differences that arise in trade.

Charlie?

Charlie Munger:

Yeah, well I think that both countries have been advancing. And of course China is advancing faster economically, because it started from a lower base and they’ve had a little more virtue than practically anybody else in the world in having a high savings rate.

And of course, a country that was mired in poverty for a long, long time, and that assimilates the advanced technology of the world, and has a big savings rate, is going to advance faster than some very mature company like Britain or the United States. And that’s what’s happened.

But I think we’re getting along fine, and I’m very optimistic that both nations will be smart enough to realize that the last thing they should do is have any ill will for the other.

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