What are Biden’s trade policy issues? Let’s assume that he takes office and that there is no Democratic majority in the U.S. Senate. What does all this mean for international trade? Firstly, it’s not clear that policy will change very much directly. The reason is that the Democratic Party concerns about international trade are rather like those of the Trump administration. The Democratic Party platform contains very similar emphases on the unfair activities of other countries. The Democratic Party platform does not approve of the way the Trump administration has been handling China, but it seems to share the same concerns. There is slightly more emphasis on workers’ rights in other countries, but to some extent these issues are also being taken up by Republicans in the Senate, at least as regards forced labour.
In one respect however the new administration may help international trade, if only indirectly. International engagement, and U.S. involvement in multilateral agreements, will be restored to some extent. This means that WTO may see a revival if the U.S. helps to restore its role in dispute resolution by allowing the appointment of new tribunal members. There will be less resort also to trade measures as a tool of general policy. Countries will always introduce countervailing duties in response to antidumping or subsidy activity, but tariffs mean pain for consumers immediately while hurting producers only in the longer term. If the United States wishes to punish some other country for perceived misbehaviour that is not trade-related, it could do so more effectively by financial measures, freezing of assets, and control of movement, or more positively although less easily through new investment agreements.
Another way in which things may change is in government spending. Infrastructure was supposed to be improved under President Trump but little actually happened. Now it may be the only way a stimulus package can be agreed politically. This would not be as beneficial for international trade as a consumer-based stimulus would be, but if the emphasis was on climate there would be more to it. Advances in transport systems, renewable energy, food production and manufacturing processes and recycling technologies will encourage innovation that will benefit the world economy as a whole.
Biden’s trade policy issues also include two outstanding questions on pluri-lateral agreements. Firstly, will the US re-join the Trans Pacific Partnership (TPP), now slightly transformed into the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)? The new administration is more committed to international cooperation, but the CPTPP agreement does not include provisions that the US had insisted on in the original agreement, so membership would have to be re-negotiated.
The second question is that of an agreement with the EU, the Transatlantic Trade and Investment Partnership (TTIP). This will take longer to be realized. There is not so much enthusiasm on the EU side, and, precisely because the scale of economic integration between the U.S. and Europe is already very large, it is not so easy to identify and agree on very beneficial improvements. Furthermore, Brexit complicates the dynamics: the UK had been a strong TTIP advocate. However, Canada already has an agreement in operation with the EU, the Comprehensive Economic and Trade Agreement (CETA). Canada is also a member of CPTPP. This may provide a stimulus to negotiations and a model for some aspects of TTIP, especially in the area of investment dispute resolution, which was one area of difficulty in earlier TTIP negotiations.
Unlimited Data
The field of data is an interesting illustration of the way in which some driving forces of the world economy are interacting. Data will always keep on growing, because there are always new things to be measured and new ways of measuring. The scope and frequency of measurement continues to increase. Hardware advances allow for further improvements in data collection, and software advances encourage analysis and new secondary data. The Chinese company Tencent has become the first Chinese company to have over a million servers. Akamai has more than 240,000 servers in over 130 countries.
Hardware advances and server advances are part of the picture. So are the growth in data and the development of software that needs more and more data (data analysis, AI). But there’s a third factor: regulation in its broadest sense. It includes trade agreements (insofar as they cover data and telecommunications) as well as specific regulations on data within a country or region. The best known example of the latter is the EUI’s GDPR, which is often responsible for those irritating website notices about cookies. However GDPR has had important effects also on investment patterns: service providers are locating servers within the EU so that EU customers and others can have the additional security that GDPR provides.
Competition: it’s not me, it’s not you, it’s us
Last year, Toyota increased its shareholding in Subaru, and Subaru bought shares in Toyota for the first time. There is no intention it is said of Toyota actually acquiring Subaru but they need to work more closely together in the light of global changes and autonomous cars. Similarly Ford and Volkswagen have joint shareholdings in each other and in another company for similar reasons. This kind of cooperation looks modest in comparison with the recent Fiat Chrysler merger with Peugeot. But it is nevertheless strategic and in fact it is a considered alternative to a merger.
Cross-shareholdings are the method by which companies try to increase their competitiveness by what looks like an anti-competitive maneuver. We can see similar patterns of small cross shareholdings in many internationalised industries, including airlines. (Here the purpose is not so much to improve technological advances as to reap the benefits of scale by enabling coordination of passenger transfer, including rationalization of routes.) Usually, competition law is only concerned with shareholdings that give effective control, and this allows structures of smaller cross-holdings to provide both companies with information and communication channels, formal and informal, for strategy and technology development.
Is all this anti-competitive? Perhaps, in that the companies are deterred, to a degree determined by the shareholdings, from competing with each other, but more importantly through the impetus given to alternative directions for each of them, which derives from the enhanced perceptions of the other’s strategy. Each may identify something better to do than going head-to-head. All the paraphernalia of international competition law, including that of the EU, is irrelevant in the face of this cleverness. Big companies are learning that there are better things to do than to seek dominant positions.
Ghosn but not forgotten
Pronouncing the man’s name is difficult enough. To understand the details of the Renault-Nissan linkage (also incorporating Mitsubishi) is even harder. But the effects are striking. A more or less unique enterprise was created that reflected the strong if different industrial policies of two G-7 member countries. France believes in national champions, and holds onto the best of state-owned enterprises. This is not just because their trade unions would never agree to anything else. It is also because strong French companies are seen as a projection of state power and perhaps more importantly as a basis for economic independence This policy has often been reinforced in practice by the movement of key staff to and fro between government and business. In Japan, the cohesion of government and business is not so explicit. This is because it does not need to be: national cohesion is still very strong, to the extent that most Japanese feel themselves to be part of something greater than themselves.
Renault Nissan is unique in that it is has been a more or less balanced partnership. Other multinational car industry ventures are more hierarchical. The VW group includes Spanish and Czech arms(SEAT and Skoda) but the German end calls the shots. It’s unique also because other joint ventures with the Japanese car industry have not endured (GM and Toyota, Daimler-Chrysler and Mitsubishi, Ford and Mazda, Volkswagen and Suzuki). Of course, there is international co-operation at lower level (in engines, platforms, etc.).
But what’s the future for Renault-Nissan? Nissan has the experience on electric vehicles that will be needed for the future. Also, Japan has a lot of expertise in solid-state batteries, which are supposed to be the next big thing. But with Mr Ghosn no longer present, does Renault-Nissan have the global strategies it will need, with lots of newcomers going into electric vehicles?For such alliances to work, the lessons of the past need to be drawn from other alliances: communication is key. Without that, you cannot even begin to give and to take.
There are at least two interesting points about electric vehicles. The first one is that they are less complicated to make than the kind with internal combustion engines. One study even says that they typically have 20 moving parts as opposed to about 2000. This seems absurd: after all if you take four wheels, four windows, five doors, three mirrors, one steering wheel, one handbrake, and two pedals, you already have a total of 20 moving parts, and then there are the windscreen wipers. But in any case we can accept that they’re easier to make. Which might lower production costs. Which might encourage new foreign direct investment in different places. Which means tariffs, especially protective ones, will change to try to keep up.
The second interesting thing about electric vehicles is that they can have very good acceleration, resulting in higher average speeds even with the same speed limits.