Common Cents

Roll Over Resolutions

Ralph Murphy

(2/4) Gravity and renewed legal enforcement have fundamentally altered trade pacts and patterns unique to the past half century. What were billed as earnings support to liberalized trade patterns in barrier relief became costly access and control authority of external states and players. Free trade areas, customs unions, group and cartel alliances flourished if backed by equity, here valued assets, and were linked to global banking. Brexit is an example of a state spin out of that orbit, but the Japanese arrest of Renault CEO Carlos Ghosh links a more monied concern. As the unlikely sharing of customs union control authority drops to backer issues there is unnecessary anxiety of the public on the way forward. Pursuit of rational self interest with respect to community created the wealth and should guide that path toward policy and reward.

Bilateral trade deals that take into account the consumer demand in want and need patterns from foreign supply sourcing are virtually timeless to relevant recorded history. They are also a consistent source of national bonding especially to material exchanges. There’s an introductory economics concept known as comparative advantage that demonstrates given available resources and training to one nation can acquire another nation’s output for a given item cheaper or at better quality level than domestic sourcing so the trade is then made. It’s a rising tide concept for both economies if an even exchange is made. There’s be price elevations and " see saw" changes otherwise to internal markets if a trade imbalance occurred but the monetary asset value would be retained if policy matched domestic output to growth.

The issue then is the trade or internal balances with politics and deviations from optimal competition routine if the foundational understanding of a competitive framework and structures are affected. That unfortunately has defined much of the post World War Two trade alliances and the whole stodgy system is now descending to likely equilibrium in dealings more closely centered on direct purchases and simple permission than subsidies or fees that alter the provision of those goods or services deemed acceptable to domestic markets.

If a nation is a strong producer and enters an impersonal trade pact like a customs union where sweeping accords lock policy to intransigent return they will almost certainly lose market share. They may even be forced from business by the politics of alternate application to the corporate role. They could be used for cultural or security roles void of other profit motive. What would be ideal and optimal for a trade alliance to flourish is for the basic model of consumer demand to reflect pain and pleasure indicators of rational self interest by buying a sought product at the lowest possible price and producers seeking it at the highest. It’s an axiom of nature and proven optimal if they’re allowed to do that. The fairness perception is more a question of nature than the market to distortions or earnings issues at that point.

Free trade areas followed bilateral accords and imposed relatively binding trade restrictions on imports and cross border exports likely by treaty to antiquity. The stored earnings were seldom mentioned as an additional factor. Bulky currency or precious metals to the eras would limit Foreign Direct Investment or simple monetary transfers unless the two sides were very close in a credit type trust understanding.. Customs unions built on the free trade areas and locked the member states into arbitrary import or export restrictions and fees and led the way to a common market concept turned reality by the post Cold War European single or common market. It was backed largely anonymously by New York bankers who wielded considerable control authority until they pulled out of it from cost and damage issues by 2016.

There was a parallel economic authority called the World Trade Organization (WTO) that emerged in 1995 and sought simple lowering of any trade barriers even if they’d devastated a host market that wanted the good or service provided. It had an enforcement regimen but to be effective required each of its members, and that incorporated most all the world. Nations were forced to write their binding economic dictates into host legislation and most did. That’s a troubling and enduring legacy that includes the other customs unions or single market amid policy disarray or other repeals that founded the law.

Countries have to review legal purpose and priorities of the externally sourced ruling amid the questioning of need or other motive in similar domestic legislation Even amid other treaty obligations or restrictions . There were countless exemptions but a reciprocity agreement claimed that a WTO member state or organization like the European Union had to follow another’s trade barriers policy which meant say America would technically be bound by it as well. It’s often cited but again did lack formal international enforcement beyond censure decisions of a judiciary body it formed. There was a further subsidy issue linked to agriculture programs that served as weak justification for other non compliance but nations had to be creative if justifying them otherwise in treaty terms.

The single market and WTO trade type unions were or were deemed to be the gateway for internal access to not just foreign economies but actual ownership and managerial control never before dreamed of by policy officials utterly divorced from even their own business communities. The Carlos Ghosn affair stands out not just for international spy thriller intrigue but the fact that the legal establishment can and did question a cross national ownership and lead alliance or strategy typifying the fanciful objective of corporate growth given its conflict of interest.

The car industry is an example of one where foreign consumers make a major commitment to a foreign supply source often reflecting their cultural identicants but also just a better deal than domestic ones. Renault, a French multinational vehicle dealer had what was known as a cross sharing ownership arrangement relatively unique to international auto dealers but common between them and which assume cartel like pricing and trade policies in practice. Renault joined Nissan by 1999 and Brazilian born Ghosn was brought in shortly after apparently given access either to equity or personnel as his background didn’t reflect that level lead.

Cross sharing firms are listed on major exchanges like New York, Nikkei, or Dax as common stock. It’s largely symbolic as prices are pegged by dealers and access very difficult these days to casual non playing investors, but it can be used as a reference for trade purposes though it doesn’t involve direct corporate earnings. If they’re listed the companies likely had access to pooled bank equity that is now closer to earners following Dodd Frank repeal amid gross theft issues of the former large banks. Cross sharing typified Renault- Nissan- Mitsubishi or The Alliance. Mitsubishi was brought in late or by 2017 likely in a funding gambit as earnings linked to western banks had collapsed as just explained with to that Dodd Frank repeal.

I’m singling the Renault group out because the dealing so typifies the world interweave of arbitrary access, presumed earnings and competence awkwardly tied to cartel pricing. shared management, politics and equity that have so dramatically curtailed growth and personal well being associated with those arrangements. French PSA Group, Germany’s Volkswagen and Daimler as well as American General Motors have or had similar cross sharing ownership that even included mergers where Chrysler was listed with Daimler as well as Italian registered Fiat within the past six years. The access and ownership and immersion very clearly alter most known or conventional trade patterns in ownership associated with competence and personal risk.

Those concepts have to be restored to trade policy if reason and theory relevant to proven optimal earnings are to be restored. If policy officials are claiming lowering trade or investment barriers are aiding domestic producers and they aren’t there can be real survival issues that affect all sectors and not just the business broker.

The basic foreign trade or import, export and cash flow concept is to generally allow foreign investment if its of personal financing, far more scrutiny if impersonal bank lending, and hardly ever a tax linked equity outflow as the programs are seldom anything but political and costly. In the current business climate trade barriers that should reflect evolved consumer interests and never involve a fee to meet its function as non politicized. It should also be taken with an eye toward reciprocity. Policy that reflects commitment and not gimmick program pitches would then benefit most everyone and not a specific planning group.