Automobile Industry: Who’s in the Fast Lane Now?

Traditionally, its been the Japanese that have commanded manufacturing of the automobile industry. the world’s 3rd largest automobile manufacturer and exporter, and has 6 of the world’s 10 largest automobile manufacturers.  It is where many of the most famous car brands are from including: Acura, Daihatsu, Datsun, Hino, Honda, Infiniti, Isuzu, Lexus, Mazda, Mitsubishi, Nissan, Subaru and Suzuki.

Indeed by 1985, Japanese automakers had been established as the top in this field with innovations being made in manufacturing systems, management systems, and automotive materials. They were also top environmentally-speaking at this time with 75 percent of Japanese cars being recyclable. Around a decade later Japan was well into the luxury car market boasting top high end brands like Acura and Lexus.

The Japan automobile industry boasts a lot of firsts also.  It was the first to introduce robotics manufacturing in car production, as well as Hybrid and Electric car technologies.

But what’s happening now?  According to a recent article in Bloomberg by Anjani Trivedi, Japan’s automakers might soon be pushed out of the US, which would potentially re-direct them to China.  With Donald Trump’s new legislation since US authorities are now “considering making imported cars meet stricter environmental requirements [such] non-tariff barrier would dent manufacturers including Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co., which together command about one-third of the market.”

Furthermore:

“Auto sales in the U.S. increased just 6 percent in March from a year earlier, and Japanese manufacturers struggled to keep pace, with Toyota, Nissan and Honda clocking average growth of 2 percent. Light trucks, rather than sedans, where the Japanese excel, are also becoming more popular, while the cost to companies of shifting a car, including buyers’ incentives and other marketing expenses, is rising.”

The idea behind Trump’s new policies is – according to Timothy Puko – said to be “designed to reduce the relative cost of cars manufactured in the U.S., by American workers…. U.S. auto makers and industry lobbyists have complained they are blocked from foreign markets by nontariff barriers. The U.S. car industry claims foreign auto makers face few of these barriers when shipping to the U.S., with Japan and Korea among the biggest targets of these grievances.”

So time will tell exactly which region will end up in the fast lane…

East Markets Post-Brexit

So what is happening to the markets and trading in the east once Britain pulled out of the EU?  How did it affect trading?  Actually that question can also be posed for the western world too.  Here we look at the positive impact this move has had on the Irish Republic.

It seems like because of Brexit there will now be some kind of trade border between the UK and the Irish Republic.  Since the UK decided to leave the EU, now it is necessary for there to be customs checks on anything moving between Europe and the UK, both ways.  Since this also includes the Republic of Ireland, the trade border has to be set up.

The negative part of this is that this will involve more bureaucracy and costs.   John O’Loughlin of PwC Ireland explained this further:

 “Understanding the Brexit impact across all parts of the business continues to be a critical action, and with much commentary in recent days regarding the relationship between the UK and EU and the EU’s stance that a transition deal is not a given, we must all continue to watch the clock tick towards March 2019.”

Meanwhile British authorities have voiced “object[ion over] EU proposals for avoiding a hard border on the island of Ireland but haven’t been able to come up with any proposals of their own.”

Still, the loyalty the Republic has shown over the years to Europe should stand them in good stead since:

“By relying on its status as a loyal EU member Ireland has managed hold the British government to its promises in relation to a hard border in a way that would have otherwise been impossible. But it has also meant that the chances of a hard Brexit have been increased.”

 

Asia’s US Purchasing Power

In 2017, Asia became the largest purchaser of US crude oil, a trend that is likely to continue in 2018 which is significant given that it has just been two years since Washington ended its crude-export ban.  According to statistics from the US Census Bureau, the percentage of how much oil Asia took from the US was 37, which was a development of 9 percent in 2016.

The Chinese refineries (government owned) are supplementing their barrel capacity by half a million tis year and the teapots (independent refiners) are also developing.  US government is predicting that production will reach more than 11 million barrels per day in the next 9 months which is right up there with Saudi Arabia and Russia. According to ESAI Energy Inc. analyst Elisabeth Murphy, “Asia is definitely the market for where exports will grow.”

Another instances of US-Asian collaboration is the presence of the US State Department’s presence at the Singapore air show in an effort to enable US defense contractors to permeate the Asian market.  According to Tina Kaidanow, State Department principal deputy assistant secretary for Bureau of Political-Military Affairs who is “responsible for the conduct of our defense sales across the globe but with particular reference, at least over the next few days, to the Indo-Pacific…This is an increasingly important region of the world for us. This is something we are really committed to developing these partnerships both in the bilateral sense but also in a multilateral sense. Over the next few days I will be speaking both to representatives of the individual countries that will be here at the show but also to some of our U.S. companies and to others so it’s a real opportunity for me and I’m looking forward to it.”

China, Europe, US Cooperation

The International Schiller Institute in this podcast on the New Paradigm of International Cooperation, in particular between China, Europe and the US. While 2017 has been pretty “tumultuous” it is hoped that what happens in the first few months of this year will encourage America to join with China and Russia in the adoption of a “win-win” vision of global partnership within the Silk Road process.

Where Asia Meets America: The Launch of BitFlyer US

On November 28, bitFlyer – the Tokyo-based bitcoin operator – brought its services to America with a US-based virtual currency exchange platform.  Already since the beginning of this year, over $100 billion has been traded in virtual currency and the company accounts for 30% of all bitcoin that is exchanged internationally.

As such, bitFlyer it is probably not unrealistic for the future to see US traders connecting to its Japanese exchange.  It has been specifically designed for individuals who are already engaged in trading at least $100,000 in virtual currency monthly; with this, they will be able to trade to place market, limit and more, letting traders connect to its Japanese exchange.

As Bartek Fingwelski, COO of bitFlyer USAexplained: “Our expansion and upcoming cross-border trading addresses a huge unmet need in the US by institutional traders looking to access large amounts of liquidity across multiple virtual currency markets. Through our web interface or API, approved professional traders can be up and running and making trades in a matter of minutes.”

British-China Trade

Confederation of British Industry data has shown that in 2016, the UK and China undertook £55 billion of trade rendering Britain China’s 8th largest partner worldwide. And last year it was only Germany that conducted more trade with China. The numbers for British-China trade are incredibly positive especially in the current post-Brexit environment.  This also gives Theresa May’s country a better marketing position for other global interactions.  Plus, British goods and services are gaining popularity in the region.

This trend is likely to continue.  With the direct China-Britain freight train, trade patterns will improve.  Knowing that speed and reliability of transport will be enhanced, according to Logistics of DP World London Gateway’s GM  Nichola Silveira, trade will no doubt expand.  Following a journey lasting nearly 3 weeks, the first China-bound freight train carrying British products left DP World London Gateway terminal on April 10.  It is hoped that a weekly service will soon be established reaching many provinces in China.

The transportation will ultimately become part of the Silk Road Economic Belt and the 21st Century Maritime Silk Road and will encourage greater fiscal integration, infrastructure inter-connectivity, people-to-people exchanges between Asia, Europe and Africa and trade.

Belt and Road Initiative

Gordon Brown, Britain’s former Prime Minister, is at the forefront of the China Belt and Road Initiative – a road and sea route linking up China with the West.  The initiative – discussed later this month at a conference in Edinburgh – will provide substantial opportunities for investment and developments between the east and west.

Known as the BRI, the project – costing $95 billion – will provide an immense opportunity to sell goods, infrastructure and advisory services to various wealthy clients around the world.  brown is an appropriate choice for leading this venture (at Edinburgh University) since not only was he a rector there but during his time at the helm of British politics, he was a huge supporter of the promotion of trade links with China.  At the conference he is set to offer participants his “unique geopolitical perspective on the continued development and influence of Asia and China on global trade.”

The BRI has also been hailed as “a road map to the future…offer[ing] a modern-day solution that fosters inclusive growth and development in the 21st century.” Spanning 60+ countries and regions from Asia to Europe, the goal is that by 2050 it will “contribute 80 per cent of global GDP growth, and advance three billion more people into the middle class.”

The East-West Economic Corridor (EWEC): India Thailand, Myanmar

In Bangkok, work is being undertaken to construct a 1,400 kilometer road to connect India with Southeast Asia. It is the first time a connection will have been made on land in tens of years and is likely to significantly bolster trade and cultural transactions between the regions.

During World War II many bridges were built in Myanmar.  Now, 73 of them are finally being renovated thanks to Indian-based funding.  This will provide a safe way for highway crossing for large vehicles.  Once this has been completed all three countries will have access to the highway.

Further, there are negotiations are taking place to reach a tri-nation motor vehicle accord so that the new road will extend to Thailand at the Tak, Mae Sot district. Really all of this is just continuing an already existing trend.  As Bhagwant Singh Bishnoi, Indian’s Ambassador to Thailand noted:  “There has always been a meeting of minds between India and Thailand. Our two countries share cultural, spiritual and linguistic links. With this road we will also have physical connectivity.”

Once the road is functioning, a true “Act East” policy supported by India will be in force.

Update: Japan-EU Deal

Comprising around 30 percent of international GDP, Japan and Europe are ready to enter into an agreement which would establish “an economic mega-bloc” between the two regions.  This not only sends a message to Washington that the two entities are committed to free trade and an open economy, but also that this will have a substantial impact on the international economic environment.

Talks for the collaboration have been going on since March 2013. There have definitely been some obstacles slowing it down, but now things are moving much faster, most notably since Trump took office with concerns of the impact of trade protectionism on worldwide trade as well as Japan and Europe’s economies.

Finally last month – on July 7 in Hamburg – a deal was signed at the G20 summit.  And what this means is that 91 percent of EU exports to Japan (and 75 percent of Japanese exports to the EU) became tariff-free vis-à-vis trade volume.  Within the next decade-and-a-half it is anticipated that both shares will reach 99 percent and tariffs for the rest of the products will slowly decrease.

The key points of the deal are the compromise agreements reached on the major food, machinery and other products. Japan’s import tariffs for cheese, currently as high as 29.8 per cent, were effectively the biggest stumbling block at the talks, but finally a solution was found. Japan will import a fixed amount of European soft cheese at a new low tariff rate, reduced to zero in 15 years. Tariffs for hard cheese like cheddar are to be abolished in 15 years without setting quotas.

As Japan’s Prime Minister Shinzo Abe said, this deal will likely result in “the world’s largest free, advanced, industrialized economic zone.”

Advancing US-China Ties

The battle for the top spot in global trading is on. China and the US are currently battling it out especially as East Asia comes up in the running. What this means for the rest of the world however, is possible anticipated fear. The concern is that countries will have to “pick a side,” which will only end negatively.

The good news however, is that since Trump took up the US presidency, the North Korea agreement went into place and discourse advanced resulting in the compliance of a 10-point trade deal. According to Renmin University’s Professor Shi Yinhong it is unlikely that the Sino-US rivalry will decline. So there’s that.

So politically there are issues. But in the arts and education things are really going well for China and the US. And that is good for relations in other industries between the two regions. As U.S.-Asia Institute Trustee and the President of DMG Entertainment Chris Fenton noted: “When people collaborate on making anything artistic, there’s an emotional pull inside of that and if it works well, you not only have a great business, you also have a great diplomatic cohesion between the two countries.”

And if anyone can offer optimism on the subject area, it’s Matt Sheehan, creator of Chinafornia Newsletter. He says that US-China relations (in particular in California) are booming: “California is the living laboratory for a new paradigm in U.S.-China relations. This new paradigm is built on grassroots ties and face-to-face interactions.”

So a lot is developing between the two nations. Let’s see where the next step takes us.