Presidential Election Impact on Future Trade

this Monday. Nicole Lamb Hall is a managing director at Kroll. She's fellow at Duff and Phelps Institute UM and she joins us on the phone in Washington, d C. Nicole, it is nice to have you here with us. Welcome to Bloomberg. Well, thank you. Carol's great to be with you. You know, it's funny we kid Jason and I kind of laugh a little bit about Oh yeah, it's as a presidential election year, because in any other year, that is what every conversation would probably revolve around, and yet

this year is unlike any other. Talk to us though about from your perspective, what you're seeing, what you're thinking about when it comes to the up coming election and when it comes to trade. Sure, well, I really believe, and and this is something that we talk to our clients with the Definite Self Institute about all the time. It's just really the differences around kind of a choice

between a unilateral and a multilateral approach to trade. Uh. It seems clear to me that the Trump doctrine is kind of a go at a loan approach that isolates and sometimes alienates the US from our allies and and in some ways embraces what I would say our market distorative tools such as tear offfs and quotas for purchases

of of US goods and services. And by contrast, and multilateral approach to trades, these collaborative action with our allies and and and in working together hopes to maybe you know, nudge uh countries that don't want to play by the same rules towards playing by those rules. And so I think that that's what the that's what's being set up now in the presidential election as it relates to trade, is just those different kind of approach, those different approaches.

And so Nicole, I guess one of the big questions is if there is a change over, if you do have a Biden administration, how easy is it to get back to a multilateral world. Since we've been in this bilateral or unilateral world now for three and a half years, Well, it's going to be very challenging, Jason, I can tell you because it's it's really there has been a sea change.

There have been some norms, that is that have obviously changed since the Trump administration came into into office, and so I think it's it's going to take us a while to get back to the point where we can be viewed as leaders in the as a leader in the multilateral approach. I don't think it will happen overnight, but I think it's necessary, particularly when you look at what's happened as it relates to US China trade. I mean, I think that that in and of itself illustrates kind

of the perils of going it alone. Um. I think that, you know, the global businesses, like our clients with Deaf and Phelps and Corole are really caught in the balance now, kind of in the cross hair, so to speak, of the U. S. China trade tensions that that have been largely brought about. I think, even though they existed prior to President Trump coming into the office into office, I

think they have created been exacerbated by this going alone approach. Well, and it's interesting because I feel like Nicole, the US isn't alone in kind of looking inward, and I feel like we've seen, you know, some of this around the world. And I do wonder though increasingly you mentioned China, if we are getting ready to kind of divide the world into China and the countries that want to work with China and the US and the countries that want to

work with the US. Well, I think there's a danger of that, and I think that is bad, particularly for global businesses like our clients has the world. You know, what what we do know now is that global supply chains our our reality. They aren't going that's not going

to change. We have globalization, and we have to learn to work together within this sphere, with multinational UH companies that are both in the US and in other countries around the world, to find a way to um, you know, create some normalcy around what global trading rules should be UM. I think what what I worry about is, and I recognize that there is a little bit of nationalism that

we're seeing around the world. I worry that some of the progress that we've made with trade agreements kind of moving away from care ofs and looking more broadly at policies like environmental protections and labor protections. I'm afraid that we're moving away from that and we're going to get to a point where the global economy and global businesses

will suffer. And so Nicole, when we look at the headlines to a and over the weekend and going into the weekend and we see something like the action around TikTok, you know, part of this is about an area that you are very familiar with, which is foreign ownership. You know, you've done a lot of work, uh, I believe on SCIPHIUS and you know that looks at it's the committee for our listeners, It's Committee on Foreign Investment in the US.

An incredibly important sort of piece of the puzzle here when you think about that element and how it relates to global trade and how it relates to the relationship among superpowers. What do you think about right now? Well, what I worry about is that SIPIUS is used and and other similar committees or entities around the world are used not for what they were intended to be used as is to protect national security, but are used as

tools and trade craft. Um, I think that you know, the as I look at the TikTok transaction, and this is you know, consistent with my experience when I was on the committee, when I was in the Obama administration. It is really centered, it seems to me, on national security concerns around data privacy of U. S citizens, And so I think that it's it's probably right on the

mark um, but it does create to the tensions. I mean, we have a trifecta tensions with China around trade, technology, and geopolitics, so it certainly falls into the kind of the technology tensions. But I think that you know, data

privacy is a real concern. And while you know, when you look at the legislation that updated the SCIFIST process and it's focus on protecting p i I or personally identifiable information of US citizens, that was always an issue even when I was on SCIFISTS, But now with the legislation being updated, it's really coming into into full focus.

And it's a it's a legitimate issue. But if scythist is used as a tool of trade craft, then you know, it kind of loses its bite, I think, and I think we want to avoid that and so, so help me.

This is a really important point now. I want to make sure that I understand it, Nicole, which is what what is the role or what mechanism should be used in this case when it relates to something like TikTok If there are indeed, and I think there's some questions out there as to whether there are you know, real concerns about data privacy. If there are those concerns, how should this be essentially investigated or ultimately litigated. What's the mechanism?

What's the right mechanism? Well, I think Scipias certainly is the right mechanism, especially because this transaction was not reviewed by Sippius when it was done initially. And Siffius does have the ability to look at cases and transactions that we're not they're called non notified transactions Jason, And there's no statute of limitations on you know, how long before Scippius can look at this. Uh, you know, they have the ability to open up any transaction that threatens national security.

So I think it's the right um, the right forum for it. So civit so sorry to interrupt you. So Ciffius is the right forum. But basically the administration or the president coming in and being like you're done or you're done. You know at a date certain is maybe not the right thing. Well, you know, SCIFFIUS has typically been a process that's been confidential. You know, it's it's a highly um because it's a national security focused review process.

It's it's usually not something that you read about in the media as much as we have in the last few days. So I'm a little bit concerned about that because that's a that's a change in norms. But I do believe that CIFFIUS is the right venue for for these issues to be resolved. And if indeed the intelligence reports show that there is a data privacy risk for U. S citizens, then it's the right decision for SIFFIUS to be reviewing this and should possibly cause it cause of

investment here. What do you hear, Nicole, from some of your clients that you guys work with, I mean you work with you know more than half of I believe the SMP five hundred companies, I mean household companies that

certainly our listeners know of. I'm curious what they see as the trade environment going forward, especially if there is a second term under Donald Trump, or whether there's a change in the White House, do they have a preference, Well, you know, it's it's it's it's a very good question, Carol. And what I'd say is our clients with the devil Fels Institute really want certainty even if the news isn't great,

even if it's not ideal. The ping pong approach or the seesaw approach of you know, teariffs or x at X level one day, you know another level another day, they're on the table, they're off the table. That really interferes with the ability of global businesses to do long term business planning. So I think that certainly if President Trump is reelected, we'll see more of the same, a continuation of kind of the unilateral approach to trade negotiations.

I mean, the President has been very clear that he does not favor multilateral negotiations. He'd rather do bilateral negotiations, So I can I anticipate that that will continue in a Biden administration. I think we will see more of what I described earlier as a multilateral approach, which really gets to or speaks to working with our allies so that we have a little bit more of a united

front and maybe more sway with China. So if you think about the t PP, the Trans Spacific Partnership Effort, you know that was designed to work with our allies to create an alternative to the approach that that China was taken and taking as it related to trade, and I could see with a Biden administration and moved towards something more like that. Nicole, I wanted to ask you about COVID Night Team because obviously that complicated, to say

the least, the relationship between US and China. And it's hard to sort of tease out the threads necessarily, or it takes a little work to tease out the threads of what is a trade tension, what is a health tension, what is a political tension, what is an economic tension? In some ways they're all wrapped up together. What were the implications of the world and the US specifically, and I guess China on the front end of dealing with

COVID nineteen and how that affected kind of the equation here. Well, it certainly has complicated the equation because, as I mentioned, the trifecta earlier earlier of trade, technology and geopolitics. When you sprinkle, you know kind of the impact of the origins and handling of COVID nineteen. Uh, it really complicates

further the U. S. China relationship. And I can tell you that the impact that we've seen with our clients is that you know, they they if they didn't understand the need for this before, they now know that they really have to diversify their supply chains. We have seen a lot of tension in the supply chains around the

world as a result of COVID nineteen. You know, China has been just kind of the center of much of manufacturing activity, particularly in supply chains, and it's it's just I think it's been a wake up call that that companies really need to be looking around the corner even more around what could happen if the center, you know, if they if they have too much of an investment in one area of the world and their supply chains,

what that can mean for their businesses overall. China has been though so important to call, as you well know, to the supply chain. Are people are companies? Is it is it more of okay, we need to you know, spread out our supply chains. Is it also that we need to reduce our exposure to China? I think it's a little bit of both because certainly what China, China has an advantaged because they've really been successful at at creating the value as it relates to the supply chains,

particularly with manufacturing companies who are global. That's been a great base h for um for such companies and they've perfected that craft. And certainly there are other countries that can benefit from some of the shifts, like Vietnam and and even India, but they aren't at the same level as China in terms of their maturity in the supply chains.

So I think that what companies are doing is, you know, they know and recognize that they need to remain in China, but they're beginning to build in other areas as well to try to hedge their bets a bit. And some of that may even involve where it's appropriate economically restoring

to the US. You know, one of the other political issues, political and trade and economic issues has been you know, right here on this continent, Nicole, and I know you're familiar with this as well, very familiar, which is the U s m c A, the re cut of NAFTA. What did that tell us about the state of trade as it relates to you know, our neighbors to the

north and South Canada, Mexico. Well, I think that's what's really important to recognize today is that regions are competing, not just countries, and so it's important to have a strong North American trade agreement for our region to be successful. It benefits the US, China and Mexico. So I think that, you know, it's it's been important and important development. It did modernize NaSTA. In fact, the irony Jason is it was modeled after the TPP that the Obama administrations put forward.

A lot of the provisions that are there are are very much along the lines of what I talked about in terms of focuses on labor and environmental concerns. So, you know, I think it's very positive that the that the North American region is able to be competitive with the rest of the world. So so much of this whether we're talking about US China, whether we're talking about U S. M c A, or as Carol Master likes to called Usmica because you know, we just love acronyms.

She doesn't actually I just teach out that other do that. Um. But you know, when I think about this through a political lens, Nicole. So much of it comes back to, especially in a presidential election year, two jobs, and that's the way it's framed. That's the way it's framed on both sides of the equation. You know. I was listening to the I'm sort of showing a little my podcast

listening here. I was traveling this weekend with my son, and we listened to the Joe Rogan interview with Bernie Sanders from like way back in the Day, which are from a year or so ago, which is interesting to listen to because there's obviously no talk of a pandemic. But one of the things that Bernie Sanders on the far left talks about is the same thing that you hear from President Trump about, you know, offshoring jobs and taking care of American workers. And that's the political lens

that we that so many people see this through. How does this fit in and how does it get magnified the jobs question when it comes to trade because we're

in a presidential year. You know, it's a a question, Jason, and I don't know that I have the perfect answer, but but what I would say is that the positive of the U S m c A is that you know, there's there was a lot of focus on UM the content in the region US content UH, ensuring that the levels were higher in terms of being able to take advantage of the of the most favorite nation status, so to speak, within the within the region having a certain level a higher level of US content and goods and

services than existed under NaSTA. And and that's good for jobs. I mean, it's good for American jobs, you know, especially when you look at an industry like the automotive industry, where products at various stages of completion are going back and forth brought across both the northern border and the southern border daily several times. That's good for jobs. I think though, what I will say is in a political year like we have now, you know, trade is a

very convenient boogeyman. And I think that you know, often both parties use use it to to varying degrees. Um, if we look at the facts, you know, I think that that they bear out that increases and exports and if we look at it even between you know, Canada, the US and Mexico create jobs and support jobs, sustained jobs. And when you think about that, and you think about the North America competing with the rest of the world and and exporting to the rest of the world. That

is also good for American jobs. So it's it's a tough it's a tough thing, but it's it's something that is certainly in an election year, does get elevated in the way you suggest it, Nicole, while we have you and I am curious because since you have such a great direct line into you know, many of the nations and worlds kind of big companies, I am curious, um how nervous they are about the second half of the year.

You know here they are looking at, you know, potentially a change in the White House or continuation of the current administration. And then we also have the virus and the impact that that is having on many many businesses, on workers, on the economy. I'm just curious about what you're hearing from them on that front. Yes, well, I thank you, Carol. The the question is is a good one, and it really varies by industry. As as we're seeing. I mean, you know, our clients and travel and tourism

are very nervous. The COVID virus not being under control has really hurt them, uh, financially and and there's really at this point we don't know where the bottom is, and so there is concerned about that uncertainty. Uh, the uncertainty around you know, consumer purchasing patterns ways on our clients minds. Um, supply chain continues to be you know, stability of the supply chain continues to be a concern.

And then when and those of the things that no one can control, you know, President controump Trump can't control those, a President Biden wouldn't be able to control those. All we can do is try to manage this by I ris um. The uncertainty around the change in administration and policy direction, I think is is common at this juncture

in our political calendar. Um. I think our clients you know, want to know, you know, kind of where the regulatory direction will be depending on who wins the White House. With President Trump, I assume it's more of the same and they do too. But you know, there's still so much uncertainty given many of the changes in norms that existed and allowed multinational companies based in the US and otherwise to make do the long term business planning that

they are accustomed to doing. So what's the biggest challenge if if we do see a Biden administration, this sort of goes back to where we started at the beginning, Nicole, Just to wrap up our conversation here, if there is a Biden administration, what's the single biggest challenge when it comes to trated What's the first thing you would advise a Biden administration to do to potentially change the direction of where we are, especially when it comes to getting

to a multilateral world, a more multilateral world. Well, the first thing that I would have uh advise the President Biden to do, and this is even broader than trade, it has happens to really relate to US foreign policy generally is outreached to our allies and and and and reassuring our allies that the United States is interested in a multilateral approach to trade. I mean, if you look at it, Jason, I mean we've been waring with some

of our traditional allies in Europe over trade. They don't know what box we're coming out of, you know, and

not to mention China and the rest of Asia. So I think the first thing that the that the President Biden would need to do is really try to get back to level two levels set the leadership that the United States has had in the areas of foreign policy and trade that have really been altered to a point where they're they're kind of, in my view, unrecognizable, and they aren't recognizable to our our allies and to global businesses. I think we need to kind of go back to

the center and then go from there. I think that would be the best thing to do. Interesting, all right, Well, uh, we know a lot of people are going to be focused on this, especially over the next few months. We really appreciate that overview, and you spending so much time with us. Nicole lamb Hale, she's a fellow at the Deaf and Phelps Institute, also former Sister Secretary of Commerce for Manufacturing and Services in the Obama administration. She joined

us on the phone from the nation's capital. Carroll, some really good context, I mean, and important to think about these issues. I feel like we get so caught up in a lot of the politics. This is just some good old fashioned policy, Shawn don in somewhere. It's like they just had a twenty five minute conversation about It's reality check, right, because we do spend so much time talking about the virus, and understandably so, it impacts, you know,

all of the industries that we touch upon. But at the same time, she's got clients who are very much thinking about the trade environment, right and going back to that, that's a core thing in terms of you know, how they construct their business or develop longer term strategies, whether it's reassessing or you know, redesigning their supply chain. So, um, a really deep die when it comes to trade, loved, and it's all connected. It's all connected, the politics, the

economics of it. And I mean, when was the last time we talked about your favorite trade agreement US MACA back back, back on the agenda