The Case for Compensated Free Trade (i.e. Pay The Losers On a Grand Scale!) [feedly]

The Case for Compensated Free Trade
https://www.project-syndicate.org/commentary/compensated-free-trade-allows-protectionism-by-robert-skidelsky-2018-11

According to Harvard's Dani Rodrik, the nation-state, democracy, and globalization are mutually irreconcilable: we can have any two, but not all three simultaneously. In fact, there may be a solution to Rodrik's "trilemma."

LONDON – Almost all liberals support globalization and oppose economic nationalism. They ignore the mounting evidence that, in its current form, globalization is dangerously incompatible with democracy.

In his 2011 book The Globalization Paradox, Harvard's Dani Rodrik says that the nation-state, democracy, and globalization are mutually irreconcilable: we can have any two, but not all three simultaneously (he calls this a "trilemma"). All over the world, the "nation" has been revolting against globalization in the name of democracy.

That became clear this year when US President Donald Trump imposed the first of a widening set of tariffs against Chinese goods, with China retaliating in kind. Trump has also torn up two major international trade treaties and threatened to withdraw from the World Trade Organization.

The trigger for America's turn to economic nationalism is its widening trade deficit – $566 billion in 2017, and growing – as the US economy recovers. But the deeper reason is the correct perception that the resulting current-account deficits are not "benign" when they are being financed by inflows of short-term capital, or "hot" money.

A current-account deficit means that a country is importing more than it is exporting. And those excess imports can lead to a net loss of "good" jobs. Six million manufacturing jobs disappeared in the first decades of the 2000s. The Rust Belt made Trump president. "It's time to rebuild Michigan, and we are not letting them take your jobs out of Michigan any more," he told cheering crowds in Detroit in 2016.

Trump's protectionism also has a geopolitical root. Metal imports have led to the closing of many enterprises that might be needed for defense. China's strategic "Made in China 2025" plan is a high-tech industrial policy aimed at transforming China into a dominant global leader in the industries of the future. It significantly relies on stealing advanced technologies from the United States. If MIC25 is successful, the US will have a depleted economic and political future.


In strictly economic terms, the political character of one's trading partners should not matter. However, in a world of strategic competition, international commerce can be, and usually is, an instrument of policy, and its use in that context should not be denied simply because it breaches the sacred principle of free trade. As Friedrich List, the nineteenth-century pioneer of economic nationalism, pointed out, free trade assumes a peaceful world.

Selective tariffs can be useful for protecting defense-related industries or to prevent other countries from stealing cutting-edge technologies. But as an overall trade policy, tariffs are crude and inexact. The US will incur high costs and might end up without a substantially lower trade deficit or other meaningful benefits.

Is there a way to limit free trade that does not lead to trade wars? The economist Vladimir Masch has advocated an ingenious "compensated free trade" (CFT) plan as a way to achieve legitimate protectionist aims without disrupting the world economic system.

Under this plan, policymakers would establish a ceiling for the trade deficit each year and impose limits on trading partners' surpluses. (Any products needed from a surplus partner would be exempted from the partner's export limit.) In the US case, this ceiling would largely affect China, Mexico, Japan, and Germany, which contributed $375 billion, $71 billion, $69 billion, and $64 billion, respectively, to the overall trade deficit in 2017.

Under CFT, a trade surplus country can reduce its exports to the set limit. But it could also exceed its export quota if its government paid the partner government a fine equal to the value of the excess exports, either collecting the necessary sum from its export producers or using its currency reserves. (The receiving government could use the fines to enlarge its own investment programs.) But if the surplus country tried to exceed its export limit without paying the fine, its surplus exports would be blocked.

This "smart" protectionism has several advantages over crude tariffs. First and foremost, it would automatically prevent trade wars. Because CFT imposes limits just on the trader's surplus, any attempt by the surplus country to decrease the value of its imports from the US would automatically decrease the value of its allowed exports.

Second, CFT would confront, in one stroke for each partner, government subsidies, price and currency manipulations, and the other dirty tricks of international trade. In contrast to prolonged and often fruitless haggling over trade treaties, results would be obtained immediately.

Third, by re-balancing the financial and trading arrangements of the global economy's participants, CFT would represent a step toward addressing its current dysfunction. CFT is not a complete solution, because it leaves open the question of who should adjust to whom. A reformed global payments system, which mandates symmetrical adjustment of global imbalances, would need to tackle this issue.

Fourth, because of America's leverage, its adoption of CFT would "nudge" reluctant trade surplus countries to accept such a payments system. Global finance would have to operate within the limits that a balanced payments system establishes.

Fifth, in terms of economic benefits to the US, implementing CFT would stimulate the return of off-shored enterprises and jobs, thus restoring the country's industrial potential and social balance.

From a historical perspective, CFT essentially amounts to a unilateral activation of the scarce-currency clause (Article 7) of the Bretton Woods Agreement, which allowed the International Monetary Fund to declare "scarce" the currency of a country running a persistent trade surplus, permitting other members to discriminate against its goods. It is consistent with Article XII of the General Agreement on Tariffs and Trade (the WTO's predecessor), which states that any country "in order to safeguard its external financial position and its balance of payments, may restrict the quantity or value of merchandise permitted to be imported."

In short, CFT addresses trade deficits, overcomes the limitations of tariffs, fights trade manipulation, corrects current mainstream economic theory, and is a necessary step toward re-establishing a feasible global payments system. In a nutshell, it overcomes the Rodrik trilemma: one can have the nation-state, democracy, and globalization at the same time.

But only one nation-state, the US, has the clout to deliver this. By doing so, it would stop the global stampede to a virulent form of economic nationalism. For that reason alone, the Masch plan deserves serious consideration.


ROBERT SKIDELSKY

Writing for PS since 2003
145 Commentaries

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Robert Skidelsky, Professor Emeritus of Political Economy at Warwick University and a fellow of the British Academy in history and economics, is a member of the British House of Lords. The author of a three-volume biography of John Maynard Keynes, he began his political career in the Labour party, became the Conservative Party's spokesman for Treasury affairs in the House of Lords, and was eventually forced out of the Conservative Party for his opposition to NATO's intervention in Kosovo in 1999.
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Progress Radio:Tonite: The Citizens Progress Diner Program: The "Drunks Delight" Show

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Adam Gopnik : Wine, War, Donald Trump, and Emmanuel Macron : "Macron made a speech... as clearly directed at and agains... [feedly]

Adam Gopnik : Wine, War, Donald Trump, and Emmanuel Macron : "Macron made a speech... as clearly directed at and agains...
https://www.bradford-delong.com/2018/11/adam-gopnik-_wine-war-donald-trump-and-emmanuel-macronhttpswwwnewyorkercomnewsdaily-commentwine-war-donald.html

 Adam Gopnik : Wine, War, Donald Trump, and Emmanuel Macron : "Macron made a speech... as clearly directed at and agains...

Grasping Reality with Both Hands: The Semi-Daily Journal Economist Brad DeLong by J. Bradford DeLong  /  19h  //  keep unread  //  hide

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Adam Gopnik: Wine, War, Donald Trump, and Emmanuel Macron: "Macron made a speech... as clearly directed at and against Trump as any he could have made... distinguished between nationalism (bad) and patriotism (good)... in eloquent terms...

..."Patriotism is the exact opposite of nationalism," he said. "Nationalism is a betrayal of patriotism," he added, "In saying, 'Our interests first, whatever happens to the others,' you erase the most precious thing a nation can have, that which makes it live, that which causes it to be great, and that which is most important: its moral values." To use a long-forgotten Howard Cosellism, I was doubly delighted by the invocation, in part because the same terms had seemed so relevant not long ago in discussing Macron's great predecessor Charles de Gaulle. He, too, had drawn that distinction, at the risk of his own life. De Gaulle knew that the patriot loves his place and its people and its idiosyncrasies; while the nationalist, of whom, for him, Adolf Hitler was the clearest and worst example, has no particular sense of affection for the place he advocates for (he is often an outsider to it, as Hitler, an Austrian, was to Germany) but channels his obsessive grievances into acts of ethnic vengeance.

It isn't clear who first made the distinction between nationalism and patriotism. Perhaps it's one of those observations that rises naturally in several places at once. Certainly, no one has made more of it in his work than John Lukacs, the American historian of Hungarian origin. Lukacs, in fact, has made it foundational to his understanding of twentieth-century history, with nationalism as the deadly solvent of civilization, and patriotism as its (partially) restorative glue. His heroes, for that reason, are the conservative patriots, Winston Churchill highest among them, along with de Gaulle. (The conservative patriots rate highly in part because the temptation of nationalism on the right is so extreme; the parallel temptation on the left is a blind faith in rational planning, even at enormous human cost...

#shouldread #orangehairedbaboons #moralresponsibility #history

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The Liberal Conception of ‘Freedom’ is Incapable of Addressing the Problems of Contemporary Capitalism [feedly]

I can imagine Karl Marx having both a friendly, and critical, good time writing about the themes in the global policy journal loosely linked around the ideas of Dani Rodrik.

The observations below on weaknesses in classical liberalism are no doubt most interesting to "liberal" sections of upper middle to upper income classes, the professions, arts and "leading edge" business.  The discussions on the relationship of democracy and economic justice in the working classes shades differently. But questions about culture, values, progress are all profoundly affected by how conflicts between liberty and justice are resolved.

The Liberal Conception of 'Freedom' is Incapable of Addressing the Problems of Contemporary Capitalism
https://www.globalpolicyjournal.com/blog/15/11/2018/liberal-conception-freedom-incapable-addressing-problems-contemporary-capitalism

The rise of populism and 'illiberal democracies' are often viewed as a reaction to the failure of liberal capitalism to meet the needs of citizens. For Andrea Lorenzo Capussela, the liberal conception of freedom as 'non-interference' may lie at the heart of this equation. He suggests that a republican notion of freedom as 'non-domination' might be more useful in addressing the problems of contemporary capitalism.

In a forthcoming book, Branko Milanović identifies four 'troublesome features' in 'meritocratic liberal capitalism'.1 These are the rising share of capital income in total income, which undermines meritocracy; the very high concentration of capital income, which runs counter to the objective of a 'property-owning' democracy; the rising association of high capital and labour incomes in the same people or families, which exacerbates inequality and hinders attempts to curb it; and the polarisation of society, shown by the declining share and purchasing power of the middle classes, which destabilises democracy and threatens to turn it into a plutocracy or a populist regime.

My remarks concern the perspective from which to look at these traits of contemporary capitalism, and I move from the assumption that the obverse of both economic inequality and inequality of opportunity, which are cause or effect of those four problems, is often some form of private domination. An example, fairly extreme but frequent, is the relationship between workers on zero-hour or similar contracts and their employers, who have the discretion to decide how much they will work and earn.

In its simplest form, liberal theory – equal rights for all citizens, which guarantee their freedom, which is in turn conceived as absence of interference – has no obvious answer to those problems. For if freedom is non-interference, then it is compatible with both inequality and private domination, at least within certain bounds, as neither directly interferes with people's individual choices. Indeed, accepting precarious employment is a choice. And as liberals cannot say that Milanović's four 'troublesome features' pose a fundamental challenge to their idea of a good society, their answer is a Ptolemaic one: sets of diverse, if potentially effective remedies such as redistribution, poverty relief, active labour market policies, civic education, and policing fake-news.

Yet I suppose that behind much contemporary discontent is not just stagnating real incomes and high and rising inequality, but also resentment at the obverse of the latter, domination. And I equally presume that the absence of a credible and powerful liberal answer to these phenomena is one reason why demagogues and populists succeed. For instance, proponents of 'illiberal democracy' argue that as liberalism no longer works, or lacks solutions to the problems of today, we can find better ideas elsewhere. They tend to look for them outside of the field of the Enlightenment, but this critique, however unarticulated, poses a challenge that warrants reflection.

Political theories may well be superstructure. But as liberalism is hegemonic it has concrete effects on what we think possible and desirable, and therefore on what we do (here I have also Rodrik's writings on the political economy of ideas in mind). My premise is that the intrinsic bias of liberalism against public action in pursuit of goals, such as curbing inequality, which neither command unanimity nor directly advance a fundamental value, such as political liberty, does constrain our ability to protect our democracies from those threats. If so, it may be useful to sniff the air that flows outside of the house of liberalism.

For the liberal conception of freedom is not the only conceivable one. Another notion, equally negative, is the republican or neo-roman one, which views freedom as non-domination. If I depend on someone else's arbitrary will, or am subject to their enormous and unchecked power, I am not free, irrespective of how that power is exercised. Hence the paradox of the 'free slave', frequent in republican literature: liberal theory implies that the slave who has a kind master is free, as she suffers no interference in her choices; republicans object that this depends entirely on the master's benevolence, which can be revoked at will and may have to be cultivated: domination and unfreedom remain, therefore, and typically lead to self-censorship and a slavish mentality.

So the state should not merely ensure that nobody interferes in my choices, as liberals assert, but rather guarantee to me a sphere within which I am my own master. The idea is well expressed by Pettit's 'eyeball test': I am free if I can look others in the eye without reason for fear or favour. People in precarious employment would hardly pass the test, for example: in this domain of their life they are unfree. Those who pass the test in most domains of their life can walk tall in society, conversely, and a good society is one in which all can hold their head high.

The republican conception of freedom is not necessarily more demanding than the liberal one, as it all depends on how many domains of social life we want to include into that sphere of freedom, and how wide we want it to be. What matters is the change in perspective, because the republican approach dissolves the liberal bias against public action and joins freedom and democracy together, for the state and its laws must not be dominating ones. While in liberal theory freedom and democracy are separate values, in fact, republican freedom directly requires democracy and has demanding institutional implications for it: for laws not to be dominating, for instance, the usual constitutional checks and balances may have to be buttressed by a 'contestatory citizenry'.

Once the republican perspective is taken, the discussion shifts from the question of whether measures to reduce inequality and private domination interfere excessively in one's private choices onto the question of whether they enhance citizens' sphere of freedom. The questioning imposed by liberalism is a valuable counterpoise to the aspiration to expand that sphere, of course, to assess whether the chosen remedy entails unreasonable interference in citizens' choices: but the change in perspective is important.

Populists are often accused of attacking pluralism and the checks-and-balances system, for instance. The charge is well founded, of course, but also underwhelming. For pluralism and the checks-and-balances system are both compatible with inequality and private domination, and are chiefly instrumental values, if cardinal ones, serving substantive ones such as freedom and equality. Only by viewing freedom as non-domination, and by moving from the institutional theory that flows from it, can one respond powerfully to the populists' challenge also on this critical front.

'Capitalism won', Milanović's synopsis argues, chiefly because it 'agreed more profoundly with human nature which values ability to make autonomous economic decisions and cares about private property'. As liberalism is content with safeguarding those human inclinations from external interference it has no counterpoise to them. Republicans emphasise the equally profound human aspiration not to be dominated, which can come into tension with them and thus open up a dialectic, within which public debate might find ways to improve our democracies.

A chronological remark, to conclude. The liberal conception of freedom, which now reigns supreme, is fairly recent. The classical notion of freedom as non-domination was first challenged by Hobbes, in the Leviathan, but still informed Madison's and Jefferson's thinking, for instance, and Montesquieu's. Yet it was liberal theory that accompanied the demise of the ancien régime. At that juncture, coupling its universalism (equal rights) with the classical notion of freedom would have produced truly radical change – in employment relationships, for example. By conceiving of freedom as non-interference the bourgeoisie opened up societies, admirably, but avoided going too far. Now, a century and a half after 1848, we can say that that model has served its purpose, as the police no longer beats and silences us, but has run its course, as it has too little to say on the problems of advanced capitalist democracies. So we may perhaps return to the republican notion of freedom, and combine it with liberal universalism.

 

 

Note

1. While retaining full responsibility for these very tentative remarks, I would like to thank Branko Milanović for his feedback on them.

 

Andrea Lorenzo Capussela led the economic and fiscal affairs office of Kosovo's supervisor, the International Civilian Office, and is the author of State-Building in Kosovo: Democracy, Corruption, and the EU in the Balkans (I.B. Tauris, 2015), and of The Political Economy of Italy's Decline (Oxford University Press, 2018). He tweets @AndreaCapussela

This post first appeared on the LSE's EUROPP blog.

Image credit: David Brossard via Flickr (CC BY-SA 2.0)

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John Quiggin: Brexit: this is it? [feedly]

Quiggen's summary is pretty clear: The May 'deal', NO DEAL or NO Brexit

Brexit: this is it?
http://crookedtimber.org/2018/11/15/brexit-this-is-it/

Since the Brexit referendum was hailed by many as representative of a new force in global politics, it's of interest even on the far side of the planet, and I've watched the slow-motion train wreck with appalled fascination.

So, as far as I can tell, the Brexit deal Theresa May has come up with is pretty much the super-soft version. About the only immediate change it will produce is a return to blue passports in place of the EU burgundy, which, it appears, were always optional. And, it appears, the new passports will be printed in France.

All that assumes that the deal will go through. In this context, I've been struck by a lot of commentary supporting the deal on the basis that a second referendum isn't feasible due to the timing requirements of the Referendums Act. Am I missing something here? Isn't Parliament supreme? And given that this issue has consumed British politics for the last two years or more, can there really be any significant ambiguity about the possible choices articulated by May today: her deal, no deal or no Brexit?

Feel free to comment on these or any other aspects of the issue.

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Democrats Need Pelosi to Promote Progressive Policies as House Speaker [feedly]

Democrats Need Pelosi to Promote Progressive Policies as House Speaker
http://cepr.net/publications/op-eds-columns/democrats-need-pelosi-to-promote-progressive-policies-as-house-speaker

Dean Baker
Newsday, November 14, 2018

Tribune News Service, November 14, 2018

See article on original site

Since the election, many Democrats have been debating whether Nancy Pelosi should serve another term as speaker.

With no obvious second choice candidate, this is the wrong debate to be having. The better debate is over the policies that the Democrats will pursue with their new majority in the House.

First, people should recognize Pelosi's skills in maneuvering among her colleagues to get key legislation passed. With our decentralized political system, Pelosi has relatively little ability to force recalcitrant members to support legislation.

Nonetheless, when the Democrats last held a majority she was able to push through the Affordable Care Act, the Stimulus Package and the Dodd-Frank financial reform bill.

She also got the House to support legislation on global warming, which would have imposed a cost on carbon emissions. This died in the Senate.

None of these bills were dream legislation from a progressive standpoint, but all represented serious progress. It's not clear that another speaker would have been able to get them through the House.

Being elected speaker is not a reward for past performance. It is necessary to ask whether she is the best person going forward to be the face of the Democrats in Congress.

While age is a factor - she will be turning 79 shortly after taking the job - Pelosi seems to be in good health and as sharp mentally as ever.

More important is that she be prepared to promote positions that fit the times, and this means using her role as speaker to push a progressive agenda.

The Democratic caucus and the country have moved considerably to the left since Pelosi's last term as speaker. The conservative "Blue Dogs," who were mostly from the South and border states, are almost all gone. In their place, the Democrats have dynamic young progressives like Alexandria Ocasio-Cortez and Rashida Tlaib.

These newcomers have pushed policies like Medicare for All, free college, and a $15 an hour minimum wage.

Obviously, these sorts of proposals have no chance of becoming law with Republicans firmly in control of the Senate and Donald Trump in the White House, but the next two years can be a period in which the Democrats use their control of the House to build momentum on such issues.

This can mean, for example, holding hearings on Medicare for All. Such hearings would call attention to the proposal and lay out more explicitly what the program would be and what a transition would look like.

That should make it harder for Donald Trump and other Republicans to say that extending Medicare to everyone would somehow destroy the Medicare program that seniors depend upon.

The same story would apply to numerous other items on the progressive agenda. The right has long tried to scare the public away from progressive positions by lying about what they mean. As speaker, Pelosi can use truth to undercut these lies.

In addition to promoting a progressive agenda, the Democrats have to restore the House's oversight responsibilities.

The Trump administration has already won the gold medal for corruption as top officials, starting with Trump himself, openly engage in practices that involve blatant conflicts of interests.

When the Republicans controlled Congress they basically gave a green-light to all manner of corruption, since they were mostly concerned about giving rich people tax cuts and getting far right-wingers on the Supreme Court.

The Democrats must seriously investigate issues like whether the IRS is giving favored tax treatment to hedge fund billionaire and big Republican donor Robert Mercer.

And we need to know how much the Trump family is profiting from deals with Saudi Arabia and other Trump allies.

Most of all, we need a speaker who will take the lead in pushing a progressive agenda.

We absolutely do not need the Nancy Pelosi who said the Democrats are committed to "pay-as-you-go" or paygo deficit reduction rules. This is not a good path forward at this point for either policy or politics.

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China Is About to Shake Up the World of Electric Cars [feedly]

China Is About to Shake Up the World of Electric Cars
https://www.bloomberg.com/news/articles/2018-11-14/china-is-about-to-shake-up-the-world-of-electric-cars-quicktake

China is set to unleash a seismic shakeup of the automotive industry when it introduces stringent rules to promote new-energy vehicles. From 2019, major manufacturers will be punished unless they meet quotas for zero- and low-emission cars or they buy credits from other companies that exceed the quotas. The so-called cap-and-trade system is designed to spur the market for electric cars at the expense of gas guzzlers, all part of China's quest to clean its air and reduce dependence on imported oil. Another major driver: Helping develop a homegrown electric-vehicle industry.

1. How is China's electric vehicle push going?

China is not only the biggest global car market but the world leader in electric cars, with sales seen topping 1 million this year for the first time. Since the first models hit the streets more than a decade ago, the country has overtaken other markets partly through its sheer size and partly by luring consumers with subsidies and tax breaks. Nonetheless, electric vehicles account for just 3 percent of sales, leaving ample room for growth. Having previously focused on stimulating demand, the government is changing lanes and shifting policy toward propelling supply.

Gearing Up for Cleaner Cars

China leads the charge as electric-vehicle sales seen surging globally

Source: Bloomberg New Energy Finance (forecasts from 2018)

2. What are the new rules?

Complicated. Automakers that produce more than 30,000 vehicles will have to obtain a new-energy vehicle (NEV) credit of at least 10 percent in 2019, rising to 12 percent in 2020. To confuse matters, a score of 10 percent doesn't mean that a full one-tenth of a company's vehicles must be new-energy varieties (battery-powered electric vehicles, plug-in gasoline-electric hybrid vehicles or fuel-cell vehicles). In fact, the total will probably be lower.

3. Why lower?

Because vehicles are awarded credit scores depending on their green credentials, such as how far they go without needing a charge. The least eco-friendly NEV will receive a credit score of two, while the greenest will get a maximum credit of six. So, to meet the 2019 credit target of 10 percent, a carmaker producing 100,000 gasoline-based vehicles would need 10,000 credits. Those could be earned by manufacturing 2,000 cars with an NEV score each of five. If the automaker produced more than 2,000, it could sell the extra credits; fewer than 2,000, and it would need to buy credits. If it failed to top up its credits, the company would face sanctions, such as new models not being approved or production halts for gasoline cars. The government is also introducing new fuel consumption guidelines in 2019. Carmakers that do not comply will be able to use the credit system to address any shortfall.

4. What impact will the quotas have?

It's a milestone policy, says the International Council on Clean Transportation. "Since China is the world's largest auto market, this NEV mandate policy will undoubtedly speed up the global transition to a zero-emission fleet, which will be vital for the climate and for urban air quality," the non-profit group said. According to Bloomberg NEF, the 12 percent target for 2020 would translate to about 4 percent to 5 percent of actual car sales, based on the current average NEV score of 3 per vehicle. China hasn't announced targets beyond 2020.

5. How are credits calculated?

To qualify for a credit, a battery-electric vehicle needs a range of at least 100 kilometers (62 miles) on one charge and a top speed of at least 100 kilometers per hour. A plug-in hybrid vehicle needs an electric range of at least 50 kilometers. The NEV credit score is calculated in two stages: First, a formula is applied (0.012 multiplied by the range + 0.8) to get a base score. (For a 300km range, the score is 4.4.) Second, that figure is multiplied by a so-called adjustment factor -- ranging from 0.5 to 1.2 -- derived from the vehicle's energy consumption and weight, yielding a maximum total of six.

6. How does the credit-trading system work?

Companies that fail to meet the 10 percent mark next year will need to purchase credits from competitors or face the aforementioned penalties. Trading of the credits will take place on a platform set up by the industry regulator, with pricing negotiated by the companies themselves and determined through supply and demand.

7. Who are the winners and losers?

Companies that have a head start on producing NEVs have the highest credit scores. Those include BYD Co., BAIC BluePark New Energy Technology Co. and Geely Automobile Holdings Ltd., according to the Ministry of Industry and Information Technology. The highest negative fuel consumption credits were Ford Motor Co.'s China venture with Chongqing Changan Automobile Co., leading SUV maker Great Wall Motor Co. and Dongfeng Motor Corp. Most global brands, such as Toyota, Volkswagen and General Motors, were somewhere in between. Though their volumes are still small, upscale electric-car makers Tesla Inc. and NIO Inc. are eventually set to obtain high scores.

China's Automakers Better Prepared

The sheer size of the global giants slows their transition to electric vehicles

Source: Bloomberg New Energy Finance's EV Exposure Index, which rates carmakers by their readiness for electric vehicles

8. What are carmakers doing to prepare?

Auto companies that focus on NEVs need do nothing different. But almost all global brands that have traditionally relied on gasoline remain far away from China's requirements and have started to accelerate the introduction and production of electric models. Some have also struck pacts with local partners that have NEV expertise; Ford has tied up with Zotye Automobile Co. and BMW agreed to work with Great Wall in producing electric Minis. Toyota, Honda, Mitsubishi and Fiat Chrysler are planning to sell what's essentially the same electric SUV, developed by local partner Guangzhou Automobile Group Co.

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