Don’t Blame ICT for Manufacturing Offshoring

During the 2000s, globalization took millions of jobs from the United States. Some have been quick to associate this job loss with the technology that ostensibly made it possible, chiefly the adoption of ICT that allowed for global connectivity. So, would the United States have been better off if it had simply never invested in ICT in the first place?

There are those who would love to somehow put the technology introduced by the ICT revolution back in the box. But a new study shows that doing so would have detrimental impact on the economy. Yes, in some cases ICT investment introduced the tools which allowed companies to outsource jobs. But, as new paper, Does ICT Investment Spur or Hamper Offshoring?, finds, the same ICT investment enabled productivity gains that kept companies at home.

Of course, it is difficult empirically to determine whether ICT investments increase the likeliness of offshoring, as causality is difficult to determine. To address this problem, authors Luigi Benfratello, Tiziano Razzolini, and Alessandro Sembenelli examined small and medium-sized Italian manufacturing firms with varying access to local broadband facilities, a random variable that was used

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U.S. Companies Continue to Suffer from the High Cost of Corporate Taxation

It is common wisdom that the world economy is becoming increasingly competitive. This puts enormous pressure on U.S. companies to lower their prices. Anything that adds extra cost to the production of U.S. goods and services threatens their viability against foreign firms. It is also common knowledge that the United States has the highest corporate tax rate in the developed world. When state and local jurisdictions are added, American companies face an average statutory rate of 39.1 percent. The weighted average of other OECD countries is 29 percent and the rate in the United Kingdom, where a lot of U.S. headquarters are ending up, is 21 percent.

Some opponents of corporate rate reduction argue that this comparison is misleading, because effective tax rates, the amount of tax that companies actually pay divided by their profits, are much lower, and in some cases even negative. The implication is that U.S. companies do not suffer from a disadvantage and tax rates are not high enough to discourage economic activity.

A new study by PwC compares the effective tax rates of 320 international companies in six industries by looking at their annual reports.

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Legal Arguments Take Shape Against Title II

Through a sleepy August, the Title II imbroglio continues, extending along two main fronts: glimmers of a legislative solution possibly gaining traction when Congress returns, and the DC Circuit Court marching through its briefing schedule. On the latter, initial industry briefs are now in, along with those of their friends, and we can start to see the shape of the legal fight to come. The court has expedited the briefing schedule, with final briefs due the middle of October, and oral argument expected in December.

It is looking to be a fairly complex case, with multiple petitioners arguing in different directions, interveners on both sides, and plenty of amici weighing in. There are many ways in which the FCC’s order could unwind. Here I want to focus on a few of the most basic legal challenges that stakeholders have advanced.

First, a point that still seems lost on many—the major Internet service providers (ISPs) are not challenging the basic net neutrality rules; instead they are focused on the FCC’s decision to classify broadband as a common carrier service under Title II of the Communications Act. Op-eds that argue carriers should

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The Internet Is not (Fully) Open, nor Should It Be

To listen to the debate about Internet governance, the world faces a Manichean choice between an open Internet—where everyone is free to share any information they wish—and a closed one, where governments block and prohibit vast troves of information. Given this stark choice, the only sensible side to take is openness. After all, as ITIF has shown, global information flows are critical not only to commerce but to the general flourishing of the knowledge economy and democracy.

But as in all other aspects of society, we don’t actually face such a binary choice. Reality is far more nuanced. The Internet is not completely open, nor should it be. As a case in point, the world should welcome the recent announcement by major Internet firms including Facebook, Google, Microsoft, and Yahoo, which are taking steps to block images of child sexual abuse. In this particular case, leading Internet companies are using a database of digital fingerprints compiled by the Internet Watch Foundation to identify known child sex abuse images and block their distribution.

Because what is being blocked is rightly deemed to be horrific and socially corrosive, even the

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How ICT Can Drive Growth in Emerging Economies

I had the honor of giving a keynote presentation on August 6 at the Fifth Ministerial Conference on the Information Society in Latin America and the Caribbean in Mexico City (video here). Hosted by the United Nation’s Economic Commission for Latin America and the Caribbean and the Government of Mexico, the conference was attended by government officials and others involved in information and communications technology (ICT) policy in the region. The focus was on how the region can coordinate more effectively on ICT policy and how Latin American and Caribbean countries can learn from each other. Three main things struck me during the conference: there was a distinct focus on trying to create the next Silicon Valley, an emphasis on fostering small businesses, and competing visions of opportunity versus growth. Although I have to say these were not surprises, as I have found that many policymakers around the world hold similar views on these topics.

Discussion turned repeatedly to the question of how to create “the next Silicon Valley,” rather than how to create the next ICT-enabled economy. In other words, too many policymakers focus on trying to

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