All posts by Stephen Ezell

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‘Innovation Box’ Proposal Would Stimulate U.S. R&D and Innovation

In recent years, the United States has become less competitive in retaining and attracting globally mobile capital. That’s in large part due to an uncompetitive tax code that features the highest statutory corporate tax rate among OECD countries; a worldwide, as opposed to territorial, tax system; and an intermittent research and development (R&D) tax credit that has fallen to just the world’s 27th most generous, behind even Brazil, China, and India.

It’s high time for Congress to begin a serious reexamination of U.S. tax policy and to incorporate innovative approaches that spur greater levels of R&D, innovation, and investment by enterprises operating in the United States. One proposal that ITIF has long championed is the “innovation box” (or “patent box”). So named because it is implemented through a check box on a tax form, the policy provides favorable tax treatment for revenues generated from newly developed intellectual property (IP). As ITIF explained in its 2011 report “Patent Boxes: Innovation in Tax Policy and Tax Policy for Innovation,” these provisions differ from—and should be seen as a supplement to—R&D tax credits in that they provide firms with

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digital

Data a Key Driver of Transatlantic Economic Growth

The Transatlantic Policy Network hosted an event on Capitol Hill yesterday to discuss the data revolution in the transatlantic marketplace. The discussion was timely, for the reality is that data is the key commodity in today’s knowledge-based economy. In fact, a recent study by Finland’s TEKES finds that, by 2025, half of all value created in the global economy will be created digitally. Meanwhile, half of all global trade in services depends on access to open, cross-border data flows. Indeed, a wide range of industries—from manufacturers to miners, to banks, hospitals, and grocers—depend on the ability to move data across borders and/or analyze it in real-time as a fundamental component of their supply chains, operations, value propositions, and business models, as ITIF writes in Cross-Border Data Flows Enable Growth in All Industries. And this is as true for small businesses at it is for large—a 2014 study found that 60 percent of U.S. and European businesses with 50 or fewer employees regard data analytics as important to their enterprises’ success.

Moreover, the competencies of countries, and their enterprises therein, at extracting value and insights from data is instrumental to

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medicalworker

TPP Poised to Improve, Not Diminish, Health Outcomes Across Asia-Pacific Nations

In a not-so-shocking revelation last week, a leaked draft of the Trans-Pacific Partnership (TPP) intellectual property (IP) chapter turned up the fact that…surprise…the United States is fighting for its domestic industries in a trade agreement.

No real news there, especially since that’s exactly what our trade representatives should be doing, namely bringing home the strongest possible deal that protects and creates jobs and fosters the kind of innovation that will secure 21st century prosperity for Americans. What is extremely disconcerting, however, is that special interest groups and the generic drug industry are lobbying for drastic cuts to intellectual property protections for innovative medicines that could have lasting consequences for both global patient health as well as U.S. jobs and economic competitiveness.

These groups are (wrongly) asserting that the IP provisions being negotiated in the TPP will weaken competition from generics and raise drug prices by establishing protections that go beyond U.S. law. But, as usually happens, groups that oppose free trade agreements never let minor inconveniences like facts get in the way of their arguments.

For instance, it’s telling when the head of one of the world’s largest generic

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Dancing in the Streets

They’re Dancing in the Streets in Beijing and Berlin

Congressional authorization of the U.S. Export-Import Bank (Ex-Im Bank) is set to expire this evening, ending 81 years of continual and effective operation in the service of American exporters. The Bank has played a critical role in supporting the competitiveness of America’s traded-sector enterprises—that is, those competing in global markets—by stepping in to provide financing or insurance for export transactions that might not otherwise occur and by leveling the playing field for U.S. exporters by matching the credit support that other nations provide for export transactions.

Yet while some in Congress are pleased that they’ve “beat back the scourge of crony capitalism,” those who are truly giddy with delight are to be found in the capitals of the more than 80 countries that operate export credit agencies (ECAs)—from Beijing, to Berlin, to Brussels—and at the headquarters of businesses both small and large in such countries. That’s because, much to the chagrin of those in Washington who insist on not recognizing that America’s traded-sector enterprises are locked in fierce competition with foreign businesses spanning the globe, the ECAs of America’s competitors aren’t going to close up shop overnight in solidarity with

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transportation

DRIVE Act Drives in Right Direction; Yet Intelligent Transportation Systems Still Underfunded

The U.S. Senate Environment and Public Works Committee introduced a new bipartisan surface transportation reauthorization bill this week: the Developing a Reliable and Innovative Vision for the Economy (DRIVE) Act. And as ITIF called for in a May 2015 report, From Concrete to Chips: Bringing the Surface Transportation Reauthorization Act Into the Digital Age, the six-year reauthorization proposal does place increased policy emphasis on intelligent transportation systems (ITS)—particularly through a ground-breaking “Transportation Innovation” title which includes numerous provisions incentivizing the use of innovative transportation technologies.

That said, and despite this progress, the proposed bill continues to significantly underfund ITS research, development, and deployment over the next six-year period. This despite the fact that intelligent transportation systems—the application of information and communications technologies (ICTs) to bring actionable, real-time intelligence to every actor and asset in a transportation network—have a cost-benefit ratio at least 9 to 1 over investments in traditional highway infrastructure.

With regard to research and development (R&D), the DRIVE Act keeps ITS research funding constant at $100 million annually. While the Act does provide an additional $72.5 million annually for the University Transportation Centers (UTC) program to fund

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plane

Latest Data Lend Urgency to Need for Ex-Im Bank Reauthorization

With Congress in the midst of considering legislation to reauthorize the U.S. Export-Import (Ex-Im) Bank—its current authorization expires and thus must be extended by June 30, 2015—comes fresh evidence reiterating the vital need for the Bank in providing export credit finance support for America’s exporters. On Friday, June 12 the Bank released its annual Report to the U.S. Congress on Global Export Credit and Competition, which once again demonstrates the emphasis America’s leading competitors place on providing export credit support for their traded-sector enterprises and underlines the risks if Congress does not reauthorize the Bank with alacrity.

As the chart below illustrates, as a share of GDP in particular, a number of countries significantly out-invested the United States in new medium- and long-term export credit assistance in 2014. In fact, as a share of its economy, China invested eight times as much in export credit assistance than the United States did in 2014, while Germany invested six times as much, and France and Italy almost five times as much. In fact, of 10 nations assessed for their 2014 export credit volumes, the United States ranked ninth in export credit

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ip

Global IP Infringement’s Significant Cost to the U.S. Economy

“Abdominal pain comes first. After three days, the kidneys fail. After five days, neurological dysfunction leads to paralysis and breathing difficulties. Patients who survive will be dialysis-dependent for the rest of their lives. But in the end, most will die.” That’s from ITIF Trade Policy Analyst Michelle Wein’s gripping monograph, The Devil Wears Counterfeit Prada—And Sells Fake Glycerin: The True Cost of Global Trade in Illicit Goods, which leads by describing the mass poisoning of 100 Panamanian children in 2006 caused by Chinese exports of counterfeit glycerin that was really poisonous diethylene glycol. Unfortunately, that’s just one example: each year, approximately 1 million people around the world die from counterfeit drugs, which account for 30 percent of global drug sales. And that’s just the damage from one category of counterfeited products. It doesn’t even count the damage caused by counterfeit foods, pet medications, electronic products, or the over 1,800 cases of suspected counterfeit electronic parts recently found across a wide range of U.S. weapons systems, according to a 2012 Senate Armed Services Committee report. In fact, the total value of the global counterfeit goods trade now tallies $1.8 trillion

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trade

Securing the Competitiveness of America’s Export Industries

With Export-Import (Ex-Im) Bank reauthorization once again before Congress—its current authorization expires on June 30, 2015—it’s a good moment to take stock of the critical role the Bank plays in ensuring the competitiveness of America’s traded sector companies and industries. As the official export credit agency of the United States, the Ex-Im Bank plays a fundamental role in ensuring the global competitiveness of U.S. exporters, as ITIF described in its 2014 report The Export-Import Bank’s Vital Role in Supporting U.S. Traded Sector Competitiveness. Specifically, the Ex-Im Bank fills two key roles. First, it provides financing—in the form of loans or loan guarantees—to foreign purchasers of American products and services for export transactions that might not otherwise occur when private commercial lenders are unable or unwilling to provide financing to foreign purchasers of U.S. exports. Second, the Bank levels the playing field for U.S. exporters by matching the credit support that other nations provide, ensuring that U.S. exporters are able to compete based upon the price and performance of their products.

Put simply, the Bank makes possible U.S. exports that otherwise would not occur without its assistance. In FY 2013,

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trade

Trade Promotion Authority A Vital Component of U.S. Trade Policy

On Wednesday, October 29, the Information Technology and Innovation Foundation hosted an event exploring whether the United States needs a new approach to Trade Promotion Authority (TPA), which featured keynote remarks from U.S. Representative Jim Moran (D-VA) and remarks from former Congressman Phil English, now Senior Government Relations Advisor at Arent Fox; former Deputy U.S. Trade Representative Miriam Sapiro; Grant Aldonas, Principal Managing Director, Split Rock International; and Tim Keeler, a Partner at Mayer Brown.

ITIF believes that Trade Promotion Authority plays an important role in enabling the United States to pursue 21st century trade agreements—such as the Trans-Pacific Partnership (TPP) and Trans-Atlantic Trade and Investment Partnership (T-TIP)—that support and create U.S. jobs while helping American manufacturers and service providers increase U.S. exports and compete in a highly competitive, globalized economy.

These next-generation trade agreements matter particularly because, as an economy, U.S. comparative advantage increasingly lies in innovation-based industries—such as life sciences, information and communications technologies (ICT), digital services, music and film, aerospace, advanced manufacturing, etc.—and these agreements are being intentionally designed to ensure that America’s innovation-based enterprises can fairly compete and thrive in global markets.

They do so

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much ado

WikiLeaks-leaked TPP IP Chapter Much Ado About Nothing

Over the past week, critics of the Trans-Pacific Partnership (TPP) Agreement—a free trade agreement (FTA) currently being negotiated by the United States and 11 of its trading partners across the Asia-Pacific region—have made a large hue and cry regarding a draft chapter of the agreement leaked on WikiLeaks pertaining to the TPP’s intellectual property (IP) provisions. Critics have lodged a litany of complaints against the TPP in general and the IP sections of the agreement in particular, including that the TPP has been negotiated “in secret,” that America’s TPP negotiators are attempting to surreptitiously circumvent existing U.S. law in negotiating the agreement, that the “onerous” protections for innovative products such as novel biologics would compromise access to medicines in the developing world, and that the TPP is likely to lead to much greater surveillance by Internet service providers (ISPs) on citizens’ online surfing habits. Yet each of these criticisms is either downright unfounded or significantly overblown, and the reality is that the “leaked TPP IP chapter” is really much ado about nothing, despite its scandalous trumpeting by those who wish to sow fear, doubt, and uncertainty regarding the TPP.

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