Digital Trade on the Hill: Hearing on Expanding U.S. Digital Trade and Eliminating Digital Trade Barriers
Digital trade issues continue to grow in importance to the U.S. economy as people and businesses find new and innovative ways to use data and technology to deliver more goods and services via the Internet. However, the growth in entrepreneurship and innovation so vastly enabled by digital technologies is increasingly threatened by a growing range of digital trade barriers. On July 13, the U.S. House Committee on Ways and Means Subcommittee on Trade held an important hearing on the growing significance of digital trade to the U.S. economy, the rise of these digital trade barriers, and the ways in which U.S. trade policy, including through the Trans-Pacific Partnership (TPP), can help remove existing—and prevent future—barriers. ITIF Founder and President Robert Atkinson testified, alongside representatives from IBM, the Internet Association, PayPal, and Fenugreen (a tech startup). This post captures a few of the key takeaways.
Digital trade benefits a large segment of the U.S. economy and its workforce. Digital trade and data flows often go unrecognized (as they are often hard to see) for the important role they play in helping U.S. companies and workers, whether from firms big or
Roving Government “Bandits” Pillaging and Stealing Intellectual Property Need to Be Confronted by “Gunboat” Nations
A number of countries see cutting-edge intellectual property, especially for life sciences and high-tech goods, much like a predatory bandit saw trade caravans in centuries past—as something there to be raided and plundered. As trade and economic activity becomes more knowledge-based and dependent on intellectual property, the battle between countries that develop and protect the latest technological innovations against those that seek to steal it will only increase. A new paper by Australian academics Sinclair Davidson and Jason Potts—The Stationary Bandit Model of Intellectual Property—presents a new model that captures key traits of this global battle over intellectual property.
Before analyzing how this model reflects the real world, it’s important to consider the contrasting foundations of the new Davidson-Potts model compared to the standard economic model of intellectual property. The standard model sees intellectual property as a government-granted monopoly designed to create public incentives, that the natural domain of this property right is under the government which grants this right, and that intellectual property theft, when it occurs, is largely private—by individuals and firms. Traditional theory paints governments as benevolent actors that create the right conditions—the supply side
This afternoon, the United States and India resolved their differences over New Delhi’s insistence for an interim mechanism for public stockholding programs for food security to continue until members reach a permanent solution – paving the way for breaking the impasse over implementation of the Trade Facilitation Agreement (TFA) at the World Trade Organization (WTO).
The TFA seeks to create binding commitments across 159(+) WTO Members to: 1) expedite the movement, release and clearance of goods; 2) improve cooperation among WTO Members on customs matters; and 3) help developing countries fully implement these obligations. In addition, the agreement promises to increase customs efficiency and effective collection of revenue, and help small businesses access new export opportunities through measures like transparency in customs practices, reduction of documentary requirements, and processing of documents before goods arrive.
Consequently, the TFA’s potential impact on facilitating global trade should not be overlooked. One study estimated the TFA could increase global output by about $1 trillion, while adding as many as 21 million new jobs, most of which would have flowed to developing nations such as India. The OECD estimated that it would cut global trade
In today’s fast-paced, globalized world, knowledge workers can choose to work anywhere. In fact, being an appealing place for people to locate, especially those with advanced skills, is a valuable national resource. Highly skilled workers earn high wages, spend those wages locally, pay domestic taxes, and contribute to spill-over effects that benefit everyone in the area. Most engineers will tell you that the most appealing location for tech workers is located right here in the United States. Some countries strike oil. Others find diamonds. The United States hit it rich with Silicon Valley.
However, Silicon Valley has a weakness that threatens this preeminence: the lack of enough skilled workers to promote expansion and innovation by existing firms and industries and the development of new ones. One of the chief causes of this problem is America’s growth-stymying, restrictive immigration policies toward high-skill, foreign-born talent. For example, for the first time in American history, there are fewer startups founded by immigrants than there were 10 years ago. The effect is especially apparent in Silicon Valley, where immigrant-founded startups dropped from 52.4 percent to 43.9 percent from 2005 to 2012. And unfortunately for
The African Growth and Opportunity Act (AGOA) is set to expire in September 2015, and last week at the United States-Africa Business Forum, President Obama pitched the idea of an early renewal, building on the growth of the Administration’s “Doing Business in Africa Campaign.” AGOA is the cornerstone of U.S. trade and investment with Africa; over its 14 year history, the program has contributed to a doubling of U.S. trade with Africa. In 2013, U.S. goods imports from sub-Saharan Africa under AGOA and the Generalized System of Preferences (GSP) program totaled $26.8 billion, more than three times the amount in 2001, the first full-year of AGOA trade.
Indeed, by providing duty-free entry into the United States for almost all African products, AGOA has helped expand and diversify African exports to the United States, while at the same time fostering an improved business environment in many African countries through streamlined eligibility requirements. These eligibility requirements remain important in the renewal process though, as part of increasing the desirability of African countries as a business destination lies in making sure that these nations have an environment that fosters growth and investment. Congress
A new paper from the FUCAPE Business School in Brazil, authored by Brazilian economist Bruno Funchal and Jadir Soares Junior, find that reductions of barriers to trade in the computer technology sector affected the Brazilian labor market. Specifically, they use the end of the “Informatics Law” in 1992 as the non-tariff barrier to trade of analysis. For eight years the “Informatics Law” imposed a limit on access by foreign companies to the manufacture of small computers and provided various support mechanisms for strictly nationally controlled companies.
Using data from the Annual Social Information Report and the Brazilian Occupational Classification, the authors compare the change in the demand for either “routine” or “non-routine” tasks before and after the repeal of the “Informatics Law” to the percentage of workers using computers in 2002 using a panel regression with fixed effects. The idea is that the liberalization of the technology market in Brazil led to a rise in the demand for workers doing non-routine tasks (considered complementary to computers) and a fall in the demand for workers doing routine tasks (considered a substitute to computers).
The authors find that industries and occupations intensive
Last week marked the fourth annual global review of the World Trade Organization’s (WTO’s) Aid for Trade (AfT) Initiative. Created in 2005 by the Sixth Ministerial Conference of the Doha Development Round, Aft targets “behind the border” constraints to trade in least developed countries (LDCs) as well as strengthens their capacity to negotiate beneficial trade agreements. Essentially, Aft focuses on trade facilitation.
The AfT Initiative shines a light on the idea that the best possible “aid” we can give LDCs is free trade. Evidenced by its theme, “Connecting to Value Chains,” the fourth annual review called for “connecting the least connected countries.” More broadly, the value chain world we live in offers many entry points for firms to connect to the global trade web. And countries don’t need to produce final goods to be a part of that global trade web—increasingly we are a world focused on trade in services and tasks. Sixty percent of global trade is now in parts and components.
Production networks stretch worldwide—Senegal assembles Indian cars, Ford has facilities in Vietnam, and Samoa produces automotive harnesses. As WTO Director-General Pascal Lamy puts it, “you do not
Free trade is only successful if all sides are operating on a relatively level, market-based playing field. Unfortunately, in the last few years many nations, particularly developing ones, have dramatically ramped up their mercantilist policies designed to unfairly gain advantages in global trade. The use of these mercantilist policies hurts not only the aggrieved nations, but also, in certain cases, the aggressor. One tool in the mercantilist tool box is “dumping”: the practice of selling exports below the cost of production, often by relying on steep government subsidies. However, to date the system of addressing dumping claims has not been as effective as it should be. All too often by the time cases are brought to and adjudicated by the World Trade Organization (WTO) the damage has been done and many domestic firms put out of business.
We see this with the current conflict between the European Union (EU) and the United States with China over unfair Chinese trade policies in the solar industry. The chief issue for U.S. and EU policymakers concerns China’s use of mercantilist practices, especially selling below cost through large government subsidies, to promote Chinese solar
On Monday at the G8 Summit, President Obama, U.K. Prime Minister Cameron, European Commission President Barroso, and European Council President Van Rompuy announced plans to launch negotiations for an ambitious trade deal between the European Union and the United States. The Transatlantic Trade and Investment Partnership (T-TIP) is an ambitious, comprehensive, and high-standard trade and investment agreement that promises to boost worldwide economic growth. During the negotiation announcement, Prime Minister Cameron said a successful deal could add £100 billion ($157 billion) to the EU economy, £80 billion ($125 billion) to the U.S. economy, and as much as £85 billion ($133 billion) to the rest of the world. While these numbers are impressive, as ITIF’s March 2013 report, Estimating the Benefits of a Transatlantic Trade Partnership found, citing data from the U.S. Chamber of Commerce, gains could be as high as $450 billion for the United States and $495 billion for the Europe Union, boosting both EU and US GDP by 3 percent. “We’re talking about what could be the biggest bilateral trade deal in history; a deal that will have a greater impact than all the other trade deals on
On this day in 1957, the Soviet Union deployed Sputnik. The two-foot, 180-pound orb’s beeping was the starting gun of the space race and we in the U.S. seemed to be just putting our sneakers on. Despite President Eisenhower’s initial shrug, America freaked out – but in good way.
In under a year, a Democratic Congress and the Republican President created and made operational the National Aeronautics and Space Administration (NASA). The National Defense Education Act, which not only jump started higher education in math and science here but also promoted the study of countries we realized were gaining on us, became law. The Advanced Research Projects Agency (ARPA) came into being. Later, of course, it became (Defense) DARPA, which yielded numerous technological advances, including what became the Internet.
When it came to being #1 in space, we didn’t wait for market forces to work their magic. In a speech at Rice University on September 12, 1962 President Kennedy said the tripling of the space budget in a little over two years was worth it. There were new jobs, new companies and new discoveries. We were in the race but