government

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Let USTR Do Its Job

Last week, the U.S. House of Representatives passed a bill funding the federal trade agencies that also called for more oversight of them, including the addition of language aimed at preventing the Office of the U.S. Trade Representative (USTR) from negotiating trade agreements that might open up the U.S. government procurement market to enterprises from other countries. The amendment language, part of the fiscal year 2015 Commerce, Justice, Science (CJS) Appropriations bill, consists of one sentence, “[n]one of the funds made available by this Act may be used to negotiate an agreement that includes a waiver of the ‘Buy American Act.’”

The 1933 Buy American Act (BAA) requires the U.S. federal government to prefer U.S. products for all goods, but not services. The BAA applies to goods acquisitions over the micro-purchase threshold of $3,000. Under the BAA, all goods for public use (articles, materials, or supplies) must be produced in the United States, and manufactured items must be manufactured in the United States from U.S. materials. The BAA creates a price preference that favors “domestic end products” from American firms in U.S. federal government contracts for:

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Reviewing USTR’s 2014 Special 301 Report

Yesterday, the Office of the U.S. Trade Representative (USTR) released its annual Special 301 Report, citing 37 countries for inadequate and ineffective protection of intellectual property. The listing included:

 

Priority Watch List: Algeria; Argentina; Chile; China; India; Indonesia; Pakistan; Russia; Thailand; and Venezuela; and

Watch List: Barbados; Belarus; Bolivia; Brazil; Bulgaria; Canada; Colombia; Costa Rica; Dominican Republic; Ecuador; Egypt; Finland; Greece; Guatemala; Jamaica; Kuwait; Lebanon; Mexico; Paraguay; Peru; Romania; Tajikistan; Trinidad and Tobago; Turkey; Turkmenistan; Uzbekistan; and Vietnam.

 

The 2014 report highlights continuing threats global U.S. intellectual property rights holders’ face in countries throughout the world. And because IP and innovative industries are so vitally important to the U.S. economy — for example, a Department of Commerce study estimates that in 2010, copyright-intensive industries accounted for $641 billion in value-added to GDP and 5.1 billion jobs — it is necessary to make sure the IP enforcement remains a priority for foreign policymakers.

USTR made minimal changes to the country designations from the 2013 Special 301. In fact, the ten countries listed on the Priority Watch List (PWL) remain completely unchanged. The only changes to … Read the rest

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Both Guns and Butter? New Study Shows Innovation Benefits from Military Procurement

For much of the postwar era the United States led the world in technology, which brought significant economic benefits to the nation. That leadership was due in large part to generous federal government funding for R&D, much of it channeled through military spending. That this occurred during the Cold War was no coincidence: as William Janeway argues in Doing Capitalism in the Innovation Economy, nations have historically been unable to muster the political will for significant spending on innovation without it being part of a “national mission,” since such spending means giving up current consumption for uncertain future benefits.  In the last half of the 1800s, nation building provided the mission for America—just as that does now for China.  But after the late 1940s the animating mission that helped drive technology innovation was winning the Cold War, which we did.

The threat from the Soviet Union meant that Americans were willing to sacrifice present consumption for the good of the nation–in this case keeping the world safe for freedom and democracy. And it meant we did what it took to win—and that meant innovating. The fact that Lockheed’s Skunk … Read the rest

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We Are Never Ever Getting Back Together

A few days ago, Marvin Ammori published a piece on Slate titled, “Hollywood’s Copyright Lobbyists Are Like Exes Who Won’t Give Up”, in reference to  the House Judiciary Subcommittee on Courts, Intellectual Property and the Internet holding a hearing regarding the Digital Millennium Copyright Act (DMCA) notice and takedown system. In it, he alleges that the hearing’s existence, created to discuss the potential of voluntary initiatives among copyright stakeholders, is proof of a conspiratorial secret resurgence of the Stop Online Piracy Act (SOPA).

Ignoring the ludicrous nature of this claim — does every hearing that every committee holds in the entirety of the U.S. Congress have some secret ulterior purpose now? — his argument is demonstrably false.  Let’s start with the facts: the DMCA notice and takedown system is the process by which content creators notify service providers that they are illegally distributing content.  In exchange for working collaboratively with rights holders, service providers receive a “safe harbor” from prosecution. The House Judiciary subcommittee hearing tomorrow is an opportunity to discuss voluntary initiatives among stakeholders to curb piracy, not a chance to propose new legislation (and in case anyone … Read the rest

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ITIF hosts Dr. William Janeway

Economist, venture capitalist, and co-founder of the Institute for New Economic Thinking Dr. William Janeway stopped by ITIF this week for a discussion about his new book, Doing Capitalism in an Innovation Economy. Dr. Janeway presented a compelling view of the economy and touched on a number of important issues along the way.

Janeway explained that the government plays a critical role in innovation by providing research funding through institutions such as DARPA and the NIH, by leveraging the buying power of the federal coffers, and by creating policies that encourage business investment in R&D. Economists have long understood that private markets fail to allocate adequate resources to innovation and research: the benefits are too hard for individual corporations to capture. For this reason, policies like the R&D tax credit and public investment in basic research have long been uncontroversial.

Contrary to what recent high-profile failures like Solyndra might lead people to believe, government policies to spur innovation in the United States have had great success. This is apparent in the vast amount of money the private sector has poured into IT and Biotech businesses based on initial … Read the rest

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Update: Trade Promotion Authority Still in Danger

Last week, Senate Finance Committee Chairman Max Baucus (D-MT) stated that he is close to reaching an agreement on renewing Trade Promotion Authority (TPA) with House Ways and Means Committee Chairman Dave Camp (R-MI). This progress comes at a crucial time given that the Obama Administration is in the middle of negotiations for two different trade agreements — the Transatlantic Trade and Investment Partnership (T-TIP) and the Transpacific Partnership (TPP).

TPA allows the President to “fast-track” trade agreements for approval or disapproval by Congress by removing the option for filibuster. Essentially, the TPA forces the House and Senate to accept or reject a trade agreement, without amendment, within 90 days of its submission to Congress by the President. The process enables the United States to negotiate more beneficial trade policies with other countries, because of the reduction in approval time compared to other legislation and because it incentivizes countries to trade concessions with the United States, because they know that Congress cannot rewrite the deal.

With the final ministerial meetings of the TPP set to begin the first week of December, and the third round of T-TIP negotiations two weeks … Read the rest

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Shutting Down Trade with the Government Shutdown

With the government shutdown now in its second week, its effect is now being felt across much of the broader U.S. economy, especially in trade. The Department of Commerce (DOC) says nearly 10 million American jobs are supported by exports. Last year, U.S. exports rose 4.4 percent to $2.196 trillion and imports grew 2.7 percent to $2.736 trillion.

Unfortunately, the shutdown is destroying much of this daily commerce. Several government agencies—including DOC, the Environmental Protection Agency (EPA) and the Department of Agriculture (DOA)—are involved in trade shipments. While Customs and Border Protection (CBP) is still staffed throughout the shutdown, most of these agencies have the authority to “release and hold” imports and exports before CBP even enters the process, meaning  that many imports and exports are stranded and unable to enter/exit the United States.

For example, the EPA halted all pesticide imports to the United States, because, with more than 90 percent of its staff furloughed, it cannot approve them.  Steel imports are stranded at customs-clearance warehouses awaiting paperwork.  And many U.S. technology companies are slowing down or stopping overseas orders because they cannot obtain DOC authorization to export. The … Read the rest

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Levin Details Important Challenges Ahead for International Trade

Today, House Ways and Means Committee Ranking Member Sandy Levin (D-MI) gave an impressive speech highlighting the past, present and future challenges in the international trade arena at the Peterson Institute. Focusing specifically on issues relating to the American automotive industry in the Transpacific Partnership (TPP), he also touched on the Transatlantic Trade and Investment Partnership (T-TIP) as well as the Trade Promotion Authority (TPA). However, his best points were those that emphasized the need for “free and fair trade,” not just “fair trade.”

In sharp contrast to much of the neoclassical literature on free trade, Representative Levin noted that markets are not, in fact, always self-correcting and that distortions from foreign mercantilist trade policies need to be addressed in free trade agreements going forward. As innovation economists, ITIF also holds this belief; global free trade is beneficial, but only when countries eschew mercantilist policies (e.g., tariffs, unfair taxes, currency manipulation, discriminatory standards, IP theft, etc.) that manipulate the system. Not only do mercantilist policies restrain productivity and innovation, but they also potentially lead to lower levels of global growth as private companies make investments in countries and in types … Read the rest

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New Evidence in Favor of Government R&D Funding

A new policy research working paper from the World Bank has combed through recent evidence on government funding for Research and Development, and finds that government funding significantly increases R&D investment. Paulo Correa, Luis Andres, and Christian Borja-Vega’s paper, “The Impact of Government Support on Firm R&D Investments: A Meta-Analysis” analyzes nearly 40 papers published worldwide from 2004-2011.

Although there is a large variation in the type of R&D funding examined, the study methodologies, and location of the studies, the results are clear: government funding boosts R&D spending. The paper tackles another important question as well—whether government spending “crowds out” private sector spending. (Crowding out is the idea that private companies will not invest if the government is doing it for them.) The paper finds evidence of the opposite, however, with data that shows public funding actually incentivizes firms to invest more in R&D.

(photo credit Idaho National Laboratory)Read the rest

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Will Politics Derail Obama’s Trade Agenda?

On Friday, 35 of the 36 freshmen House Republicans signed a letter to new USTR Michael Froman indicating their strong support for President Obama’s free and fair trade agenda. Stating, “We write to you as new members of the House of Representatives who strongly believe that expanding trade will increase economic growth and expand jobs across the United States,” the letter went on to describe their readiness to work on negotiations for the Transatlantic Trade and Investment Partnership (T-TIP), the Transpacific Partnership (TPP) and the Trade in Services Agreement (TISA).

The Republican letter comes at a crucial time during trade negotiations for the United States. With the first round of T-TIP negotiations set to begin next week, and the 18th round of the TPP negotiations the week after, Congressional support is key to moving forward. However, the 2007 expiration of Trade Promotion Authority (TPA) threatens to erode much of the potential for forward movement. TPA, which allows the President to “fast-track” trade agreements for approval or disapproval by Congress by removing the option for filibuster, is currently being considered for renewal. Essentially, the TPA forces the House and Senate … Read the rest