Trade

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Unsubstantiated attacks on the Ex-Im Bank fail to take flight

A recent review by the Wall Street Journal of a Standard & Poor’s (S&P) credit analysis of Boeing in relation to the U.S. Export-Import (Ex-Im) Bank appears to have missed the point. The article sums up the report with the quote, “We don’t believe that the expiration of Ex-Im’s authorization in September would hurt Boeing’s credit quality or ability to make planned deliveries in 2014 and 2015.” However, this ignores the fact that this statement relates only to planes already in production being prepared for delivery. S&P goes on to conclude that alternative financing sources would not be able to match the demand for Boeing airplanes, and that Boeing would lose out on new orders of aircraft. In addition, it states that the effect of an Ex-Im Bank dissolution on Boeing’s credit quality would be significant, especially in sales to emerging markets or to start-up and financially weak airlines. Judging by 2014 data, Boeing’s new financing needs would total between $7 billion and $9 billion if it lost the support of the Ex-Im Bank.

This ‘misunderstanding’ seems to stem from a desire to portray the Ex-Im Bank—which has been quietly … Read the rest

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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:

India at a crossroads

India at the Crossroads of Opportunity

Earlier today, ITIF hosted a robust discussion on Capitol Hill regarding our most recent report, The Indian Economy at a Crossroads. We were fortunate to be joined by Congressman Ami Bera (CA-7), along with Executive Vice President of the U.S. Chamber of Commerce’s Global Intellectual Property Center (GIPC) Mark Elliot, and Rick Rossow of the Center for Strategic and International Studies. The timing of the event could not have been more appropriate as India recently elected a new government. With a record 550 million votes cast, Prime Minister Narendra Modi and his BJP party won the election based on their pro-business platform, which provided an excellent context to discuss ITIF’s policy recommendations for the Indian economy.

As the only Indian-American currently serving in Congress, Representative Bera provided a unique and insightful perspective on the U.S.-India relationship, noting that, while it is still developing, the incoming Modi government presents a perfect occasion for U.S. businesses to establish effective partnerships with India. He did recognize the many challenges that currently exist between the two nations, but stressed that the opportunities far outweigh those differences.

This was followed by an overview of … Read the rest

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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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If Manufacturing Employment is Dead Then Take a Look at China’s Zombie Apocalypse

Policy-making relies on narratives, and narratives often come from data. Or claim that they do. One story often told by economists—by everyone from Dani Rodrik to Erik Brynjolfsson and Andrew McAfee to James Kynge to Laurence Summers—is that China’s manufacturing sector has been shedding workers since the mid-1990s. This story leads us to believe that something like this is happening:

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This argument ends up as a morality tale with serious policy implications: if even China, manufacturing powerhouse with wages developed countries cannot hope to compete with, is losing manufacturing jobs, then surely manufacturing jobs are obsolete and the U.S. is foolish to try to maintain them—let alone get them back.

Unfortunately, this story is based on a gross misreading of inaccurate evidence. There are three major problems. First, even based on a simplistic look at the data, it’s flat out wrong. Take a look at this chart that shows the actual manufacturing employment in China. (You may note that this chart only goes back to 1998, and that the peak of employment  underlying most claims was in 1996—more on that in a bit.)

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Strangely enough this graph looks nothing … Read the rest

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Digital Trade Act of 2013 Instrumental to Protecting and Empowering the Global Digital Economy

On Tuesday, December 10, Senators John Thune (R-SD) and Ron Wyden (D-OR) introduced The Digital Trade Act of 2013, legislation that would protect the Internet from restrictive measures that obstruct the free flow of data in the global economy. The Act establishes negotiating principles designed to guide U.S. negotiators in addressing key digital trade issues in future bilateral and multilateral agreements and in multi-stakeholder settings. Key principles include: preventing or eliminating restrictions on cross-border data flows, prohibiting localization requirements for data and computing infrastructure, ensuring that provisions affecting platform Internet sites are consistent with U.S. law, and recommitting to a multi-stakeholder model of Internet governance.

Affirming these principles protecting digital trade is vitally important because information and communications technologies have become the modern global economy’s principal driver of growth. For example, a March 2013 study by Finland’s Ministry of Employment and Economy estimates that, by 2025, half of all value in the global economy will be created digitally. Similarly, the McKinsey Global Institute estimates that the Internet alone accounted for 21 percent of aggregate GDP growth between 2007 and 2011 across 13 of the world’s largest economies. Digitally enabled … Read the rest

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Talking TPP: Getting Through to Negotiators

As final negotiations begin for the Trans Pacific Partnership (TPP) trade pact, it is essential that U.S. representatives understand the impact this agreement will have on our future. The TPP presents an opportunity to set the standard for future trade agreements, but implementing the wrong policies could do more harm than good.

Any TPP agreement must enable U.S. innovation and not finalizing an agreement is better than signing one that compromises America’s ability to create technologies and make advancements that benefit society. A key factor in protecting innovation through the TPP will be the assurance of strong intellectual property (IP) rights protections that promote investments in R&D and technology development and insure the free flow of information across borders.

As ITIF has noted, IP is a central component of the innovation ecosystem, which is a key factor in a healthy economy, in both developed and developing nations. For example, strengthening IP rights has been connected with increased inflows of foreign direct investment, rates of domestic innovation, and trade in high technology products.

A new ITIF report further examines the TPP and emphasizes the importance of designing an agreement that … 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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Balancing Innovation: Managing Current Needs with Future Success in Developing Countries

No one disputes the benefits of innovative technology. It has resulted in IT, medical, and energy advancements that have revolutionized the way we live our lives. What often goes unappreciated, however, is the time and resources invested that ultimately yields this progress. As I discussed on Friday as part of a panel at the Global Intellectual Property Center’s IP Summit, failing to acknowledge and respect intellectual property puts future innovation in jeopardy, and it is critically important that we educate developing countries on the benefits of protecting IP before it has lasting effects on not just the global innovation economy, but their own individual innovation economies

At a time when developing countries are not only trying to recover from the Great Recession, but also working toward building more prosperous economies, access to innovation is increasingly important. Unfortunately, all too often developing countries believe that to achieve their economic and social goals, they must focus on getting access to technologies (including pharmaceutical products, sometimes through issuing compulsory licenses) in the near-term, instead of setting up an environment of strong IP protection where innovation can flourish over the long-term. These actions are … Read the rest

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Trade Liberalization Enhances Economic Growth: New Evidence

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 … Read the rest