The digital economy has been a major boon to U.S. domestic and international trade, as is documented by a new report by the United States International Trade Commission entitled Digital Trade in the U.S. and Global Economies (summary here). And even though the report shows important benefits from digital trade, those benefits are likely understated. This is because the report limited its analysis to “digitally intensive” sectors, which means that its numbers exclude contributions from firms that only use digital trade as a smaller part of their business.
Still, digital trade has made quite an impact: the report estimates that digital trade has raised real U.S. GDP by $517.1-$710.7 billion (3.4−4.8 percent) by increasing productivity and lowering the costs of trade. By raising GDP, digital trade increased average wages, and the increased wages likely contributed to increased employment by as much as 2.4 million jobs.
Within digitally intensive industries (and likely within many non-digitally intensive industries, although the report focused on the former), the internet has come to play a major role in everyday commerce. Firms in these industries sell nearly a trillion dollars’ worth of goods and services … Read the rest
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 … Read the rest
Colombia’s national soccer team famously taught the world how to properly celebrate a World Cup goal; now the nation is poised to teach the world a thing or two about innovation. In 2010, Colombia’s Ministry of Information Technologies and Communications (MinTIC) devised a plan to connect 27 million people, or more than half of its population, to the Internet by 2018. This plan, called Vive Digital, has had many accomplishments, which include increasing the number of Colombia’s Broadband Internet connections from 2.2 million to more than 8.2 million. In the past four years, the Colombian government has reduced the barriers for adoption of broadband technologies, efforts that brought computers and tablets to schools and created a robust network for digital entrepreneurs. MinTIC has also poured investment into Internet infrastructure, and is in the process of extending fiber-optic Internet access to 96 percent of the country’s municipalities—many of which are isolated in remote areas.
The man behind these aggressive efforts is the minister of MinTIC, Diego Molano Vega.
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
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:
- Unmanufactured products mined or
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
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
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:
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.)
Strangely enough this graph looks nothing … Read the rest
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
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.