The Progressive Fix

PPI Applauds Senate Passage of TPA

PPI applauds the Senate for passing Trade Promotion Authority and taking a key step in assuring that America continues to be a global leader in crafting strong, progressive trade rules that will help grow our economy and support good jobs—while also advancing important American values.

As PPI has detailed in recent reports on the Administration’s trade agenda and open digital trade, new U.S. trade agreements can make vital progress on issues that are important to Democrats and progressives. They can, for example, tap a growing global middle class to power more inclusive American economic growth, expand the reach of strong rules on labor rights and environment protection, reform past agreements like NAFTA, and “democratize” trade by empowering entrepreneurs, small businesses, and consumers to more directly participate in and benefit from global commerce.

TPA would provide a fair and more open process for considering new trade agreements, and would obligate future Administrations—both Democrat and Republican—to pursue these and other progressive provisions in future trade agreements, as well.

Finally, today’s vote illustrates the leverage that pro-growth, pro-trade Democrats can exercise in trade debates. As trade legislation moves to the House, PPI urges Democrats to continue to work constructively to build smart, progressive policies that enhance America’s global competitiveness. In addition to support for TPA, these efforts should include a comprehensive program of reform—in education, training, innovation, infrastructure, and more—like that proposed in the New Democrat Coalition’s American Prosperity Agenda. Unlike reflexive opposition to new trade initiatives, this approach will assure that America—and more Americans—can share in the significant benefits of global growth.

Mandel: Eliminating an Obsolete Regulation at the FCC

PPI favors the elimination or rewriting of outmoded regulations wherever possible. We believe that clearing the deadwood of obsolete rules is a win-win for consumers, workers, and businesses, allowing regulators to focus limited resources on more important issues while freeing companies to innovate faster.

That’s why we strongly favor FCC Chairman Tom Wheeler’s proposal to streamline the “effective competition” rule for cable video providers. Cable television has long been one of the most regulated industries in the economy, including regulation of their rates by local authorities. The justification for such price controls—not acceptable for most industries—was the lack of meaningful competition from other video providers.

But the world has changed. Today many if not most cable video systems face a wide range of competitors from satellite providers such as DISH and telecom companies such as AT&T and Verizon, not to mention new internet-based video services such as Netflix and Amazon.

The legislation governing cable operators allows them to be relieved of some regulatory burdens—including rate regulation by local authorities–if the FCC rules that they face “effective competition.” The legislation includes several possible tests for effective competition, including a satellite video provider or other competitor having 15% of the pay video market, or if a phone company is offering video service in the area.

These hurdles are not hard to reach, given the prevalence of satellite and other video competitors. As a result, the FCC has ruled in favor of effective competition on almost all the hearings on this subject since 2013.

Nevertheless, up to now, cable video companies have had to go through a long and burdensome process to get regulatory relief. That is why Wheeler is proposing to simplify the process by adapting it to market realities. Challengers would have to demonstrate that effective competition did not exist in a particular location. The net result is that a larger number of cable video providers would have greater freedom to compete and innovate.

Given the amount of competition to cable, it is unlikely that cable video rates would suddenly jump. After all, with the prevalence of alternatives, and subscriber growth having topped out, why should cable companies drive away customers?

We have had disagreements with Chairman Wheeler, particularly around the Open Internet issue. But on this issue, his approach to cleaning up the regulatory process makes excellent sense for both consumers and companies.

PPI Statement on Senate Trade Vote: Don’t Misread Vote as Repudiation of TPA

It would be a huge mistake to misread today’s Senate trade vote as a repudiation of Trade Promotion Authority and the U.S. trade agenda. The pro-trade Democrats who provided the decisive votes today were not voting against TPA, but were seeking to include other trade measures—including those on trade enforcement and trade with Africa—in the debate. There are various ways to address concerns about these important issues and we hope that trade supporters in the Senate can work together to craft a solution that allows the vital debate on trade to proceed.

As PPI has explained in recent reports on the Obama Administration’s trade agenda and on open digital trade, new U.S. trade agreements have the potential to advance goals that are important to Democrats and progressives. These new initiatives can, for example, tap a growing global middle class to help power American economic growth, expand the reach of strong rules on labor rights and environment protections, update past agreements like NAFTA, and “democratize” trade by empowering entrepreneurs, small businesses and consumers to more directly participate in and benefit from global commerce. TPA would provide a fair and considered process for considering new trade deals, and would obligate future Administrations—both Democrat and Republican—to seek these and other progressive provisions in future trade agreements, as well.

Today’s developments illustrate the leverage that pro-trade Democrats can exercise in trade debates. PPI hopes that more Democrats will engage in constructive efforts to build and support a progressive pro-trade agenda. Simply working to kill TPA legislation, and other reflexive opposition to new trade initiatives, does little to advance important progressive goals.

PPI WEEKLY WRAP-UP: Trade for the 99 Percent, UK Elections and EU Digital Agenda

TRADE FOR THE 99%: On Tuesday, PPI released The Digital Opportunity: Democratizing Trade for the 99 Percent. Authored by Ed Gerwin, PPI Senior Fellow for Trade and Global Opportunity, the new policy brief highlights some of the many ways in which “democratized” trade in the global digital economy benefits America’s 99 percent—from entrepreneurs and small businesses to consumers and communities. The brief details why it is critical for America to lead in writing modern trade rules that promote the free flow of data and open digital commerce. Gerwin summarized the findings of his policy brief in an op-ed for Republic 3.0, The Digital Economy, Trade Agreements and the 99 Percent.

UK ELECTIONS: Earlier this week, PPI President Will Marshall wrote an op-ed for CNN on how the fracturing of Britain’s once stable political order will make it difficult for the incoming Prime Minister to form a strong and coherent government, and the implications that will have on Britain’s role in the EU and their relationship with the US.

Today, the day after the election, Marshall provided a follow-up piece to CNN distilling a few key lessons from the oddest British election in memory.

EU DIGITAL AGENDA: On Thursday, the European Commission unveiled a digital single market for Europe. PPI Chief Economist Dr. Michael Mandel wrote this week that the digital single market is essential for the success of the EU economy, but it should be built on principles of openness and encouragement of innovation, not higher levels of regulation that will discourage both.

LABOR PRODUCTIVITY: Mandel penned a response on Wednesday to the release of the Bureau of Labor Statistics (BLS) first quarter labor productivity and costs report. Mandel calculates that ten-year productivity growth plunged to a startling 1.4% in the first quarter of 2015, the lowest level since the 1980s. Moreover, Mandel estimates that the slowdown in productivity growth since 2000 is responsible for two-thirds of the decline in real compensation growth, a key measure of living standards. His conclusion: The sharp fall in productivity growth is the major reason why Americans feel so squeezed. Growth policies are key.

: A recent policy report on tech employment, authored by Mandel and PPI Economist Diana Carew, calculated that women have been getting three times as many healthcare-related bachelor’s degrees as men. But according to Mandel, the healthcare employment boom may actually represent a bubble, warning that college students and administrators may be overestimating the safety and security of healthcare careers. If the bubble bursts, women may bear the brunt. Given the strong possibility of such a change, progressives should support a diversification of college degrees out of healthcare and into other growing areas such as tech.

MOTOR CITY SCHOOLS MAKEOVER: In an op-ed for U.S. News & World Report, PPI senior fellow and director of the Reinventing America’s Schools Project, David Osborne examines a new plan by Michigan Governor Rick Snyder to set up a Detroit Education Commission that would have the power to measure school performance, create a common enrollment system for all public schools, close mediocre schools (charter and traditional) and replace them with new schools (charter and traditional). Osborne writes, “This would be a huge step forward: For the first time, Detroit would have a citywide portfolio manager with the power to steer both the traditional and charter sectors toward higher performance.”

Governor Markell for The Atlantic: Americans Need Jobs, Not Populism

In an op-ed for The Atlantic, Governor Jack Markell (D-Del.) argues that instead of raging against a “rigged” system, Democrats should work together with business to build an economy that distributes its benefits more broadly.

The bottom line is that private enterprise creates the primary condition for reducing poverty and want: economic growth. Governments don’t create jobs; however, government has an ability and responsibility to create a nurturing environment where business leaders and entrepreneurs want to locate and expand. What that means is that government has an active role in creating an economic environment that creates middle class success and prosperity. …

Long-term success requires an active government that partners with business to ensure that the bounty of economic growth is shared broadly. Sharing this bounty is not about having a “bleeding heart.” It’s a matter of cold economic sense.  

I am hugely bullish about the future of the American economy because I believe in investing in people, engaging with the world and sharing broadly the bounty that economic growth will generate. Growing without sharing won’t get it done.  And neither will redistribution without growth. Americans really are in this together.

Read the piece in its entirety at The Atlantic.

Don’t Ban Zero-Rating in India

Zero-rating – a practice where mobile operators provide select Internet content for free – is coming under heavy fire in India. Indeed the Indian government is likely to ban the practice as early as next month. But given that zero-rating could enable tremendous social and economic opportunity to developing countries like India, banning it now would be a mistake.

Widespread media attention has put India’s approach to Internet regulation and “net neutrality” into the global spotlight. It started with a report issued last month from their telecommunications regulator (TRAI) asking for public comments on how to regulate “over-the-top” content offering from mobile providers. A large public outpouring of information (and misinformation) ensued, leading one Indian Member of Parliament to write, “TRAI cannot control the internet by charging separately for services that are created by the very people who believe in the idea of free access to information and knowledge.”

Already several companies providing content through zero-rating programs have backed out over the backlash, lest they be charged with enabling Internet discrimination. Adding more fuel to the fire, this week a group of Indian tech entrepreneurs sent a letter to India’s Prime Minister arguing that zero-rating could stunt economic growth as Internet start-ups are unable to compete with free content. “These practices, if allowed, will exclude promising startups from the Internet and end our dream of seeing them flourish,” they said.

It’s unlikely, however, that zero rating will crush anyone’s dreams. In fact, as we’ve recently argued in our paper “Zero-Rating: Kick-Starting Internet Ecosystems in Developing Countries,” zero-rating could be a powerful vehicle for economic growth and prosperity in countries like India, where large segments of the population aren’t online.

In the developing world, zero-rating has the potential to jumpstart local Internet ecosystems. Consumers that have previously used up their monthly data allotments on sites like Google, Twitter, and Facebook could now use them instead to surf local content. Moreover, people who are currently not connected to the Internet may have a stronger incentive to sign up for a monthly data plan, seeing a higher value in accessing the Internet. The larger customer base for local content would then provide a greater incentive for tech entrepreneurs to invest in turning their ideas into the latest online site or service. As more local content becomes available, a resulting boost in local demand will follow in a virtuous economic feedback loop.

Consider, for example, a local business collecting agricultural prices across a poor country that would like to post them online. Such data could be extremely valuable for the country’s farmers, who stand to benefit greatly from access to better information. Yet if there are too few farmers or other consumers of this data online, no one has an incentive to collect the data and create an online platform. Yet if offerings such as zero-rating encouraged more farmers to get connected, this business could get off the ground – and more could follow – enabling locally-driven economic growth.

Although many zero-rating programs are relatively new, early results are promising. Countries across the globe, from the Philippines to Egypt, and in sub-Saharan Africa, have seen large increases in connectivity alongside zero-rating offerings. And perhaps most importantly, there is no evidence that zero-rating has caused any economic damage in underserved areas with low connectivity.

India’s politicians and regulators would be well-served to see zero-rating as an opportunity to increase local business potential, not as a threat to it. Local businesses could even use Twitter, Google, and Facebook to advertise their services, as part of the local Internet ecosystem.

Our report instead proposes guiding principles for zero-rating. For example, such offerings should be non-exclusive, to guard against anti-competitive behavior across mobile operators, and zero-rating programs should be regularly evaluated. These principles would promote transparency and accountability, and most importantly, increase public trust.

Of course, zero-rating is not a silver bullet for dispelling inequality or eradicating poverty. But it is an important part of a pro-growth strategy that will boost local economies. It could make the difference between a would-be Internet entrepreneur creating new apps for local services and data or going to another country with higher connectivity.

That’s why banning zero-rating in India now would be a mistake. The best path forward for India’s Internet economy is to promote policies that enable its citizens and businesses to fully participate in the data-driven economy. That means keeping every pathway to future global growth, opportunity, and prosperity open, including zero-rating.

PPI Returns from 2015 Digital Trade Mission to Europe

Dear Friend,

We’re just back from Europe, where last week PPI led a bipartisan delegation of Congressional staff on a four-day swing through three capitals: London, Brussels and Berlin. Our goal was twofold: 1) to learn more about the European Union’s ambitious plan to create a “digital single market” and, 2) to press PPI’s case for moving digital trade from the periphery to the center of the transatlantic agenda.

Why is this so important? Consider these facts:

  • The free movement of data raises the productivity of businesses and reduces trade costs, creating jobs and growth on both sides of the Atlantic.
  • US/EU cross-border data flows are by far the highest in the world, 50 percent more than between the United States and Asia.
  • America runs a large trade surplus in services, of which 61 percent are delivered digitally.
  • The Internet is becoming a powerful export platform for small enterprises, connecting them to global customers at low cost.

As PPI has documented in a series of groundbreaking reports, digital innovation and commerce are increasingly driving economic investment and growth in America and Europe. We believe the transatlantic partners share a common interest in ensuring that digital trade enjoys the same legal protections as trade in physical goods and services. Instead of joining forces to extend free trade principles to digital commerce, however, Europe and America are embroiled in a raft of disputes that threaten to erect barriers to cross-border data flows.   

Such disputes, for example, involve calls for data localization, for national or European clouds, for taxing data flows and for imposing stringent privacy or data protection rules on businesses. Right now, the European Court of Justice is considering a challenge to the “safe harbor” rules that have allowed US tech companies to operate in Europe. In addition, new tensions have arisen around issues of copyright protection, “platform competition,” tax avoidance and many core provisions of the proposed Transatlantic Trade and Investment Partnership (T-TIP).

As you probably know, PPI has long been a catalyst for transatlantic dialogue, going back to the Clinton-Blair “Third Way” conversations we helped to launch in the 1990s. Over the last four years, our work in Europe  has focused on reviving transatlantic economic cooperation, with a particular emphasis on the rise of data-driven innovation and growth. At a time when authoritarian countries seek to limit the free flow of information, we think it’s crucial that the Western democracies work together to prevent the balkanization of the Internet and defend free digital trade.

That’s why we organized this second “Digital Trade Study Group”—a bipartisan group of 12 senior House and Senate staffers, whose bosses have oversight of issues related to trade, digital commerce, copyright, intellectual property, privacy, cyber security, and communications and technology. (We took the first such group to Europe in April 2014). Last week’s trip featured a productive round of high-level talks with prominent political, business, policy and media leaders.

Here are the highlights: 

  • In London, our traveling party met with Daniel Korski, Special Advisor to Prime Minister David Cameron, and Guy Levin, formerly special advisor to Chancellor of the Exchequer George Osborne, to discuss UK technology policy. As Michael Mandel, PPI’s chief economic strategist, has documented, London has emerged as one of the world’s premier centers for tech entrepreneurship.
  • Vanessa Houlder, who covers economics for the Financial Times, briefed our group on the Cameron government’s controversial new “diverted profits tax.” Aimed ostensibly at discouraging tax avoidance, it slaps a 25 percent tax on the local profits of U.S. and other foreign companies operating in the UK, and has been dubbed the “Google tax” by detractors. 
  • Also in London, PPI released a new policy brief by MandelTaxing Intangibles: The Law of Unintended Consequences. It notes that digitized information differs from physical goods and services in that it can be duplicated at negligible cost and used by different consumers at once. As such, Mandel argues, it makes little sense to tax this intangible knowledge as one would a car or the provision of a unique service. In fact, new proposals for taxing intangibles will undermine global growth and thus be self-defeating, the report argues.
  • In Brussels, two officials of the European Commission’s DG Connect unit, Eric Peters, Deputy Head of the Single Market Unit and Tamas Kenessey, Legal Officer, briefed the group. The Digital Single Market, they stressed, is the EU’s top priority. It would enable tech companies that start in one of the Union’s 28 countries to grow to continental scale, and speed the onset of what we call the “Internet of Things.”
  • Over dinner, the Digital Trade Study Group heard from Ken Propp, Legal Counsel with the US Mission to the EU, and Paul Hofheinz, President of the Lisbon Council, PPI’s think tank partner in Brussels. The discussion centered on the headwinds T-TIP has encountered and political differences within the EU on digital policy.
  • Then it was on to Berlin, for lunch with two leading Green Party officials, Konstantin von Notz, a Member of the German Bundestag, and Dieter Janacek, the party’s spokesman on economic issues. The Greens are strong backers of Europe’s Data Protection Regulation, which our speakers noted reflects Germany’s unhappy experience with secret police agencies of the past. Joining us for dinner was Torsten Riecke, an international correspondent for Handelsblatt, who gave our group an insider’s perspective of German domestic politics, as well as its increasingly central role in European politics. The next morning, we drilled deeper into German concerns about data protection and privacy with Marcus Loning of the Stiftung Neue Verantwortung and former Free Democratic Party Member of the German Bundestag.
  • Our group received an insightful briefing on Industrie 4.0—Germany’s equivalent of the “Internet of Things.” As explained by Boris Petschulat, Deputy Director General at the German Federal Ministry for Economic Affairs & Energy, Industrie 4.0 seeks to digitize production without disrupting its finely honed industrial export machine. 
  • We paid a visit to the Federal Association of German Newspaper and Magazine Publishers, which has been battling tech companies, especially Google, over copyrightand content issues. A lively debate ensued with Managing Director Christoph Fiedler and Christoph Keese, Vice President of the Axel Springer publishing empire. For more on this important subject, check out another just-released policy brief by Mandel, Copyright in the Digital Age: Key Economic Issues.
  • Thomas Jarzombek, a member of the German Bundestag, who sits on the committee responsible for the digital agenda, elaborated on the German government’s efforts to build a digital infrastructure and nurture a more entrepreneurial, start-up culture.
  • We finished our mission at the US Embassy in Berlin, where Ambassador John Emerson, a longtime PPI friend, offered a wide-ranging and insightful perspective on US-German relations.

PPI’s Digital Trade Study Group excursions to Europe serve two important purposes. First, they enable key Congressional staff from both parties to get a better understanding of European views on innovation policy, T-TIP, digital trade, privacy, copyright and other interests of mutual concern and transmit that knowledge to Members of Congress.  Second, they underscore to our European friends the importance Congress attaches to transatlantic commerce in general and to data trade specifically.

This year’s mission advanced both of these goals. And it added important new dimensions to the extensive network of European political leaders, industry professionals, and policy analysts that PPI has built over the years. As always, I welcome any feedback you may have. 


Will Marshall
PPI President