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Marshall for CNN: Suddenly Britain looks like Italy

Posted on May 6, 2015 by The Progressive Policy Institute

Staid old Britain suddenly looks more like Italy. No less than seven parties are vying for seats in the parliamentary election taking place Thursday, a contest that has underscored the unraveling of any national consensus around certain fundamental assumptions about Britain’s role in Europe, its special relationship with the United States and even its own political cohesion and identity. But perhaps what’s most distressing about the campaign debate, from a trans-Atlantic perspective, is its utter insularity.

On Prime Minister David Cameron’s watch, Britain’s customary global role seems to be shrinking before our eyes. Indeed, London has been absent from the Ukraine crisis and has played only a marginal role in the U.S.-led campaign against ISIS. Meanwhile, to the consternation of UK military chiefs, Cameron reportedly refused to guarantee defense spending would not sink below the NATO-recommended threshold of 2% of gross domestic product. Britain’s army is reportedly set to be smaller than it was in Napoleonic times.

“David Cameron has presided over the biggest loss of influence for our country in a generation,” charges Ed Miliband, the main opposition Labour Party leader. While chiding the government’s “pessimistic isolationism,” however, Miliband seems likely to disappoint those looking to revive Anglo-American ties. His outlook on foreign policy seems to be an amalgam of soft multilateralism and post-Iraq wariness of security cooperation with Washington. Indeed, when challenged to show he is tough enough to confront Vladimir Putin, Miliband instead cited his opposition to President Barack Obama’s calls for strikes on Syria in response to chemical attacks on civilians. “I think standing up to the leader of the free world shows a certain toughness,” he said.

Continue reading at CNN.

Gerwin for Republic 3.0: The Digital Economy, Trade Agreements and the 99 Percent

Posted on May 5, 2015 by The Progressive Policy Institute

Who benefits from trade deals like the Trans-Pacific Partnership (TPP)?

Critics—like Joseph Stiglitz and Senator Elizabeth Warren—charge that these agreements would primarily help the world’s one percent. Stiglitz, for example, claims there’s a real risk that TPP will “benefit the wealthiest sliver of the American and global elite at the expense of everyone else.”

But a rapidly growing segment of the 99 percent—entrepreneurs, small businesses, and consumers who trade globally on the Internet—likely sees things differently. For these newly empowered traders, the TPP—and pacts like the Transatlantic Trade and Investment Partnership (TTIP) and the Trade in Services Agreement (TiSA)—can play a critical role in supporting their businesses by writing new rules that promote and protect electronic trade.

Continue Reading at Republic 3.0.

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

Posted on May 4, 2015September 18, 2024 by The Progressive Policy Institute

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.

Playing Digital Catch-Up with the US-The Wrong Way

Posted on May 3, 2015September 18, 2024 by The Progressive Policy Institute

If you are losing a race because of a pebble in your shoe, do you take the pebble out, or do you trip your competitor?

European digital entrepreneurs have a problem, a big one. The so-called single market—the biggest economic achievement of the European Union—has turned out to be anything but single when it comes to digital goods and services. A wide variety of outmoded national rules and restrictions hamper cross-border ecommerce within Europe. It’s as if a resident of New York couldn’t buy online from a website based in New Jersey, or had to pay a higher price, or couldn’t get packages shipped.

As a consequence, European digital start-ups have struggled to gain critical mass. Indeed, old-line incumbent European firms have often lobbied to keep these restrictions in place, fearing, quite correctly, that European digital competitors would force down prices and undercut their cozy control over national markets.

But now many European politicians and business leaders are realizing that this defensive strategy was short-sighted. American firms such as Google, Apple, Amazon, and Facebook have leapt ahead in the digital race, fueled by a combination of innovation, better access to capital, and a larger home market.

So what’s the solution? The European Commission, lead by President Jean-Claude Juncker, is mounting a full scale effort to create a “Digital Single Market”. On May 6th the Commission will come out with its proposals for removing the barriers that stop European firms and startups from offering digital services across European borders—in effect, removing several of the pebbles hobbling European digital competitors.

Unfortunately, recent news articles indicate that the European proposals will also make an attempt to trip competitors—in this case, US tech giants. Rumored measures, which may not make it into the final proposal, call for starting the process of regulating large digital platforms–such as Google search, Facebook, eBay, Etsy, Skype (owned by Microsoft), Amazon shopping, and the iTunes store–as public utilities.

It’s not hard to understand the motivation of European politicians here. They see the success of the American tech companies, and want to make sure their tech sector companies have a chance to catch up. Moreover, they fear, with little evidence, that unsupervised digital platforms will exercise market power.

The problem is that by combining the Digital Single Market with intense regulation of the most innovative and successful companies, European bureaucrats are sending a message to their own companies and startups: “Innovation is not welcome in Europe. Success is not welcome in Europe.”

The Digital Single Market is essential for the success of the European economy. But it should be built on the principles of openness and encouragement of innovation, not higher levels of regulation that will discourage growth.

Huffington Post: Science, Not Politics, Should Drive Trade and Regulatory Decisions

Posted on April 30, 2015 by The Progressive Policy Institute

The Obama administration issued a stinging rebuke of the European Union’s decision this week to allow countries in Europe to “opt-out” of U.S. imports of genetically modified (GM) foods and feed. The U.S. Trade Representative said that such a rule “ignore[s] science-based safety and environmental determinations” that modifying crops in laboratories is no more harmful than traditional cross-breeding crops in the fields. Yet, in today’s hyper-politicized culture, the regulatory process in the United States is also often hijacked by special interest groups that subvert science in favor of their own emotional “narratives” that can be deeply misleading.

Modern advances in food science, both in how we produce and deliver food, have become key battlegrounds in the science versus fear-mongering debate. On the production side, GM foods can offer a much-needed path to feeding the world’s population. In the United States, the Food and Drug Administration (FDA) and the Environmental Protection Agency (EPA) have carefully studied GM foods and found them safe. The lack of any scientifically valid concerns, though, has not stopped special interest groups from seeking federal and state laws requiring that GM foods be labeled. Also, as much as the federal government may want to cast aspersions, the USDA has held up approval of modified salmon despite clear science that such fish are safe.

The politicization of the federal regulatory process takes on a whole new level, though, when one federal agency funds special interest studies that undermine another agency’s scientific conclusions key to federal regulations. This has been happening with bisphenol-A (BPA), which has been used since the 1960s to coat metal food cans to stop germs from growing in the cans that can be harmful to consumers. It has long been well understood that BPA molecules can migrate from the packaging to the food, and the FDA regulates BPA as an indirect food additive.

Here, the global community is united. The FDA, along with the European Food Safety Authority, Health Canada, and the World Health Organization, has studied BPA extensively and found its use in food containers to be safe. These groups have grounded their decisions in science. In short, they have found that humans rapidly metabolize BPA and that any BPA ingested is excreted in urine. Since 2000, though, National Institutes of Health (NIH) has funded $172 million in research of BPA. Many grants have gone to scientists supported by the same groups that oppose GM foods regardless of science — Greenpeace, Natural Resources Defense Council, and others. Not surprisingly, these scientists produce studies critical of BPA.

In response to alarmist reports, a subcommittee of the FDA’s science board recommended in 2008 that the agency re-examine the scientific basis for approving BPA. Last year, the FDA completed a four-year review of more than 300 scientific studies and once again found no evidence that BPA is harmful to humans when used in food containers and packaging. The broader scientific community found the studies critical of BPA to be fundamentally flawed. At this point, NIH must stop funding scientifically questionable studies or it will risk harming the American government’s credibility to be stewards over important scientific issues.

The tactic of trying to influence regulations by undermining science is not unique to food science or any political party or cause. Several years ago, reproductive rights groups rightly called foul when the FDA, under pressure from conservative activists, held up the Plan B over-the-counter pill despite science proving the drug’s safety and effectiveness. We saw what happened with the measles outbreak last year when libertarians across the political spectrum refused to follow regulations based on sound science that children be immunized from certain diseases, including the measles.

Progressives who believe in a strong regulatory regime should follow the U.S. Trade Representative’s sentiment and oppose the use of junk science to undermine the credibility of federal regulations. Since Vice President Gore’s Reinventing Government efforts in the 1990s, progressives have grabbed the pragmatic position in the debate over appropriate levels of government regulation. Federal agencies should get smart on an issue, develop targeted regulations, and effectively facilitate commerce while assuring appropriate protections.

As technology advancements continually push against our political and moral boundaries and regulatory agencies grow their footprints, it becomes increasingly important that science, not politics drive regulatory decisions. Especially when it comes to life’s basics needs, such as finding ways to make food more plentiful and less expensive, if scientific facts become undermined for political expediency, the most vulnerable people among us will lose.

This piece was cross-posted on The Huffington Post.

Tech Opportunity for Minorities and Women: A Good News, Bad News Story

Posted on April 30, 2015 by The Progressive Policy Institute

Can tech jobs be a source of economic opportunity and upward mobility for an increasingly diverse American population?

Yes—consider two key facts about the labor market recovery, both of which show the potential for tech jobs to empower communities and bring shared prosperity.

First, since the recovery began in 2009, tech has created almost as many jobs for college graduates as healthcare. Tech jobs, here defined as all computer and mathematical occupations across industries, include computer systems analysts, network architects, and statisticians. Over 2009-2014, these tech jobs added about 730,000 college-educated workers. By comparison, healthcare occupations—which include everything from doctors and nurses to lab technicians and therapists—added 787,000 workers with a college degree.

This near parity in tech and healthcare job creation is significant given healthcare has long been regarded as the most dependable force for job creation. A growing and aging U.S. population, alongside rising medical costs, are widely seen as keeping healthcare jobs in high demand.

Second, we find that college-educated blacks and Hispanics have benefited enormously from the tech jobs boom. From 2009 to 2014, blacks with a college degree gained slightly more tech jobs than healthcare jobs—employment rose by 79,000 in computer and mathematical occupations (a 58% increase), compared to 76,000 gain in healthcare occupations (an 18% increase). The number of Hispanics with a bachelor’s degree increased by 104,000 in the healthcare occupations (a 40% increase), not so far ahead of the 81,000 gain in computer and mathematical occupations (an impressive 103% increase).

Indeed, the opportunity tech jobs are creating for non-Asian minorities defies conventional stereotypes. That’s because the tech/info jobs boom is much broader than in Silicon Valley. Tech jobs are increasingly found across all industries and the country. Tech jobs are in finance, education, and government, and urban tech clusters are forming in U.S. cities such as New Orleans, New York, and Denver.

Download “2015.04_Mandel-Carew_Tech-Opportunity-for-Minorities-and-Women_A-Good-News-Bad-News-Story/”

London Shines in Tech/Info Employment; The Rest of the UK Struggles

Posted on April 23, 2015 by The Progressive Policy Institute

Approximately one year ago, I undertook a study of the London tech/info economy, together with Dr. Jonathan Liebenau of the London School of Economics. In that study, titled “London: Digital City On The Rise,” we showed that London’s tech/info performance compared favorably with the other two major global tech hubs, New York and San Francisco/Silicon Valley.^{^[i]} Our analysis ran through 2013.

In this brief note, I update some of the earlier results to include 2014. As before, I focus on what I call the tech/info economy, rather than the conventional tech sector. The tech/info economy has three legs—Internet, telecom, and content. The first leg, Internet, includes companies such as Google, Facebook, LinkedIn, and other search, social media, and cloud companies. The second leg, telecom, includes household names such as BT and Verizon, as well as global companies such as Level 3 Communications and Akamai. The third leg, content, includes television, movies, music, games, and publishing companies, as well as new giants such as Netflix.

The reason for combining the three legs into one group is that their boundaries have become increasingly permeable. Internet companies provide more and more telecom-like services directly, as well as hosting and creating content. Many telecom companies are content producers as well. Meanwhile, content companies have seen more and more of their content be delivered by the Internet, leading them to often be major employers of tech workers. (The exact definition of the tech/info sector is found in the 2014 paper.)

Here are some of the key results of the update:

Since 2010, when David Cameron took office, London tech/info employment has risen by 23%. That compares favorably to New York City’s 16% tech/info gain for the same period. However, tech/info employment in the San Francisco/Silicon Valley region rose by 31% over the same period.^{^[ii]}
The top three regions for tech/info employment in the United Kingdom are London, the South East (including Oxford) and the East (including Cambridge). Together the combined London-East-South East regions employ more tech/info workers than California (808,000 tech/info workers versus 721,000 tech/info workers in California as of 2014). Since 2010, tech/info employment in the combined London-East-South East regions grew by 21%, compared to 15% for California. ^{^[iii]}
Outside of the combined London-East-South East regions, tech/info employment has grown by only 2% since 2010 (see chart below). Tech/info employment in the United Kingdom has become increasingly concentrated since 2010.

Endnotes

^{^[i]} Michael Mandel and Jonathan Liebenau, “London: Digital City on the Rise,” South Mountain Economics LLC, 2014. https://southmountaineconomics.files.wordpress.com/2014/06/london-digital-city-on-the-rise.pdf

^{^[ii]} For this comparison, I am comparing London with New York City and the combined San Francisco/San Jose metropolitan statistical areas. My analysis does not include the computer and electronic product manufacturing industry, which employs a substantial number of people in California but is not growing.

^{^[iii]} As previously noted, these figures do not include the computer and electronics products manufacturing industry in California. Add in this industry would increase the size of employment, but lower the growth rate.

Download “2015.04-Mandel_London-Shines-in-Tech-Info-Employment.pdf”

Don’t Ban Zero-Rating in India

Posted on April 23, 2015September 18, 2024 by The Progressive Policy Institute

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.

The Hill: Pelosi’s choice: Obama or left?

Posted on April 21, 2015 by The Progressive Policy Institute

Ed Gerwin, PPI Senior Fellow for Trade and Global Opportunity, was quoted in the The Hill on how Nancy Pelosi is confronting a conundrum on trade as she walks a delicate line between the president she champions and the caucus she leads:

Ed Gerwin, a trade expert with the Progressive Policy Institute, a rare liberal group that supports the fast-track bill, said Pelosi’s reticence is bolstering Obama’s hand.

“Whether or not she ends up as a supporter, what she has been doing is very helpful in trying to get to yes, on trade,” Gerwin said. “What Pelosi has been doing, combined with the significant efforts by Wyden in the Senate, may allow Democrats to put more of a stamp on trade and may help some members keep an open mind on TPA and eventual trade deals.”

Read the piece in its entirety at The Hill.

CNN: Why trade is in the national interest

Posted on April 17, 2015 by The Progressive Policy Institute

Withstanding intense pressure from anti-trade “progressives” — an oxymoron if ever there was one — Sen. Ron Wyden, D-Oregon, has struck a deal with Congressional Republicans to move a bipartisan trade promotion authority bill.

Wyden’s display of grit is good news for the cooling U.S. economy, which needs a lift from export-led growth; for American workers, who need the jobs and rising pay that come with rising exports and stronger growth; and for President Barack Obama, who needs the authority to complete negotiations over three major trade pacts and get them through Congress.

Wyden is a staunch liberal, but one with an independent streak who’d rather solve problems than strike poses. But committing acts of political leadership is dangerous in Washington these days, and Wyden can expect more abuse from “populists” within his own party. That’s a shame, because the Oregon Democrat has actually moved trade promotion authority (TPA) in a more progressive direction.

Continue Reading at CNN

PPI Returns from 2015 Digital Trade Mission to Europe

Posted on April 15, 2015September 18, 2024 by The Progressive Policy Institute

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 Mandel, Taxing 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.

Sincerely,

Will Marshall
PPI President

The Hill: Is it that hard for a party to hold the White House for three terms?

Posted on April 15, 2015 by The Progressive Policy Institute

Going into 2016, Democrats seem to face a daunting challenge in holding the presidency for a third consecutive term. Indeed, this feat has only been accomplished once since 1950, when George H.W. Bush succeeded the highly popular Ronald Reagan in 1988. However, a closer look at the historical record may give Democrats more reason for hope.

Looking back, long runs of single-party dominance were once the norm in American politics. Republicans won four consecutive terms between 1896 and 1908, and three more in the 1920s. The Democrats then had a five-term juggernaut from 1932 to 1948.

Granted, this was a long time ago, and these streaks followed turning-point elections that produced enduring political realignments heavily favoring one party over the other, namely Republicans after 1896 and then Democrats after 1932. In recent decades, the two major parties have been more evenly matched and have more regularly alternated in the White House.

Continue reading at The Hill.

Should the US consider a patent box?

Posted on April 13, 2015September 18, 2024 by The Progressive Policy Institute

Who will write the new rules of the global tax system? Right now risk-averse bureaucrats at the OECD’s Paris headquarters are busily constructing a new set of tax principles–known as the ‘BEPS project’–that could accidentally squash global growth, as we warned in our recently released policy brief, “Taxing Intangibles: The Law of Unintended Consequences.”*

Instead, the rulebook for 21^st century global tax policy must be written by those policymakers, in the US and elsewhere, who understand the importance of risk-taking and investment in innovation. This imperative drives the United States to consider concepts such as the “patent box,” a tax instrument that discourages tax avoidance by large corporations while encouraging the creation of growth-enhancing knowledge.

The “patent box”—or as it is sometimes called, the “IP box” or “innovation box”—is already in use by countries such as the United Kingdom and the Netherlands. It gets its name from the idea that companies invest in research and development that leads to patents. These patents are metaphorically put into the patent box, where they are taxed at a lower rate. Sometimes the preferential rates are broadened to other types of intangible investments, which is why it sometimes goes by a different name.

The underlying economic insight behind the ‘patent box’ is the indisputable fact that global growth is increasingly driven by knowledge, in the form of patents, copyrights, data, and other intangibles. Unfortunately, the rising importance of intangibles means current tax rules are simultaneously too strong in some aspects and too weak. On the one hand, statutory tax rates on intangibles is almost certainly too high. Remember that the investment in knowledge by one company or country spills over to other companies and countries, creating a positive externality for the whole global economy. As a result, many economists agree that intangibles should be taxed at a lower rate to acknowledge their benefits.

On the other hand, under the current rules, the same virtues of intangibles that enable global growth also enable knowledge companies to easily transfer nominal ownership of intangibles to subsidiaries in low-tax countries. The combination of high statutory tax rates and easy transfers means that corporations have both an incentive and the means to legally and dramatically cut their taxes.

This state of affairs cannot persist. Faced with political and fiscal pressure, governments will take aggressive steps to bring in more tax revenues. Indeed, the BEPS project is advocating that governments give up long-held notions of tax sovereignty to “capture” the income from intangibles, even if these measures end up hurting global growth. Unfortunately, as we showed in our paper, the tax approach advocated by the BEPS project is ultimately self-defeating, requiring enforcement of a tortuous set of transfer pricing rules every time an intangible crosses national borders—an approach that only a bureaucrat could love.

For US policymakers looking to spur growth, one better solution to this dilemma—though not the only one—is the patent or innovation box. In simple terms, the patent box offers corporations much lower tax rates on income from investment in intangibles such as R&D. In return, this lower tax rate is only available to intangible investments made in that country—what tax experts call a ‘nexus.’

A patent box offers corporations both a carrot and a stick. The carrot is the lower tax rate on the income from domestic investments in intangibles made in the United States. The stick is that this lower rate would not be available to companies that moved nominal ownership of intangibles to other countries, thus reducing the avenues for legal tax avoidance.

Many countries in Europe have already adopted varieties of the patent box approach, including the United Kingdom. However, the patent box in the UK and elsewhere has come under pressure from supporters of the BEPS approach, who believe that such “preferential regimes” should be eliminated or greatly restricted.

By contrast, we believe that the patent box should be seriously explored in the United States as a means of encouraging growth while discouraging corporate tax avoidance. It may not be the ultimate solution, but it’s one step in the right direction.

*BEPS stands for Base Erosion and Profit-Shifting. It’s a major OECD project for reworking the global tax system for the digital age. The BEPS project has many good points, in terms of reducing the opportunities for tax avoidance, but it may have a negative impact on global growth.

Copyright in the Digital Age: Key Economic Issues

Posted on April 13, 2015 by The Progressive Policy Institute

The bounds of traditional copyright are being stretched and broken by technological change. The ease of digital copying, combined with new forms of creativity and production, including 3D printing, is transforming the copyright landscape at an accelerated pace.

Creators, companies, and governments need to think clearly about which goal or goals of copyright is the most important to them, and move towards a system that supports those goals. Speaking in the broadest terms, copyright establishes the right of an author or creator to control and benefit from his or her artistic endeavor. Yet what is society trying to achieve by granting such a right?

There is no better time to consider this fundamental question. The European Commission, under President Jean-Claude Juncker, has put a high priority on creating a Digital Single Market, which among other things would replace national copyright systems with a single EU system. Meanwhile, over the next several months, the European Parliament will be considering a draft report that offers up its own version of an EU-wide copyright system.

Simultaneously, American and European T-TIP negotiators are talking about how to harmonize intellectual property protection across the Atlantic, which could affect copyright as well. And national governments in Germany and Spain extended their copyright systems in recent years for the explicit—and ultimately unsuccessful—purpose of charging Google News and other sites a fee for running snippets of stories from national newspapers.

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