Testimony from Edward Gresser House Judiciary Committee Subcommittee on Courts, Intellectual Property, and the Internet
June 6, 2023
Mr. Chairman and Mr. Ranking Member,
Thank you very much for inviting me to testify at this morning’s hearing on intellectual property, innovation, and the U.S. competition with China, focused on the World Trade Organization and its decision on waiver of patent obligations for COVID-19 vaccines and potentially for “diagnostics and therapeutics” related to COVID-19.
By way of introduction, I am Vice President of the Progressive Policy Institute (PPI) here in Washington, D.C., a 501(c)(3) nonprofit research institution established in 1989 and publishing in a wide range of public policy topics. Before joining PPI, I served at the Office of the U.S. Trade Representative from 2015 to 2021 as Assistant U.S. Trade Representative for Policy and Economics, with responsibility for overseeing USTR’s economic research and use of trade data, chairing the interagency Trade Policy Staff Committee, and administering the Generalized System of Preferences. This period coincided with the beginning of the COVID-19 pandemic in December 2019 and extended through the initial WTO discussions on a temporary waiver of some elements of the 1994 TRIPS agreement relating to COVID vaccines.
The hearing poses some important questions. Specifically, how does the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) relate to U.S. interests in innovation and technological progress? Was the Biden administration correct to support a waiver of some of the TRIPS patent provisions for COVID-19 vaccines? Will this be to the advantage of China vis-à-vis the United States? I can summarize my view of this in four points.
A generation of technological innovation, infrastructure deployment, and generally good policy have combined to create a global digital world of 5.3 billion people. The Biden administration recently produced a report, “Declaration on the Future of the Internet,” outlining the vision of the future — one with free flows of information, high-quality consumer protection, economic growth, and liberty preserved.
Today, the Progressive Policy Institute (PPI) released a new report “Digital Trade 2023: The Declaration, The Debates, and the Next Global Economy,” detailing how the Biden administration’s vision is correct, but highly contested across the world. Report author Ed Gresser, Vice President and Director for Trade and Global Markets, provides recommendations on how the administration can achieve its vision and contribute to the next generation’s growth and digital liberty.
“A strong digital trade agenda is both a contributor to growth and American leadership, and a chance to shape the next-generation world economy in the spirit of liberty, inclusion, and American values,” said Ed Gresser.
The report makes the following policy recommendations:
An idealistic and ambitious approach in the 15-country “Indo-Pacific Economic Framework” (IPEF), that provides a future vision more attractive than authoritarian alternatives resting on free flows of data, opposition to forced localization of server and data, strong consumer protection, non-discriminatory regulation, anti-spam and anti-disinformation policies, cyber-security, and broad-based growth through encouragement for open electronic commerce.
A strong response in the U.S.-EU Trade and Technology Council (TTC) to European Union attempts to create discriminatory regulations and taxes targeting American technologies and firms.
Defense of U.S. values in the U.N., WTO, and other venues against “digital sovereignty” campaigns by China and others that endanger the internet’s multi-stakeholder governance, normalize large-scale censorship and firewalling, and generally place the political fears and policy goals of authoritarian governments above the liberties of individuals.
Supporting responsible governance of technology and politely but firmly pushing back on attempts either at home or internationally to demonize technological innovation and American success.
The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C., with offices in Brussels, Berlin and the United Kingdom. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.
In the single generation since the launch of the internet, a generation’s worth of scientific research and technological innovation, infrastructure deployment, and generally good policymaking has taken a small set of computer networks operated by academics, business researchers, and government scientists, and turned into a global digital world of 5.3 billion people. Associated with this has been an enormous leap forward in individual liberty, in global prosperity, and in new policy challenges. Looking ahead with its allies and partners last year, the Biden administration helped produce a vision of the future. This is the “Declaration on the Future of the Internet,” which, in a brief two and a half pages, illuminates a possible version of the next the digital world: one of freer flows of information, higher-quality consumer protection, enhanced economic growth, and liberty preserved.
Their vision is right, but it is highly contested — in part by authoritarian governments seeking to restore or strengthen controls over their publics (or even, at least in part, other countries’ publics), and in part by often friendly countries mistakenly believing that their own technological leadership might depend on diminishing that of the U.S. tech industry. The administration can help achieve its vision, and in doing so contribute to the realization of the Declaration’s vision, through four steps:
1. An idealistic and ambitious approach in the 15-country “Indo-Pacific Economic Framework” (IPEF), that provides a future vision more attractive than authoritarian alternatives resting on free flows of data, opposition to forced localization of server and data, strong consumer protection, non-discriminatory regulation, anti-spam and anti-disinformation policies, cyber-security, and broad-based growth through encouragement for open electronic commerce.
2. A strong response in the U.S.-EU Trade and Technology Council (TTC) to European Union attempts to create discriminatory regulations and taxes targeting American technologies and firms.
3. Defense of U.S. values in the U.N., WTO, and other venues against “digital sovereignty” campaigns by China and others that endanger the internet’s multi-stakeholder governance, normalize large-scale censorship and firewalling, and generally place the political fears and policy goals of authoritarian government above the liberties of individuals.
4. Supporting responsible governance of technology and politely but firmly pushing back on attempts either at home or internationally to demonize technological innovation and American success.
Expectations are sky-high for Ukraine’s coming counteroffensive against Russian invaders. Following the loss of Bakhmut, Kyiv hopes to regain the military initiative and break out of a grinding war of attrition that plays to Moscow’s big advantage in manpower.
In the next round, Ukraine’s forces will have a decided qualitative edge to offset Russia’s seemingly bottomless well of cannon fodder. They’ve received an infusion of top-line tanks, air defense systems and other advanced weapons from the United States and Europe, as well as combined arms training that will help them dictate the terms of battle.
On top of that, Ukraine’s defenders have exhibited superior morale and tactical ingenuity on the battlefield. While few military experts think the offensive will end the war, significant gains by Ukraine could have large political repercussions in Moscow, Washington and European capitals.
FACT: India is now the world’s most populous country.
THE NUMBERS: Annual deaths to natural disasters* –
World population
17.5%
World GDP
3.0%*
World goods/services exports
2.2%
* Exchange-rate basis, IMF estimate. The alternative purchasing-power parities calculation gives a GDP share of 5.9%.
WHAT THEY MEAN:
One day towards the end of April, or perhaps in the early days of May, a handful of births and a few memorial services left India (by the U.N.’s estimates) passing China as the world’s most populous country. (Bharat 1.427 billion; Zhongguo 1.426 billion.) A couple of India-in-the-world observations at this point of transition:
1. People: India’s 1.427 billion people represent a bit more than one in six of the world’s 8 billion. Apart from being a shade above China’s now-gently-declining population, the total is (a) about equal to the population of continental Africa, and (b) 200 million more than the 1.24 billion of all high-income countries combined. Put another way, seven of India’s 28 states and Union Territories would be among the world’s 20 most populous countries.
2. Economy:Indian GDP, now fifth-largest in the world after passing France in 2019 and the U.K. in 2020, is about $3.7 trillion and growing at 5.9% by IMF estimates this year. This puts India at about 3% of the $105 trillion world GDP (with the U.S. at $26.9 trillion, China $19.4 trillion, and the EU $17.8 trillion). Perhaps still modest in comparison to population, but growing faster than all 19 of the other top-20 world economies this year (and also faster than 49 of the world’s top 50, just shaded by the Philippines’ 6.0%). International Monetary Fund forecasters see enough sustained growth for India to reach $5 trillion in 2027, passing both Germany and Japan that year.
3. Trade flows: India’s presence in trade flows remains particularly small. As of 2021, India’s $395 billion in goods exports made up 1.8% of a $22.4 trillion world total, at par with Spain and the United Arab Emirates. Its $240 billion in services exports draws a lot of attention and is in fact larger, but still is only 4% of the $6.0 trillion world services-export total. Some of this reflects geography — particularly the constant turbulence and frequent border closures with Pakistan — but not all; it’s hard to find explanations outside policy for India’s very small trading relationships with the ASEAN and the East African countries on its east and west.
4. Trade policy: India’s contemporary trade diplomacy inherits powerful swaraj (“self-sufficiency”) instincts, and (at least in the view of two generations of frustrated American trade negotiators) puts more energy toward import limits than export goals. As of 2022, India’s tariff rate is the highest among the 164 WTO members — 18.3% by simple applied average according to the WTO’s World Tariff Profiles 2022, or 12.6% by trade-weighted average. India is also the WTO’s most enthusiastic anti-dumping user, with 775 anti-dumping penalties reported from 1995 through 2022, about a sixth of the 4,463 total known worldwide. One index of the consequences is India’s modest overall share of trade; another one is the particularly low level of trade with neighboring countries — about 3% of ASEAN’s goods exchanged, and 5% of sub-Saharan Africa’s. India’s place in services trade is, however, larger — 4.0% of exports, slightly above India’s GDP share but probably still below potential.
The IMF’s World Economic Outlook database tracks and estimates GDP in dollars and by growth rates, imports and exports, and lots more, for all countries.
The WTO reviews Indian trade policy now (or more precisely January 2021; new review coming next year).
The Arthasastra, an encyclopedia-type Sanskrit work traditionally ascribed to the Maurya empire’s 4th century B.C. political fixer Kautilya, has a reasonable claim to be not only the world’s oldest political guidebook but also the oldest trade-policy manual (or even the first think-tank product, translating in English to 800 pages on war, administrative organization, tax, natural resource management, and more, complete with bullet-point format). Quick samples:
As a strategist and diplomat, Kautilya has a pessimistic, probably overly reductive premise: any bordering kingdom is your enemy; any neighbor of that kingdom, so long as it doesn’t also border you, is your natural ally. As a human resources theorist, he’s practical and not much inhibited by conventional scruples: “Those who are cruel, lazy, and devoid of any affection for their relatives shall be recruited as poisoners.” On the other hand, K. takes a sensible view of natural resource management (designate state forests and limit their exploitation for wood), and views consumer protection as an important government responsibility. His trade advice is precise, profit- and growth-minded, and divides easily into three parts:
(a) Trade facilitation: A wise ruler will appoint officials responsible to keep international trade routes “free from obstruction by courtiers, state officials, thieves, frontier guards, and herds of cattle.” (Note the assumption that the main obstructors are likely to be the king’s own greedy officials.) Also, set up marketplaces in towns and at crossroads to ensure access to imports.
(b) Import promotion: Importers should get special privileges as suppliers of essential goods. Kautilya recommends (i) exempting the early-India equivalent of the retail and wholesale sectors from taxes imposed on people selling only locally-produced goods, and (ii) allowing them to make 10% profits as opposed to the 5% cap for local business. Offsetting this, he recommended a 20% ad valorem tariff — coincidentally, almost identical to the 18.3% “simple average applied” tariff the WTO reported for India last year — with the uncharacteristically sentimental exceptions of duty-free treatment for goods meant for weddings, dowries, and religious occasions.
(c) Export policy: Here Kautilya is cautious, apparently reflecting the relatively poor information available to rulers about foreign markets and likewise the high level of physical risk involved in moving valuable stuff past the border. Kings should authorize exports, he says, but only careful investigation shows that (i) their likely selling price would bring a profit after netting out the costs of shipbuilding, harbor and/or road fees, tariffs, and payoffs to royals in the receiving kingdom, or (ii) that exports would bring some other (unstated) “economic, political, or strategic” advantage. He forbids exports of metals, armor, weapons, or other national security assets, and advises a strong armed guard for outbound caravans.
The WTO’s Tariff Profiles 2022 catalogs tariff rates in 145 countries and economies around the world. These can go into great detail — simple average bound, “non-agricultural,” peaks, etc. A first approximation (using “simple average applied”) looks like this, with Iran and Sudan as the highest-tariff countries in the list (and perhaps the world) to Hong Kong and Singapore among five zero-tariff economies:
… Or direct to a count of anti-dumping penalties by country, each year from 1995-2022 and with the full 28-year totals.
ABOUT ED
Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.
Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.
Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.
Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.
Paul Bledsoe, Strategic Advisor at the Progressive Policy Institute (PPI), released the following response in reaction to the permitting reforms included in the reported agreement-in-principle to raise the debt ceiling.
“PPI supports the permitting reforms included in the budget agreement, including tighter deadlines for environmental impact statements, designation of lead agencies, and other improvements we recommended in PPI’s major report on permitting reforms last fall. We therefore urge adoption of these reforms by Congress.
“But far more extensive reforms will be needed to expedite the thousands of new energy projects that are pending approval, and to reduce both consumer costs and emissions in the long-term. These reforms include provisions to more quickly and cost-effectively build large electric power lines, natural gas and other pipelines, wind and solar projects, advanced nuclear power, electricity storage, and many other energy technologies. We look forward to working with Congress and the Administration to pass these additional and urgently needed reforms into law.”
The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.
It was a perfect spring Sunday in Kyiv and the city’s cafés were filled with people laughing in the sunlight.
Inside the Pinchuk Art Centre, the mood was different — quiet, focused, somber — but it too was filling with visitors eager to see an exhibition of works by young Ukrainian conceptual artists.
Their pieces were mostly responses to the war, many steeped in pain and loss.
Yet of all the places, people could be spending a spring Sunday in a country at war, these visitors were choosing a museum.
Ben Ritz, Director of the Progressive Policy Institute’s Center for Funding America’s Future, released the following statement on the reported agreement-in-principle to raise the debt ceiling:
“Congress should immediately pass the debt limit increase and budget compromise negotiated by President Biden and Speaker McCarthy.
“On the one hand, this package does not represent our ideal policy. The decision to freeze spending only on domestic discretionary programs is backwards. This part of the budget funds critical long-term public investments in infrastructure, education, and scientific research. Meanwhile, taking both increased revenues and any cuts to other programs that comprise 85% of non-interest spending off the table in negotiations leaves our budget on a clearly unsustainable path. It is, at best, a punt on tackling our fiscal challenges.
“But on the other hand, this compromise is currently the only plausible way to take the threat of defaulting on the national debt off the table for the remainder of President Biden’s first term. Congress must pass it now, and in the future, lawmakers should seek out a better mechanism for encouraging fiscal discipline without calling into question our government’s constitutional obligation to repay its debts.”
PPI has consistently condemned the GOP’s efforts to take the full faith and credit of the United States hostage to extract ideological policy concessions. It has also supported the bipartisan Responsible Budgeting Act to end debt limit brinkmanship and create more sensible mechanisms for encouraging fiscal discipline.
PPI’s Center for Funding America’s Future works to promote a fiscally responsible public investment agenda that fosters robust and inclusive economic growth. It tackles issues of public finance in the United States and offers innovative proposals to strengthen public investments in the foundation of our economy, modernize health and retirement programs to reflect an aging society, and transform our tax code to reward work over wealth.
The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C., with offices in Brussels, Berlin and the United Kingdom. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.
Despite its role in supporting a $7.1 trillion transatlantic digital economy, the legal mechanism which allows for U.S.-EU data flow continues to face a high level of scrutiny by the European Union. The result has been the excessive targeting of American companies which — in order to preserve the ability of American businesses to operate in European markets at all — must be swiftly addressed by the Biden Administration by carrying out the steps outlined in President Biden’s October 2022 Executive Order.
A decision by the European Data Protection Board this week creates a fresh sense of urgency for implementing a new U.S.-EU data flow agreement. Following an inquiry into American company Meta’s compliance with European data protection standards, the Board ordered Meta to cease data transfers between the U.S. and EU. It also levied a retroactive fine of 1.2 billion euros for the period in which data transfers were occurring under a legal mechanism that, until this decision, had been deemed valid by the EU.
The decision further complicates an already tricky legal landscape for companies that transfer data across the Atlantic. Prior to 2020, American businesses relied on the Privacy Shield agreement to legally transfer personal data compliant with EU law. But that year, the EU’s Court of Justice declared the Privacy Shield to be invalid. Among other concerns, the Court held that the agreement gave too much leeway to the U.S. government to access data while failing to provide European citizens with appropriate redress should they want their personal information erased. This decision left more than 5,300 companies, large and small, which relied on the agreement, to conduct transatlantic trade without a clear path to compliance with the EU’s data protection rules.
However, the 2020 decision did leave intact the ability for companies to use an alternative legal mechanism called Standard Contractual Clauses (SCCs) — pre-approved, standardized data protection clauses in compliance with the EU’s data privacy law, GDPR. Though the Biden administration wants to replace the Privacy Shield with an updated Data Privacy Framework, a deal negotiated with the European Commission in March 2022, SCCs have provided a legal means for businesses to continue data transfers in the meantime. Still, it is essential that the Framework be quickly implemented so that the United States can receive an adequacy decision from the EU, which would provide a broad legal basis for data transfers between the United States and the EU, rather than relying on a business-by-business basis.
That’s why this week’s Meta decision is so troubling. The European Data Protection Board determined that the SCC mechanism failed to address the risks to the fundamental rights and freedoms of data subjects identified by the Court of Justice in striking down the Privacy Shield. This creates a monumental risk for other American companies, thousands of which currently engage in data transfers supported by SCCs. Though Meta was the first to face investigation, this decision opens the door for a litany of ex-post fines for adhering to agreements that are currently recognized by the EU as valid.
Equally troubling is the potential impact on the European digital sector. The Court’s decision continues a pattern of layer after layer of new EU regulations that seem almost intentionally designed to discourage U.S. digital companies from investing and operating in Europe. But in the modern global economy, cross-border transfers of innovation and risk capital are essential for boosting productivity growth. From this perspective, systematic barriers to transatlantic data transfers will likely undercut tech innovation in Europe, with no evidence that the regulation of American companies has spurred growth of European tech firms.
Making matters worse is that this decision makes it unclear whether any company using SCCs is acting in compliance with GDPR, since the issues cited are a matter of the United States’ lack of data protection laws and concerns about the intelligence communities’ access to personal information. This means any company currently transferring personal data to and from the EU could be exposed to large ex-post fines.
There are immediate actions that could be taken by the Biden Administration to address this risk. In October, President Biden signed an Executive Order outlining steps the U.S. must take to implement U.S. commitments under the proposed European Union-U.S. Data Privacy Framework. Given this week’s decision by the European Data Protection Board and its severe implications for American companies, the Biden Administration must prioritize the implementation of the Framework. Without U.S.-EU data flows, we risk a fractured global market for digital services and the deterioration of U.S. companies’ ability to participate in transatlantic digital trade.
It was an unmarked, unprepossessing building on the outskirts of Zaporizhzhia, a dusty industrial city in the heart of Ukraine that is all but sure to see intensified fighting when Kyiv’s anticipated counteroffensive begins. The wounded soldiers were crammed into a warren of tiny rooms, but the trio of musicians, also fighting-age men in fatigues, found places to stand between beds and began playing—first a rousing song with dirty lyrics making fun of Russians, then a string of haunting ballads full of melancholy and longing.
The hospital was the first stop on a two-day trip I took earlier this month with Cultural Forces, a collective of Ukrainian entertainers now devoting themselves full-time to boosting morale on the front lines. A world away from the Hollywood stars who entertained mass rallies in World War II Europe and Vietnam, Cultural Forces sends a handful of soloists—on my trip, an acoustic guitarist, a violinist and a keyboard player, plus two amateur poets—to play in gritty, intimate settings like hospitals and mess halls.
On this episode of the Mosaic Moment, PPI’s State and Local Political Director Reid Fauble sits down with Sahar Fathi, Policy Director for the Washington State Attorney General’s office and Mosaic Project Alum to discuss her role in the Washington State AG’s office, why the legislative work and policy initiatives of state and local legislative chambers matter, and how state and local governments will serve as the new frontier of shared democratic values.
FACT: Corruption is a large factor in the global economy, but one with few verifiable statistics.
THE NUMBERS: U.S. “corruption perception” ranking, Transparency International –
2022 24th
2020 28th
2017 16th
WHAT THEY MEAN:
Corruption is notoriously difficult to track and measure: hidden from the public for obvious reasons, slippery to define, perhaps meaning one thing in government and other things in businesses, unions, media, nonprofits, etc. Those hoping to put numbers on it find it still harder to get anything very reliable. Even the White House’s June 2021 Memorandum on Establishing the Fight Against Corruption as a Core United States National Security Interest wound up passing on a long-debunked data point. (“It has been estimated that acts of corruption sap between 2% and 5% of global gross domestic product.” See below for a look at the origins of this statistic.) But though particular numbers and definitions may dissolve under examination, broad definitions, general observations, and case studies alike suggest that the White House’s view of corruption as a security threat is well-founded. Three useful approaches:
(1) Definitions – Corruption beyond bribery and crimes: William Riordan’s Plunkitt of Tammany Hall (1905), an admiring/appalled biography-in-interviews of an early 20th century NYC political boss, explains why actual bribery (and by extension other crimes) aren’t always the right things to look for. “With the grand opportunities all around for a man of political pull,” says Plunkitt, “there’s no excuse for stealin’ a cent.” He viewed taking a bribe as the high-risk, low-reward act of a fool, because the big money was in low-risk, high-reward insider deals. Plunkitt made himself rich through perfectly legal purchases of land he knew NYC would later designate for city parks, which he then sold to the city at much higher prices a few months later. As a more sinister and security-linked modern counterpart, look perhaps to the high-pay, low-work sinecures and Board consultancies Russia’s state energy and mining firms were giving out to retiring Western politicians during the 2010s.
(2) A general approach – Corruption shifts wealth and reduces long-term growth: The IMF’s Paolo Mauro (2021) looks at ways in which corruption can shift taxation and spending, and (over time) eat away at long-term growth and development. He reports that governments in low-corruption countries collect about 4% of GDP more in tax revenue than governments in high-corruption countries, and that in practical terms this suggests that if high-corruption governments reduced corruption rates to those of their low-corruption counterparts, they would gain perhaps $1.25 trillion in revenue. This wouldn’t be “lost,” or “sapped” from global GDP, but would presumably move away from mansion-building and tax-haven accounts to public investment. Moreover, Mauro observes, lower-corruption governments use revenue differently (spending somewhat less of their money on defense and public works and somewhat more on education and public health), and get more growth for the money:
“Grand corruption is usually associated with complex and costly projects such as construction and defense equipment. By comparison, it is harder to collect bribes on teachers’ and health care workers’ wages. As a result, spending on education and health is likely to be lower where corruption is high, making it less likely that worker productivity and living standards will improve.”
(3) A case study – Corruption and the erosion of state legitimacy: In Thieves of State (2015), Sarah Chayes draws on ground-level experience to explain how province- and federal-level corruption hollowed out attempts to build a representative government in Afghanistan, prefiguring the fall of the state:
“Officeholders who had to recoup the money they’d spent buying their jobs would request assignments in zones where cash flowed. Senior officials, anticipating the sums to be collected, would not try too hard to fill billets in impoverished rural districts. … An absence of integrity in the system meant that this late in the game [2009] constructive men and women had been stripped out – and by now might want to stay clear. ‘No one would dirty his hands getting near this government,’ a Kandahar-area farmer exclaimed to me once.’”
In conclusion: The White House might have been a bit quick to pass on an interesting data point. But it’s probably right to view corruption as a national security threat, and to think about ways to do better.
FURTHER READING:
Policy:
The White House’s June 2021 Memorandum designating corruption as a national security threat.
… and from this past March, Treasury Secretary Yellen updates.
Analyses and examples: IMF analyst Paolo Mauro estimates that governments lose about $1 trillion in tax revenue to corruption.
Sarah Chayes’s prescient Thieves of State: Why Corruption Threatens Global Securityanalyzes the fall of democratic Afghanistan six years before it actually happened.
Where did the White House figure come from? To refresh, the June 2021 Memorandum asserted that: “it has been estimated that acts of corruption sap between 2 and 5 percent of global gross domestic product.” Others — the U.N. Secretary General, academic analysts, etc. — had used variants of this before, often adding a figure of “$2.6 trillion” to the percentage. A January 2021 note by the World Bank’s Anti-Corruption Resource Center tracked this back through a quarter-century of quotations and extrapolations, to a 1998 speech on money laundering (a different though related topic) by then-International Monetary Fund Managing Director Michel Camdessus. Camdessus had cautiously suggested that the ratio of annual laundering flows to global GDP might be 2% to 5%. A separate organization appears to have inappropriately converted this in 2008 from a “flow” to a “net cost to global GDP” and derived the $2.6 trillion in losses from it. (World GDP in 2007 was $58 trillion.) The WB group’s plea: “No organisation or advocate should cite this statistic under any circumstances.”
The WB fact-checks 10 frequently cited corruption stats, and finds not even one of them usable.
… a similar error from the UN Secretary-General (2018).
… and a depressing coda, in which the WB press office encourages lazy tweeters to forward a short sentence that seems more likely to aggravate the problem than to warn over-eager analysts away. (“A popular estimate is that more than $2.6 trillion, or 5% of global GDP, is lost to corruption annually around the world.”) Another approach:
What then might be a useful measurement? One very well-known approach is that of Transparency International, a 30-year-old NGO which else publishes an annual Corruption Perceptions Index. This is a kind of global opinion poll asking how corrupt the respondents think various governments and institutions might be. Their most recent edition, released in January 2023 and covering perceptions as of late 2022, ranks 180 countries. It places Denmark, Finland, and New Zealand at the very top; North Korea, South Sudan, and Somalia at the bottom; and India exactly in the middle. The U.S. is in 24th place. This is an improvement from the 28th-place ranking of 2020, enough to America’s anti-corruption image above those of Taiwan, Bhutan, Chile, and the United Arab Emirates, but still well below the 16th-place ranking in the 2017 Index (and only sixth among the G-7 countries). TI’s summary suggests that the U.S.’ not-entirely-savory reputation reflects perceptions less of corruption in state/federal bureaucracies or of private-sector businesses than of a deteriorating political system:
“The [U.S.’] lack of progress on the CPI [Corruption Perceptions Index] can be explained by the persistent attacks on free and fair elections, culminating in a violent assault on the U.S. Capitol, and an increasingly opaque campaign finance system.”
Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.
Ed returns to PPI after working for the think tank from 2001-2011. He most recently served as the Assistant U.S. Trade Representative for Trade Policy and Economics at the Office of the United States Trade Representative (USTR). In this position, he led USTR’s economic research unit from 2015-2021, and chaired the 21-agency Trade Policy Staff Committee.
Ed began his career on Capitol Hill before serving USTR as Policy Advisor to USTR Charlene Barshefsky from 1998 to 2001. He then led PPI’s Trade and Global Markets Project from 2001 to 2011. After PPI, he co-founded and directed the independent think tank Progressive Economy until rejoining USTR in 2015. In 2013, the Washington International Trade Association presented him with its Lighthouse Award, awarded annually to an individual or group for significant contributions to trade policy.
Ed is the author of Freedom from Want: American Liberalism and the Global Economy (2007). He has published in a variety of journals and newspapers, and his research has been cited by leading academics and international organizations including the WTO, World Bank, and International Monetary Fund. He is a graduate of Stanford University and holds a Master’s Degree in International Affairs from Columbia Universities and a certificate from the Averell Harriman Institute for Advanced Study of the Soviet Union.
A new AP poll found that only 31% of Americans approve of President Joe Biden’s handling of the economy, a result both shocking and familiar. Shocking because no modern president has received such poor marks during a period of very low unemployment and a growing economy. But it is also familiar because it shows Democrats have a chronic political problem regarding the economy: Many voters don’t trust them on economic issues even though Democratic presidents have demonstrably better records of producing job growth, income improvements and avoiding recessions.
As research has found, of 17 recessions over the last century, 13 began under Republican presidents, including all of the biggest: the Great Depression and the major recessions of 1981, 2007 and 2020. The last Democratic recession occurred more than four decades ago.
Why don’t voters believe it? One problem is that the far-left of the Democratic Party reflexively indulges in anti-business rhetoric, and often in policies, led today by the Sen. Bernie Sanders (I-Vt.) wing of the party. If you spend time bashing the very companies that produce most jobs, growth and wealth, it should come as no surprise that most Americans don’t trust you to help the private sector be more productive. So, while issues like income inequality are important to address, as recent Biden legislation helped do, condemning the private sector as a political strategy often ends up backfiring.
Elan Sykes, Energy Policy Analyst at the Progressive Policy Institute (PPI), released the following response in reaction to the New Democrat Coalition’s bipartisan permitting reform proposal.
“Combatting the climate crisis requires the ability to swiftly build and deploy massive new infrastructure and technology, without a thicket of federal and state regulations that slow the transition and in many cases even penalize cleaner technologies relative to fossil fuels. The Progressive Policy Institute has long advocated for updates to the existing regulatory framework to better reflect the impact and benefits of clean energy technologies for the climate and the U.S. economy.
“PPI supports the New Democrat Coalition’s proposal, which builds on successful, existing reforms while highlighting the need for ambitious modernization of the National Environmental Policy Act (NEPA) and specific new reforms for electricity transmission to place it on par with rules for natural gas. In September, PPI released policy recommendations for permitting reform legislation and is pleased to see those recommendations included in the New Democrat Coaliton’s plan.
“Securing permitting reforms will not only help address climate change with the proper urgency, but it will also lower household energy costs for American families in a time of concerning inflation. Congress must take effective, bipartisan action to break through this outdated, bureaucratic red tape and let America build.”
The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.
Last week, the Los Angeles Department of Transportation held a press conference and ribbon-cutting ceremony to launch its latest facility: a bus shade and lamp roughly the size of a streetside parking sign called “La Sombrita.” Pictures displaying the device showed an internet eager for Sombrita content and its limited ambitions (see the viral chatter on Twitter and TikTok), as it provides little or no shade at certain times of day and the lamp is pointed so it doesn’t even illuminate its surroundings:
The Los Angeles Department of Transportation (LADOT) and Kounkuey Design Initiative (KDI), the nonprofit behind La Sombrita’s design, explicitly acknowledge that the structure was specifically designed for situations where permitting delays, agency conflicts, or narrow sidewalks prevent the installation of street trees or traditional bus shelters with a roof and seating. Indeed, highlighting these constraints may have been the most valuable contribution that La Sombrita makes to the Los Angeles bus system, because these limitations are self-imposed, or at the very least, stem from a narrow political vision that must be widened for cities to govern effectively through coming challenges.
Despite the humorous tone of the discussion — and La Sombrita certainly deserves the jokes at its expense — the issues of shade, nighttime lighting, and general infrastructure needs for pedestrians and bus users are all quite serious business. Bus riders — often low-income workers using current American bus systems as a mode of last resort — are forced to wait for infrequent service under the scorching sun with nowhere to sit, and without coverage from street trees like those common in richer neighborhoods. The structure’s lamp was included to meet an identified need for better lighting to help provide security for women against the risk of gendered violence. Narrow sidewalks and poor maintenance hurt all users, but they make any further obstruction especially difficult for people with mobility disabilities to pass by. And for the public and planet at large, infrastructure that improves low-emissions transportation methods like buses and walking will be increasingly important to us all as climate change continues to raise temperatures and reduce cloud cover in a brutal feedback cycle.
Adopting programs like these in the U.S. will never succeed if every program is launched as an expensive pilot project forced to jump through the hoops of countless agencies’ rules and forced through tortuous process requirements. U.S. cities aiming for ambitious progress on climate, mobility, and equity should be applauded for the results they achieve rather than the ideals they profess in service of overpriced half-measures. A comprehensive and forward-looking mode of urban governance does not require spending lavish sums on vanity projects but should instead focus on:
Enabling real infrastructure deployment by streamlining the permitting process, consolidating and coordinating across separate agencies, and empowering agencies to buy and implement off-the-shelf components faster and cheaper.
Ending land-use restrictions on urban density including zoning, setbacks, and parking requirements that limit shade from buildings and disperse destinations to inhibit walking and bus transport.
Treating pedestrian and bus infrastructure investment on par with other transport modes.
Encouraging wider adoption of solar shading and cooling facilities in hot and warming cities.
If America’s cities get out of their own way with unnecessary requirements and limitations to embrace a vision of livable and vibrant cities, the next $200,000 spent on urban infrastructure will go much further than La Sombrita.
Malena Dailey, Technology Policy Analyst at the Progressive Policy Institute (PPI), released the following response in reaction to the U.S. Supreme Court’s rulings in Gonzalez v. Google and Twitter, Inc. v. Taamneh, leaving intact Section 230 of the Communications Decency Act, the legal framework through which websites are able to host third-party content.
“PPI has consistently argued any changes to the landmark Section 230 statute must consider the potential risks to American innovation and the digital ecosystem, including in an amicus brief filed in the case of Gonzalez v. Google.
“Since Section 230’s inception, the internet has been a platform for entrepreneurship, advocacy, and community, empowered by the ability for individuals to lift up their voices online. The preservation of Section 230 is a win for American innovation and the growing digital economy — all of which have spurred American job growth in the last several decades.
“There is a clear need for moderation of content users post on online platforms. While there may be room to update content liability to reflect the harms of the modern internet, any changes must keep in mind the integral role Section 230 plays in the development of an ever-growing digital ecosystem.”
The Progressive Policy Institute (PPI) is a catalyst for policy innovation and political reform based in Washington, D.C. Its mission is to create radically pragmatic ideas for moving America beyond ideological and partisan deadlock. Learn more about PPI by visiting progressivepolicy.org.
