issue: Foreign Policy & Defense

NY Daily News: A counterproductive new trade consensus: Democrats need to get responsible on the TPP and other economic pacts

Posted on by The Progressive Policy Institute

After the Republican fear-fest in Cleveland, watching the Democrats in Philadelphia last week was like stepping out of the Dark Ages into the Enlightenment. Donald Trump may have no use for facts, civility or rational argument, but these things still seem to matter to Democrats.

There was, however, a big exception to the rule: trade. Riding a wave of populist wrath, Democrats demonized President Obama’s Trans-Pacific Partnership (TPP) as a gift to the 1% and mortal threat to U.S. workers. It’s a bogus claim, and one that has them sounding a lot like, well, Trump.

TPP is a linchpin of Obama’s strategic goal of “rebalancing” U.S. power and diplomacy. It would combine the U.S. and 11 Pacific nations in a vast free-trade zone that would act as a counterweight to China’s enormous economic might. If the pact goes down, so will our influence in the region, leaving Beijing to call the shots.

Continue reading at New York Daily News.

New Ruling Makes Waves in South China Sea

Posted on by The Progressive Policy Institute

An international court ruled today on a challenge to China’s controversial bid to extend its sovereignty over vast swaths of the South China Sea. The Philippines brought the case to the Permanent Court of Arbitration in The Hague in June 2013, but multi-national disputes over the island chains and surrounding waters date back centuries. In recent years, China has been building islands within an area it’s defined as the “nine-dash line,” and has been claiming control over a 12-mile radius surrounding each of the new landmasses.

The much anticipated ruling, however, may be moot, since China already has declared that it will not adhere to any ruling by the tribunal. Beijing’s truculence underscores the necessity of President Obama’s attempts to “rebalance” U.S. foreign and security policy toward the Asia Pacific. Moreover, the United States is obligated through defense pacts with both the Philippines and Japan to provide military assistance in the region. To vindicate the right of all nations to navigate these waters, the United States sent a missile destroyer last October within the 12-nautical mile zone China has claimed as sovereign waters. The U.S. Navy has continued to sail within the disputed waters, and it recently concluded a major exercise consisting of two carrier strike groups near the Philippines.

The islands themselves appear to be heavily militarized with ports capable of servicing naval vessels and runways long enough to support advanced military aircraft. This militarization has encouraged several countries to seek strategic partnerships with the U.S. This includes Vietnam, which has allowed U.S. naval forces increased access to its deep water ports. The Philippines has invited the U.S. forces back into several military bases for the first time since giving them the boot in the early 1990s. In addition to joint military aid, Washington is seeking to organize a vast free trade bloc that pointedly excludes China. The Trans-Pacific Partnership (TPP) would lower trade barriers while raising labor and environmental standards throughout the region.

Defense Secretary Ashton Carter has strongly supported TPP as a vital soft power complement to America’s military presence in the Pacific. “In fact, you may not expect to hear this from a Secretary of Defense, but in terms of our rebalance in the broadest sense, passing TPP is as important to me as another aircraft carrier,” Carter said. With China already refusing to adhere to any ruling made by the tribunal, the TPP is a potent tool Washington can use to assemble a regional coalition of nations to balance China’s economic and military clout.

While all the TPP countries have a common interest in unfettered access to the South China Sea’s shipping lanes, Brunei, Malaysia and Vietnam, in particular, have competing claims on islands in the region. Additionally, the Philippines has expressed strong interest in joining the trade agreement. If Congress fails to approve the TPP, it would undermine America’s influence in the Asia Pacific and ability to act as a counterweight to China.

With more than half the world’s merchant ships passing through the disputed area, the United States and its Asian allies must not acquiesce in China’s aggressive bid to control the South China Sea. But our security strategy also needs a strong economic component. President Obama rightly envisions the TPP as a way to forge closer commercial and trade relationships with key regional partners and emerging markets like Vietnam. Not only will that make China’s anxious neighbors less susceptible to economic reprisals from Beijing, it will also give Americans access to the world’s fastest growing markets.

The Hill: How ‘Brexit’ would inflame populism abroad – and here in the US

Posted on by The Progressive Policy Institute

The ‘Brexit’ tide at last seems to have hit the sturdy seawall of British common sense. Heading into today’s national referendum, polls show rising support for staying in the European Union.

True, the contest remains a dead heat and could go either way. But the momentum apparently shifted after last week’s shocking murder of Labour Member of Parliament Jo Cox by a man spouting ultra-nationalist slogans. It’s also possible that the impending vote has concentrated U.K. voters’ minds on the sheer implausibility of going it alone in today’s interconnected world.

There’s little doubt where global markets stand on the question. Stocks surged everywhere early this week and the British pound rose as word of the new polls spread. That reaction can only reinforce the “Remain” camp’s argument that detaching from Europe would, on balance, weaken Britain’s economy.

Continue reading at The Hill.

RealClearPolicy: Trump’s Wrong on Trade Policy & Maybe Trade Politics, Too

Posted on by The Progressive Policy Institute

The Washington Post’s Catherine Rampell recently detailed the economic carnage that would result from Donald Trump’s reckless approach to trade — including likely recessions, millions of lost jobs, and higher prices for American consumers.

As we’ve detailed, protectionism is bad economics. But, apparently, it’s been good politics for Trump as well as Bernie Sanders, both of whom used trade-bashing populism to energize angry voters during primary elections, where extreme partisans often play an outsized role. And Trump promises to double down on opposition to trade as he pivots toward November.

As America moves from interminable primaries to the general election, however, Trump — and Hillary Clinton — will face a different political calculus on trade. A new Progressive Policy Institute poll shows that Democratic voters in key battleground states have a broadly positive view on trade — and a more positive one than do Republicans. Crucially, so do the swing voters, who will ultimately determine whether these states go red or blue in November.

Swing voters and voters in battleground states played a decisive role in reelecting Barack Obama in 2012 — and in sending a large Republican majority to Congress in 2014. As detailed in our new poll, conducted by veteran Democratic pollster Peter Brodnitz, these voters also have decidedly different attitudes about trade and America’s role in the global economy.

Continue reading at RealClearPolicy.

The Hill: Geopolitics moves to center stage of Obama trade deal push

Posted on by The Progressive Policy Institute

PPI Senior Fellow and trade expert Ed Gerwin was quoted by The Hill’s Vicki Needham in this article about the Trans-Pacific Partnership.

Ed Gerwin, a trade expert with the Progressive Policy Institute, said that the significance of the strategic issues only became clear to him after he traveled to Japan last fall and spoke with their defense ministers where there are rising concerns about China actions in the South China Sea.

“I think in terms of the TPP there’s a huge geopolitical basis for passing it,” he said.

“TPP influences what kind of China we have commercially,” he said.”

Read the article in its entirety at The Hill.

Press Release: PPI Statement on USITC Report Concerning the Trans-Pacific Partnership

Posted on by The Progressive Policy Institute

FOR IMMEDIATE RELEASE
May 19, 2016

Contact: Cody Tucker, ctucker@ppionline.org, 202-775-0106;
Steven Chlapecka, schlapecka@ppionline.org, 202-525-3931

WASHINGTON—Ed Gerwin, senior fellow for trade and global opportunity at the Progressive Policy Institute (PPI), today released the following statement after the United States International Trade Commission (USITC) released a new report concerning the likely impact of the Trans-Pacific Partnership (TPP) agreement on the U.S. economy:

“The Progressive Policy Institute welcomes the release of the U.S. International Trade Commission’s report on the economic effects of the Trans-Pacific Partnership on the American economy. We are pleased that the Commission’s detailed economic analysis concludes that a U.S. economy with TPP would, overall, see higher growth, employment, and exports as compared to a U.S. economy without TPP, and we look forward to reviewing the report in detail.

“It’s important to recognize—as the Commission itself notes—that the USITC’s cautious economic model does not capture the full economic impact of many of the TPP’s high standard reforms. These include the benefits of stronger protections for U.S. intellectual property, the elimination of trade impediments for many U.S. service providers, and reductions in standards-related barriers to American exports.

“In particular, the Commission’s economic analysis does not fully reflect the potentially substantial economic benefits of two key TPP reforms: (1) the many TPP provisions that establish a modern framework for e-commerce and digital trade, and (2) those that make trade easier, faster, cheaper, and more certain for American small business. As the Commission notes, many observers believe—as we do—that the TPP’s provisions on digital trade are ‘the most transformative measures in the agreement.’

“PPI’s analysis has shown that expanding e-commerce and digital trade has particular potential to ‘democratize’ trade, by making trade easier for small and non-traditional traders. And—when taken together with the TPP’s many advancements for small exporters—the TPP’s digital trade provisions can support stronger growth, better jobs, and new pathways for sharing trade’s benefits more inclusively.

“Finally, the TPP would have benefits beyond those that can be measured in economic terms, including strengthening America’s geopolitical ties around the Pacific Rim and supporting important values—like the rule of law, transparency, and the protection of workers and the environment—that we seek to more fully share with our friends and allies.”

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Argentina: The Road to the App Economy

Posted on by The Progressive Policy Institute

All around the world we are seeing the rise of the App Economy—jobs, companies, and economic growth created by the production and distribution of mobile applications (“apps”) that run on smartphones. Since the introduction of the iPhone in 2007, the App Economy has grown from nothing to a powerful economic force that rivals existing industries.

In this paper we examine the production and distribution of mobile apps as a source of growth and job creation for Argentina. We find that Argentina had roughly 33,250 App Economy jobs as of March 2016.

What’s more, Argentina has the potential to add many more App Economy jobs in the near future. With President Mauricio Macri taking office in December 2015, Argentina began the arduous process of regaining its economic stability after the country’s crippling debt disputes of the prior 15 years.

Macri has made some large strides in normalizing the economy such as lifting currency controls, removing several export taxes, and most importantly, settling the debt dispute. By reaching an agreement with the holdout bondholders, Ar- gentina has regained access to international financial markets, giving Argentines, as well as outsider investors, hope for Argentina’s return to economic stability.

Download “2016.05-DiIonno_Mandel_Argentina_The-Road-to-the-App-Economy”

The Daily Beast: Donald Trump and Bernie Sanders Are Delusional on Trade Policy

Posted on by The Progressive Policy Institute

In this campaign season of populist anger and demagoguery, bad ideas are bubbling to the surface like marsh gas. Among the worst is protectionism, which would wreak havoc on a U.S. economy that’s finally picking up steam.

Both Donald Trump and Bernie Sanders have seized on trade as a convenient scapegoat for the nation’s economic woes. There’s deep irony here. The popular frustrations on which they feed stem mainly from the productivity and wage slump America has experienced since 2000. Yet their proposed fix—shredding international treaties and walling off the U.S. economy—is a textbook formula for economic stagnation.

It’s a perfect negative feedback loop. And it won’t be the “one percent” who suffer if the populists get their way; it will be U.S. companies with global supply chains and millions of middle-class American workers and consumers.

Continue reading at The Daily Beast.

PPI Tackles Tax Disputes in Europe

Posted on by The Progressive Policy Institute

Last week, PPI led a bipartisan delegation of 10 high-ranking Congressional staffers to London and Brussels, which is still grieving in the aftermath of the March 22 terrorist attacks. Our visit there so soon after the atrocity was greeted warmly as an act of transatlantic solidarity.

The Digital Economy Study Group was the third such delegation PPI has taken to Europe in as many years. Our mission is to engage influential government and private leaders in exploring common ways to tackle our mutual dilemma of slow growth and stalled social mobility. We believe more innovation and growth are the best antidotes to the virulent strains of populism that are warping democratic politics on both sides of the Atlantic.

Our trip began last Tuesday in London at 10 Downing Street, where Daniel Korski, deputy head of policy for Prime Minister David Cameron, briefed our delegation on the government’s efforts—including a low-tax patent or innovation box—to encourage greater digital investment in the UK. Then it was on to Westminster, where Tory MP Ian Liddell-Grainger led the group on an entertaining tour of Parliament, which also included a brisk dissection of Britain’s controversial Pay As You Earn (PAYE) tax.

Also at Parliament, Labour MP Meg Hillier, Chair of the Public Accounts Committee, defended the government’s diverted profits tax as a response to public anger over the tax avoidance strategies of international companies. At breakfast the next day, veteran Labour MP John Spellar offered a trenchant analysis of how economic change and slow growth have scrambled British politics and led directly to June’s “Brexit” referendum. At UK Treasury, Financial Secretary David Gauke explained how recent reforms to corporate tax rules have resulted in greater foreign investment and business creation.

On Thursday, we took the Eurostar to Brussels, where the U.S. Mission to the European Union briefed us on difficult aspects of the US-EU economic relationship, including the new “Privacy Shield” agreement, international tax policy, and the TTIP trade pact. At the European Commission’s powerful Competition directorate, the group had a robust exchange of views with officials overseeing “state aid” investigations that have called into question tax agreements negotiated by EU member states and U.S. companies. We expect these issues resurfaced this week when Commissioner Margarethe Vestager visited Washington for talks with Congress and the administration.

Later, officials at DG CONNECT briefed the group on Europe’s efforts to establish a digital single market and plans for “platform regulation” to create space for European tech companies to grow. On Friday, the DG GROW team discussed their wide-ranging efforts to spur entrepreneurship and digital skills building across Europe. The growing gulf between U.S. and European views on tax policy also was the subject of a lunch with Bart Van Humbeeck, economic advisor to Kris Peeters, Vice-Prime Minister of Belgium, hosted by Paul Hofheinz of the Lisbon Council. Our last official meeting was with PPI friend Ann Mettler, Head of the European Strategy Centre, an in-house think tank for EU President Jean-Claude Junker.

These frank and in-depth discussions enabled us and Congressional staff to get a better understanding of the sometimes byzantine workings of the EU, as well as its often different perspectives on issues vital to both sides—privacy and cross-border data flows, digital innovation, trade, tax, copyright and more. The visits also have impressed on our European friends that U.S. policymakers are paying closer attention to such issues. PPI’s hope is to nudge these sometimes contentious conversations to common ground, and strengthen the fraying bonds of transatlantic economic cooperation.

Unleashing Innovation and Growth: A Progressive Alternative to Populism

Posted on by The Progressive Policy Institute

As Americans choose a new president in 2016, populist anger dominates the campaign. To hear Donald Trump or Senator Bernie Sanders tell it, America is either a global doormat or a sham democracy controlled by the “one percent.” These dark narratives are caricatures, but they do stem from a real dilemma: America is stuck in a slow- growth trap that holds down wages and living standards. How to break this long spell of economic stagnation is the central question in this election.

Today’s populists peddle nostalgia for our country’s past industrial glory but offer few practical ideas for building a new American prosperity in today’s global knowledge economy. Progressives owe U.S. voters a hopeful alternative to populist outrage and the false panaceas of nativism, protectionism, and democratic socialism. What America needs is a forward-looking plan to unleash innovation, stimulate productive investment, groom the world’s most talented workers, and put our economy back on a high-growth path. It’s time to banish fear and pessimism and trust instead in the liberal and individualist values and enterprising culture that have always made America great.

Download Unleashing Innovation and Growth: A Progressive Alternative to Populism

PPI WEEKLY WRAP-UP: PPI in Europe, State AGs Abusing Power, & U.S. App Economy Capitol Hill Briefing

Posted on by The Progressive Policy Institute

PPI IN EUROPE: PPI Chief Economic Strategist Dr. Michael Mandel was in Brussels this week, where he was invited to speak at an event on small and medium-sized enterprises (SMEs) and the Digital Single Market. The event was sponsored by the Swedish, Finnish, Irish and Estonian Permanent Missions to the European Union. While there, he and PPI Executive Director Lindsay Lewis held several meetings with the European Commission.

STATE AGs ABUSING POWER: In an op-ed for RealClearPolicy, Phil Goldberg, Director of the Civil Justice Center at PPI, details the evolution of the role of state attorney general over the last 20 years from mere law enforcer to general policymaker:

“Today, both Democratic and Republican AGs use litigation and the powers of the office to regulate. But with this new responsibility comes new opportunities to breach the public trust.

“A particularly alarming development is AGs’ increasing use of private law firms to sue companies under no-bid contracts where the firms get percentages of the settlements or awards. These arrangements were born out of tobacco litigation in the 1990s and have spread to all sorts of actions, leading to several scandals over the connections between AGs and the firms they hire.

“An aggressive way to address the politicization of the state AG is to have the AG selected by the governor, rather than through a popular election where he or she must raise campaign funds. The states that select their chief law enforcement officers this way have seen fewer scandals. For now, though, states should adopt legislation such as [the Transparency in Private Attorney Contract Act] to ensure that law-enforcement actions brought on behalf of the state put the public good above private profits.”

U.S. APP ECONOMY CAPITOL HILL BRIEFING: Please join PPI and TechNet next Thursdayfor a Capitol Hill breakfast briefing on “App Economy Jobs in the United States.” The event will feature remarks by Congressman Mike Bishop (R-MI), followed by a panel discussion featuring:

  • Dr. Michael Mandel, Chief Economic Strategist, PPI
  • Terry Howerton, CEO, TechNexus Venture Collaborative
  • Ron Klain, Executive Vice President & General Counsel, Revolution, LLC
  • Linda Moore, President & CEO, TechNet
  • Brendan Peter, Vice President, Global Government Relations, CA Technologies
  • Karl Rectanus, CEO, Lea(R)n
Thursday, March 3, 2016
10AM to 11:30AM
2226 Rayburn House Office Building
 
RSVP to rsvp@technet.org

PRESS RELEASE — PPI President: Law Enforcement Has Not Met Burden of Proof on Encryption

Posted on by The Progressive Policy Institute

WASHINGTON—PPI President Will Marshall today released the following statement after a U.S. federal magistrate ordered Apple to help the Federal Bureau of Investigation unlock the encrypted iPhone of one of the San Bernardino shooters:

“The Progressive Policy Institute has long advocated a forceful U.S. response to the threat of jihadist terrorism. With the rise and spread of the so-called Islamic State, that threat has grown more acute than ever. That’s why we are usually inclined to give U.S. intelligence, military and law enforcement agencies the benefit of the doubt when they seek new tools to keep us safe.

“However, a federal court’s demand that Apple weaken encryption for its iPhones gives us pause. For many Americans, it may seem intuitively obvious that law enforcement should be able to ‘unlock’ a dead terrorists’ cellphone. But weaker encryption wouldn’t just apply to terrorists and criminals; it would jeopardize the privacy of any American with a smart phone.

“What’s more, other governments would doubtless follow Washington’s lead in demanding that phone makers develop software to help them get around encryption. We don’t want to endanger human rights and democracy activists around the world by giving dictators and authoritarian regimes new tools for surveillance and repression.

“We recognize that there is always a trade-off between privacy and security. To justify exposing the private communications of citizens to government scrutiny, U.S. security agencies would have to offer compelling evidence that gathering data from smart phones is essential to defusing the terrorist threat.  In our view, they have yet to meet this burden of proof.”

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WSJ: Small Businesses With a Big Stake in the Pacific Trade Deal

Posted on by The Progressive Policy Institute

During the seven years that the Trans-Pacific Partnership was being negotiated, critics repeatedly claimed that the trade agreement wouldn’t be about trade or cutting tariffs but, instead, would primarily advance the special interests of large multinationals. Economist Joseph Stiglitz, for example, warned that the TPP could “benefit the wealthiest sliver of the American and global elite at the expense of everyone else.”

The negotiations are now over, and the full text of the agreement, released on Nov. 5, tells a different story. Notably, the agreement includes groundbreaking provisions that better enable smaller businesses to prosper by exporting to the 12 countries that are in the partnership. The growing markets in these countries account for some 40% of the global economy.

Ninety-eight percent of America’s 300,000 exporters are small or medium-size enterprises (SMEs)—firms with fewer than 500 employees. Together they account for about a third of the $1.6 trillion in annual goods exports. And because only 5% of SMEs currently export, there’s a significant potential for growth.

Small businesses account for almost two-thirds of America’s net new jobs and—according to economists—are essential building blocks for economic mobility. Smaller firms that export are especially prolific creators of good jobs for diverse groups. Census Bureau data show that the average American women-owned exporter, for example, employs five times more workers and pays an average salary almost $17,000 more than women-owned non-exporters. Similarly, minority-owned exporters employ three times more workers and pay nearly $16,000 more.

Continue reading at the Wall Street Journal.

RealClearPolitics: What Obama Must Do in Syria

Posted on by The Progressive Policy Institute

Syria has become Barack Obama’s Iraq—a foreign policy debacle rooted in faulty assumptions about the utility of American power. Where George W. Bush overstated what U.S. military intervention could achieve in Iraq, Obama has underestimated the risks and costs of non-intervention in Syria.

The analogy will rankle many progressives, as well as conservative “realists” who have praised Obama’s doctrine of U.S. restraint. But any administration’s policies must be judged by their results, not the elegance of their conceptual underpinnings. And the results of Obama’s decision to stand aloof from the Syrian crisis have gone from bad to worse.

Despite declaring early on that Syrian dictator Bashar al-Assad must go, Obama in 2012 overruled his national security team — including then-Secretary of State Hillary Clinton — which urged him to train and equip moderate Syrian rebels not allied with jihadists groups. Having decided the previous year to pull all U.S. troops out of Iraq, Obama was not about to get sucked into Syria.

But power vacuums invite trouble, especially in the combustible Middle East. The Syrian caldron soon boiled over, morphing into a regional conflict as Iran and Hezbollah rushed to Assad’s rescue, while Saudi Arabia and Arab states came to the aid of Sunni rebels. Then came the hard-core Islamists of al-Qaeda and the even more fanatical spinoff, the Islamic State (commonly called Daesh), which proclaimed a new caliphate centered in Raqqa.

Continue reading at RealClearPolitics.

The Trans-Pacific Partnership and Small Business: Boosting Exports and Inclusive Growth

Posted on by The Progressive Policy Institute

With the release of the full text of the Trans-Pacific Partnership (TPP), America now has an important—and extensive—opportunity to review the agreement’s actual terms. Critics are certain to reprise old arguments, including those that blame trade for economic disruptions whose origins often lie elsewhere. And they’ll offer newer criticisms, including the claim that TPP isn’t really about trade or cutting tariffs but, rather, is a scheme to advance the agenda of large multinational corporations.

This latest charge will likely be news to the hundreds of thousands of small and mid-sized American firms that currently export—and the growing numbers of small entrepreneurs who are seeking greater opportunity through trade. America’s smaller exporters will note that the TPP has made small business trade a key point of emphasis, and that it includes groundbreaking provisions to boost their ability to export to key TPP markets.

Increasing exports by U.S. small business can also be a vital opportunity to promote stronger—and more inclusive—economic growth. Small and medium-sized enterprises (SMEs) that export have higher sales, hire more employees, and pay higher wages than non-exporting SMEs. And because exporters account for only about one percent of all U.S. SMEs, America has significant untapped potential to support growth, good jobs, and economic mobility through increased small business trade.

But to meet this potential, it’s vital for the United States to reduce the extensive and often onerous foreign trade barriers that often keep SME traders on the sidelines. High duties and costs, customs red tape, unnecessarily complex regulations, and other barriers negatively impact American exporters of all sizes, but they can loom particularly large for small entrepreneurs that lack the resources, personnel, contacts, and extensive support networks of bigger competitors.

In this policy brief, we first review the TPP agreement and explain how it would eliminate significant trade barriers to U.S. small business and enable more American SMEs to prosper by exporting to fast-growing Asia-Pacific markets. We then highlight how the TPP’s support for small business trade can play a vital, broader role, helping to boost the overall economy and “democratizing” trade by assuring that trade’s significant benefits are shared more widely by more Americans.

Download “2015.11-Gerwin_The-Trans-Pacific-Partnership-and-Small-Business_Boosting-Exports-and-Inclusive-Growth”

 

Quartz: The TPP could help tiny companies become global exporters

Posted on by The Progressive Policy Institute

Ed Gerwin, PPI Senior Fellow for Trade and Global Opportunity, was quoted by Ana Campoy of Quartz talking about the importance and influence of Obama’s proposed Trans-Pacific Partnership:

Aside from the lower tariffs that are part of any run-of-the-mill trade agreement, TPP has a whole chapter on international e-commerce, and another on small- and medium-sized companies. The specific provisions of the pact have not been released yet, but a public summary of its contents shows that the TPP ‘could be potentially transformative,’ Ed Gerwin, a trade expert at the Progressive Policy Institute, tells Quartz.

For example, the treaty promises to speed up the process of getting merchandise across borders by making import rules more easily accessible and transparent. If the agreement is approved, express packages would be expedited and customs officials would be encouraged to adopt time-saving measures such as electronic forms and signatures.

‘That stuff is a big deal,’ says Gerwin. ‘Having uniform rules is really important.’”

Read the article in its entirety at Quartz.