Ed Gerwin, PPI Senior Fellow for Trade and Global Opportunity, talks with NBC4’s Conan Nolan about recent trade votes in the House of Representatives and the future of trade agreements.
issue: Foreign Policy & Defense
LeBron James and the Do-Something Democrats: Support for Democrats In the Arena on Trade
In this year’s NBA Finals, LeBron James cemented his reputation as one of the greatest basketball players of all time—becoming the first player in Finals history to lead both teams in points, rebounds, and assists in every game, and averaging an astounding 35.8 points, 13.3 rebounds, and 8.8 assists for the six-game series.
In addition to his basketball prowess, Lebron is also a student of oratory and leadership. When faced with criticism and second-guessing, he’s frequently cited Theodore Roosevelt’s 1910 address on “Citizenship in a Republic,” popularly known as the “Man in the Arena” speech. Like Roosevelt, LeBron believes that:
“The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, and comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds. . . . “
In Washington’s ongoing trade battles, there’s a group of Democratic House Members and Senators who are displaying the type of grit and determination that both TR and LBJ would almost certainly admire. These are the 28 House Democrats and 14 Democratic Senators who’ve voted to advance Trade Promotion Authority (TPA) legislation, often in the face of intense criticism from anti-trade forces.
These Democrats support a forward-looking trade agenda that includes critical priorities for progressives, including strong and enforceable labor and environmental standards, and new rules to protect innovation, to assure open digital commerce, and to “democratize” trade for small business and consumers. As pro-growth Democrats, they understand that increased trade can tap a burgeoning global middle class and help power more inclusive economic growth for middle class Americans.
These Democrats are also realists—and doers. They understand that writing modern rules for liberal trade is a messy and often-thankless task that requires hard work and perseverance. They appreciate that trade is always a negotiation and recognize the need for principled compromise among Congressional colleagues, the Administration, foreign governments, and the many and varied interests that make up America’s economic and social fabric.
While these Democrats know that they won’t achieve everything they seek, they also believe that it is vital to stand with the long line of Democrats—from FDR and Truman to JFK and Bill Clinton—who have progressively built an increasingly effective rules-based trading system that has fostered global peace and prosperity, lifted millions worldwide out of poverty, and continues to deliver substantial benefits to all Americans.
Many Democrats who have opposed TPA say that they support increased trade and stronger trade rules, and that they want to achieve the best deal for America. These TPA critics may be sincere, but they often offer only nebulous ideas on how to achieve these important ends.
Pragmatic, do-something Democrats, on the other hand, recognize the Trade Promotion Authority offers the only realistic, near-term means of achieving the outcomes that so many Democrats claim to want. They know that our negotiating partners will never table their best and final offers to open markets or raise standards without TPA. And they understand that the United States will never achieve anything meaningful in trade if our trading partners must effectively negotiate with 535 members of Congress. This is especially so after last’s week’s spectacle in which labor and anti-trade groups prevailed on House Democrats to kill worker adjustment assistance—a six-decade Democratic priority—in a cynical bid to scuttle TPA and the overall trade agenda.
Pro-trade Democratic Members understand that key portions of the progressive coalition, including Democrats (58%), millennials (69%), Hispanics (71%), and mayors, believe that trade deals are good for the United States. But they’re not asking Americans to sign a blank check for new agreements. Under the leadership of Senator Ron Wyden, Congressman Ron Kind, and others, they’ve worked hard to assure that TPA includes unprecedented new transparency provisions, including the requirement that the text of any new trade deal be posted on the Internet for months before it is ever brought to a vote.
In a news conference before the NBA Finals, LeBron offered a pithy addendum to his favorite Roosevelt quote. When asked to guarantee a championship, LeBron said that he could only guarantee that “we will play our asses off.”
It’s time for Democrats who say they support expanded trade and progressive rules to get off of the sidelines—and to join the do-something Democrats who are “in the arena” sweating and striving towards those vital goals.
The Washington Post: Three of Obama’s biggest fights are about to be decided
PPI Chief Economic Strategist Michael Mandel was quoted in The Washington Post regarding the impact of the OECD’s BEPS rules on U.S. jobs and tax revenue:
An international tax agreement could draw companies out of the United States, writes the Progressive Policy Institute’s chief economic strategist, Michael Mandel. “You probably haven’t heard of the BEPS project — but you soon will. Short for Base Erosion and Profit Shifting, the BEPS Project… changes the international tax rules by forcing companies to pay corporate taxes according to the location of the economic activity and value creation generating their profits. … Remember that most European countries already have substantially lower corporate tax rates than the United States does. … Under the proposed BEPS rules, though, the only way for American companies to take advantage of these lower rates in a European country would be to prove to tax authorities that they are engaged in value creation in that country. And the simplest way to show the location of value creation is to move jobs to that country.” The New York Times.
Read the piece in its entirety at The Washington Post.
NEWSMAX: Mandel: Obama’s Support of Global Tax Reform Is Big Loser for US
PPI Chief Economic Strategist Michael Mandel was quoted in NEWSMAX regarding the impact of the OECD’s BEPS rules on U.S. jobs and tax revenue:
The Obama administration backs the project to ensure that more corporate tax payments enter the government’s coffers. “But as the project heads for its end-of-year deadline … nobody in Washington is paying attention to a simple fact: the United States lost, and lost big,” Mandel writes in the New York Times.
“BEPS rules will likely not generate more tax revenues for the United States. Instead, they will encourage American companies to quickly move high-paying jobs, such as those of research scientists and software developers, to Europe to take advantage of lower tax rates.”
Without quick corporate tax reform by Congress, BEPS could “turn into an enormous job-and-revenue grab by Europe, and an enormous loss of jobs and revenues by the United States,” Mandel argues.
Read the piece in its entirety at NEWSMAX.
PRESS RELEASE: A Moment of Truth for Pro-Growth Progressives on Trade
WASHINGTON–Ed Gerwin, Senior Fellow for Trade and Opportunity at the Progressive Policy Institute, today released the following statement prior to a vote on Trade Promotion Authority in the House of Representatives:
“Opening overseas markets to U.S. exports is integral to putting America back on a high-growth trajectory. PPI therefore urges pro-growth progressives to support President Obama’s major trade initiatives. To conclude trade agreements that advance U.S. interests, this President, like any president, needs Trade Promotion Authority (TPA). What’s more, TPA enables Congress to identify its key objectives for U.S. trade policy.
“As PPI has detailed in recent reports on the Obama Administration’s trade agenda and open digital trade, new U.S. trade agreements can make vital progress on issues that are important to Democrats and progressives. They can, for example, tap a growing global middle class to fuel more inclusive American economic growth, strengthen and expand the reach of rules on labor rights and environment protection, and ‘democratize’ trade by empowering entrepreneurs, small businesses, and consumers to more directly participate in and benefit from global commerce.
“TPA would provide a fairer and considerably more open process for considering new trade agreements, and would obligate future administrations—both Democrat and Republican—to pursue other progressive priorities in future trade agreements, as well. Without TPA and the important new trade initiatives that it would enable, other countries—particularly China—would have much greater influence in setting global trade norms that fail to reflect high standards or progressive goals.
“Key Democratic and progressive constituencies support TPA and new trade agreements. In endorsing TPA, the U.S. Conference of Mayors has emphasized that expanding trade is critical for good jobs in America’s metro areas, which depend on exports for fully one-third of their economic growth. And, according to recent opinion surveys, Democrats (58 percent), millennials (69 percent), and Hispanics (71 percent) all believe that free trade agreements are, on balance, good for the United States.
“PPI applauds those House Democrats who have stood up forthrightly for liberal trade and TPA. As the House takes up TPA tomorrow, we hope others also will reject the spurious arguments and bullying of anti-trade activists who yearn for the industrial landscape of the 1970s and imagine that Americans can prosper in isolation from the rest of the world.”
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The BEPS Effect: New International Tax Rules Could Kill US Jobs
Tax avoidance by multinationals, and the creative use of loopholes, has long been part of the international tax system. Governments have usually responded with targeted measures to close those loopholes. But after the Great Recession, many national governments faced extraordinarily tight budgets and huge debt burdens. It was therefore especially galling for politicians in the United States and Europe to see large profitable multinationals such as Google, Apple, and Starbucks apparently paying less than their “fair” share of taxes.
In response, in 2013 the finance ministers of the world’s largest countries—the group known as the G20—and the OECD initiated a sweeping reassessment of the global tax system known as the “Base Erosion and Profit Shifting” (BEPS) Project. The OECD tax experts at the BEPS Project, based in Paris, were told to develop a set of principles to “ensure that profits are taxed where economic activities generating the profits are performed and where value is created.”What’s more, they were also told to finish their work on an accelerated schedule, by the end of 2015.
It is now the middle of 2015, and the broad outlines of the new BEPS principles are becoming clear. This paper examines these new principles, as laid out by the BEPS project, and analyzes their likely impact on tax revenues and jobs. We find that unless Congress and the Obama Administration act quickly to reform the U.S. corporate tax system, the BEPS principles give multinationals a very strong incentive to move high-paying creative and research jobs from the United States to Europe.
Download “2015.06-Mandel_The-BEPS-Effect_New-International-Tax-Rules-Could-Kill-US-Jobs”
PPI Applauds Senate Passage of TPA
PPI applauds the Senate for passing Trade Promotion Authority and taking a key step in assuring that America continues to be a global leader in crafting strong, progressive trade rules that will help grow our economy and support good jobs—while also advancing important American values.
As PPI has detailed in recent reports on the Administration’s trade agenda and open digital trade, new U.S. trade agreements can make vital progress on issues that are important to Democrats and progressives. They can, for example, tap a growing global middle class to power more inclusive American economic growth, expand the reach of strong rules on labor rights and environment protection, reform past agreements like NAFTA, and “democratize” trade by empowering entrepreneurs, small businesses, and consumers to more directly participate in and benefit from global commerce.
TPA would provide a fair and more open process for considering new trade agreements, and would obligate future Administrations—both Democrat and Republican—to pursue these and other progressive provisions in future trade agreements, as well.
Finally, today’s vote illustrates the leverage that pro-growth, pro-trade Democrats can exercise in trade debates. As trade legislation moves to the House, PPI urges Democrats to continue to work constructively to build smart, progressive policies that enhance America’s global competitiveness. In addition to support for TPA, these efforts should include a comprehensive program of reform—in education, training, innovation, infrastructure, and more—like that proposed in the New Democrat Coalition’s American Prosperity Agenda. Unlike reflexive opposition to new trade initiatives, this approach will assure that America—and more Americans—can share in the significant benefits of global growth.
The Blame Game: Multinational Taxation in an Era of Knowledge
U.S.-based companies such as Google, McDonalds, Starbucks, Apple, and Mi-crosoft are being attacked by European politicians for not paying their fair share of taxes. For example, in March 2014 Google was hit by a French tax assessment of perhaps as much as a billion euros according to press reports at the time. In November 2014, U.K. lawmakers accused Google, Amazon, and Starbucks of us-ing convoluted accounting methods to reduce their tax liabilities.
Indeed, the feeling that U.S. multinationals—especially digital giants—are ‘getting away with something’ has fueled a concerted effort by developed countries to re-write the global tax system. This so-called BEPS project (for Base Erosion and Profit Shifting), organized by the OECD, is in the process of issuing a series of guidelines for how countries can revamp their tax codes to best capture “stateless income.”
However, these accusations of tax avoidance are, in reality, not as clear-cut as they seem. Certainly some companies are taking advantage of legal but blatant loopholes that make no economic sense. Eliminating such loopholes is an im-portant part of the BEPS project that we support.
Marshall for CNN: Can Cameron hold U.K. together?
In what must surely rank as the oddest British election in memory, the Conservative Party has won a smashing victory. But so did its nemesis, the Scottish National Party, which ran the table north of Hadrian’s Wall. The vote leaves three big questions hanging: Will Scotland leave Britain, will Britain leave Europe, and will the Labour Party learn how to win again?
Although pre-election polls showed the Conservatives and Labour running neck and neck, the Tories look set to win an outright Parliamentary majority of 331. Labour, annihilated in Scotland, also failed to make inroads in England. Top Labour figures like Ed Balls and Douglas Alexander lost their seats and party leader Ed Miliband announced his resignation.
Election night was even bleaker for the Liberal Democrats, the junior partner in the governing coalition. Getting a paltry 8% of the national vote, they went from having 57 MPs to just nine. That makes the upstart SNP Britain’s third largest party.
Even though the incumbent Tories won, the election confirmed a new configuration in British politics shaped by resurgent nationalism and the rise of new parties that are chipping away at the long-dominant Conservative-Labour duopoly. As analysts sift through the election results, some clear conclusions and lessons are emerging…
Continue reading at CNN.
Marshall for CNN: Suddenly Britain looks like Italy
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.
The Digital Opportunity: Democratizing Trade for the 99 Percent
Trade critics often charge that proposed trade agreements like the Trans Pacific Partnership (TPP) essentially serve the one percent—while harming virtually everyone else. But new trade pacts actually present a significant opportunity to drive more inclusive trade—especially by supporting the revolution in digitally enabled global commerce.
In this policy brief, we explain why it is critical for America to lead in writing modern trade rules that promote the free flow of data and open digital commerce. And we highlight some of the many ways in which the 99 percent—from entrepreneurs and small businesses to consumers and communities—benefit from “democratized” trade in a global digital economy that is both open and fair.
Who Benefits from New Trade Deals?
Over the past three decades, America’s trade agreements have become increasingly complex. While early trade agreements were focused on eliminating high tariffs, modern trade pacts also address non-tariff and “behind the border” barriers, like standards that discriminate against imported products or rules that discourage foreign investment.
To President Obama and supporters of trade promotion authority (TPA) legislation, addressing “21st Century” issues in the TPP and other new trade pacts would enable America to benefit broadly from expanding trade with a growing global economy.
Download “2015.05-Gerwin_The-Digital-Economy-Trade-Agreements-and-the-99-Percent”
CNN: Why trade is in the national interest
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.
PPI Returns from 2015 Digital Trade Mission to Europe
Dear Friend,
We’re just back from Europe, where last week PPI led a bipartisan delegation of Congressional staff on a four-day swing through three capitals: London, Brussels and Berlin. Our goal was twofold: 1) to learn more about the European Union’s ambitious plan to create a “digital single market” and, 2) to press PPI’s case for moving digital trade from the periphery to the center of the transatlantic agenda.
Why is this so important? Consider these facts:
- The free movement of data raises the productivity of businesses and reduces trade costs, creating jobs and growth on both sides of the Atlantic.
- US/EU cross-border data flows are by far the highest in the world, 50 percent more than between the United States and Asia.
- America runs a large trade surplus in services, of which 61 percent are delivered digitally.
- The Internet is becoming a powerful export platform for small enterprises, connecting them to global customers at low cost.
As PPI has documented in a series of groundbreaking reports, digital innovation and commerce are increasingly driving economic investment and growth in America and Europe. We believe the transatlantic partners share a common interest in ensuring that digital trade enjoys the same legal protections as trade in physical goods and services. Instead of joining forces to extend free trade principles to digital commerce, however, Europe and America are embroiled in a raft of disputes that threaten to erect barriers to cross-border data flows.
Such disputes, for example, involve calls for data localization, for national or European clouds, for taxing data flows and for imposing stringent privacy or data protection rules on businesses. Right now, the European Court of Justice is considering a challenge to the “safe harbor” rules that have allowed US tech companies to operate in Europe. In addition, new tensions have arisen around issues of copyright protection, “platform competition,” tax avoidance and many core provisions of the proposed Transatlantic Trade and Investment Partnership (T-TIP).
As you probably know, PPI has long been a catalyst for transatlantic dialogue, going back to the Clinton-Blair “Third Way” conversations we helped to launch in the 1990s. Over the last four years, our work in Europe has focused on reviving transatlantic economic cooperation, with a particular emphasis on the rise of data-driven innovation and growth. At a time when authoritarian countries seek to limit the free flow of information, we think it’s crucial that the Western democracies work together to prevent the balkanization of the Internet and defend free digital trade.
That’s why we organized this second “Digital Trade Study Group”—a bipartisan group of 12 senior House and Senate staffers, whose bosses have oversight of issues related to trade, digital commerce, copyright, intellectual property, privacy, cyber security, and communications and technology. (We took the first such group to Europe in April 2014). Last week’s trip featured a productive round of high-level talks with prominent political, business, policy and media leaders.
Here are the highlights:
- In London, our traveling party met with Daniel Korski, Special Advisor to Prime Minister David Cameron, and Guy Levin, formerly special advisor to Chancellor of the Exchequer George Osborne, to discuss UK technology policy. As Michael Mandel, PPI’s chief economic strategist, has documented, London has emerged as one of the world’s premier centers for tech entrepreneurship.
- Vanessa Houlder, who covers economics for the Financial Times, briefed our group on the Cameron government’s controversial new “diverted profits tax.” Aimed ostensibly at discouraging tax avoidance, it slaps a 25 percent tax on the local profits of U.S. and other foreign companies operating in the UK, and has been dubbed the “Google tax” by detractors.
- Also in London, PPI released a new policy brief by 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
Taxing Intangibles: The Law of Unintended Consequences
Can efforts to put new and stricter tax rules on tech and other knowledge companies actually backfire and hurt global growth?
There’s a sense of outrage and worry in Europe that American tech giants such as Google and Apple seem to be beating European rivals soundly. At the same time, governments claim that many global companies—including but not exclusively American tech companies—have been able to game the international tax system to great advantage. Given the need for revenue to support social benefits, that puts global companies in the cross-hairs of policymakers.
In an effort to stop global companies from escaping the grasp of domestic tax collectors, experts at the Organisation for Economic Co-operation and Development (OECD), the Paris-based group of developed countries, are developing a new set of principles for international tax cooperation. This effort, known as the Base Ero-sion and Profit Shifting (BEPS) project, has resulted in a series of documents out-lining some of these new principles, with more to come over the next year
These new principles—called ‘Actions’—are intended to transform the global tax system. As one OECD document says: “The BEPS project marks a turning point in the history of international co-operation on taxation.” (OECD 2013). Moreover, even though international tax policy is generally a matter for bilateral treaties be-tween individual governments—the BEPS project is developing the first multilat-eral “instrument” that would supersede and modify existing bilateral treaties.
Download “2015.04-Mandel_Taxing-Intangibles_The-Law-of-Unintended-Consequences.pdf”
The Hill: How the Obama trade agenda can advance progressive goals
In the last month, protesters have camped out in the Washington office of Sen. Ron Wyden (D-Ore.) and have even flown a 30-foot blimp over his town halls in Oregon. The senator’s offense? As the ranking member of the Senate Finance Committee, Wyden is negotiating with the Obama administration and pro-trade Republicans and Democrats on Trade Promotion Authority (TPA)—legislation that would set requirements for new trade agreements and rules for how they’re considered by Congress.
Wyden believes that—if done right—new trade deals with Asia (TPP) and Europe (TTIP) coupled with strong enforcement can promote stronger growth and good jobs in his trade-dependent state, while also advancing important values like environmental protection, labor rights and an open Internet.
For the protesters, however, opposition to free trade agreements is an article of faith in their version of the progressive cannon. Since the great NAFTA debate of the 1990s, trade has often been a polarizing issue among progressives. But key developments since then—the rise of China, the dramatic growth in digital trade via the Internet, and concerns about a long-term slowdown in U.S. growth—give progressives good reasons to think again.
Trade-skeptical Democrats should use the debate on Trade Promotion Authority to take a fresh look at President Obama’s far-reaching trade initiatives. As we’ve detailed in a recent Progressive Policy Institute report, open-minded progressives can find many examples of how the Administration is combining smart trade policy and progressive ideals to advance vital goals while strengthening both the United States and the global economy:
Tapping into Global Growth. Assuring that Americans have a fairer slice of the economic pie is easier when the pie is growing.
In the past, America’s middle class fueled growth in the rest of the world. Now, an exploding global middle class—especially in Asia—can return the favor. By 2030, Asia will add 1.2 billion new middle class consumers to the global economy. These global consumers will want to buy what America has to sell—from wholesome food and cutting-edge consumer products to modern financial services and health care.
Trade initiatives like the TPP can help America’s businesses and workers tap into growing global demand by eliminating high duties, discriminatory standards, and other significant barriers to U.S. exports. And—if combined with progressive initiatives in areas like education and training—growing trade can help support broad-based American prosperity.
Democratizing Trade. Trade agreements can also “democratize” trade by empowering small business and global consumers.
The Internet and services like eBay and FedEx make it increasingly possible for America’s small exporters to sell globally as easily as their bigger rivals. Small firms that export do well—with 20 percent greater productivity and 20 percent higher job growth than those that don’t. But an array of trade barriers—including high duties and fees and complex standards—still make it difficult for smaller exporters to compete.
U.S. trade negotiators are focusing intensively on eliminating small business trade barriers in the TPP and T-TIP. And they’re working to foster a robust trade ecosystem for small traders by promoting transparent rules, open electronic commerce, and strong protection for innovation. Opening up modern Internet-enabled trade can provide global consumers with greater choice, freedom, and economic power, as well.
Leading on Fairer Trade. Trade agreements like TPP and T-TIP help America lead coalitions of like-minded countries that seek a fairer global trading system in which abuses like exploiting workers, despoiling the environment, or blocking the Internet are not longer accepted means of competition.
Based on a 2007 deal initiated by House Democrats, U.S. trade agreements now include strong and enforceable rules that require trading partners to abide by and enforce fundamental labor rights and key environmental laws and agreements. TPP and T-TIP negotiations afford the opportunity to extend these—and other important progressive principles—to two-thirds of global trade. If America doesn’t lead, however, countries like China may succeed with a competing trade model—one that ignores values like worker rights, environmental protection, and an open Internet.
Updating Trade Rules. New trade deals also provide the opportunity to update old trade rules and write important new ones.
Critics of NAFTA, for example, have long complained that its “side agreements” on labor and the environment contain weaker requirements that are neither part of NAFTA nor enforceable under that agreement. Negotiating with Canada and Mexico in the TPP can help assure that trade with America’s first and third largest trading partners is governed by strong, modern, and enforceable labor and environmental rules.
Additionally, new trade agreements can address an array of emerging challenges to U.S. trade, including State-Owned Enterprises that use government subsidies and special privileges to gain unfair advantages, and a growing list of barriers to innovation and electronic commerce.
Supporting a Progressive Growth Agenda. Finally, progressives can use a thoughtful trade debate to remind colleagues that trade is only one piece of America’s larger economic puzzle.
A new study by Progressive Economy concludes that trade is likely not a major cause—nor a major solution—for the serious problem of income inequality. The study notes that trade policy can make key contributions by, for example, driving stronger growth and reducing high duties that particularly impact lower-income Americans. But, ultimately, solving America’s major economic problems will also require many domestic initiatives long championed by progressives, including better access to education and training, and investment in innovation and infrastructure.
When it comes to trade, not all progressive-leaning Americans are flying protest blimps. Indeed, according to recent polling, some 60 percent of Democrats and 65 percent of millennials believe that trade deals like TPP and T-TIP are “good” for America. It’s time for progressives to avoid reflexive opposition and take a fresh look at the U.S. trade agenda.
The Iran deal and collective security
A buoyant President Obama announced on April 2 “a historic understanding with Iran” to defang its nuclear program. Chalk one up for the president’s oft-criticized Middle East diplomacy.
If it holds, the deal will indeed be a major foreign policy accomplishment for a president who badly needs one. But equally, if not more important, it could breathe new life into collective security.
That’s the vision of liberal internationalists like Presidents Franklin Roosevelt and Harry Truman. After the colossal failure of balance-of-power politics to keep peace in Europe, they envisioned a new order upheld by great powers acting through legitimizing organizations like the United Nations and formal alliances like NATO.
Continue reading at the Hill.