Trade Archives - Page 19 of 29 - Progressive Policy Institute

PPI’s Trade Fact of the Week: ‘Squid Game’ outdrew the World Series this year – Nov. 17, 2021

Posted on November 17, 2021September 18, 2024 by The Progressive Policy Institute

FACT:

“Squid Game” outdrew the World Series this year.

THE NUMBERS:

111 million: Squid Game viewers, September/October 2021
70 million: World Series viewers, October/November 2021

WHAT THEY MEAN:

Korea-made drama Squid Game, which premiered Sept. 17 on Netflix, centers on a contest in which 456 impoverished and debt-ridden players compete for a ₩45.6 billion prize (~$38 million) in a series of children’s games. The losing players are ruthlessly executed. (Shot, stabbed, thrown off a bridge, etc.; more variety presumably in Season 2.) The show’s 9-episode Season 1 run logged over 111 million views, a count not only well above Netflix’s earlier 82-million-viewer record (the 2020 scheming-18th century-Brit-aristocrat series Bridgerton), but outpacing the Atlanta-v.-Houston World Series. Americans weren’t alone in their enthusiasm: Squid Game was also Netflix’s top show in Denmark, Bolivia, Kuwait and Bahrain, India, Bulgaria, and 44 other countries.

Not a unique triumph for Korean arts, Squid Game is an especially visible example of the much larger “Hallyu Wave” phenomenon. Hallyu, translated as “Korean Wave,” is shorthand for the international appeal of South Korean pop culture, first in Japan, China, Taiwan, and Southeast Asia and more recently in the U.S., Europe, Latin America, and the Middle East. At the cultural high end, last year’s Parasite — a satire on class disparity and wealth inequality, pitting scheming low-income moochers against a greedy and clueless rich family — was the first Asian and first non-English-language film to win a Best Picture Oscar. At the somewhat less-high end, five of Billboard’s 10 non-English No. 1 albums since 1958 have come since 2018 from K-Pop boy-band groups BTS and SuperM. In between are clothing styles, video games, cosmetics, band and artist merchandise, and other cultural and lifestyle products.

Korean government economists calculate the value of Hallyu exports at $12 billion in 2020. This would still be well below the $36 billion in exports from Korea’s mighty auto factories, but within sight and growing by 22 percent per year. More is presumably ahead; as one 2021 indicator, Netflix invested nearly $500 million in the Korean entertainment industry and opened two studio facilities in South Korea.

What explains Hallyu’s success? Some analysis credits Korean government support and organization. The Korea Herald, reporting on the creation of a “Hallyu Department” in the Ministry of Culture, Sports, and Tourism last year scoffs at this idea: “it is not the first time that the government is attempting to play a role in the promotion of the Korean wave, each time against resistance from the industry who feared government meddling in what is essentially a private sector initiative may have the opposite effect”. Rather, the success of Korean culture looks organic, matching (a) appealing plotting, cliffhanger endings, and striking visuals with (b) new forms of access as widespread Internet use, secure financial services, and open data flow enable online streaming services such as Netflix and Hulu to compete to offer their subscribers an array of films, music, and TV, and (c) devoted and highly organized international fan bases using social media to evangelize and market to one another.

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 ProgressiveEconomy 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.

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PPI’s Trade Fact of the Week: Pirate attacks are at their lowest rate in 30 years – Nov. 10, 2021

Posted on November 10, 2021September 18, 2024 by Alyssa Brown

FACT:

Pirate attacks are at their lowest rate in 30 years.

THE NUMBERS:

Pirate attacks worldwide

2021: 125?
2020: 195
2019: 162
2012: 297
2010: 445

WHAT THEY MEAN:

A terse description of a high-seas pirate attack off Nigeria three weeks ago, from the International Maritime Bureau’s Piracy Reporting Centre:

Oct. 25, 2021: While underway, a container ship was boarded by an unknown number of pirate and the crew retreated into the citadel. On being notified of the incident, the IMB Piracy Reporting Centre immediately alerted and liaised with the Regional Authorities and international warships to request for assistance. A Russian Navy warship and its helicopter responded and proceeded to render assistance resulting in the crew and ship being safe. The pirates escaped with stolen ship’s properties.

Background: A decade of naval cooperation, even among distrustful big powers, appears to have made high-seas pirate work more difficult and less rewarding.

In 2010, international waters off Somalia — the Red Sea, the Gulf of Aden, and the ‘Bab-el-Mandeb’ strait, the principal commercial and energy link between Asia and Europe, with 50 ship transits and 3.4 million barrels of oil moving daily — were the center of the pirate industry. The collapse of Somalia’s central state in 1991 left country prey to sequential waves of violent clan-based militias, radical fundamentalists and crime gangs. One product of this was a notorious high-seas pirate industry; at its peak from 2005 to 2010, gangs using small speedboats and automatic weapons were attacking three or more ships a week on the high seas — in total, 181 attacks in 2009 — and in 2010 they were holding 30 vessels and 600 sailors for ransoms ranging up to $95 million.

Since then, the 29-country naval patrol known as CTF-151 (“Combined Task Force 151”) with rotating commands led this year by Pakistan and now Brazil, appears to have essentially eliminated the Somali pirate industry. The last two successful attacks on high-seas vessels in this region were in 2017, and the most recent failed attempt was in 2019; none at all are reported for 2020 and 2021.

On a worldwide scale, pirate attacks have fallen by over half in the past decade, from 445 known attacks in 2010 to 195 in 2020. The running tally kept by the International Maritime Bureau in Kuala Lumpur suggests that this year’s count may fall below 150, which would be the fewest attacks since 1994. Piracy is now most frequent in Indonesia and in the Singapore Strait, the sites of 47 of last year’s 161 attacks and 25 of the 97 attacks reported through September 2021. Only two of these, though, were actual attacks on high-seas shipping; the others were attempted robberies of ships in port or at anchor. Attacks off West Africa are somewhat less frequent — 24 in 2020, or two each month — but appear to feature especially well-armed and violent pirates, responsible for all three 2020 high-seas hijackings of ships, along with 128 of the 135 crew kidnappings, and nine of the 11 incidents of firing on shipping. In West Africa too though, frequency and severity have diminished this year, with the open-water event off Brass last month the only high-seas attack recorded so far. Its quick interruption by a Russian naval patrol, even though the pirates got away with some stolen equipment, suggests some success for international naval cooperation here as well.

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

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PPI’S TRADE FACT OF THE WEEK: U.S. trade deficit up ~60% since 2016 – OCT. 27, 2021

Posted on October 27, 2021September 18, 2024 by The Progressive Policy Institute

FACT:

The U.S. trade deficit is up ~60% since 2016.

THE NUMBERS:

$1.05 trillion*: U.S. manufacturing trade deficit, 2021
$0.90 trillion: U.S. manufacturing trade deficit, 2020
$0.65 billion: U.S. manufacturing trade deficit, 2016

* Educated guesswork for a volatile post-COVID closure period, based on 8 months of available data for 2021

WHAT THEY MEAN:

Each February, the Office of the U.S. Trade Representative puts out a report entitled “The President’s Trade Agenda,” meant to set out administration goals for the coming year. The 2017 edition, the first of the Trump administration, cited U.S. trade balance statistics as proof that early administrations got things wrong: “In 2000, the U.S. trade deficit in manufactured goods was $317 billion. Last year it was $648 billion — an increase of 100%.” The next one, in 2018, used “bilateral” trade balance to (a) claim failure for the North American Free Trade Agreement (“our goods trade balance with Mexico, until 1994 characterized by reciprocal trade flows, almost immediately soured after NAFTA implementation, with a deficit of over $15 billion in 1995, and over $71 billion by 2017”) and (b) define a goal for a renegotiated “USMCA”: “USTR has set as its primary objective for these renegotiations to improve the U.S. trade balance and reduce the trade deficit with the NAFTA countries.”

Few economists see trade balance as a useful way to judge trade policy, whether in terms of the content of agreements, or the nature of permanent systems like tariff schedules and antidumping laws. In the standard Econ 101 equations, a country’s trade balance will always match the difference between its savings and its investment; since the mid-1970s, Americans have been investing more than we save; ergo, deficits result. In this view, very high deficits can cause alarm as indicators of unsustainable booms and potential financial shocks, but the appropriate response is long-term measures to raise savings rates. Trade policy, meanwhile, should be judged against hopes for growth, job quality, control of inflation, raising living standards for low-income families, business competitiveness and innovation, and so on.

But shoving such high-minded quibbling aside, how do the Trump legacy policies — tariffs on metals and Chinese goods, withdrawal from the World Trade Organization’s Dispute Settlement Body, the new USMCA, etc. — look when judged by the standards the 2017 and 2018 reports set?

1. By 2020, the U.S. deficit in manufactured goods had hit $900 billion. This is a four-year jump of $252 billion, not much below the $331 billion 16-year increase cited in the 2017 report. Barring some unexpected economic shock this November, the 2021 figure will easily top $1 trillion.

With respect to Mexico specifically, the bilateral goods deficit in 2020 was $114 billion. The 2021 figure looks about the same. Adding Canada gets a total north of $150 billion.So by these standards, not too good. Not what the policies’ authors predicted. And some grounds for high-minded quibblers to smirk.

FURTHER READING

Data:

Compare this data against the Census Bureau’s U.S. monthly trade data, through August 2021.
… and for the U.S. with Canada and Mexico, specifically.

… and for the big picture, U.S. exports, imports, and balances from 1960-2020 on one convenient page.

What happened?

Trumpism leaves a larger deficit overall, and more concentrated in manufacturing than the 2016 figures. The basic figures are, pulling the lens steadily back:

(a) The U.S. “goods” deficit — exports of manufacturing, energy, agriculture, scrap and waste and uncategorized small-scale shipments minus the equivalent imports — was $749 billion in 2016 and $922 billion in 2020. The manufacturing deficit was equivalent to 86% of the 2016 total, and by 2020 had risen to 98% of the total. A 2021 annualization suggests a total goods deficit around $1.05 trillion in 2021, with manufacturing more than 100% of the total and other goods in small net surplus.

(b) A broader measure, counting services trade (generally in surplus for the United States) as well as goods, finds a goods/services trade deficit up from $481 billion in 2016 to $677 billion in 2020. The 2021 figure is likely to be around $900 billion.

(c) Relative to GDP (more meaningful), a deficit of 2.7% of GDP in 2016 rose to 3.1% in 2020, and a likely 4% in 2021. This would be the highest since the modern-era peaks of 5.7% in 2005 and 2006.

Why the jump? Tax policy is the obvious suspect. Three of the four upward ratchets in U.S. trade deficits since the 1970s followed tax-cut bills — one in the first Reagan term, another in the second Bush administration, and the third in 2017. Bills of this sort bring higher government deficits. Unless a rise in family or business savings offsets this public dis-savings, overall U.S. savings will fall, and all else equal, by virtue of the “savings – investment = trade balance” identity, trade deficits rise. So the higher 2020 and 2021 deficits likely emerge from the 2017 tax bill.

The Trump-era tariffs likely had relatively little trade-balance impact, but do seem to have had two outcomes. One is a shift in import patterns: imports from China, though slightly above 2016 levels in dollar terms, have dropped from 21.6% of goods imports to 18.1% in 2020 and 2021, as clothes, consumer electronics, etc. from Vietnam, India, Taiwan, and so forth replace some Chinese-origin goods. Second, some shift in composition, with relatively more manufacturing deficits and relatively less energy. Where the permanent U.S. tariff system is mostly a way to tax clothing and shoes and so falls mainly on retailers and families, Trump-era tariffs on steel, aluminum, and Chinese goods were more concentrated in industrial inputs such as metals, auto parts, electrical converters, etc. As an example, tariff revenue on insulated electric conductors rose from $56 million in 2017 to $322 million in 2020. As U.S. manufacturers absorb these costs, the likely result is marginal loss of competitiveness both for exporters trying to sell to foreign buyers and for firms competing against imports at home (and of course exporters facing retaliation by foreign countries responding to tariffs), pushing more of the U.S deficit into manufacturing.

The two reports:

Read the 2017 “President’s Trade Agenda” report.

… and also read the 2018 follow-up (with a wildly wrong claim that the 2017 tax bill “has the potential to reduce the U.S. trade deficit by reducing artificial profit shifting”).

And so … “House on fire! Bring more kerosene!” In the Economist last month, Trump-era lead trade negotiator Robert Lighthizer again laments high trade deficit, skates around the 2017-2021 rise, and suggests more of the 2018-2020 approach will bring it down this time. Read the Economist piece here.

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PPI’s Trade Fact of the Week: Liberalism is worth defending – Oct. 20, 2021

Posted on October 20, 2021September 18, 2024 by The Progressive Policy Institute

FACT:

Liberalism is Worth Defending

THE NUMBERS:

COVID vaccinations per week, worldwide: 150 million
Workers escaping deep poverty, 2000-2019: 440 million
International students in the U.S., 2020: 1.07 million

WHAT THEY MEAN:

PPI re-launches this Trade Fact series under the political equivalent of storm warnings and lowering clouds, in the U.S and worldwide. Looking abroad, publics abroad appear more tempted than at any time in decades to believe that their country’s gain must entail another’s loss. Looking inward, they seem increasingly at risk from authoritarian populists and illiberal political parties. And on a different level of analysis, trust among big-power governments has eroded; and the institutions and agreements built up since the Second World War to safeguard security and promote shared growth – whether NATO, the World Trade Organization, the European Union – accordingly seem ever more fragile.

Against this ominous backdrop, in concert with like-minded policymakers and intellectuals in the U.S. and elsewhere, PPI aspires to help – by (a) offering new ideas and projects for a liberalism besieged and in need of revitalization; (b) rebutting unfounded cynicism and pessimism, which often are more the cause than the reflection of deteriorating ideals and institutions; and (c) highlighting the successes of active government joined with open exchange of goods, services, and ideas. In this spirit, the first in this new Trade Fact series notes three successes of liberalism-writ-large:

Half the World’s People Have Received COVID-19 Vaccinations This Year: 22 months after the discovery of a previously unknown coronavirus in Wuhan, government, non-profit, and private-sector investment in medicine development, production technologies, and distribution has provided vaccination shots to 47.8% of the world’s public – that is, 3.7 billion people – with 150 million more shots going into arms each week.

Low-Income Work Has Contracted by Two Thirds Since 2000: The International Labor Organization finds that in 2020, about 8% of the world’s 3.5 billion workers earned ‘extreme poverty’ wages. That is, for 280 million workers, a day’s labor brought $1.90 or less in constant 2011 dollars. In 2000, the ILO’s figure was 26% of 2.76 billion workers, or 720 million. The difference – 440 million people – implies that, on average, every day since the turn of the millennium, 68,000 workers (and along with them, tens of thousands of their children and relatives), have escaped deep poverty.

1.07 Million International Students Are Enrolled in American Universities: Despite Trump-era efforts to close borders, America remains the world’s top choice for study abroad, home to 1.07 million of the world’s 5.8 million international students. Their tuition and expenses count as an “export of services” in trade accounts; in 2020, this came to $39 billion. (For context, this is 2% of the $2.13 trillion in total U.S. exports; alternatively, by comparison, U.S. farm exports totaled $150 billion in 2020 and auto exports $59 billion.) Over the long term, the effects are likely larger. Surveys from the mid-2010s suggest that about half of foreign grad students take U.S. jobs after their degree, contributing to consumer demand, business creation, and perhaps especially – given that half of them are in engineering, math, and science – to American science and technology. Despite neo-Maoism and U.S.-China tension, 372,000 Chinese students make up the largest single cohort of the 1.07 million. After classes and commencements, some will stay on to work, while others return to join China’s next-generation elites in business, civil service, arts and media, and so to help shape these institutions’ role in Chinese domestic policy, daily life, and international affairs.

To ignore storm warnings and lowering clouds is reckless. The proper response to them is to identify those parts of a roof or a wall that may leak or give way in heavy weather, shore up their weaknesses or replace them with something better. It is equally important, however, to identify areas of strength, build upon them, and draw on the lessons they offer. Metaphorical examples appear, in the response of government, non-profit, and private-sector science to a unique medical emergency; in the road out of poverty a still largely open global economy offers the world’s poor; and in the short- and long-term good that can come from education and exchange of ideas. In such things one can see breaks in the clouds, patches of sunlight ahead, and foundation for PPI’s belief that the liberal project remains vital, successful, and worth defending.

ABOUT ED

Ed Gresser is Vice President and Director for Trade and Global Markets at PPI.

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PPI Announces Hire of Edward Gresser to Lead PPI’s Trade and Global Markets Policy

Posted on October 4, 2021 by The Progressive Policy Institute

Today, the Progressive Policy Institute (PPI) announced that Edward “Ed” Gresser will join PPI as the Vice President of Trade and Global Markets policy. 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.

“PPI is thrilled to welcome our erstwhile colleague Ed Gresser back after his years of distinguished service with the United States Trade Representative,” said Will Marshall, President of PPI. “Ed is one of America’s most trenchant analysts and writers on trade and global markets. Ed’s expertise and understanding of the vital role trade plays in ensuring a dynamic and competitive U.S. economy can help President Biden and pragmatic progressives in the administration undo the damage done by his predecessor’s detour into protectionism.”

Ed is the author of Freedom from Want: The Global Economy and American Liberalism (2007), and has been published in a variety of publications including the Wall Street Journal, Foreign Affairs, and U.S. News and World Report. 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.

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.

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Media Contact: Aaron White – awhite@ppionline.org

Biotech Innovation: Two Important Questions

Posted on June 30, 2021 by The Progressive Policy Institute

INTRODUCTION

It’s rare when a single acquisition can offer insight into two different important questions in innovation. But the proposed purchase of cancer-diagnostic developer Grail — a startup with tremendous potential — by gene-sequencing leader Illumina is just that pivotal. First, is it pro-innovation for European antitrust regulators to have the power to block a deal involving two American biotech companies that do no substantial business in Europe? We argue that such “regulatory imperialism” by the EU has the potential to slow down biotech innovation, especially given the region’s generally lagging performance in biotech (BioNTech notwithstanding).

Second, under what conditions is vertical integration a socially beneficial strategy for accelerating innovation? Successful innovation in the biosciences often combines risk-taking by small companies with the development and regulatory resources of larger companies. We conclude that excessive antitrust focus on blocking vertical integration in the biosciences could impede the development of important new products and treatments.

These issues go far beyond Illumina and Grail. But it’s helpful to have the facts about this particular case. Grail has spent the past five years developing a diagnostic capable of screening for 50 different cancers at once — a test set to launch this year — while Illumina makes the hardware that performs those tests. Illumina offered to buy Grail, with the idea of integrating Grail’s technology with its own, to simplify the process of using gene sequencing for clinical diagnostics on a massive scale. If successful, this would dramatically reduce the cost of performing cancer screenings.

The Federal Trade Commission (FTC) intervened to block the acquisition, worried that Illumina would block potential competitors of Grail from using its gene sequencers. Illumina promised to supply these competitors with gene sequencing equipment and supplies without price increases. The FTC, through a complicated series of maneuvers that are not relevant to this paper, temporarily pulled back from its intervention to allow the European Commission to take the first swing at blocking the acquisition. The EU antitrust regulators are planning to rule by July 27 on whether to clear the merger.

And here’s where we come to the first issue: Should the EU antitrust regulators be considering a biotech deal that by the ordinary rules would not come under their jurisdiction? As the Wall Street Journal notes, “Since the merger doesn’t qualify for antitrust review under the bylaws of the European Union or any member states, the Commission asked countries to invoke Article 22 of the EU’s Merger Regulations. This rarely used provision allows countries to refer transactions to the Commission when their governments lack jurisdiction.”

This fits the general EU strategy of “regulatory imperialism.” Rather than focusing on innovation, the EU has tried to position itself as the global leader in regulation in a variety of areas, from artificial intelligence to chemicals to GMOs to data privacy. The European approach to regulation has been framed by the precautionary principle, which puts less weight on the benefits of innovation and more on the potential harms.

That risk-avoiding approach is one important reason why Europe has consistently lagged in biotech. European biotech is not nonexistent — after all, Pfizer partnered with a German biotech firm, BioNTech, to develop a very successful COVID-19 vaccine. Nevertheless, data from the Organisation for Economic Co-operation and Development shows that business spending on biotech research and development (R&D) in the EU comes to roughly one-third that of the U.S.

Tacitly accepting European jurisdiction over American biotech deals has the potential to slow down commercialization of important technologies. According to the New York Times, Europe has been “a world leader in technology regulation, including privacy and antitrust.” In a recent speech, Emmanuel Macron said that during its turn at the helm of the EU presidency, France would “try to deliver a maximum of regulation and progress.” When the EU sets the global standard on regulation and companies choose to comply with it everywhere (even where standards are lower), that’s known as the “Brussels effect.”

First, on privacy, the General Data Protection Regulation (GDPR) has become a de facto floor on policy for many large multinational companies. The problem for companies — especially in biotech and software — is that there are very high fixed costs to product development (and low marginal costs for distribution), and reworking a product for a different regulatory environment is often more trouble than it’s worth. That leads to a race to the top (or bottom, depending on your perspective) in terms of regulation.

In its first few years in effect, GDPR’s flaws have become manifest and EU policymakers are starting to consider reforms to the law. According to a recent joint report from three academy networks, “GDPR rules have stalled or derailed at least 40 cancer studies funded by the US National Institutes of Health (NIH).” The authors go on to note that “5,000 international health projects were affected by GDPR requirements in 2019 alone.” This flawed model for privacy regulation has unfortunately been exported around the globe.

Second, mergers between globally competitive firms with a presence in multiple jurisdictions have to get clearance from multiple antitrust enforcement agencies. If a single agency in a large market objects to the merger, the deal might fall apart completely. For example, a merger between U.S.-based Honeywell and U.S.-based General Electric collapsed after the EU competition enforcement agency decided to block the deal out of concern it would create a monopoly in jet engines. Of course, the EU’s investigation of the Illumina-Grail merger takes that one step further, given the fact that Grail doesn’t conduct any business in the EU, and Illumina’s business there isn’t substantial, with revenues below the usual threshold for antitrust scrutiny for both the European Commission and individual countries.

The next important question raised by the Illumina-Grail purchase is the role of vertical integration. We start with the simple observation that innovating in complex systems is both risky and expensive. That’s true in frontier industries such as electric vehicles and e-commerce, and it’s especially true in the biosciences, with the high hurdle set by the need for safety and efficacy.

The cost to bring a drug to market is a huge barrier for startups to remain independent. A 2020 paper in JAMA examining 63 of the 355 new therapeutic drugs and biologic agents approved by the U.S. Food and Drug Administration between 2009 and 2018 found that the median capitalized research and development cost per medicine was $985 million. Other studies using private data have found even higher figures. A 2019 study published in the Journal of Health Economics estimated the average cost to reach approval at $2.6 billion (post-approval R&D costs nudge the total up to $2.9 billion).

Should these complex systems be built by one company, which is better able to integrate all the pieces of the puzzle? (Tesla comes to mind when we are discussing electric vehicles). Or is it better to distribute the risk over multiple companies? The biotech industry has mostly followed this second strategy. Risky R&D is done by small firms with financing by high-risk capital such as venture firms. Then the resulting product, if successfully passing clinical trials, is acquired by a larger firm for commercialization.

In some cases, both strategies are important. The initial stages of research and development of a new idea are farmed out to a smaller company and financed by risk capital. And then when it comes time to build the idea into a complex system, the actual integration is done by a larger company, which has an established distribution network and marketing resources for reaching patients in a targeted fashion. This can greatly accelerate the development process.

The question, then, is whether this integration would be easier within one company or at arms-length. Illumina has made an offer to buy Grail, which was originally spun off from Illumina in order to get funding from risk capital. The goal, obviously, is to accelerate the development of this game changing integration.

The FTC has objected to the acquisition, because the agency worries about Illumina prioritizing its internal customer over other potential cancer diagnostics systems. Certainly, it’s true that some vertical mergers are anti-competitive. “Killer acquisitions” are one type of merger in biotech that is anti-competitive in nature. A recent paper from Ederer, Cunningham and Ma found that between 5% and 7% of acquisitions in the pharmaceutical industry are killer acquisitions, meaning the incumbent firm purchased the startup with the intention of shutting down one or more of its products, because the legacy company offers a competing product that is more profitable.

There is increasing agreement among regulators on both sides of the Atlantic that acquisitions — especially in the pharmaceutical sector — need to be scrutinized more closely if products have the potential to be killed off post-acquisition. One heuristic a regulator might use is to look at how much overlap there is between the acquired product and the incumbent, especially in terms of benefits and use cases. If the incumbent’s product is still on patent, then there is a significant incentive to acquire a competitive product that might be disruptive to an acquirer’s portfolio and shut down the new product.

But there’s little evidence that most vertical acquisitions are anti-competitive. Vertical mergers — or the combination of two companies at different layers of the supply chain — are less likely than horizontal mergers — acquisition of a direct competitor — to be anticompetitive as both economic theory and empirical evidence show. Regarding the theory, firms are engaged in “make or buy” decisions all the time. If they choose to produce an input in-house instead of buying it from the market, then they have vertically integrated (either by developing the capacity on their own or by acquiring another firm with that capacity). Prohibiting firms from vertically integrating via acquisition would forgo some of the benefits of economies of scope and economies of scale. A literature review by Lafontaine and Slade showed that vertical mergers were procompetitive on average.

One of the most common reasons vertical mergers are less suspect than horizontal mergers has to do with “double marginalization.” If you assume two products are monopolies in their respective markets, then the producers of those products will each charge the monopoly price, which is higher than socially optimal. If the two products are complementary, then the companies can merge and create a positive sum scenario by lowering prices. Lower prices reduce deadweight loss, which is good for consumers, and lead to higher profits for the combined firm.

We note that if the FTC ruling stands, it will mean that developers of complex integrated systems will choose to keep their technologies in house rather than spinning them out and run the risk of having an acquisition blocked. And innovative development will be slowed rather than accelerated.

PPI Statement on Senate Confirmation of Katherine Tai as USTR

Posted on March 17, 2021 by The Progressive Policy Institute

Today, Will Marshall, President of the Progressive Policy Institute (PPI) released the following statement on the unanimous bipartisan Senate confirmation of Katherine Tai to be the Biden Administration’s United States Trade Representative:

“Without doubt, Katherine Tai will capably represent America on the world stage, and help us regain our footing with our international trading partners after the previous administration’s ill-conceived detour into blunderbuss tariffs, protectionism and gratuitous ally-bashing.

“Our new Administration faces unprecedented challenges in trade – caused not only by COVID-19, but also by China’s routine flouting of global trade rules. We also have rare and exciting opportunities for growth and innovation in digital trade policy, which – if addressed robustly – will benefit American businesses, workers, and producers for generations to come.

“The Progressive Policy Institute congratulates USTR Tai on her historic confirmation, and commends the Biden Administration for this excellent choice in leadership.”

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.

Media Contact: Aaron White – awhite@ppionline.org

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A Transatlantic Digital Trade Agenda for the Next Administration

Posted on July 1, 2020 by The Progressive Policy Institute

CAN A NEW DEMOCRATIC ADMINISTRATION RECONSTRUCT DIGITAL TRADE POLICY WITH EUROPE FROM THE ASHES OF TTIP?

As the global leader in digital trade, the United States has a big stake in ensuring that international rules facilitating its continued expansion are put in place.

The Obama Administration’s bold agenda to establish these rules across Europe and the Asia-Pacific did not yield lasting success, with the failure of the Transatlantic Trade and Investment Partnership (TTIP) negotiations and the Trump Administration’s withdrawal from the Trans-Pacific Partnership (TPP). Nonetheless, the key elements of US digital trade policy enjoy bipartisan policy support, providing a promising basis for the next Democratic administration to re-engage with Europe, our biggest digital trading partner.

Part 1 of this issue brief explains why international rules are needed to protect and facilitate digital trade. Part 2 describes the turbulent past decade in transatlantic trade relations and the growing importance of US digital trade with Europe. Part 3 explains why the US government and the European Union (EU), during TTIP negotiations, were unable to agree on a digital trade chapter, including a key provision guaranteeing the free flow of data. Finally, Part 4 suggests how two parallel sets of trade negotiations beginning early this year — between the EU and the United Kingdom (UK) and between the United States and the UK — may help a future US Administration end the transatlantic stand-off over digital trade.

1. THE CASE FOR DIGITAL TRADE AGREEMENTS

The United States leads the world in the fast-growing digital economy.1 Digital services include not just information and communications technology (ICT) but also other services which can be delivered remotely over ICT networks (e.g. engineering, software, design and finance).2 Although trade in digital services is hard to measure precisely, there is no mistaking that it has become one of the fastest-growing areas for the United States internationally. In 2017, all types of digital services made up 55% of all U.S. services exports, and yielded 68% of the U.S. global surplus in services trade.3 The beneficiaries of this burgeoning area of trade are not just the U.S. technology giants, but also many smaller and medium-sized companies that develop and sell digital services or use ICT networks for marketing products to consumers.

More than a decade ago, the Office of the US Trade Representative (USTR) recognized the US comparative advantage in digital services trade and began to pursue binding rules with a number of foreign governments. TPP negotiations were the first major step in this direction. The TPP agreement signed by the Obama Administration included provisions designed to protect against practices harmful to digital trade. It prohibited:

Customs duties and other discriminatory measures on digital products like e-books, movies, software and games;
Requirements that data or computing facilities be localized in the foreign jurisdiction;
Discriminatory treatment of crossborder data flows;
Obligations to use local technology, content, or suppliers;
Discriminatory foreign standards or burdensome testing requirements; and
Requirements for disclosing source code and algorithms.

TPP also included facilitative measures:

Requiring governments to adopt measures to protect against on-line fraud and guard consumers’ personal information;
Promoting cooperative approaches to cybersecurity; and
Facilitating the use of electronic authorizations and signatures for e-commerce, electronic payments, and other on-line applications

President Trump’s decision to withdraw the United States from TPP left US digital services companies exposed to these harmful practices in the Asia-Pacific region. From the perspective of liberalizing and expanding US digital trade, it was a spectacular own goal.4 However, USTR quickly set out to partially mitigate its effect by seeking bilateral trade accords with some TPP signatories. Digital chapters in the updated Korea-US Free Trade Agreement (KORUS), the new US-Mexico-Canada Free Trade Agreement (USMCA), and, most recently, the Japan-US Digital Trade Agreement largely duplicate the TPP’s digital trade provisions.

2. THE TRANSATLANTIC TERRIBLE TEENS

Transatlantic trade politics also has seen its share of drama over the past decade. The comprehensive TTIP negotiations begun in 2013 badly backfired. Popular fears of US corporate domination flared across Europe, the EU’s member states failed to back the project enthusiastically, and progress between US and European Commission negotiators on the many subject-matter chapters proved glacial. As the Obama Administration came to an end, TTIP talks were quietly shelved.

The Trump Administration’s trade agenda for Europe has been strikingly different. It has concentrated on rectifying the sizeable US deficit in merchandise trade with the EU, which reached an estimated record high of $168 billion in 2018.5 The President demanded that the EU, which is solely responsible for the bloc’s international trade relations, address the imbalance in such areas as steel, aluminum and automobile trade. (He also somewhat mystified Germany by insisting that it negotiate directly with the United States to reduce the U.S. goods trade deficit.) The US Government determined that a number of jurisdictions including the EU had engaged in trade practices unfair to US steel and aluminum, and imposed higher tariffs on these imported products as a consequence; higher tariffs on European autos so far remain a threat.

In the summer of 2018, European Commission (then-)President Jean-Claude Juncker managed partly to defuse transatlantic tensions by agreeing to negotiate with the United States on increasing EU purchases of US-made industrial goods and on related regulatory standard.

Juncker also committed to greater European purchases of US natural gas and soybeans. Trump in return agreed not to proceed with unilateral tariff increases for the time being. Since the advent of new EU leadership late last year, USTR Robert Lighthizer and his Commission counterpart Philip Hogan have stepped up efforts toward reaching, before the 2020 US presidential election, a limited accord in the areas identified by Trump and Juncker.

Throughout the decade, the volume of goods and services trade across the Atlantic has continued to grow steadily. The United States and the European Union are still each other’s largest trading partners. US goods exports to the EU grew to $293 billion in the first eleven months of 2018, a 13% increase over the previous year.6 US exports of all types of services to the EU reached a record $298 billion in 2017, resulting in a $66 billion surplus in 2017.7 European countries comprise four of the top ten export markets for US services, and in 2017 the Union as a whole absorbed 37% of US services exports.8

Despite the continuing growth in trade, the next Democratic administration will inherit a transatlantic trade policy environment characterized by an unusually high level of tension and distrust. TTIP’s failure appears to have stifled any impulses in Washington and Brussels simply to resume the slog towards a comprehensive trade agreement. Still, there are good reasons for Democrats to not abandon the work begun on digital trade during the TTIP negotiations.

3. THE US DIGITAL TRADE IMPASSE WITH EUROPE

Since Trump’s trade ambitions with the EU remain firmly focused on the goods deficit, the question of whether the United States should resume direct digital services trade negotiating efforts with Europe seems likely to be deferred till the next administration. From an economic perspective, the case for US re-engagement is compelling. In 2017, the United States exported $204.2 billion in digital services to Europe, generating a surplus in this area of more than $80 billion.9 International data flows, measured in terms of capacity for data bandwidth, also are heavily skewed in a transatlantic direction. Cross-border data transfers between the United States and Europe, by this measure, are 50% higher than those between the United States and Asia.10 In sum, the transatlantic area is the world’s largest for digital trade.

During TTIP negotiations, the United States proposed language close to TPP digital trade provisions, but the EU objected to a number of them. One of the most important was a US proposal to guarantee cross-border ‘free flow’ of electronic information for business purposes, and to put bounds on the extent to which European public policy measures relating to personal privacy could serve as an exception to unrestricted data flows.

The United States proposed that public policy exceptions be allowed, but that they be subjected to long-established World Trade Organization (WTO) disciplines. These WTO rules allow for exceptions for legitimate public policy objectives, so long as they do not constitute arbitrary or unjustifiable discrimination or disguised restrictions on trade, and they are narrowly tailored to achieve a public policy objective.11 Alleged breaches could ultimately be addressed through a formal dispute settlement system, if necessary.

The EU regarded the US proposal as an attack upon its unfettered discretion to apply its privacy laws to data moving across the Atlantic, and it rejected the possibility of any discipline based upon WTO rules. The EU’s rejection of objective limits on its potential public policy measures leaves it free to invoke privacy rules as a basis to discriminate against US digital service providers or to protect local competitors. The issue remained firmly deadlocked when TTIP negotiations were set aside.12 Since then, the United States and the EU have not re-engaged bilaterally on digital trade rules.

Both governments are among the eighty countries participating in a low-profile multilateral negotiation on electronic commerce (e-commerce) launched a year ago under WTO auspices, however.13 In Geneva, the United States has tabled a similar proposal to its TTIP and TPP language; the EU so far has not managed to offer a counter-proposal. For the time being, it seems unlikely that the WTO negotiations will yield quick success in settling the disagreement between the EU and the United States and other like-minded countries on regulatory limits to the free flow of data.14

A new Democratic Administration should engage bilaterally with the EU to see if there might be scope for a targeted digital trade agreement, but without softening its insistence on a rigorous free flow of data obligation. Agreeing with the EU on the proper scope for public policy exceptions should not be an impossible task, as WTO rules provide a useful framework. Moreover, it is conceivable that the new leadership of the European Commission at some point will consider jettisoning its insistence on a selfjudging privacy exception, in favor of language more consistent with international trade law.

4. BREXIT AND DIGITAL TRADE

Following Britain’s January 31 departure from the European Union, it now has embarked on the urgent task of negotiating its future economic relationship with the EU. Brexit notwithstanding, the EU will remain the UK’s principal trading partner; 45% of overall UK exports in 2018 were destined for the Continent.15 At the end of 2020, however, if no accord is reached, EU tariffs and quotas on UK exports would revert to much higher WTO tariff levels, which would have a damaging effect on UK-EU trade.

In addition to fixing tariff levels, Britain and the UK also must agree on the extent to which the UK will continue to adhere to EU regulations in a host of areas – for example, workers’ and consumers’ right, the environment, and antitrust. Many observers expect the UK-EU talks on these non-tariff barriers to be difficult and drawn out, likely stretching beyond the 2020 deadline. Despite continuing tough UK rhetoric, the parties may well settle for a ‘phase one’ agreement on goods tariffs, and grant themselves an extension into 2021 or beyond to complete the rest of a comprehensive agreement.

Setting the terms for digital trade with the EU will be particularly important for Britain. UK services exports to the EU yielded a £77 billion surplus in 2018, more than offsetting a deficit in goods trade.16 Approximately three-quarters of Britain’s data flows are with EU countries17, making harmonization with the Continent on privacy regulation crucial for its thriving data-dependent businesses, such as financial services.

In its negotiating mandate for the future economic partnership agreement with the UK, the EU specifically calls for provisions facilitating digital trade, but also indicates an intention to “address data flows subject to exceptions for legitimate public policy objectives, while not affecting the Union’s personal data protection rules.”18 The UK’s counterpart negotiating mandate similarly calls for measures to facilitate the flow of data to and from the EU, and expresses an ambition to go beyond the digital trade provisions in the EU’s trade agreements with other countries.19

The Union previously had pledged to decide before the end of 2020 whether the UK’s postBrexit privacy protections are ‘adequate’ in relation to those on the continent; an adequacy determination would be by far the most favorable and efficient legal basis for data flows across the Channel.20 The EU should have leverage in this separate negotiation, and as a result the UK’s future data protection regime should remain generally close to the EU’s General Data Protection Regulation (GDPR). An adequacy finding is not a foregone conclusion, however, as Britain may be reluctant to alter its wide-ranging surveillance laws.21

The United States is also a very important trading partner for the United Kingdom, accounting for 15% of Britain’s total trade.22 Nearly a fifth of Britain’s exports head across the Atlantic, more than double the share it sends to Germany, its next-biggest trading partner.23 US services trade with the United Kingdom exceeds goods trade, and is growing; US services exports measured $74.1 billion in 2018, generating a surplus of $13.3 billion that year with Britain.24 There are more transatlantic undersea cable connections transmitting data directly between the United States and the United Kingdom than with the rest of Europe combined.25 Foreign affiliates of U.S. multinationals supply more information services in the United Kingdom than in any other European country.26

The Office of the US Trade Representative and the UK Department for International Trade started negotiations on a bilateral trade agreement in May. The United States seeks a comprehensive agreement with the British, including a chapter on digital trade in goods and services and cross-border data flows modeled on the most recent U.S. bilateral successes with other countries.27 The United Kingdom’s negotiating objectives with the United States are broadly consistent with the United States perspective on digital trade.28 They specifically mention the importance of preserving UK data protection rules in an agreement with the United States.29 The United States officially attaches the highest priority to these negotiations and aims to complete them in 2020.30 Privately, US officials acknowledge that the United Kingdom will have to give greater priority this year to redefining its all-important trading relationship with the EU, before US-UK talks can advance definitively.

The most that US and UK trade negotiators may be able to deliver this year is a partial agreement setting tariffs and quotas for goods. A new Democratic administration would be well-advised to build upon whatever progress is achieved with the UK this year, and to give particular priority in the future to agreement on digital trade. The latter could even take the form of a stand-alone agreement on digital trade, as was done in the Japan – United States Digital Trade Agreement, if a comprehensive US-UK trade agreement proves a longer-term prospect.

The United States and the United Kingdom should be able to make rapid progress on many aspects of a digital trade agreement. Historically, both governments have shared a philosophical commitment to open international trading regimes. Both have highly developed digital economies and leading-edge digital services companies. Each favor free data flows and opposes data localization measures. Intangible factors including similar legal traditions also could speed talks.

The long arm of the European Union will constrain the United Kingdom’s negotiating room on digital trade with the United States, however. The EU may insist that, as part of the price for adequacy, the UK agree not to undermine the Union’s position on data flows in any of the UK’s future trade agreements with third countries. The United States, for its part, presumably would take the same position on this issue as it took in TTIP – that legitimate privacy measures are those permitted under WTO principles rather than by EU fiat.

Still, in the short term, the United States may be better off tackling this tough issue with the United Kingdom than seeking to resolve it bilaterally with the EU. The British are in a tough negotiating position: they must find a way forward on data flows with both the EU and a range of important third country trading partners. UK negotiators will need all their creative legal talents to find a way through this intersection of digital trade and privacy law. If they succeed, the payoff in a settled legal landscape for digital trade across both the Channel and the Atlantic eventually could be substantial. Brexit has generated considerable trade uncertainty, but it also ultimately could yield dividends for digital trade.

The US medical equipment and supply industry: What happened?

Posted on March 19, 2020September 18, 2024 by The Progressive Policy Institute

America now depends on overseas suppliers for more than half of its medical equipment and supplies, up sharply from a few years ago. That’s based on a PPI analysis of government trade and industry data, What happened?

As we go through this terrible pandemic, U.S. healthcare providers are suffering from a surprising shortage of medical equipment and supplies. Even after President Trump invoked the Defense Production Act on Wednesday, there doesn’t seem to be an easy spigot of domestic factory production to turn on, and overseas factories are serving their own hardhit populations.

Part of the problem is that the U.S. has become increasing dependent on overseas sources for its medical equipment and supplies. Until 2016, the U.S. economy consistently maintained a trade surplus in medical equipment and supplies. But things changed in the past few years (chart). Demand rose and domestic production expanded, hiring 18,000 new workers since 2015.

But here’s the rub: Domestic production of medical equipment and supplies did not expand enough to meet demand. As a result, the long-time trade surplus in medical equipment and supplies turned into a rapidly widening trade deficit, hitting $7 billion in 2019.

As a result, an estimated 52% of medical equipment and supplies now come from outside the United States.

Where is the new surge of imports coming from? It’s not just China. In fact, imports of medical equipment and supplies from Europe have soared by $4.3 billion since 2015, or 33 percent. Imports from Asia (excepting China) are up $2.7 billion, or 43 percent. And of course, with these regions facing their own crisis, the flow of goods has slowed down.

This was not a case of hollowed-out manufacturing–employment in the U.S. medical equipment and supplies manufacturing industry is at an all time high. Nevertheless we didn’t expand fast enough.

In pandemics, like wars, it’s better to have your own factories.

Note: For trade purposes, we track NAICS 3391. For domestic sales and employment, we track the combination of NAICS 339112 and 339113.

Trump Trade Deficit Widens to New Record

Posted on December 2, 2019September 18, 2024 by The Progressive Policy Institute

Despite all his bluster, the “Trump Trade Deficit” widened to a new record in the third quarter of 2019. The non-oil merchandise trade deficit hit $1.047 trillion in the third quarter of 2019, in 2012 dollars (annual rate). That’s according to PPI calculations based on new data released by the Bureau of Economic Analysis on November 27. The latest trade deficit beat the previous record set in the fourth quarter of 2018, also under Trump.

These widening trade deficits claw right at the heart of the middle of the country, where farmers and factory workers are suffering under Trump’s misguided policies. Factory closings just keep coming: Sparta, Wisconsin; Atlanta, Ga; West Plains, Missouri.

Trump’s trade failures give progressive presidential candidates an opportunity to run a pro-manufacturing, pro-growth campaign. They should be advocating policies that jumpstart a new generation of manufacturing entrepreneurs across the country. They should support local distributed manufacturing, which both creates jobs and helps the environment. Most of all, progressives should come out squarely in favor of a Production Economy that supports America’s core values as a producer rather than a consumer.

Bledsoe for Forbes: “Tax Credits for Affordable Electric Vehicles Gain Speed, But Legislation Must Avoid Stop Signs

Posted on June 18, 2019 by The Progressive Policy Institute

As Congress begins to turn toward tax policies to help clean energy manufacturing, electric vehicle tax credits aimed directly at more affordable vehicles are gaining speed, just as a previous Forbes column and a Progressive Policy Institute (PPI) white paper urged several months ago.

The question now is will EV advocates in Congress, the U.S. auto industry and labor unions get the message and reform tax incentives to benefit middle-income Americans. Such revised tax credits focused on more affordable EVs will increase the chances new incentives become law, and will better allow the U.S. to reap the remarkable economic, health, manufacturing and environmental benefits of EVs. Yet as of now, new EV tax credits have been left entirely out of a so-called “tax extenders” outline circulating among House Ways and Means Committee members.

But a series of new developments are demonstrating that tax credits focused on affordable vehicles are gaining momentum.

Read the full piece on Forbes by clicking here.

Gerwin for Medium: “Getting Democrats to ‘Yes’ on Trump’s New NAFTA”

Posted on June 17, 2019September 18, 2024 by The Progressive Policy Institute

President Trump is apparently a trade alchemist. He’s taken the core of NAFTA (the “worst trade deal ever”), liberally sprinkled in modern rules from the Trans Pacific Partnership (a “potential disaster”), and created a “brand new” trade deal — the US-Mexico-Canada Agreement (USMCA).

Trump’s hyperbole aside, the USMCA, while not perfect, would do a creditable job of preserving the essential rules of the road for North America’s highly integrated, $22 trillion economy. It would also update the decades-old NAFTA by, among other things, adding enforceable labor and environmental rules, promoting digital commerce, and cutting red tape for small business. Given Trump’s years of railing against NAFTA and repeated threats to terminate the Agreement, this is a positive development.

For the USMCA to enter into force, it must be approved by Congress, including the Democratic-controlled House. In recent weeks, Trump hasn’t been helping this process. Insulting and trying to bulldoze House Democratic leaders and threatening damaging new tariffs on Mexico are hardly constructive strategies.

Read the full piece on Medium by clicking here.

How The China Trade War Will Jump Start Digital Manufacturing

Posted on June 3, 2019September 18, 2024 by The Progressive Policy Institute

(As originally appeared on Forbes.com)

Trade war! In my previous column on China and digital manufacturing, I observed that the low price of Chinese imports has been artificially suppressing domestic investments in manufacturing automation. The process of digitization is expensive and risky, and rational investors and managers won’t spend money if they know they will be immediately undercut by Chinese competitors.

Now President Donald Trump has amped up a trade war with China. The new tariffs will hit consumers in their wallets, as even Trump economic advisor Larry Kudlow agrees. Moreover, the trade war runs the risk of boosting inflation, raising interest rates, and potentially tipping the economy into recession.

But for companies in the digital manufacturing space, there’s a silver lining to the dark cloud of the trade war. Suddenly the risk-benefit calculation of investment in digitization starts to look more attractive, purely as an economic proposition. For one, sourcing parts out of China is becoming riskier and potentially more expensive.

With perfect timing, Xometry, a Gaithersburg, Md-based manufacturing platform which calls itself “the largest on-demand manufacturing marketplace,” with more than 2500 U.S. manufacturing partners, just announced a $50 million equity funding round to further build out its capabilities. An article in the Wall Street Journal noted that Xometry’s business “can help blunt small companies’ exposure to price fluctuations and shortages as trade tensions and U.S. tariffs on steel and aluminum make prices more volatile.”

“We’ve definitely seen more requests for reshoring but I don’t think the tides have fully turned,” adds Dave Evans, CEO and co-founder at Fictiv, a high-profile San Francisco-based manufacturing platform. Rather, says Evans, companies are “tariff engineering” their product to reduce costs by making specific parts or assembling locally in the U.S.

For manufacturers of robotics and other industrial automation equipment, the trade war is a mixed bag. On the one hand, domestic companies are gearing up to invest more in robotics. On the other hand, China has been investing heavily in automation, and those markets may be in trouble as the trade war heats up.

For now, manufacturers are still hoping that the China-US trade war will turn out to be only a skirmish. But at some point, companies that have relied on China for their production will decide that the combination of trade tensions and new technology and new business models–what we have called the Internet of Goods–make it more profitable to produce in the domestic market for the domestic market. And that’s when the digital revolution in manufacturing will really take off.

Gerwin for Medium: “Trump Thinks ‘Trade Isn’t Tricky'”

Posted on March 6, 2019September 18, 2024 by The Progressive Policy Institute

When economic historians recount U.S. trade policy under Donald Trump, they’ll tell a cautionary tale. Like the current consensus that the Smoot-Hawley tariffs worsened the Great Depression and tanked global trade, future analysts will detail the negative economic effects of Trump’s go-it-alone trade policies. And historians will draw from a treasure trove of quotes from the “Tariff Man,” who famously said that “trade wars are good and easy to win.”

Perhaps no quote better captures the essence — and dysfunction — of Trump’s trade policies than his claim that “trade isn’t tricky.” Trump sees trade as a straightforward, black-and-white issue. As a result, he’s pursued simplistic — often blunt-force — solutions. Trump’s failure to appreciate the complexity of the interconnected global economy is perhaps the greatest source of the long-term damage that his policies are causing to America’s economy and global standing.

Read the full piece on Medium by clicking here.

Press Release: PPI Urges Support for Bipartisan Legislation to Ensure Congressional Review of National Security Tariffs

Posted on January 30, 2019 by The Progressive Policy Institute

WASHINGTON— Ed Gerwin, Senior Fellow for Trade and Global Opportunity at the Progressive Policy Institute (PPI), today released the following statement in response to the introduction of the bipartisan, bicameral Congressional Trade Authority Act:

PPI welcomes the introduction of the Congressional Trade Authority Act by Representatives Ron Kind (D-WI) and Michael Gallagher (R-WI) and Senators Pat Toomey (R-PA) and Mark Warner (D-VA). We urge Congress to enact this responsible and balanced legislation.

The bill would amend the Trade Expansion Act of 1962 to provide Congress with new tools to oversee and either approve or reject the use of tariffs or other trade restrictions for national security purposes. Under the bill, national security trade restrictions proposed by the president would require congressional approval under an expedited, 60-day procedure. National security tariffs imposed within the past four years would also, retroactively, be subject to congressional review. Other reforms in the bill would include tightening the definition of “national security” to prevent the abuse of congressionally delegated powers to restrict trade for security reasons.

As PPI has explained in a recent policy brief, legislation like the Congressional Trade Authority Act is needed to restore an appropriate balance between Congress and the president in the exercise of trade and tariff powers.

Article I, Section 8 of the U.S. Constitution empowers Congress to “lay and collect . . . duties” and “regulate commerce with foreign nations.” For almost a century, in exercising these powers, Congress has delegated significant authority to the president, including the power to restrict import trade for national security reasons.

Past presidents have generally used these delegated security powers prudently. The Trump Administration has not. Instead, it’s imposed “national security” tariffs and quotas on imports of aluminum and steel from longstanding U.S. allies with scant security justification. And the President has threatened to impose “national security” tariffs—to be paid ultimately by American drivers—on imported autos, as well. As PPI has detailed, the Administration’s unfocused tariffs and trade restrictions have cost jobs for American workers, raised prices for American families, increased costs for businesses and state and local governments, and led to crushing retaliation against American exports.

When he signed the Trade Expansion Act of 1962, President Kennedy advocated building stronger trade alliances and warned against “stagnating behind tariff walls.” At the same time, as PPI has explained in the context of China’s technology theft, smart and targeted trade restrictions are sometimes required to address critical national security threats. Congress has crucial roles to play in both promoting open trade and protecting national security. The balanced reforms contained in the Congressional Trade Authority Act would help Congress better exercise these important responsibilities.

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PPI Launches Series of New Ideas for a ‘Do-Something’ Congress

Posted on January 16, 2019 by The Progressive Policy Institute

Dear Democratic Class of 2018,

Congratulations on your election to the U.S. House of Representatives! In addition to winning your own race, you are part of something larger – the first wave of a progressive resurgence in U.S. politics.

The midterm elections gave U.S. voters their first opportunity to react to the way Donald Trump has conducted himself in America’s highest office. Their verdict was an emphatic thumbs down. That’s an encouraging sign that our democracy’s antibodies are working to suppress the populist virus of demagoguery and extremism.

Now that Democrats have reclaimed the people’s House, what should they do with it? Some are tempted to use it mainly as a platform for resisting Trump and airing “unapologetically progressive” ideas that have no chance of advancing before the 2020 elections. We here at the Progressive Policy Institute think that would be huge missed opportunity.

If the voters increasingly are disgusted with their dissembling and divisive president, they seem even more fed up with Washington’s tribalism and broken politics. For pragmatic progressives, the urgent matter at hand is not to impeach Trump or to embroil the House in multiple and endless investigations. It’s to show Democrats are determined to put the federal government back in the business of helping Americans solve their problems.

We think the House Democratic Class of 2018 should adopt this simple mantra: “Get things done.” Tackle the backlog of big national problems that Washington has ignored: exploding deficits and debt; run-down, second-rate infrastructure; soaring health and retirement costs; climate change and more. And yes, getting things done should include slamming the brakes on Trump’s reckless trade wars, blocking GOP efforts to strip Americans of health care, as well as repealing tax cuts for the wealthiest Americans.

PPI, a leading center for policy analysis and innovation, stands ready to help. We’re developing an extensive “Do Something” Agenda. Today, we are releasing the first in a series of concrete, actionable ideas designed expressly for Democrats who come to Washington to solve problems, not just to raise money and smite political enemies.

As you get settled into your new office, we’ll look for opportunities to acquaint you and your staff with these pragmatic, common-sense initiatives, and to discuss other ways we might be of service to you. That’s what we’re here for.

Regards,

Will Marshall
President
Progressive Policy Institute

New Ideas for a Do-Something Congress No. 1: “A Check on Trump’s Reckless Tariffs”

First and foremost, it’s time for Congress to start doing its job on trade. A key step is enacting the Trade Authority Protection (TAP) Act. This balanced legislation would rein in Trump’s abuse of delegated trade powers, require greater presidential accountability, and enable Congress to nullify irresponsible tariffs and trade restrictions.

A Radically Pragmatic Idea for the 116th Congress: Take “Yes” for an Answer on Net Neutrality

For the last two decades, different versions of net neutrality have bounced between Congress, the Federal Communications Commission, the courts – and most recently the states – but the issue remains unresolved.

It is time for Congress to solve this problem for good by enacting a strong, pro-consumer net neutrality law – an outcome that is politically possible even in this era of maximalist gridlock and deeply divided government, given the broad consensus that has formed around the vital issue of ensuring an open internet.

New Ideas for a Do-Something Congress No. 2: “Jumpstart a New Generation of Manufacturing Entrepreneurs”

The number of large U.S. manufacturing facilities has dropped by more than a third since 2000, devastating many communities where factories were the lifeblood of the local economy.

One promising way to revive America’s manufacturing might is not by going big but by going small – and going local. Digitally-assisted manufacturing technologies, such as 3D printing, have the potential to launch a new generation of manufacturing startups producing customized, locally-designed goods in a way overseas mega-factories can’t match. To jumpstart this revolution, we need to provide local manufacturing entrepreneurs with access to the latest technologies to test out their ideas. The Grassroots Manufacturing Act would create federally-supported centers offering budding entrepreneurs and small and medium-sized firms access to the latest 3D printing and robotics equipment.

New Ideas for a Do-Something Congress No. 3: “End The Federal Bias Against Career Education”

As many as 4.4 million U.S. jobs are going unfilled due to shortages of workers with the right skills. Many of these opportunities are in so-called “middle-skill” occupations, such as IT or advanced manufacturing, where workers need some sort of post-secondary credential but not a four-year degree.

Expanding access to high-quality career education and training is one way to help close this “skills gap.” Under current law, however, many students pursuing short-term career programs are ineligible for federal financial aid that could help them afford their education. Pell grants, for instance, are geared primarily toward traditional college, which means older and displaced workers – for whom college is neither practicable nor desirable – lose out. Broadening the scope of the Pell grant program to shorter-term, high-quality career education would help more Americans afford the chance to upgrade their skills and grow the number of highly trained workers U.S. businesses need.

New Ideas for a Do-Something Congress No. 4: “Expand Access to Telehealth Services in Medicare”

America’s massive health care industry faces three major challenges: how to cover everyone, reduce costs, and increase productivity. Telehealth – the use of technology to help treat patients remotely – may help address all three. Telehealth reduces the need for expensive real estate and enables providers to better leverage their current medical personnel to provide improved care to more people.

Despite its enormous potential, however, telehealth has hit legal snags over basic questions: who can practice it, what services can be delivered, and how it should be reimbursed. As is the case with any innovation, policymakers are looking to find the right balance between encouraging new technologies and protecting consumers – or, in this case, the health of patients.

Telehealth policy has come a long way in recent years, with major advances in the kinds of services that are delivered. Yet a simple change in Medicare policy could take the next step to increase access and encourage adoption of telehealth services. Currently, there are strict rules around where the patient and provider must be located at the time of service – these are known as “originating site” requirements – and patients are not allowed to be treated in their homes except in very special circumstances. To expand access to Telehealth, Congress could add the patient’s home as an originating site and allow Medicare beneficiaries in both urban and rural settings to access telehealth services in their homes.

New Ideas for a Do-Something Congress No. 5: Make Rural America’s “Higher Education Deserts” Bloom

As many as 41 million Americans live in “higher education deserts” – at least half an hour’s drive from the nearest college or university and with limited access to community college. Many of these deserts are in rural America, which is one reason so much of rural America is less prosperous than it deserves to be.

The lack of higher education access means fewer opportunities for going back to school or improving skills. A less educated workforce in turn means communities have a tougher time attracting businesses and creating new jobs. Congress should work to eradicate higher education deserts. In particular, it can encourage new models of higher education – such as “higher education centers” and virtual colleges – that can fill this gap and bring more opportunity to workers and their communities. Rural higher education innovation grants are one potential way to help states pilot new approaches.

New Ideas for a Do-Something Congress No. 6: Break America’s Regulatory Log-jam

Regulation plays a critical role in refereeing competition in a free market economy. But there’s a problem: Each year, Congress piles new rules upon old, creating a thick sludge of regulations – some obsolete, repetitive, and even contradictory – that weighs down citizens and businesses. In 2017, the Code of Federal Regulations swelled to a record 186,374 pages, up 19 percent from just a decade before. PPI proposes a Regulatory Improvement Commission (RIC), modeled on the highly successful Defense Base Realignment and Closure (BRAC) process for closing obsolete military installations. Like the BRAC process, the proposed RIC would examine old rules and present Congress with a package of recommendations for an up-or-down vote to eliminate or modify outdated rules.

New Ideas for a Do-Something Congress No. 7: Winning the Global Race on Electric Cars

Jumpstarting U.S. production and purchase of Electric Vehicles (EVs) would produce an unprecedented set of benefits, including cleaner air and a reduction in greenhouse gas emissions; a resurgence of the U.S. auto industry and American manufacturing; the creation of millions of new, good, middle class manufacturing jobs; lower consumer costs for owning and operating vehicles; and the elimination of U.S. dependence on foreign oil. U.S. automakers are already moving toward EVs, but the pace of this transition is lagging behind our foreign competitors. A dramatic expansion of tax credits for EV purchases could go a long way toward boosting the U.S. EV industry as part of a broader agenda to promote the evolution of the transportation industry away from carbon-intensive fuels.

New Ideas for a Do-Something Congress No. 8: Enable More Workers to Become Owners through Employee Stock Ownership

More American workers would benefit directly from economic growth if they had an ownership in the companies where they work. To help achieve this goal, Congress should encourage more companies to adopt employee stock ownership plans (ESOPs), which provide opportunities for workers to participate in a company’s profits and share in its growth. Firms with ESOPs enjoy higher productivity growth and stronger resilience during downturns, and employees enjoy a direct stake in that growth. ESOP firms also generate higher levels of retirement savings for workers, thereby addressing another crucial priority for American workers.

New Ideas for a Do-Something Congress No. 9: Reserve corporate tax cuts for the companies that deserve it

Americans are fed up seeing corporate profits soaring even as their paychecks inch upward by comparison. Companies need stronger incentives to share their prosperity with workers – something the 2017 GOP tax package should have included.

Though President Donald Trump promised higher wages as one result of his corporate tax cuts, the biggest winners were executives and shareholders, not workers. Nevertheless, a growing number of firms are doing right by their workers, taking the high road as “triple-bottom line” concerns committed to worker welfare, environmental stewardship and responsible corporate governance. Many of these are so-called “benefit corporations,” legally chartered to pursue goals beyond maximizing profits and often “certified” as living up to their multiple missions. Congress should encourage more companies to follow this example. One way is to offer tax breaks only for high-road companies with a proven track record of good corporate citizenship, including better wages and benefits for their workers.