issue: Trade

Biotech Innovation: Two Important Questions

Posted on 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 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 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 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 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 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 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 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 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 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 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.

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

Posted on by The Progressive Policy Institute

Article I, Section 8 of the Constitution sets out Congress’s job description on international trade, empowering it “to lay and collect . . . duties” and “to regulate commerce with foreign nations.”

For the past two years, Congress hasn’t been doing its job. Instead, it’s stood by while President Trump has hijacked its constitutional trade powers and recklessly imposed damaging tariffs. Trump’s abuse of trade powers delegated to him by Congress is destroying U.S. jobs, hammering large and small businesses, increasing prices for American families, and prompting foreign retaliation against American manufactured and farm exports.

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.

 

THE CHALLENGE: PRESIDENT TRUMP’S ABUSE OF DELEGATED POWERS ON TARIFFS AND TRADE IS HARMING AMERICAN BUSINESSES, WORKERS, AND CONSUMERS.

President Trump’s reckless tariffs are damaging America’s economy and U.S. trade relations.
From Maine lobstermen(1) to West Coast dockworkers (2), and for countless workers, farmers, manufacturers (3), and consumers nationwide, President Trump’s tariffs—and resulting foreign retaliation—are causing serious and growing economic pain. Workers are losing jobs (4), manufacturing is being offshored (5), and farmers worry about rotting crops and lost export markets (6). America’s families are paying more for everything from washers and dryers to couches, clothing, canned beer, Christmas lights, and car insurance, while higher costs for infrastructure projects are straining local budgets (7). And unfocused tariffs against allies make it harder for America to mount joint action against serious trade threats, especially China’s technology theft and state subsidies (8).

In taking these irresponsible actions, the President is abusing trade powers delegated to him by Congress. Congress has done nothing to rein in Trump’s reckless trade wars and his hijacking of its constitutional trade authority.

Past presidents have prudently used trade powers delegated by Congress.
The Constitution provides Congress with primary authority over tariffs and foreign trade (9). For the first 145 years under the Constitution, Congress employed these powers directly through legislation. After the disastrous Smoot-Hawley tariffs deepened the Great Depression, Congress wisely adopted a different approach (10).

Beginning with the Reciprocal Trade Agreement Act of 1934,11 Congress increasingly delegated authority to the president to negotiate trade deals, adjust tariffs, and enforce U.S. trade rights (12). In effect, while retaining its constitutional trade powers and oversight authority, Congress has “subcontracted” key trade functions to the president.

These delegations make sense under America’s constitutional system. A 535-member Congress isn’t particularly well equipped to set tariffs, bargain on trade agreements, or enforce trade rules.

Presidents of both parties have largely exercised delegated trade powers responsibly, working constructively with Congress to expand trade (13). When President Kennedy signed the Trade Expansion Act of 1962—which authorized the president to impose trade restrictions to address “national security” threats—he emphasized building alliances and reducing trade barriers, and warned against “stagnating behind tariff walls” (14).

President Trump has abused delegated tariff and trade powers.
Unlike his bipartisan predecessors,15 Donald Trump hasn’t been a prudent steward of delegated trade powers. Rather, he’s cynically abused delegated authority, believing, for example, that simply invoking “national security” enables him to take virtually any action to restrict trade (16).

In imposing tariffs on imports of steel and aluminum, President Trump has used “national security” as little more than a pretext. Long-time trade experts note that the Administration’s investigations in these cases were “extremely non-transparent” and that its security and economic analyses were “embarrassingly feeble” and “absurd” (17).

Since adopting the metals tariffs, the Administration has implemented an exemption process that’s been chaotic, opaque, and lacking essential due process—especially for thousands of small businesses harmed by the tariffs. Applicants rarely get relief. The process seems designed, instead, to preserve tariffs for the Administration’s well-connected cronies in the primary metals sector (18).

Trump is doubling down on abusive “national security” cases, pushing for national security duties on auto imports from U.S. allies, despite near-universal opposition. The Administration’s public hearing in this investigation has been called a “show trial” intended to justify the President’s pre-ordained auto tariffs (19).

The Administration is abusing other delegated trade authorities. In a vital “Section 301” investigation of China’s theft of U.S. hi-tech, Trump initially sought to change China’s conduct by imposing unilateral tariffs on $50 billion in Chinese imports—based on faulty advice that China wouldn’t retaliate. When China retaliated, Trump impulsively increased the tariffed imports by another $200 billion and has threatened duties on all $500 billion in U.S. imports from China (20).

Trump’s irresponsible actions regarding China appear to be driven more by whim than any real strategy. It’s no surprise that his unfocused tariffs haven’t caused China to budge (21).

 

THE GOAL: REIGN IN PRESIDENT TRUMP’S ABUSE OF DELEGATED POWERS WHILE PRESERVING A RESPONSIBLE BALANCE BETWEEN CONGRESS AND THE PRESIDENT ON TRADE

President Trump is seriously abusing trade powers “subcontracted” to him by Congress. Accordingly, like any responsible general contractor, Congress must step in and better oversee how the president uses delegated trade powers.

Most importantly, Congress needs an effective procedure for stopping reckless trade restrictions by the president—and reversing damaging tariffs on hundreds of billions in imports that Trump has already enacted. Any new mechanism should apply to the full range of trade restrictions—including tariffs, quotas, and import prohibitions—and to the full list of laws that authorize the president to restrict trade.

At the same time, Congress shouldn’t return to the role of setting tariffs, negotiating trade deals, or enforcing trade rules. And, the president must still have authority to take initiative to restrict trade for legitimate reasons, subject to effective congressional oversight.

 

THE SOLUTION: ENACT THE TRADE AUTHORITY PROTECTION ACT

The bipartisan Trade Authority Protection Act would establish a process to enable Congress to evaluate and, if necessary nullify, the president’s use of trade powers delegated by Congress. (The TAP Act was introduced in May 2018 by Reps. Ron Kind (D-WI), Gregory Meeks (D-NY), Ralph Norman (R-SC) and Charles Dent (R-PA)) (22).

Under the TAP Act, 60 days before any “congressionally delegated trade action” could go into effect, the president would be required to submit a report to Congress on the proposed action. The report would describe the proposed action and its economic impacts, including the impacts of potential foreign retaliation. The Act would also require the Government Accountability Office—the investigative arm of Congress—to report on whether the proposed action complies with applicable law.

The TAP Act defines “congressionally delegated trade actions” broadly, to include tariffs, quotas, and import prohibitions under a range of laws that empower the President to restrict trade (23).

The Act would establish a procedure—like the Congressional Review Act (24) process for reviewing major regulations—to enable Congress to nullify the President’s proposed trade action. To do so, Congress would use an expedited process to pass a resolution disapproving the President’s proposed action within the 60-day review period.

The TAP Act would also require, in the first year after any trade action takes effect, that the U.S. International Trade Commission conduct a comprehensive assessment for Congress of the economic effects of the action on U.S. producers and consumers.

Finally, since the TAP Act was introduced in May 2018, President Trump has used delegated powers to impose reckless and damaging tariffs on hundreds of billions of dollars of imports, often using highly questionable legal and economic justifications. To assure these past actions are fully evaluated and reviewed by Congress, it’s vital that the original TAP Act be amended to assure that its reporting and nullification requirements apply retroactively to past Administration actions.

 

ENDNOTES

1 Shawn Donnan, Even Lobsters Can’t Escape Trump’s Trade War, Bloomberg, Nov. 7, 2018, https://www.bloomberg.com/news/features/2018-11-07/even-lobsters-can-t-escape-trump-s-trade-war?cmpid=socialflow-twitter-businessweek&utm_source=twitter&utm_content=businessweek&utm_medium=social&utm_campaign=socialflow-organic.

2 Jeff Stein, ‘People are worried and people are scared.’ These workers are hurt by Trump’s trade war, but ineligible for his bailout, Washington Post, Oct. 24, 2018, https://www.washingtonpost.com/business/economy/hurt-by-trumps-trade-war-ineligible-for-a-bailout/2018/10/24/7f30d866-ce67-11e8-a360-85875bac0b1f_story.html?utm_term=.5d8bc2ddefd.

3 Keith Naughton and Joe Deaux, Ford’s Hinrichs says Trump tariffs make U.S. steel costliest in the world, Automotive News, Oct. 22, 2018, https://www.autonews.com/article/20181022/OEM01/181029915/trump-tariffs-ford-hinrichs-stel; Rick Barrett, As tariffs continue, panic begins to sink in among Wisconsin manufacturers, Journal Sentinel, Oct. 22, 2018, https://www.jsonline.com/story/money/2018/10/22/tariffs-boats-cribs-bourbon-more-rattle-wisonsin-manufacturers/1686445002/.

4 Trump Trade War—Mid Continent Nail facing closure over tariffs, Steel News, Oct. 16, 2018, https://steelguru.com/steel/trump-trade-war-mid-continent-nail-facing-closure-over-tariffs/523502.

5 Bob Bryan, A Chicago-area manufacturer is laying off 153 workers and moving to Mexico partly because of Trump’s tariffs, Business Insider, Aug. 15, 2018, https://www.businessinsider.com/trump-tariffs-trade-war-causes-150-layoffs-at-chicago-manufacturer-2018-8.

6 Binyamin Appelbaum, Their Soybeans Piling Up, Farmers Hope Trade War Ends Before Beans Rot, New York Times, Nov. 5, 2018, https://www.nytimes.com/2018/11/05/business/soybeans-farmers-trade-war.html#click=https://t.co/iTW7QnQWbT.

7 Ed Gerwin, The ‘Trump Trade Tax’ Strikes Out America’s Baseball Fans, Progressive Policy Institute, Jul. 17, 2018, https://www.progressivepolicy.org/blog/the-trump-trade-tax-strikes-out-americas-baseball-fan//; Doug Palmer, Trump’s tariffs put pressure on insurance companies and premiums, Politico Morning Trade, Nov. 5, 2018, https://www.politico.com/newsletters/morning-trade/2018/11/05/trumps-tariffs-put-pressure-on-insurance-companies-and-premiums-400272; Infrastructure Construction Projects Stalled on Trump Tariffs, Yahoo, Jul. 18, 2018, https://www.forconstructionpros.com/business/news/21014043/infrastructure-construction-projects-stalled-on-trump-tariffs.

8 Ed Gerwin, Confronting China’s Threat to Open Trade, Progressive Policy Institute, Jun. 20, 2018, https://www.progressivepolicy.org/publications/confronting-chinas-threat-to-open-trade/.

9 U.S. Constitution, Art. I, Sec. 8, https://www.law.cornell.edu/constitution/articlei.

10 Bill Krist, Did the Smoot-Hawley Tariff Cause the Great Depression? America’s Trade Policy, Washington International Trade Association, Jun. 16, 2014, https://americastradepolicy.com/did-the-smoot-hawley-tariff-cause-the-great-depression/#.W-xJ3y2ZOCQ.

11 U.S. House of Representatives, Historical Highlights: The Reciprocal Trade Agreements Act of 1943, https://history.house.gov/HistoricalHighlight/Detail/36918.

12 Office of the U.S. Trade Representative, Eighty Years After the Reciprocal Trade Agreements Act, Tradewinds, Jun. 2014, https://ustr.gov/about-us/policy-offices/press-office/blog/2014/June/Eighty-years-of-the-Reciprocal-Trade-Agreements-Act.

13 Rep. Ron Kind, Congress must defend role in international trade, The Hill, Jun. 7, 2018, https://thehill.com/blogs/congress-blog/economy-budget/391230-congress-must-defend-role-in-international-trade.

14 John F. Kennedy, Remarks Upon Signing the Trade Expansion Act, Oct. 11, 1962,
https://www.presidency.ucsb.edu/documents/remarks-upon-signing-the-trade-expansion-act.

15 Previous presidents, for example, responsibly limited their use of “national security” trade powers to matters that raise legitimate security concerns. David Wassel, Section 232: A splendid little trade war, The Hill, Mar. 17, 2018, https://thehill.com/opinion/finance/378290-section-232-a-splendid-little-trade-war.

16 Paul Krugman, Trump’s Manchurian Trade Policy, New York Times, May 28, 2018, https://www.nytimes.com/2018/05/28/opinion/trump-china-trade-policy.html; It’s telling that President Trump often ignores the pretext of “national security,” and admits that the real purpose of his purported security tariffs is to provide leverage against trade partners on other trade priorities. Michael C. Bender, Rebecca Ballhaus, Peter Nicholas, and Alex Leary, Trump Steps Up Attacks on Fed Chairman Jerome Powell, Wall Street Journal, Oct. 12, 2018, https://www.wsj.com/articles/trump-steps-up-attacks-on-fed-chairman-jerome-powell-1540338090?mod=hp_lead_pos.

17 Chad P. Bown, Trump has announced massive aluminum and steel tariffs, Here are 5 things you need to know. Washington Post, Mar. 3, 2018, https://www.washingtonpost.com/news/monkey-cage/wp/2018/03/01/trump-has-announced-massive-aluminum-and-steel-tariffs-here-are-5-things-you-need-to-know/?utm_term=.c88a87214dda; Phil Levy, The Commerce Department Makes A Feeble National Security Plea For Steel Protection, Forbes, Feb. 16, 2018, https://www.forbes.com/sites/phillevy/2018/02/16/the-commerce-departments-feeble-national-security-plea-for-steel-protection/#40bbede842dc.

18 Megan Keller, Commerce Department IG to audit Trump’s tariff exemptions, The Hill, Nov. 1, 2018, https://thehill.com/policy/finance/414193-commerce-department-inspector-general-audits-tariff-exemption-process; Ed Gerwin, Off-the-rails trade policy shows how America loses under Trump, The Hill, Sept. 18, 2018, https://thehill.com/opinion/finance/407179-off-the-rails-trade-war-shows-how-america-loses-under-trump.

19 Ana Swanson, On Trump’s Car Tariffs, Companies are United in Dissent, New York Times, Jul. 19, 2018, https://www.nytimes.com/2018/07/19/us/politics/trump-car-import-tariffs.html; Jennifer Jacobs and Jenny Leonard, U.S. Car-Import Probe Advances as Trump Plans Trade Meeting, Bloomberg, Nov. 12, 2018, https://www.bloomberg.com/news/articles/2018-11-12/u-s-car-import-probe-advances-as-trump-plans-trade-team-meeting.

20 Louis Nelson, Victoria Guida, and Adam Behsudi, Trump threatens tariffs on all $500 billion worth of Chinese imports, Politico, Jul. 20. 2018, https://www.politico.com/story/2018/07/20/trump-china-tariffs-734938.

21 Anna Fifield, China’s trade surplus with the U.S. hit a record $34.1 billion in September amid trade war, Washington Post, Oct. 12, 2018, https://www.washingtonpost.com/world/chinas-trade-surplus-with-the-us-hit-a-record-341-billion-in-september-amid-trade-war/2018/10/12/acdb7412-cdd9-11e8-a360-85875bac0b1f_story.html?utm_term=.f9d7beaa6bda.

22 Trade Authority Protection Act, H.R. 5760, 115th Cong., 2nd Sess., https://www.congress.gov/bill/115th-congress/house-bill/5760/text; Congressman Ron Kind, Bipartisan Group of Lawmakers Call for Implementation of Congressional Review Act Procedures on Trade Measures, Press Release, May 10, 2018, https://kind.house.gov/media-center/press-releases/bipartisan-group-lawmakers-call-implementation-congressional-review-act.

23 Ibid.

24 U.S. Government Accountability Office, Congressional Review Act, https://www.gao.gov/legal/other-legal-work/congressional-review-act.

America’s Resilient Center and the Road to 2020 – Results from a New National Survey

Posted on by The Progressive Policy Institute

The Progressive Policy Institute (PPI) today released a national opinion survey that highlights the surprising resilience of America’s pragmatic political center two years into Donald Trump’s deeply polarizing presidency. The poll reinforces a key takeaway from the 2018 midterm elections: Suburban voters – especially women – are repelled by the president’s racial and cultural demagoguery and are moving away from a Trump-dominated GOP.

“Our poll suggests that Donald Trump’s election in 2016 is more likely to be an aberration than any permanent shift in America’s political course,” said Anne Kim, PPI Director of Social and Domestic Policy and PPI President Will Marshall. “The defection of suburban voters creates a political landscape that favors Democrats in 2020 – if they stick to the ‘big tent’ approach that proved so effective in the midterm.”

The poll conducted by Pete Brodnitz at Expedition Strategies contains findings about what’s top of mind for voters, their ideological outlook and leanings, and their views on health care, trade, growth and inequality, the role of government, monopoly and competition, and other contentious issues.

“The agenda that could help Democrats sustain a governing majority, our poll suggests, is one that is progressive yet pragmatic—one that’s optimistic, aspirational and respects Americans’ beliefs in individual initiative and self-determination; one that broadens Americans’ opportunities for success in the private sector and strengthens the nation’s global economic role; one that demands more from business but doesn’t cross the line into stifling growth; and one that adopts a practical approach to big challenges such as immigration reform and climate change,” write Kim and Marshall.

“For Democrats to maintain and expand this near-majority advantage, they must craft a broadly appealing agenda that brings or keeps independents and less committed partisans—the majority of whom call themselves ‘moderate’—under the tent.”

PPI-Expedition-Strategies-2018-Poll-PPT

PPI_Americans-and-The-Economy2018

Gerwin for The Wall Street Journal, “Trump’s Tariffs Give Democrats a Chance to Lead on Trade”

Posted on by The Progressive Policy Institute

‘We lost $817 billion a year, over the last number of years, in trade,” President Trump said at a summer rally. “In other words, if we didn’t trade, we’d save a hell of a lot of money.”

Mr. Trump’s bombast has flipped the Republican pro-trade script. For Democrats, this change offers a significant political opening and a pivotal choice: Should Democrats echo Mr. Trump’s 1930s-era protectionism, or reclaim the tradition of global engagement sustained by FDR, JFK, and Bill Clinton?

Continue reading at The Wall Street Journal.

Gerwin for New York Daily News, “Trump’s NAFTA revision actually reaffirmed open regional trade”

Posted on by The Progressive Policy Institute

Donald Trump huffed, and he puffed, but he couldn’t blow NAFTA down.

Like the Big Bad Wolf in the fairy tale, President Trump presumed that NAFTA — which he’s called the “worst trade deal ever” — would collapse before his bluster like a house of straw. Trump’s bombast may have knocked a few shingles off the agreement’s free trade edifice. And it’s caused serious collateral damage to America’s neighborhood and beyond. But, in the end, NAFTA’s structure — like the Three Pigs’ house of bricks — still stands.

Trump, of course, tells a different fable. At a recent rally, Trump declared “[w]e are replacing the job-killing disaster known as NAFTA, with the brand new U.S.-Mexico-Canada trade agreement.”

Continue reading at New York Daily News.

Marshall for New York Daily News, “New Old Labour: The U.K. party’s tight embrace of retrograde ideas, and what it might mean for Democratic Socialists in the U.S.”

Posted on by The Progressive Policy Institute

Democrats, like progressive parties across the transatlantic world, are struggling to find an answer to populist nationalism. Could that answer lie in reviving another old political creed, socialism?

Some young Democratic activists, inspired by Sen. Bernie Sanders, are flirting with “democratic socialism.” But they have nothing on Britain’s Labour Party, which consummated its on-again relationship with socialism in Liverpool last week.

The occasion was the party’s annual conference, which I attended when not wallowing in Liverpool’s trove of Beatles memorabilia. The gathering presented an oddly incongruous picture: a reinvigorated party with lots of young faces hawking old ideas.

The Merseyside Conference also capped Jeremy Corbyn’s improbable odyssey from Labour’s hard-left fringe in the early 1980s to party leader today. Having survived media ridicule for his retro views, several attempted ousters and a recent imbroglio over charges that he’s tolerated anti-Semitism among left-wing Labour members, Corbyn at last seems to have his party firmly in hand.

Continue reading at New York Daily News.