issue: Trade

The Hill: Pelosi’s choice: Obama or left?

Posted on by The Progressive Policy Institute

Ed Gerwin, PPI Senior Fellow for Trade and Global Opportunity, was quoted in the The Hill on how Nancy Pelosi is confronting a conundrum on trade as she walks a delicate line between the president she champions and the caucus she leads:

Ed Gerwin, a trade expert with the Progressive Policy Institute, a rare liberal group that supports the fast-track bill, said Pelosi’s reticence is bolstering Obama’s hand.

“Whether or not she ends up as a supporter, what she has been doing is very helpful in trying to get to yes, on trade,” Gerwin said. “What Pelosi has been doing, combined with the significant efforts by Wyden in the Senate, may allow Democrats to put more of a stamp on trade and may help some members keep an open mind on TPA and eventual trade deals.”

Read the piece in its entirety at The Hill.

CNN: Why trade is in the national interest

Posted on by The Progressive Policy Institute

Withstanding intense pressure from anti-trade “progressives” — an oxymoron if ever there was one — Sen. Ron Wyden, D-Oregon, has struck a deal with Congressional Republicans to move a bipartisan trade promotion authority bill.

Wyden’s display of grit is good news for the cooling U.S. economy, which needs a lift from export-led growth; for American workers, who need the jobs and rising pay that come with rising exports and stronger growth; and for President Barack Obama, who needs the authority to complete negotiations over three major trade pacts and get them through Congress.

Wyden is a staunch liberal, but one with an independent streak who’d rather solve problems than strike poses. But committing acts of political leadership is dangerous in Washington these days, and Wyden can expect more abuse from “populists” within his own party. That’s a shame, because the Oregon Democrat has actually moved trade promotion authority (TPA) in a more progressive direction.

Continue Reading at CNN

PPI Returns from 2015 Digital Trade Mission to Europe

Posted on by The Progressive Policy Institute

Dear Friend,

We’re just back from Europe, where last week PPI led a bipartisan delegation of Congressional staff on a four-day swing through three capitals: London, Brussels and Berlin. Our goal was twofold: 1) to learn more about the European Union’s ambitious plan to create a “digital single market” and, 2) to press PPI’s case for moving digital trade from the periphery to the center of the transatlantic agenda.

Why is this so important? Consider these facts:

  • The free movement of data raises the productivity of businesses and reduces trade costs, creating jobs and growth on both sides of the Atlantic.
  • US/EU cross-border data flows are by far the highest in the world, 50 percent more than between the United States and Asia.
  • America runs a large trade surplus in services, of which 61 percent are delivered digitally.
  • The Internet is becoming a powerful export platform for small enterprises, connecting them to global customers at low cost.

As PPI has documented in a series of groundbreaking reports, digital innovation and commerce are increasingly driving economic investment and growth in America and Europe. We believe the transatlantic partners share a common interest in ensuring that digital trade enjoys the same legal protections as trade in physical goods and services. Instead of joining forces to extend free trade principles to digital commerce, however, Europe and America are embroiled in a raft of disputes that threaten to erect barriers to cross-border data flows.   

Such disputes, for example, involve calls for data localization, for national or European clouds, for taxing data flows and for imposing stringent privacy or data protection rules on businesses. Right now, the European Court of Justice is considering a challenge to the “safe harbor” rules that have allowed US tech companies to operate in Europe. In addition, new tensions have arisen around issues of copyright protection, “platform competition,” tax avoidance and many core provisions of the proposed Transatlantic Trade and Investment Partnership (T-TIP).

As you probably know, PPI has long been a catalyst for transatlantic dialogue, going back to the Clinton-Blair “Third Way” conversations we helped to launch in the 1990s. Over the last four years, our work in Europe  has focused on reviving transatlantic economic cooperation, with a particular emphasis on the rise of data-driven innovation and growth. At a time when authoritarian countries seek to limit the free flow of information, we think it’s crucial that the Western democracies work together to prevent the balkanization of the Internet and defend free digital trade.

That’s why we organized this second “Digital Trade Study Group”—a bipartisan group of 12 senior House and Senate staffers, whose bosses have oversight of issues related to trade, digital commerce, copyright, intellectual property, privacy, cyber security, and communications and technology. (We took the first such group to Europe in April 2014). Last week’s trip featured a productive round of high-level talks with prominent political, business, policy and media leaders.

Here are the highlights: 

  • In London, our traveling party met with Daniel Korski, Special Advisor to Prime Minister David Cameron, and Guy Levin, formerly special advisor to Chancellor of the Exchequer George Osborne, to discuss UK technology policy. As Michael Mandel, PPI’s chief economic strategist, has documented, London has emerged as one of the world’s premier centers for tech entrepreneurship.
  • Vanessa Houlder, who covers economics for the Financial Times, briefed our group on the Cameron government’s controversial new “diverted profits tax.” Aimed ostensibly at discouraging tax avoidance, it slaps a 25 percent tax on the local profits of U.S. and other foreign companies operating in the UK, and has been dubbed the “Google tax” by detractors. 
  • Also in London, PPI released a new policy brief by Mandel, Taxing Intangibles: The Law of Unintended Consequences. It notes that digitized information differs from physical goods and services in that it can be duplicated at negligible cost and used by different consumers at once. As such, Mandel argues, it makes little sense to tax this intangible knowledge as one would a car or the provision of a unique service. In fact, new proposals for taxing intangibles will undermine global growth and thus be self-defeating, the report argues.
  • In Brussels, two officials of the European Commission’s DG Connect unit, Eric Peters, Deputy Head of the Single Market Unit and Tamas Kenessey, Legal Officer, briefed the group. The Digital Single Market, they stressed, is the EU’s top priority. It would enable tech companies that start in one of the Union’s 28 countries to grow to continental scale, and speed the onset of what we call the “Internet of Things.”
  • Over dinner, the Digital Trade Study Group heard from Ken Propp, Legal Counsel with the US Mission to the EU, and Paul Hofheinz, President of the Lisbon Council, PPI’s think tank partner in Brussels. The discussion centered on the headwinds T-TIP has encountered and political differences within the EU on digital policy.
  • Then it was on to Berlin, for lunch with two leading Green Party officials, Konstantin von Notz, a Member of the German Bundestag, and Dieter Janacek, the party’s spokesman on economic issues. The Greens are strong backers of Europe’s Data Protection Regulation, which our speakers noted reflects Germany’s unhappy experience with secret police agencies of the past. Joining us for dinner was Torsten Riecke, an international correspondent for Handelsblatt, who gave our group an insider’s perspective of German domestic politics, as well as its increasingly central role in European politics. The next morning, we drilled deeper into German concerns about data protection and privacy with Marcus Loning of the Stiftung Neue Verantwortung and former Free Democratic Party Member of the German Bundestag.
  • Our group received an insightful briefing on Industrie 4.0—Germany’s equivalent of the “Internet of Things.” As explained by Boris Petschulat, Deputy Director General at the German Federal Ministry for Economic Affairs & Energy, Industrie 4.0 seeks to digitize production without disrupting its finely honed industrial export machine. 
  • We paid a visit to the Federal Association of German Newspaper and Magazine Publishers, which has been battling tech companies, especially Google, over copyrightand content issues. A lively debate ensued with Managing Director Christoph Fiedler and Christoph Keese, Vice President of the Axel Springer publishing empire. For more on this important subject, check out another just-released policy brief by Mandel, Copyright in the Digital Age: Key Economic Issues.
  • Thomas Jarzombek, a member of the German Bundestag, who sits on the committee responsible for the digital agenda, elaborated on the German government’s efforts to build a digital infrastructure and nurture a more entrepreneurial, start-up culture.
  • We finished our mission at the US Embassy in Berlin, where Ambassador John Emerson, a longtime PPI friend, offered a wide-ranging and insightful perspective on US-German relations.

PPI’s Digital Trade Study Group excursions to Europe serve two important purposes. First, they enable key Congressional staff from both parties to get a better understanding of European views on innovation policy, T-TIP, digital trade, privacy, copyright and other interests of mutual concern and transmit that knowledge to Members of Congress.  Second, they underscore to our European friends the importance Congress attaches to transatlantic commerce in general and to data trade specifically.

This year’s mission advanced both of these goals. And it added important new dimensions to the extensive network of European political leaders, industry professionals, and policy analysts that PPI has built over the years. As always, I welcome any feedback you may have. 

Sincerely,

Will Marshall
PPI President

Should the US consider a patent box?

Posted on by The Progressive Policy Institute

Who will write the new rules of the global tax system? Right now risk-averse bureaucrats at the OECD’s Paris headquarters are busily constructing a new set of tax principles–known as the ‘BEPS project’–that could accidentally squash global growth, as we warned in our recently released policy brief, “Taxing Intangibles: The Law of Unintended Consequences.”*

Instead, the rulebook for 21st century global tax policy must be written by those policymakers, in the US and elsewhere,  who understand the importance of risk-taking and investment in innovation.  This imperative drives the United States to consider concepts such as the “patent box,” a tax instrument that discourages tax avoidance by large corporations while encouraging the creation of growth-enhancing knowledge.

The “patent box”—or as it is sometimes called, the  “IP box” or “innovation box”—is already in use by countries such as the United Kingdom and the Netherlands. It gets its name from the idea that companies invest in research and development that leads to patents.  These patents are metaphorically put into the patent box, where they are taxed at a lower rate. Sometimes the preferential rates are broadened to other types of intangible investments, which is why it sometimes goes by a different name.

The underlying economic insight behind the ‘patent box’ is the indisputable fact that global growth is increasingly driven by knowledge, in the form of patents, copyrights, data, and other intangibles.  Unfortunately, the rising importance of intangibles means current tax rules are simultaneously too strong in some aspects and too weak.  On the one hand, statutory tax rates on intangibles is almost certainly too high. Remember that the investment in knowledge by one company or country spills over to other companies and countries, creating a positive externality for the whole global economy.  As a result, many economists agree that intangibles should be taxed at a lower rate to acknowledge their benefits.

On the other hand, under the current rules, the same virtues of intangibles that enable global growth also enable knowledge companies to easily transfer nominal ownership of intangibles to subsidiaries in low-tax countries. The combination of high statutory tax rates and easy transfers means that corporations have both an incentive and the means to legally and dramatically cut their taxes.

This state of affairs cannot persist.  Faced with political and fiscal pressure, governments will take aggressive steps to bring in more tax revenues.  Indeed, the BEPS project is advocating that governments  give up long-held notions of tax sovereignty to “capture” the income from intangibles, even if these measures end up hurting global growth.  Unfortunately, as we showed in our paper, the tax approach advocated by the BEPS project is ultimately self-defeating, requiring enforcement of a tortuous set of transfer pricing rules every time an intangible crosses national borders—an approach that only a bureaucrat could love.

For US policymakers looking to spur growth, one better solution to this dilemma—though not the only one—is the patent or innovation box. In simple terms, the patent box offers corporations much lower tax rates on income from investment in intangibles such as R&D.  In return, this lower tax rate is only available to intangible investments made in that country—what tax experts call a ‘nexus.’

A patent box offers corporations both a carrot and a stick.  The carrot is the lower tax rate on the income from domestic investments in intangibles made in the United States. The stick is that this lower rate would not be available to companies that moved nominal ownership of intangibles to other countries, thus reducing the avenues for legal tax avoidance.

Many countries in Europe have already adopted varieties of the patent box approach, including the United Kingdom.  However, the patent box in the UK and elsewhere has come under pressure from supporters of the BEPS approach, who believe that such “preferential regimes” should be eliminated or greatly restricted.

By contrast, we believe that the patent box should be seriously explored in the United States as a means of encouraging growth while discouraging corporate tax avoidance.  It may not be the ultimate solution, but it’s one step in the right direction.

*BEPS stands for Base Erosion and Profit-Shifting. It’s a major OECD project for reworking the global tax system for the digital age. The BEPS project has many good points, in terms of reducing the opportunities for tax avoidance, but it may have a negative impact on global growth.

The Hill: How the Obama trade agenda can advance progressive goals

Posted on by The Progressive Policy Institute

In the last month, protesters have camped out in the Washington office of Sen. Ron Wyden (D-Ore.) and have even flown a 30-foot blimp over his town halls in Oregon. The senator’s offense? As the ranking member of the Senate Finance Committee, Wyden is negotiating with the Obama administration and pro-trade Republicans and Democrats on Trade Promotion Authority (TPA)—legislation that would set requirements for new trade agreements and rules for how they’re considered by Congress.

Wyden believes that—if done right—new trade deals with Asia (TPP) and Europe (TTIP) coupled with strong enforcement can promote stronger growth and good jobs in his trade-dependent state, while also advancing important values like environmental protection, labor rights and an open Internet.

For the protesters, however, opposition to free trade agreements is an article of faith in their version of the progressive cannon.  Since the great NAFTA debate of the 1990s, trade has often been a polarizing issue among progressives. But key developments since then—the rise of China, the dramatic growth in digital trade via the Internet, and concerns about a long-term slowdown in U.S. growth—give progressives good reasons to think again.

Trade-skeptical Democrats should use the debate on Trade Promotion Authority to take a fresh look at President Obama’s far-reaching trade initiatives. As we’ve detailed in a recent Progressive Policy Institute report, open-minded progressives can find many examples of how the Administration is combining smart trade policy and progressive ideals to advance vital goals while strengthening both the United States and the global economy:

Tapping into Global Growth. Assuring that Americans have a fairer slice of the economic pie is easier when the pie is growing.

In the past, America’s middle class fueled growth in the rest of the world. Now, an exploding global middle class—especially in Asia—can return the favor. By 2030, Asia will add 1.2 billion new middle class consumers to the global economy. These global consumers will want to buy what America has to sell—from wholesome food and cutting-edge consumer products to modern financial services and health care.

Trade initiatives like the TPP can help America’s businesses and workers tap into growing global demand by eliminating high duties, discriminatory standards, and other significant barriers to U.S. exports.  And­—if combined with progressive initiatives in areas like education and training—growing trade can help support broad-based American prosperity.

Democratizing Trade. Trade agreements can also “democratize” trade by empowering small business and global consumers.

The Internet and services like eBay and FedEx make it increasingly possible for America’s small exporters to sell globally as easily as their bigger rivals. Small firms that export do well—with 20 percent greater productivity and 20 percent higher job growth than those that don’t. But an array of trade barriers—including high duties and fees and complex standards—still make it difficult for smaller exporters to compete.

U.S. trade negotiators are focusing intensively on eliminating small business trade barriers in the TPP and T-TIP. And they’re working to foster a robust trade ecosystem for small traders by promoting transparent rules, open electronic commerce, and strong protection for innovation. Opening up modern Internet-enabled trade can provide global consumers with greater choice, freedom, and economic power, as well.

Leading on Fairer Trade. Trade agreements like TPP and T-TIP help America lead coalitions of like-minded countries that seek a fairer global trading system in which abuses like exploiting workers, despoiling the environment, or blocking the Internet are not longer accepted means of competition.

Based on a 2007 deal initiated by House Democrats, U.S. trade agreements now include strong and enforceable rules that require trading partners to abide by and enforce fundamental labor rights and key environmental laws and agreements. TPP and T-TIP negotiations afford the opportunity to extend these—and other important progressive principles—to two-thirds of global trade. If America doesn’t lead, however, countries like China may succeed with a competing trade model—one that ignores values like worker rights, environmental protection, and an open Internet.

Updating Trade Rules.  New trade deals also provide the opportunity to update old trade rules and write important new ones.

Critics of NAFTA, for example, have long complained that its “side agreements” on labor and the environment contain weaker requirements that are neither part of NAFTA nor enforceable under that agreement. Negotiating with Canada and Mexico in the TPP can help assure that trade with America’s first and third largest trading partners is governed by strong, modern, and enforceable labor and environmental rules.

Additionally, new trade agreements can address an array of emerging challenges to U.S. trade, including State-Owned Enterprises that use government subsidies and special privileges to gain unfair advantages, and a growing list of barriers to innovation and electronic commerce.

Supporting a Progressive Growth Agenda. Finally, progressives can use a thoughtful trade debate to remind colleagues that trade is only one piece of America’s larger economic puzzle.

A new study by Progressive Economy concludes that trade is likely not a major cause—nor a major solution—for the serious problem of income inequality. The study notes that trade policy can make key contributions by, for example, driving stronger growth and reducing high duties that particularly impact lower-income Americans.  But, ultimately, solving America’s major economic problems will also require many domestic initiatives long championed by progressives, including better access to education and training, and investment in innovation and infrastructure.

When it comes to trade, not all progressive-leaning Americans are flying protest blimps. Indeed, according to recent polling, some 60 percent of Democrats and 65 percent of millennials believe that trade deals like TPP and T-TIP are “good” for America. It’s time for progressives to avoid reflexive opposition and take a fresh look at the U.S. trade agenda.

Forbes: Hillary Clinton and Trade: Not a Marriage Made in Heaven

Posted on by The Progressive Policy Institute

PPI senior fellow for trade and global opportunity, Ed Gerwin, today was quoted in a Forbes piece regarding Hillary Clinton and how Democrats approach to trade:

“The problem is there is a strain within the Democratic Party and the progressive movement that is of the view that support for any kind of free trade agreement is an absolute non-starter,” said Ed Gerwin, a trade expert with the Progress Policy Institute. “For these folks, it has become a part of their almost religious canon that you can’t support these FTAs.”

That’s counter-productive, he said, “because if that’s the attitude they take, then they lose all influence in the trade debate. People write off these hard-core anti-trade people because they’re not going to support you, whatever you do.”

Read the piece in its entirety at Forbes.

The Hill: Obama trade agenda

Posted on by The Progressive Policy Institute

PPI President Will Marshall was quoted by Kevin Cirilli in The Hill on the growing tensions in the Democratic party over President Obama’s trade agenda:

Will Marshall, president of centrist Democratic think tank the Progressive Policy Institute, said that “Democratic candidates in 2016 aren’t going to get into trouble for supporting” the trade agreements.

“Most voters understand that America can’t prosper in isolation and they have little interest in yet another reenactment of the long-ago battle of NAFTA,” he said.

Continue reading at The Hill.

Politico Pro: Report urges progressives to reconsider Obama trade agenda

Posted on by The Progressive Policy Institute

PPI Senior Fellow Ed Gerwin’s latest report was featured in a trade story by Politico Pro‘s Doug Palmer:

A new report urges progressive Democrats opposed to President Barack Obama’s trade agenda with countries in the Asia-Pacific to give it another look, arguing that trade deals support progressive goals in a variety of ways, including by helping economic growth.

“Trade-skeptical progressives … should take a thoughtful look at the details of the Obama trade agenda and how it might better position America in the modern global economy,” Ed Gerwin, a senior fellow at the Progressive Policy Institute, said in the report. “If they do, they’re likely to find important policies and initiatives for progressives to like.”

“A progressive society that is both prosperous and fair requires strong and inclusive economic growth. The Administration’s trade agenda can play an important role in assuring that America can tap into one key source of economic vitality — surging demand in key foreign markets,” Gerwin said.

The report comes as Congress is gearing up for action on trade promotion authority, also known as fast-track trade legislation because it would allow the White House to submit trade agreements to Congress for straight up-or-down votes without any amendments.

 

The Obama Trade Agenda: Five Things for Progressives to Like

Posted on by The Progressive Policy Institute

In his recent State of the Union address, President Obama went all in on international trade.

The Administration has already been aggressively pursuing the most ambitious set of trade agreements in decades—including potentially groundbreaking deals with 11 Asian-Pacific countries (the Trans Pacific Partnership, or TPP), and the European Union (the Transatlantic Trade and Investment Partnership, or T-TIP), as well as agreements in key sectors like services, information technology, and environmental products.

Now, to set the stage for eventual Congressional approval for these deals, the President has launched an Administration-wide effort to obtain Trade Promotion Authority (TPA) from Congress. Under TPA, Congress sets detailed priorities and extensive consultation requirements for U.S. trade negotiators, and agrees to follow special expedited procedures for agreements that meet these rules.

Congressional Republicans largely support TPA and the Administration’s trade agenda. There is less support, however, among Congressional Democrats, many of whom have doubts about new trade deals. And, because trade has long been a difficult political issue, it’s quite tempting for these trade skeptics to readily side with those who have consistently opposed trade agreements.

Download “2015.02-Gerwin_The-Obama-Free-Trade-Agenda”

 

The Hill: Shooting yourself in the foot

Posted on by The Progressive Policy Institute

What’s gotten into our European friends? Beset by slow growth, tensions over immigration and a rising fever of anti-Euro populism, some leaders are trying to deflect public discontent onto U.S. companies—a move that may turn out to backfire economically

The latest example comes from UK Chancellor of the Exchequer, George Osborne. He recently floated a proposed “diverted profits tax” on foreign companies doing business in Britain. It’s been called the “Google tax” and little wonder, since it’s clearly aimed at U.S. tech companies.

Osborne describes the idea as a way to foil tax avoidance strategies many companies use. That’s a legitimate issue. But what the Chancellor is proposing is a unilateral step that could torpedo the elaborate process the European Union and other governments already launched (through the Organization for Economic Cooperation and Development) to develop a common approach to tax base erosion and profit-shifting.

This gambit by the government of Prime Minister David Cameron, a Conservative who is forever extolling Britain’s “special relationship” with America, is unfortunately not an isolated incident.

Continue reading at The Hill.

Forbes: Net Neutrality at Home, TTIP Abroad. Moving Towards the Center?

Posted on by The Progressive Policy Institute

In an article on net neutrality and the Transatlantic Trade and Investment Partnership, Forbes contributor Larry Downes mentioned speaking at “Growing the Transatlantic Digital Economy,” an event hosted last week by the Progressive Policy Institute and the Lisbon Council:

Later in the week, I spoke at a program co-sponsored by the Progressive Policy Institute, the Lisbon Council, and the Georgetown Center for Business and Public Policy on “Growing the Transatlantic Digital Economy,” which reviewed efforts to bridge what have often been large gaps in policy that make digital trade between the U.S. and the E.U. difficult, including differences our respective approaches to competition, privacy, and communications infrastructure regulation between the two economies.

Read the full piece on Forbes.com

Anti-inversion legislation: A “boomerang bill”

Posted on by The Progressive Policy Institute

There must be a good word for legislation that produces exactly the opposite result that its supporters intend. I know, let’s call it a “boomerang bill.”

The anti-inversion legislation that Treasury Secretary Jack Lew advocated on September 7th is, unfortunately, a classic example of a boomerang bill.  It is intended to stop a feared tidal wave of corporate inversions–that’s a fancy technical term for when a U.S. company moves its headquarters to another country, often but not always for tax reasons.

In reality, anti-inversion legislation, at least as currently proposed, is likely to turn U.S.-based multinationals into hunted prey, selling out to foreign rivals. The proposed legislation basically draws up a roadmap for activist investors and foreign companies, showing them how to get access to the overseas cash of U.S. companies by buying them up and moving their headquarters out of the country.

How does that happen? Proponents of anti-corporate-inversion legislation are worried that the tax benefits of moving the headquarters of a U.S. multinational overseas are compelling–so compelling that if they allow a few companies to do it, a tidal wave will follow.

So to stop the flood, the legislation would require that any company that wants to “invert” show at least 50% foreign ownership in order to escape the U.S. tax system. That’s intended to stop companies such as Medtronic, which is planning to acquire the Irish company Covidien and move its headquarters to Ireland, while maintaining its existing operations in the U.S.

Now, there is much debate about whether Medtronic is making this move for strategic or tax reasons. But that’s not important.  The big problem is that the anti-inversion legislation does nothing to fix the underlying problem, which is the incredibly weird and broken U.S. corporate tax system.

Instead, the legislation encourages activist investors and foreign companies to work together to make takeover bids for U.S. multinationals with large amounts of cash outside of the country. No company, no matter how large, would be safe.

What’s the real solution here? America’s corporate tax system is broken, and you don’t fix a broken leg by applying a band-aid. For one, it has a higher corporate tax rate, 35%, than almost any other industrialized country.

Second, America taxes all income, foreign and domestic, of U.S.-headquartered companies at this higher rate, something almost no other country does.

Let me state for the record that I believe America is an awesome place to live and work. In particular, America’s history and culture as a wellspring of innovation makes it the best place to build a business in the world, bar none.  And I am gratified when I see foreign businesses open up factories, software labs, or R&D facilities in this country.

At the same time, I don’t necessarily like it when a U.S.-based company moves its headquarters overseas. Still, it’s a business decision, the same as when a foreign company takes tax breaks to open up a big plant, say, in Alabama or Kentucky.

The solution here is to fix the corporate tax system, not to enact a boomerang bill that will only make things worse.

 

Jobs in the Australian App Economy

Posted on by The Progressive Policy Institute

Is Australia ready for the digital economy? This is obviously a subject of great debate, intertwined with decisions about investments in the National Broadband Network and public concerns about data privacy. It is clear that some parts of the Australian digital economy, notably mobile communications, are quite vibrant. Two recent reports from the Australian Communications and Media Authority show the strength of this sector.

  • The number of Australians using the Internet via their mobile phone rose 33% from June 2012 to June 2013.
  • The number of Australians with a smartphone rose by 29% from May 2012 to May 2013.
  • Mobile broadband boosted Australia’s economic activity in 2013 by an estimated $34 billion (AUD).

In this study, we focus on one particular aspect of the mobile boom: The number of Australian jobs created in Australia’s ‘App Economy’. Australia has a large number of app developers—these are the people who design and create the apps distributed by small and large companies, nonprofits, and government agencies. Indeed, it’s astonishing how fast many companies have embraced the App Economy, hiring the workers needed to develop mobile applications at a rapid rate. We are seeing the creation of new specialties and new ways to interact with customers and employees.

But building a successful app is not a one-shot deal. Think of an app like a car—once built, it still needs to be repaired (in the case of bugs or security risks), updated, and maintained. And just as the automobile industry supports a large number of workers, from engineers to factory production workers to sales to service stations, so too does the App Economy support a significant number of workers.

An Australian company that does app development has to hire sales people, marketers, human resource specialists, accountants, and all the myriad of workers that inevitably make up the modern workforce. Finally, each app developer supports a certain number of local jobs. (The full definition of an App Economy job is found later in this study).

In this report we estimate that the Australian App Economy employed roughly 140,000 workers as of June 2014. The top state was New South Wales, with 77,000 App Economy jobs, but every state had some App Economy employment. Moreover, we note that Australia stacks up well against the United States and the United Kingdom when it comes to App Economy employment per capita.

Read the full memo – Jobs in the Australian App Economy

Does Ex-Im Bank Need a ‘Third Option’?

Posted on by The Progressive Policy Institute

Long dogged by claims of corporate welfare, the Export-Import Bank (Ex-Im) finds itself once again fighting for its survival. At 80 years old, Ex-Im has always won the fight. But this time, a “third option” of reform might just be what it needs — one that focuses on making the agency better, not closing its doors.

The Export-Import Bank is a government agency with a mission to support U.S. jobs through exports. The bank provides loans, guarantees and insurance to help U.S. exporters level the playing field against foreign competitors, in a world where 59 other countries provide export financing assistance. As a “lender of last resort,” each transaction must demonstrate “additionality,” where the export would not go forward absent Ex-Im Bank.

In the past, trade promotion by leveling the playing field has been argument enough for reauthorization. But now, the battle over Ex-Im Bank is about more than corporate welfare — it’s a face-off between the establishment Republicans and Tea Party conservatives.

Continue reading at The Hill.

A Fresh Approach to International Investment Rules

Posted on by The Progressive Policy Institute

Money makes the world go round. Although money flows are global, the rules governing investment are bilateral and regional. Cross-border investment is governed by a patchwork of over 3,000 bilateral investment treaties (BITs), regional and bilateral trade agreements (FTAs) with investment chapters, as well as the trade-related investment provisions of the World Trade Organization. While many states have signed international investment agreements (IIAs), they do not cover all states, investors, or categories of investments. Taken in sum, these IIAs have many problems, including:

  • The 3,000-plus IIAs vary significantly and do not offer clear and uniform guidelines to protect international investment.
  • Tribunals have no effective means of enforcing their decisions.
  • Some investors and states take advantage of the hodgepodge of rules to “game the system” through forum-shopping and other strategies.
  • Investors are increasingly challenging government regulatory or budgetary policies that reduce the value of their investments as “indirect expropriations.”
  • Citizens in the United States, EU, and other countries are increasingly critical of the balkanized, uneven investor-state arbitration process.

We believe it is time for a fresh approach to international investment agreements: one that builds a more universal, consistent, and accountable system. In this policy brief, we put forward three concrete steps that can promote and protect foreign investment, advance the rule of law, preserve the ability of governments to regulate, and link trade and investment.

Step 1: At the behest of the G-20, the WTO and international organizations with investment competence should establish a committee of experts to develop a code of norms and best practices. G-20 members should use this code as a template for future investment agreements and encourage all WTO member states to sign up.

Step 2: WTO members should set up an Investment Appellate Body to review and if necessary, override controversial arbitrations where the rights of investors or governments were inadequately protected. The Investment Appellate Body will stand beside the WTO’s Trade Appellate Body.

Step 3: To give the Investment Appellate Body teeth, one or more WTO member states should ask the WTO Secretariat to explore the feasibility of using trade policy to retaliate against states that fail to comply with its decisions.

Download the complete report.

Bloomberg: EU Risks Hurting Growth in Data Safeguard Effort, Study Finds

Posted on by The Progressive Policy Institute

Rebecca Christie of Bloomberg wrote an article covering PPI’s transatlantic conference and paper release in Brussels last week. The paper, Bridging The Data Gap: How Digital Innovation Can Drive Growth and Jobs, aims to measure the costs of data protectionism  and knee-jerk reactions to NSA revelations may hurt European economies. Michael Mandel, co-author and PPI’s chief economist explained:

A European Internet might sound like a grand, patriotic idea…But were it to take shape, it would harm few people or places more than Europe and Europeans themselves.

You can find the full article on Bloomberg’s website, here.