The recent debate over corporate inversions (U.S. companies reincorporating themselves in nations with lower tax rates) threatens to derail progress on comprehensive tax reform even further. The administration and some in Congress seem set on treating the symptom rather than the disease. This is unfortunate because broader reform is both necessary and doable.
The United States is Slipping in Triadic Patents
Triadic patents, are patents filed jointly with the United States Patent and Trade Office, the European Patent Office, and the Japanese Patent Office, represent inventions with potentially global economic impact. A serious decline in U.S. triadic patents is the latest warning sign of diminished American innovation in advanced industries.
Worry About Slow Productivity Growth, Not Fast Productivity Growth
A recent report on US productivity growth confirms that we need more proactive public policies that encourage investment and growth. While many see new technology as responsible for high unemployment now or in the future, the truth is close to the opposite. Employment growth requires new investment and new investment goes hand in hand with productivity growth.
The Export-Import Bank's Vital Role in Supporting U.S. Traded Sector Competitiveness
As the official export credit agency of the United States, the U.S. Export-Import (Ex-Im) Bank plays a vital role in fostering U.S. traded sector competitiveness and facilitating exports of innovative U.S. products and services to foreign markets. The bank provides financing for export transactions that might not otherwise occur when private commercial lenders are unable or unwilling to provide financing to foreign purchasers of U.S. exports and plays a key role in leveling the playing field for America’s exporters by matching the credit support that other nations provide, ensuring that U.S. exporters are able to compete based upon the price and performance features of their products. In 2013, the Ex-Im Bank supported over $37 billion in U.S. exports—many of which would not have been possible without Ex-Im assistance—which supported over 200,000 jobs at more than 33,000 firms or their suppliers.
Yet the Ex-Im Bank is under heavy attack from a variety of ideological and special interest critics who oppose the Banks’ very existence. Populist opponents, from both the left and right, oppose the Bank as mere big business “crony capitalism” and a manifestation of unnecessary government intervention into market forces. Other groups have made unsubstantiated claims that the bank’s export credit assistance distorts capacity in markets such as the global aviation industry. Yet there is scant evidence that the global aviation industry suffers from sustained structural overcapacity or that export credit finance contributes to overcapacity in any meaningful way. This report debunks the fallacious claims of both the Bank’s ideological and special interest opponents, which have been designed to obscure the instrumental role the Ex-Im Bank plays in supporting U.S. manufacturing and services exports.
The reality is that the export credit finance the U.S. Ex-Im Bank provides is needed now more than ever, especially as foreign export credit competition continues to intensify. For example, in 2013, China issued three times as much new medium- and long-term export credit than the United States did (China’s $45.5 billion compared to America’s $14.5 billion) and over the past five years China and Germany issued four and five times much export credit as a share of GDP, respectively. If the Ex-Im Bank were disbanded as critics desire, leaving the United States unable to provide export credit assistance to foreign purchasers of U.S. products and services in situations where private sector lenders are unable to do so, the simple reality is that U.S. exports of aircraft, locomotives, power-generation equipment, and thousands of other products and services would be replaced by those of Asian or European producers, whose still-operating export credit agencies would step in to fill the void.
In short, failure to reauthorize the Ex-Im Bank will have far reaching negative results, including fewer U.S. exports, fewer U.S. jobs, and higher U.S. trade deficits. Therefore:
- With Congressional authorization of the U.S. Export-Import Bank set to expire on September 30, 2014, Congress should move expeditiously to reauthorize the Ex-Im Bank for a new five-year term.
- Congress should raise the Ex-Im Bank’s current exposure limit (i.e., lending cap) of $140 billion to at least $160 billion by 2018, ensuring that American exporters don’t fall behind foreign competitors, whose countries are investing substantially more in export credit finance as a share of their GDP than the United States.
It’s Not Too Late for India’s New Beginning
New Indian Prime Minister Narendra Modi and his BJP party won election in part on campaign pledges to improve the environment for doing business in India, in part by improving India's intellectual property environment. Yet foreign developers of innovative life sciences products continue to face challenges securing intellectual property rights in India, including with regard to compulsory licenses, patent denials, and patent revocations. Meanwhile, India has fallen to 134th in the World Bank's Doing Business Index and to 76th (from 62nd in 2011) in INSEAD's Global Innovation Index. This is a reflection of Indian policies in recent years that have focused more on advantaging domestic producers at the expense of foreign competitors as opposed to boosting the innovation capacity of India’s own entrepreneurs, businesses, and industries. While it's still early in Modi's tenure, and there are some positive signs of prog ress, if India is to become a robust 21st-century economy it must renounce the tried-and-failed innovation mercantilist policies of the past and instead embrace core tenets of free and competitive markets, open and non-discriminatory trade, protections for innovators' intellectual property, and openness to flows of goods, technology, capital, and people.
Unsubstantiated Attacks on the Ex-Im Bank Fail to Take Flight
Bent on decrying ‘crony capitalism,’ the Wall Street Journal is misusing a new S&P report to discredit the Ex-Im Bank. The report’s actual finding, however, is that without Ex-Im financing support, Boeing would see a finance gap of $7 billion to $9 billion. The report demonstrates that the Ex-Im Bank is fulfilling its mandate to provide financing that enables American Exports where demand exist but credit institutions are unwilling or unable to finance deals.
The Decline of America’s National Innovation System
The United States used to have the world’s strongest National innovation System but today lags behind many of our international competitors, hampering economic and job growth. To rebuild our innovation infrastructure, the United States must strengthen trade, tax, and regulatory institutions, implement policies to encourage research, human capital development, and the flow of
The U.S. Government Isn't Friendly Enough To Big Business
There is an increasing hue and cry in Washington against “crony capitalism” and “industrial policy”—the notion that the federal government unfairly supports certain large corporations and industries. But what we really should be concerned about is America’s “size- based” industrial policy, which actually favors small businesses to the detriment of the economy as a whole.