Globalization-related issues.

Create global knowledge investment zones (GKIZs) to attract foreign direct investment.

The federal government should identify a limited number of global knowledge investment zones as a key mechanism for attracting high-value-added foreign direct investment. Firms located in these zones would be eligible to receive a number of benefits, including: 1) The ability to write off (on federal taxes) all capital expenditures in the first year; 2) A collaborative R&D tax credit of 25 percent on all expenditures on research made at the associated universities in the GKIZ. For companies that are not yet profitable, tax benefits could be applied against payroll taxes; 3) Streamlined access to university technology, with university zone participants agreeing to implement leading-edge intellectual property and technology transfer practices, including “standardized” licensing agreements and policies to encourage faculty entrepreneurship, industry engagement, and technology commercialization; 4) Access to better-funded NSF I/UCRCs; and 5) Visa preferences by tapping into the unused portion of existing EB-5 visas.

Congress should amend countervailing duty law so that unfair currency manipulation will be taken into consideration when calculating countervailing duties.

Market forces, not government intervention, should set currency markets, yet too many nations—led by China—manipulate their currencies to achieve competitive advantage. To address this, Congress and the President should sign legislation that would require retaliatory tariffs on nations found to have misaligned currency. Further, Congress should amend countervailing duty law so that unfair currency manipulation will be taken into consideration when calculating countervailing duties

Congress should review export control policies that inhibit U.S. exports.

While the Obama Administration’s Export Control Reform Initiative has begun the effort to implement common sense reforms to streamline and improve the nation’s export control system, more needs to be done. In particular, the government should remove outdated U.S. export control restrictions, especially unilateral burdens placed on widely available ICT products or software. For instance, the United States could remove performance-based controls on commercial scalar computers and associated technology, because access to computing power is so widely available that U.S. export controls on commercial computers are no longer effective and undermine U.S. technology competitiveness and national security. The United States could also remove encryption controls on products and components that are, or will be, widely available or deployed, do not contain encryption as their primary function, or are not peculiarly responsible for creating a military- or intelligence-related advantage.

Congress should update the charter of the Committee on Foreign Investment in the United States (CFIUS) and provide it more resources to address the realities of modern-age state capitalism.

CFIUS is an inter-agency committee authorized to review transactions that could result in control of a U.S. business by a foreign entity (“covered transactions”), in order to determine the effect of such transactions on the national security of the United States. Current CFIUS regulations state that examiners must review covered transactions on a case-by-case basis. But because the threat to both the U.S. defense industrial base and the U.S. industrial base overall is systemic, the CFIUS charter needs to be updated to address the realities of modern-age state capitalism—particularly the threat from SOEs—by allowing reviewers to assess and gauge systemic threats and examine covered transactions in a broader context. Congress should also increase the time period permitted for an initial CFIUS review and also better equip CFIUS with additional personnel and financial resources to support more thorough reviews.

Congress should authorize the Export-Import (Ex-Im) Bank to provide loan assistance to SMEs and to firms competing against subsidized foreign competitors.

Congress should authorize the Export-Import Bank to go beyond providing export credit financing by leveraging the resources of the Bank to help create domestic manufacturing jobs. In particular, Congress should allow the Bank to use $20 billion in unobligated authority to lend directly to domestic manufacturing companies that are in competition with subsidized foreign competitors (e.g., competitors who receive subsidies in the form of grants, subsidized loans, special tax treatment, beneficial land use, etc.). The loan recipients should be able to demonstrate how the funds would support expanded manufacturing activities and employment in the United States.

Congress should raise the Export-Import Bank’s authorization limit to at least $200 billion.

In May 2012, President Obama signed Congressional legislation that reauthorized the Export-Import Bank (Ex-Im Bank) for three additional years while raising its lending authority by 40 percent to $140 billion by 2014. While this is an important step in the right direction, the reality is that foreign competitors continue to invest substantially more in their countries’ export credit agencies (ECAs) as a share of GDP than the United States does. For example, in 2010, Brazil and China provided ten times more and Germany, France, and India all provided at least seven times more export credit financing to their exporters as a share of GDP than did the United States. To adequately respond to increasing foreign export credit competition, Congress should raise the Ex-Im Bank’s authorization limit to at least $200 billion.

USTR should fight local data center requirements and highlight instances of non-compliance by foreign governments.

Strong U.S. leadership is necessary to combat the unfair trade practices nations are using to block foreign competitors in the rapidly growing cloud computing industry. For example, the United States Trade Representative should highlight this type of behavior in its annual 301 report.

The Obama administration should detail Vice President Biden to lead a new free trade coalition.

The Obama administration should detail Vice President Biden to lead an effort to build a coalition with the Europeans, Canadians, Australians, Japanese, and whoever else will come aboard to lay out a renewed vision for globalization grounded in the perspective that markets should drive global trade and investment, that countries should not seek sustained trade surpluses, that currency prices should be set by the market (or at least not manipulated for competitive advantage); and that fair international competition and “good” innovation policies that leave all countries better off. The United States could start this with efforts to establish a TAP, a Trans-Atlantic Partnership: a new trade agreement with Europe and perhaps the Commonwealth nations.

Letting the Fox in the Hen House: Why the U.S. Should Restrict Chinese Control of the IMF

March 25, 2013
| Blogs & Op-eds

If the IMF is truly committed to open trade and market-oriented policies it will need to make rolling back Chinese mercantilism a top goal, rather than expanding their influence and letting the mercantilist fox in the free-traders’ hen house.

Eliminating transatlantic tariffs would boost EU-US trade by more than $120 billion within five years.

Perhaps the most aggressive estimate of economic benefits from an EU-US free trade agreement (FTA) has come from the U.S. Chamber of Commerce, which estimates that a 50 percent NTB reduction scenario would increase both EU and U.S. GDP by 3 percent, generating annual gains of $450 billion for the United States and $495 billion for Europe. The Chamber also estimates that full tariff elimination alone would boost combined EU-US GDP by $180 billion within five years. Read more »

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