Reports

The Coming Transportation Revolution

October 17, 2014
| Reports

The Internet of Things, cloud computing and improved sensor technology have created a new paradigm in transportation development that will allow for the creation of truly connected and ultimately autonomous vehicles. These technologies will improve safety, increase efficiency on America's roadways and eventually save billions in accident costs and lost productivity.

The Global Mercantilist Index: A New Approach to Ranking Nations’ Trade Policies

October 8, 2014
| Reports

Countries’ use of mercantilist policies in recent years has expanded dramatically, particularly in emerging economies such as Brazil, China, and India. These practices, such as forced technology transfer or local production as a condition of market access, intellectual property (IP) theft, compulsory licensing of IP, restrictions on cross-border data flows, and currency manipulation, all distort trade and investment and damage the global economy.

Collectively, these policies represent a major threat to the integrity of the global trading system and they demand a coherent and bold response from both free-trading nations such as the United States, as well as multilateral trade and development organizations, such as the World Bank, the WTO, and the United Nations. Despite this, many choose to turn a blind eye to mercantilism, for instance, the World Bank’s Temporary Trade Barriers Database 2013 Update asserts that protectionism may have peaked, and is now subsiding. ITIF refutes that claim, arguing that mercantilism is indeed still a major concern not only for the U.S. economy but for the entire global economy and trading system. It’s time the U.S. government and its like-minded trading partners get more serious about confronting mercantilism.

In order for the U.S. to take the lead in more effectively combating foreign mercantilism, it is time for Congress to provide the charge and the resources to the United States Trade Representative to develop an annual comprehensive ranking of nations’ mercantilist policies; in other words, a “Global Mercantilist Index”. ITIF's “Global Mercantilist Index” (GMI) uses a new comprehensive method to rank nations on mercantilist policies, while also proposing new policy tools to address the problem. 


Summary Policy Recommendations:

Congress should task USTR with creating an annual “Global Mercantilist Index” and provide additional funding accordingly;

The White House should publish a national trade enforcement strategy that reviews the adequacy of U.S. trade enforcement mechanisms with the goal of developing additional enforcement tools and focusing on the worst-behaving countries (Brazil, Russia, India, China and Argentina);

Congress needs to craft an Omnibus Trade and Competitiveness Act, similar to that of 1988, that both institutionalizes a Chief Trade Enforcement Officer and Working Group at USTR and restructures the interagency trade process;

Congress should increase USTR, the International Trade Enforcement Center (ITEC) and the International Trade Administration (ITA) appropriations with those increases targeted to trade and customs enforcement;

Congress also needs to be sure to appoint individuals to the International Trade Commission (ITC) who take trade enforcement seriously and do not simply have a “maximize consumer welfare” mindset;

Congress should require that provision of trade preferences, such as GSP and other development assistance, be tied to the GMI and Special 301 Report findings;

The U.S. Agency for International Development (USAID), the Millennium Challenge Corporation, the State Department, and other U.S. development organizations should advocate for a new approach to development economics not grounded in export led high-tech growth;

The United States should work with our free-trade allies to restructure the WTO to recognize a change in membership toward countries that do not play by the rules so that it becomes a more effective enforcement organization and not just a market opening one;

Trade policymakers should work with the WTO to develop a similar global mercantilist ranking report that applies an international lens;

International development organizations such as the International Monetary Fund, EuropeAid and the World Bank should use the global mercantilist ranking report to inform their funding decisions.

The Rise of Data Poverty in America

September 10, 2014
| Reports

 

Data-driven innovations offer enormous opportunities to 
advance important societal goals. However, to take 
advantage of these opportunities, individuals must have 
access to high-quality data about themselves and their 
communities. If certain groups routinely do not have data 
collected about them, their problems may be overlooked 
and their communities held back in spite of progress 
elsewhere. Given this risk, policymakers should begin a 
concerted effort to address the “data divide”—the social 
and economic inequalities that may result from a lack of 
collection or use of data about individuals or communities. 

Data-driven innovations offer enormous opportunities to advance important societal goals. However, to take advantage of these opportunities, individuals must have access to high-quality data about themselves and their communities. If certain groups routinely do not have data collected about them, their problems may be overlooked and their communities held back in spite of progress elsewhere. Given this risk, policymakers should begin a concerted effort to address the “data divide”—the social and economic inequalities that may result from a lack of collection or use of data about individuals or communities. 

Going Local: Connecting the National Labs to their Regions for Innovation and Growth

September 10, 2014
| Reports

Since their inception in the 1940s, the Department of Energy (DOE) national laboratories have been in the vanguard of America’s global research and development leadership. However, the national innovation system has changed in the past 70 years. Today, much technology development and application occurs in the context of synergistic regional clusters of firms, trade associations, educational institutions, private labs, and regional economic development organizations. Unfortunately, legacy operating procedures limit the DOE labs’ ability to engage fully with the regional economies in which they are located. This lack of consistent engagement with regional technology clusters has likely limited the labs’ overall contributions to U.S. economic growth.

Beyond Internet Universalism: A Framework for Addressing Cross-Border Internet Policy

September 9, 2014
| Reports

 

In 1995, Bavarian authorities raided the German offices of CompuServe and charged Felix Somm, the president of CompuServe’s German subsidiary, with violating the law because the company did not block access to certain websites, including some sites containing child pornography and Nazi propaganda. In response to these charges, CompuServe subsequently blocked access to two hundred online messaging boards for all four million of its customers worldwide, outraging many of its Internet users who were angry that German law could dictate what content was available to those outside its borders when other countries had more permissive laws about indecent and offensive content.
In 1998, a German court convicted Somm and gave him a suspended two-year sentence and a fine, but the ruling was overturned a year later. This case set off an international debate about the appropriateness of applying domestic laws to a global network—a debate which is even more heated, more important, and still unresolved to this day.
The Internet is a global network that is fundamental to commerce, communication, and culture. The ability to use the Internet to purchase products and services from halfway around the world, to talk to friends and strangers in other countries, and to share and discover new ideas, is what has made the Internet the defining technology of the 21st century. But the same capabilities that make the Internet the incredible powerhouse that contributes trillions of dollars annually to the global economy—the ability to transfer data seamlessly across geographic borders—has exacerbated the international conflicts that arise between nations with different laws and values.
Even though the importance of the Internet to the global economy and society continues to grow each day, collectively nations have made little substantive progress in creating a framework for resolving the many conflicts over Internet policy that inevitably occur between sovereign nations. These conflicts arise over a myriad of issues, such as free speech, intellectual property, privacy, cybercrime, consumer protection, taxation, commerce regulation, and others. To date, despite many attempts, no framework has been successful at providing a practical and widely-accepted model for policymakers to resolve cross-border Internet policy conflicts in ways that respect both the global nature of the Internet and national laws and norms. 
One reason for the lack of progress is that different nations have different sets of values and priorities, and attempts at resolving policy disputes inevitably falter because the various parties lack a common basis for dialogue. Another reason is that many proposed frameworks tend to apply a particular nation’s worldview on the rest of the world, such as promoting democracy and freedom of expression (as in the case of the United States) or maintaining political control (as in the case of nations like China and Russia). But despite their appeal (e.g., they would be relatively easy to administer if everyone would just agree to one universal framework), such frameworks simply cannot work because nations have significantly different cultural values, policy priorities, and legal systems. It is highly unlikely Europe will agree to a U.S. privacy framework (or that the United States will agree to an EU privacy framework), or that Saudi Arabia will agree to U.S. free speech framework, especially when it comes to Internet pornography. But the alternative, a Balkanized, fragmented global Internet that gives nations the right to act on the Internet with impunity cannot be the answer either.
What is needed is a framework that allows nations the right to customize Internet policy to their own national needs and rules, while at the same time constraining those rights in ways that enable global Internet commerce and digital free trade while also preserving the underlying global Internet architecture, like the global domain name system. While nations will not always agree unanimously on specific policy proposals, appropriate solutions, or even the relevant evidence, a common framework of understanding cross-border Internet policy issues will allow for healthier Internet policy debates, better cooperation and coordination between nations, and fewer policy conflicts.
This report explores the nature of cross-border Internet policy conflicts and provides a sample of the types of conflicts that have been seen in recent years. It also discusses the limitations of existing Internet policy frameworks, offers an alternative perspective and outlines a specific set of rules that should be used for evaluating cross-border Internet policy conflicts. Finally, it operationalizes this framework using various examples to show the method in action.

 

In 1995, Bavarian authorities raided the German offices of CompuServe and charged Felix Somm, the president of CompuServe’s German subsidiary, with violating the law because the company did not block access to certain websites, including some sites containing child pornography and Nazi propaganda. In response to these charges, CompuServe subsequently blocked access to two hundred online messaging boards for all four million of its customers worldwide, outraging many of its Internet users who were angry that German law could dictate what content was available to those outside its borders when other countries had more permissive laws about indecent and offensive content.

In 1998, a German court convicted Somm and gave him a suspended two-year sentence and a fine, but the ruling was overturned a year later. This case set off an international debate about the appropriateness of applying domestic laws to a global network—a debate which is even more heated, more important, and still unresolved to this day.

The Internet is a global network that is fundamental to commerce, communication, and culture. The ability to use the Internet to purchase products and services from halfway around the world, to talk to friends and strangers in other countries, and to share and discover new ideas, is what has made the Internet the defining technology of the 21st century. But the same capabilities that make the Internet the incredible powerhouse that contributes trillions of dollars annually to the global economy—the ability to transfer data seamlessly across geographic borders—has exacerbated the international conflicts that arise between nations with different laws and values.

Even though the importance of the Internet to the global economy and society continues to grow each day, collectively nations have made little substantive progress in creating a framework for resolving the many conflicts over Internet policy that inevitably occur between sovereign nations. These conflicts arise over a myriad of issues, such as free speech, intellectual property, privacy, cybercrime, consumer protection, taxation, commerce regulation, and others. To date, despite many attempts, no framework has been successful at providing a practical and widely-accepted model for policymakers to resolve cross-border Internet policy conflicts in ways that respect both the global nature of the Internet and national laws and norms. 

One reason for the lack of progress is that different nations have different sets of values and priorities, and attempts at resolving policy disputes inevitably falter because the various parties lack a common basis for dialogue. Another reason is that many proposed frameworks tend to apply a particular nation’s worldview on the rest of the world, such as promoting democracy and freedom of expression (as in the case of the United States) or maintaining political control (as in the case of nations like China and Russia). But despite their appeal (e.g., they would be relatively easy to administer if everyone would just agree to one universal framework), such frameworks simply cannot work because nations have significantly different cultural values, policy priorities, and legal systems. It is highly unlikely Europe will agree to a U.S. privacy framework (or that the United States will agree to an EU privacy framework), or that Saudi Arabia will agree to U.S. free speech framework, especially when it comes to Internet pornography. But the alternative, a Balkanized, fragmented global Internet that gives nations the right to act on the Internet with impunity cannot be the answer either.

What is needed is a framework that allows nations the right to customize Internet policy to their own national needs and rules, while at the same time constraining those rights in ways that enable global Internet commerce and digital free trade while also preserving the underlying global Internet architecture, like the global domain name system. While nations will not always agree unanimously on specific policy proposals, appropriate solutions, or even the relevant evidence, a common framework of understanding cross-border Internet policy issues will allow for healthier Internet policy debates, better cooperation and coordination between nations, and fewer policy conflicts.

This report explores the nature of cross-border Internet policy conflicts and provides a sample of the types of conflicts that have been seen in recent years. It also discusses the limitations of existing Internet policy frameworks, offers an alternative perspective and outlines a specific set of rules that should be used for evaluating cross-border Internet policy conflicts. Finally, it operationalizes this framework using various examples to show the method in action.

State Open Data Policies and Portals

August 18, 2014
| Reports

This report provides a snapshot of states’ efforts to create open data policies and portals and ranks states on their progress. The six top-scoring states are Hawaii, Illinois, Maryland, New York, Oklahoma, and Utah. Each of these states has established an open data policy that requires basic government data, such as expenditure information, as well as other agency data, to be published on their open data portals in a machine-readable format. These portals contain extensive catalogs of open data, are relatively simple to navigate, and provide data in machine-readable formats as required. The next highest-ranked state, Connecticut, offers a similarly serviceable, machine-readable open data portal that provides wide varieties of information, but its policy does not require machine readability. Of the next three top-ranking states, Texas’s and Rhode Island’s policies require neither machine readability nor government data beyond expenditures; New Hampshire’s policy requires machine readability and many types of data, but its open data portal is not yet fully functional. States creating new open data policies or portals, or refreshing old ones, have many opportunities to learn from the experiences of early adopters in order to fully realize the benefits of data-driven innovation.

The Export-Import Bank's Vital Role in Supporting U.S. Traded Sector Competitiveness

July 28, 2014
| Reports

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:

  1. 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.

  2. 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. 

ICT Innovation Policy in China: A Review

July 21, 2014
| Reports

China is not only a producer of manufactured goods, but it is increasingly a nexus for technological innovation as a growing share of home grown, high-tech companies compete in the global marketplace. The Chinese government sees information and communications technology (ICT) both as a key catalyst for China’s transition from a manufacturing to a knowledge-based economy and as a positive influence in boosting across the board productivity and overall quality of life in China. That is why a decade ago China designated “informatization,” the adoption and enhancement of ICT in every aspect of the economy and society, as a central facet of the nation’s economic modernization strategy.

This report reviews the long-term, mid-term and industry-specific ICT policies China is utilizing to implement informatization and improve its overall international economic competitiveness. This includes the frameworks to enhance innovation and development in the “Internet of Things,” cloud computing and data innovation.

The report concludes by noting that while Chinese policy is moving in the right direction, the nation still has a long way to go to match the ICT policy framework of the United States or Europe. This would include creating policies to attract, rather than compel, ICT foreign direct investment, while reforming existing regulations and requirements to ensure domestic and foreign firms are operating on a level playing field.

Understanding the U.S. National Innovation System

June 30, 2014
| Reports

The conventional view of innovation is that it is something that just takes place idiosyncratically in “Silicon Valley garages” and R&D laboratories. But in fact, innovation in any nation is best understood as being embedded in a national innovation system (NIS). Just as innovation is more than science and technology, an innovation system is more than those elements directly related to the promotion of science and technology. Rather, it also includes all economic, political and other social institutions affecting innovation (e.g., a nation’s financial system; organization of private firms; the pre-university educational system; labor markets; culture, regulatory policies and institutions, etc.). Indeed, as Christopher Freeman defined it, a national innovation system is “the network of institutions in the public and private sectors whose activities and interactions initiate, import, modify and diffuse new technologies.”

This report identifies the broad elements that make up a national innovation system, including a description of the innovation success triangle, which measures the business environment, regulatory environment, and innovation environment of a nation, and is used to predict the success of an innovation system in promoting technological development and economic growth. It then uses this framework to analyze the U.S. national innovation system and assess the strengths and weaknesses of individual components  and whether those components  are improving, stable or deteriorating relative to our competitors. Unfortunately, in many areas the U.S. national innovation system falls behind our global competitors, hampering our ability to foster the innovation that is imperative for success in the 21st century economy.

As nations compete to win the global innovation race, the effectiveness of their national innovation systems will be a key factor in deciding the winners and the losers. Thus, the challenge for the United States going forward is whether it can make the needed changes to its innovation system to keep up with the international innovation leaders and remain a key player in the innovation economy. The future health of our nation will depend on the answer.

Setting the Record Straight: De-Identification Does Work

June 16, 2014
| Reports

In the coming years, analytics will offer an enormous opportunity to generate economic and social value from data. But much of the success of data analytics will depend on the ability to ensure that individuals’ privacy is respected. One of the most effective ways in which to do this is through strong “de-identification” of the data – in essence, storing and sharing the data without revealing the identity of the individuals involved.

A number of researchers have been investigating techniques to re-identify de-identified datasets. Unfortunately, some commentators have misconstrued their findings to suggest that de-identification is ineffective. Contrary to what misleading headlines and pronouncements in the media almost regularly suggest, datasets containing personal information may be de-identified in a manner that minimizes the risk of re-identification, often while maintaining a high level of data quality.

Despite previous efforts to dispel the myth that datasets cannot be reliably de-identified no matter the methods employed to de-identify the data, this view continues to be promulgated. It is increasingly apparent that one of the reasons for the staying power of this myth is not factual inaccuracies or errors within the primary literature, but rather a tendency on the part of commentators on that literature to overstate the findings. While nothing is perfect, the risk of re-identification of individuals from properly de-identified data is significantly lower than indicated by commentators on the primary literature.

At the same time, advancements in data analytics are unlocking opportunities to use de-identified datasets in ways never before possible. Where appropriate safeguards exist, the evidence-based insights and innovations made possible through such analysis create substantial social and economic benefits. However, the continued lack of trust in de-identification and focus on re-identification risks may make data custodians less inclined to provide researchers with access to much needed information, even if it has been strongly de-identified; or worse, to believe that they should not waste their time even attempting to de-identify personal information before making it available for secondary research purposes. This could have a highly negative impact on the availability of de-identified information for potentially beneficial secondary uses. 

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