Shannon K. O'Neil

Latin America's Moment

O'Neil analyzes developments in Latin America and U.S. relations in the region.

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CFR’s Task Force on U.S. Trade and Investment Policy

by Shannon K. O'Neil
September 19, 2011

Container ship sails beneath Golden Gate Bridge en route to port in California (Robert Galbraith/Courtesy Reuters).

Today the Council on Foreign Relations is releasing its independent Task Force report, “U.S. Trade and Investment Policy.” Led by Andrew H. Card — former White House Chief of Staff under George W. Bush – and Thomas A. Daschle – former U.S. Senator and Senate Majority Leader – and directed by my CFR colleagues Edward Alden and Matthew Slaughter, the 22 members took on the increasingly thorny issue of the future of  U.S. trade policy.

One of the most interesting discussions within the report is of multinational corporations. While representing less than 1 percent of all companies, they provide nearly a quarter of all private sector jobs, nearly 40 percent of all U.S. capital investment, and conduct the vast majority of research and development. These are the engines of today and tomorrow’s economy – and as such the United States needs to become much more competitive in attracting these corporations to its shores.

Another important discussion involves the increasing skepticism among the U.S. public toward trade’s benefits. The group rightly points out this has occurred not because of the general public’s lack of understanding or “ignorance”, but because of the experience of the average American worker. Over the last ten years –the time frame within which trade became a much harder sell — nearly all American workers saw their real earnings fall. U.S. based export oriented jobs – which in general pay more than domestically oriented ones – haven’t grown, even as the world economy exploded. Inequality too has grown during this time frame. And while the report rightly points out that trade was not the only, or perhaps even the deciding factor behind these shifts, it did play a role. As such, any new policy must take into account and work to enhance the widespread benefits of trade for America’s citizens.

Too often participants in policy debates come out as for or against trade, without defining for what end. Here, the Task Force usefully defines the main goals of U.S. trade and investment policies as “improving American living standards and advancing America’s broader interests.” To better meet this end it provides several concrete recommendations, including prioritizing service sector opening in ongoing trade negotiations, reforming the tax code and removing protectionist regulations on international mergers and acquisitions in order to encourage foreign investment in the United States, streamlining the WTO and creating stronger international trade enforcement mechanisms, and expanding adjustment assistance programs to provide a broader safety net for American workers.

As is often the case in trade oriented debates, Task Force members weren’t able to reach a unanimous consensus on what a better trade policy would look like, and how to get there. It is worth looking at the additional dissenting views section to get a sense of the varied perspectives on the report’s conclusions.  Still, everyone did agree to the Task Force’s basic takeaway – that the administration and Congress must revise America’s trade strategy or risk losing out on the enormous potential gains of deeper global engagement.  The report is well worth a read, offering insights on how the United States can emerge from the recession and financial crisis a stronger and more capable leader in the international economy.

Post a Comment 2 Comments

  • Posted by Peter Talbot

    Claptrap from a nation that should have the words “tempis fugit” stenciled on its flag, if not the foreheads of its leaders.
    Service sector opening? How? Americans don’t assiduously learn other languages and cultures and America discourages immigration, further depleting its international service sector talent pool. We are going to tell other countries to open doors to American banks (which have rules against fraud and are therefore non-competitive) or consultants (which Congressional lobbyists would that be?) or high tech talent (that all countries want to emulate but not import)? Services follow consumers. They are derivative and do not represent the building of residual assets necessary to maintain independence (i.e.: freedom from foreign control and belligerence). Reforming the tax code to what purpose? Eliminating corporate taxes so multinationals will bring back some of their earnings from off shore investment? Useless: the buck goes further overseas anyway and America is no longer the biggest growth economy for consumer products. The carrot has been dangled but the stick is required. Removing protectionist regulations on intl mergers to encourage foreign (sovereign) investment in the US. Why? We want to sell midtown NY and Disney world to Asian real estate speculators that take their money from their government and kick back referral fees to commissars outside their corporate structures as a routine order of business? Or is it that we want the Fed to take orders from their sovereign banks as regards credit? Or dismantle FASB so that we are all on the same level playing field of naive capitalist robber barons that rule the third world? Streamline the WTO. Meaning abolish it because it favors countries with a rule of law? Create stronger intl trade enforcement mechanisms. How, when all our overseas partners thrive on selective enforcement and our multinationals graft their way to glory regardless? Expand adjustment assistance for American workers. More bailouts for Americans to retrain them to do what at age 55 in an economy of high tech native Arabic or Hindi or Mandarin speakers? The “innovation” jobs humbug is the most perfidious of the benighted lot. Sylandra comes to mind.

    The Task Force is reiterating the tired follies of the Ayn Randian “free trade” proponents that have made Walmart profitable and beggared Main Street USA since the 1960’s because of the US polity’s uneducated religious belief that markets are beasts with genius and government can’t be trusted to regulate for the good of its citizens. Sheer adolescent mopery. Global engagement for the USA is a canard. Emergence from this and future financial crises depends on 1) reinstatement of Glass Steagal; 2) crippling new tax penalties for multinationals that keep assets offshore; 3) selective high protective tariffs to help rebuild vertical structures of domestic manufacturing for all major products and intermediates; 4)foregoing sales for a Value Added Tax; 5)federal direct investment in key industries to ensure american presence in transportation and logistics; 6) relaxation of immigration quotas to invite attractive workers; 7)harsh regulations to strengthen investment vehicle fiduciary rules to penalize speculative hedging; 8) decertification of overseas companies that serve as sovereign dilutions of American national interest; 9) making constructive campaign contributions to individuals, PACs and parties above $5000 illegal and non-compliance felonious to stop the super-rich pillagers from controlling the electorate. We don’t need to pretend to be a leader to attract investment. We need to put teeth into American law to reward ONLY those companies that invest in American labor (not consumers) to stop the bloodletting of American labor and residual capital assets to survive.

    The CFR with its right and centrist politicos still pontificating ex-cathedra is living in the dimly lit imperial American past and proves by this rehash of tried and failed dogma that it is itself irrelevant.
    It is not a committee: it is a cabal and the foreign relations it fixates on are folkloric myths from a neverland where unfettered investment always works for the good of the populace. Even Adam Smith never took that wooden nickel, and Washington, Adams, Hamilton and the other “founders” would be horrified to see the corporate stepchildren of the British East India company and Hudson Bay Company (e.g.: General Electric, Boeing, et al) dictating not only policy to the United States but moral instruction to the world’s most corrupt and corrupting agglomerations of wealth.

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