Idea Lab

Doha Round - for Plan B to Work

2011-06-29T16:09:01Z

I made the following points this week in a discussion on the cuts-trade forum:

That business has been less enthusiastic about Doha is not just a multinational phenomenon. What business community exists in Brazil, India and China, for example, has opposed any deal that would require reciprocity. As a constituency, their impact on the round and their own countries' trade policies has been negative.

But, with respect to the multinationals, there is little interest in the round because the bargain framed there is entirely inapposite to their needs. The reduction in transaction costs attending global economic integration has fundamentally altered the way firms are organized and the basis on which they compete. The barriers they worry about are those that hinder their ability to tap sources of capital, talent and ideas globally to form a value chain that serves global markets.

My basic point is that we need something that appeals to both ends of the supply chain to succeed. Since both the multinationals and their suppliers benefit from trade facilitation and rules that diminish the friction involved in trade, that is where we should start. We should then explore those areas that would lend themselves to ITA-style agreements that avoid the MFN hurdle by aggregating enough of the players in any given sector so as to diminish the importance of free riders. But, staying on the current path, I fear, is a sure way to end up listening to another decade of pieties about development from all sides without making any material progress toward a more equitable, as well as more balanced, global trading system.

Hard Money and Human Freedom

2009-11-05T15:00:00Z

Henry David Thoreau argued that every reader should demand an accounting of an author - asking what they stand for before reading anything they write. In that spirit, I want to open our blog with an entry that does just that.

I had the great fortune at a young age of working for Allen Wallis, who had a long distinguished academic career, culminating with his successful tenure as the President of the University of Rochester. At the time we met, he was serving as the Under Secretary of State for Economic Affairs. I was one of his several special assistants, covering international trade and a number of other issues.

Allen came into my office one morning and found me reading the Wall Street Journal's opinion page. Since this was early in President Reagan's first term in office, I figured I was on safe ground. But, Allen immediately asked me, "What the hell are you reading that for? Don't you have thoughts of your own?"

It turned out to be the most liberating thing anyone could ever have said to me. I found out that I did, in fact, have thoughts of my own. Allen's challenge to think for myself was really a challenge to avoid conforming to the cant of party or partisan affiliation. What Allen warned me against was the prejudice that naturally follows conformity of any sort. That has made all the difference.

What that means for this blog is the following. Two bedrock principles inform my outlook on politics, society, economy policy and foreign affairs. The first is human freedom. Human freedom is, in my view, the irreducible measure by which any society should be judged.

Does a government's actions expand or limit liberty? Does a candidate seek office to expand the scope of individual choice or seize power to impose an agenda of his or her own? Does a social group's mores acknowledge and encourage diversity of thought, or is the group's goal the pursuit of exclusive privilege?

Regardless of a person's social standing, income, political beliefs, religious creed, ethnicity, sexual orientation or any of a dozen other indicators by which we tend to group ourselves, the ultimate test of a person's humanity is their willingness to encourage a diversity of thought and action that expands, rather than restricts, the human prospect. That logic applies with equal force to society as a whole.

That is not to say that liberty has no limits. Plainly, the exercise of freedom finds its natural bar when it begins to deprive others of their own freedom. It is not an easy line to draw. Many of society's fissures lie along the fault line where one person's or one group's liberty confronts another's.

Yet, defining liberty and its limits is the challenge we must confront. Serious consideration of how policies or social standards affect our freedom, rather than the cacophony that confronts us on cable news channels, is the real work of democracy. It is both the burden and principal benefit of living in a free society.

The second principle that guides my thinking - hard money - is a corollary of the first. Political philosophy and economic theory have fallen into a similar logical trap. By dividing freedom into separate realms - political, on the one hand, and economic, on the other - both fields have missed the broader truth that freedom is ultimately indivisible.

It is axiomatic that, in the absence of economic freedom, individuals lack the wherewithal to exercise their political rights. Equally, without their political freedom, individuals lack the ability to affect the actions of society and government that so often define economic possibility. Freedom is not neatly segregable into the realms to which professors of philosophy and economics would consign it.

So, what does that mean in practical terms? By hard money, I mean a measure of the extent to which society adopts the institutions and rules that encourage the exercise of freedom in both realms.

Does society reward the freedom of thought which encourages innovation? Do our economic policies reward the individual initiative and industry that is the source of all economic progress? Does the incentive structure reward the thrift and self-possession that a free society must demand of every individual? And, does society encourage the acquisition of skills and habits of learning that will allow individuals to take full advantage of the freedom on offer?

In answering those questions as current events present them, I hope we can provide a touchstone for a conversation that vindicates our past and illuminates our future, as well as finds a constructive way forward.

I have practiced politics over the course of my professional lifetime. I have helped pass significant pieces of legislation through Congress and, perhaps more importantly, helped block a dozen more profoundly bad ideas from becoming law. I have negotiated with foreign governments about going to war, restructuring debts, expanding trade and encouraging human rights.

I have also been an active participant in the market - as an international lawyer advising clients on investments and governments on trade agreements, as an entrepreneur launching my own business, and as an investor trying to find companies that offered new approaches to old challenges, as well as good management and a focus on their shareholders' money.

I intend to bring all of that to bear on what gets offered here without fear or favor.

Regional Integration Behind the Border - Applying a Value Chain Approach

2009-08-28T14:01:00Z

This paper outlines a methodology for assessing the cost of internal and external obstacles affecting the performance of the value chains serving local producers in developing countries as a means of identifying high impact interventions that would contribute to the country's successful integration into regional and global markets. The objective is to create a single measure of the effect of such barriers in order to illustrate the value of examining internal reforms (i.e., those steps essential to regional integration "behind the border") as well as export barriers in developing a regional integration strategy that makes sense in the context of the accelerating integration of global markets.

Certainty in an Uncertain World? Resolving Cross-Border Tax Controversies

2009-08-24T16:18:21Z

Keynote Address to the Tax Counsel Policy Institute, February 25, 2009. Reprinted in Taxes - The Tax Magazine, June 2009.
While the forces driving globalization have fundamentally altered the basis of economic competition, U.S. economic policy in general, and tax policy in particular, have failed to keep pace. Rather than coming to grips with the challenges that American firms and workers face competing in a knowledge-driven, globalized world economy, the political debate over globalization has been confined to the narrow arena of trade policy, missing the broader forces shaping America's economic future. Drawing on examples in the tax arena and others, the address illustrates the approach U.S. economic policy must adopt in order to ensure economic growth, rising productivity, a rising standard of living and a more broadly-shared prosperity.

Report: Rethinking the Global Trading System - The Next Frontier

2009-08-15T16:20:33Z

Report of a Conference Sponsored by the Government of Sweden (September 2009).
The report explores four areas on the cutting edge of trade theory and trade policy - (1) the impact of changing patterns of trade and investment in the global economy on both the conduct of world trade and trade theory; (2) the challenge of integrating trade and environmental goals, particularly in developing a global response to the challenge of climate change; (3) the role of trade in reducing global poverty, particularly how trading partners could bargain more directly for development; and (4) defining the World Trade Organization's role in a new international economic architecture, as well as the means for overcoming the institutional challenges the WTO faces in fulfilling its role as a pillar of global economic governance. The report also includes a summary of the keynote address provided by Dr. Paul Krugman, the 2008 Nobel Laureate in Economics, on the links between trade and the current economic crisis, and remarks by Dr. Ewa Björling, Sweden's trade minister on the challenges facing the global trading system.