Iain Murray, CEI’s Vice President for Strategy, along with Freedom Association Director Rory Broomfield, won second place in the Institute for Economic Affairs’ Brexit Competition. The goal of the competition is to devise a strategy for Britain’s exit from the European Union.
Today’s ruling of the D.C. Circuit Court of Appeals that Dodd-Frank’s “conflict minerals” disclosure mandate violates the First Amendment is the first time ever a court has ruled that a provision of Dodd-Frank violates the Constitution. Regulations issued under Dodd-Frank have been struck down for reasons such as inadequate cost-benefit analysis and other procedural violations, but this is first time a provision has been found to be unconstitutional.
And it couldn’t happen to a more misguided and destructive provision of the law! As my Competitive Enterprise Institute colleague Hans Bader and I have written in blog posts, articles, and regulatory comments, the conflict disclosure mandate creates a compliance nightmare, hurts American miners and manufacturers, and does the greatest harm to those it was intended to help — the struggling worker in and nearby the Democratic Republic of Congo.
As explained by Mercatus Center scholars Hester Peirce and James Broughel in their book Dodd-Frank: What It Does and Why It’s Flawed, the “conflict minerals” mandate of Section 1502 is one the law’s many “miscellaneous provisions” that offer “a clear example of how a statute invoked as the answer to the financial crisis is, in reality, an odd conglomeration of responses to issues, many of which had nothing to do with the financial crisis.” Section 1502, championed by celebrities, including Ashley Judd and Ben Affleck, requires all types of firms to disclose their products’ use of five “conflict minerals” — including gold, tin, and tungsten — that can be sourced to war-torn regions of the Congo.
The trade debate is heating up in the wake of President Obama’s nod to trade in his State of the Union address, the introduction this month of a Trade Promotion Authority (TPA) bill, and the on-going negotiation on two major trade deals.
A major schism among Democrats on trade broke out January 29, when Senate Majority Leader Harry Reid, D-Nev., said in an interview that he was against TPA, commonly known as “fast-track” legislation, which gives the president authority to negotiate trade agreements that are then voted on by Congress without amendments. Without fast-track, it’s difficult to negotiate final trade deals with other countries when they know Congress can change the terms. Reid was quoted as saying: “Everyone would be well-advised just to not push this right now.”
Reid’s opposition is in contrast to President Obama’s endorsement of fast-track authority in his State of the Union address earlier this week when he said:
We need to work together on tools like bipartisan trade promotion authority to protect our workers, protect our environment, and open new markets to new goods stamped “Made in the USA.” China and Europe aren’t standing on the sidelines. Neither should we.
Reid’s stance is at odds too with some leading Democrats, such as Senate Finance Committee Chairman Max Baucus, D-Mont., who joined with Ranking Member Orrin Hatch, R-Utah, and House Ways and Means Committee Chairman Dave Camp, R-Mich., to introduce a TPA bill on January 9. However, Baucus’ active leadership on TPA may be in question, since he was nominated to be Ambassador to China.
WikiLeaks on January 15 leaked another chapter of the negotiation text of a major trade agreement – the environmental chapter of the Trans-Pacific Partnership Agreement (TPP). Environmental groups jumped on the text and said the U.S. position outlined in the documents shows backward steps in areas such as enforcement of environmental provisions and deference to multilateral environmental agreements (MEAs).
According to an article in the New York Times, the U.S. seems to be pushing for more extensive environmental provisions, but the other eleven negotiating parties are pushing back, arguing that such provisions would hamper needed growth in their countries.
For example, in the Chairs’ summary of different countries’ views on incorporating measures in TPP to fulfill specific MEAs and making those enforceable, only the U.S. supported that position. Ten of the twelve countries thought otherwise and indicated that since those agreements were negotiated in different circumstances, those obligations shouldn’t be subject to dispute settlement in TPP.
In an apparent reaction to the leaks and to negative reaction from environmental activists, the Office of the U.S. Trade Representative late Wednesday afternoon issued a press release stating its strong commitment to the environmental chapter:
The United States’ position on the environment in the Trans-Pacific Partnership negotiations is this: environmental stewardship is a core American value, and we will insist on a robust, fully enforceable environment chapter in the TPP or we will not come to agreement.
The release went on to state:
In December the trade ministers of the 12 TPP countries met for three days to tackle tough issues together, including in the environment chapter. There, the United States reiterated our bedrock position on enforceability of the entire environment chapter, as well as our strong commitments to provisions such as those combating wildlife trafficking and illegal logging.
Last month, the Congressional Research Service released a report on Bitcoin analyzing the structure of the network and its implications, if any, on monetary policy. The report was impressive in its accuracy describing Bitcoin’s technical aspects. The report correctly states how the network’s transactions are “pseudononymous” rather than anonymous due to Bitcoin’s use of a “public ledger,” known as the “blockchain,” which publishes all transactions using bitcoins. The report also describes how bitcoins are creating through what is known as “mining.” While the report accurately describes the infrastructure of the Bitcoin network, its criticisms were somewhat lacking.
One key criticism against the network was its deflationary nature. Bitcoin is design to have a fixed supply of total bitcoins (21 million BTC), and as demand for bitcoins increases so will their individual values. This increase in the value of the currency will result in falling prices, relative to the Bitcoin currency in question. The argument is that this will result in hoarding, as people wait for lower prices instead of spending bitcoins now.
It should be noted that deflation is not necessarily a bad aspect of bitcoin’s structure, especially since the report itself notes that a key benefit of Bitcoin is its ability to circumvent dollar inflation. The Friedman Rule was a rule designed by economist Milton Friedman which utilized a built-in deflationary slant to guide Federal Reserve monetary policy.
Within the section on Bitcoin’s deflationary nature was the following passage:
The perils of an inelastic currency were evident, for a period from about 1880 to 1914, when the United States monetary system operated under a gold standard. At this time the deflationary bias of an inelastic supply of gold led to elevated real interest rates, caused periodic banking panics, and produced increased instability of output. The Federal Reserve was created in 1913 to provide an elastic currency.
This time frame, known collectively as the Gilded and Progressive Eras, had two key “panics” (now known as recessions), the Panic of 1893 and the Panic of 1907. In A Monetary History of the United States, 1867-1960, authors Milton Friedman and Anna Jacobson Schwartz discussed these two panics in greater detail.
It sounds like fast-track authority for trade deals is getting some traction, according to an article today in the Financial Times. The FT says that senior aides to influential committee chairman are gearing up to move legislation that would give the Administration the ability to craft trade deals that would go to the House and the Senate for up-or-down votes.
The push for fast track would ease the way for consideration of the Trans-Pacific Partnership Agreement – a trade agreement well along in its negotiations and that could be considered next year. Top U.S. negotiators are heading to Singapore for continued talks on TPP, which would include 12 countries in a comprehensive trade pact. The current members are Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, the United States, Vietnam, Canada, Mexico, and Japan.
That trade agreement would likely unravel without fast track because that would allow multiple special interests, including unions and environmental groups, to push for including their pet issues. In addition, in November 2013, Wikileaks published a draft of the intellectual property chapter, which already has set off lots of opposing views on those issues.
Moving quickly on fast track won’t be easy. The last time it was reauthorized was in 2007 under President Bush and ushered in the mandatory inclusion of labor and environment provisions in trade agreements. Proponents of including non-trade issues in trade agreements are likely to be pushing for even more in a new Trade Promotion Authority bill.
A protectionist meat labeling rule requires complicated labeling of beef, pork and poultry to indicate where the animals were born, raised, and slaughtered. Called country-of-origin labeling or COOL, the U.S. Department of Agriculture labeling scheme means that cattle from Canada moved to the U.S. for slaughtering, for example, will have to be tracked, segregated, and recorded to show that the meat is from cattle “Born in Canada, raised in Canada, and slaughtered in the U.S.” Meat products from animals born, raised, and slaughtered in the U.S. would have labels indicating that.
The rule particularly affects major U.S. trading partners, Canada and Mexico, which are part of an increasingly integrated system of meat production for those three countries. But the rule also hits domestic meat processors and retailers with higher costs of a tracking and record-keeping system from birth through raising, then through the meat processing and distribution systems.
The original COOL rule was part of the 2008 U.S. farm bill. It mandated that the “Made in America” label could only be used for meat products from animals that had been born, raised, and harvested in the U.S. However, Canada and Mexico in 2009 brought a complaint to the World Trade Organization that the rule discriminated against those two countries and was a violation of the WTO rule on Technical Barriers to Trade. The WTO ruled in 2012 against the U.S. and determined that the COOL label requirements had a “detrimental impact on imported livestock because its record-keeping and verification requirements create an incentive for processors to use exclusively domestic livestock.” The WTO said the rule had to be rewritten to be compliant.
The revised USDA rule first went into effect in May 23, 2013, with the USDA allowing an extension to November 23, 2013. But its requirements for major trade partner Canada has led two Canadian government ministers to call for another WTO review to ascertain whether the revised rule is compliant and to publish a list of possible retaliatory measures against a wide range of imports from the U.S. In a statement accompanying the listing, the two ministers wrote:
Despite consistent rulings by the World Trade Organization, the U.S. government continues its unfair trade practices, which are severely damaging to Canadian industry and jobs.
Our government is extremely disappointed that the United States continues to uphold this protectionist policy, which the WTO has ruled to be unfair, and we call on the United States to abide by the WTO ruling.
We are preparing to launch the next phase of the WTO dispute settlement process on the new U.S. rule, which we had hoped to avoid by the United States living up to its trade obligations.
The Canadian government, with the full support and active engagement of Canadian industry, has fought against this unfair treatment, which is also hurting U.S. industry and consumers.
Two common points made in defense of the Export-Import bank are its recent profitability and the number of jobs it supports. During the recent reauthorization debate, defenders argued that it would be silly to cut a program that makes a profit for taxpayers and supports American jobs. The Ex-Im bank claims it posted a $1 billion profit in FY2013 and supports 255,000 American jobs.
However, new evidence undermines both these claims. As part of the 2012 Export-Import Bank Reauthorization Act, Congress directed the Government Accountability Office to review the Export-Import Bank’s method for calculating its impact on employment. The Bank feeds the value of the exports by industry into input-output tables published by the Bureau of Labor Statistics (BLS) to calculate the total number of jobs it supports. As the GAO’s report notes, there are several limitations of to this methodology:
- The Export-Import Bank’s method cannot distinguish between jobs its programs create, jobs its programs merely maintain, and jobs that are shifted to exporting sectors. The bank often elides this distinction by speaking of jobs its program “supports” or jobs “associated” with its programs. In fairness, this ambiguity is a general limitation rather than a specific failing on the bank’s fault.
- The input-output tables produced by the BLS are based on 2002 data and have not been updated in over a decade. The Export-Import Bank’s calculations, then, do not reflect structural changes to the economy from the Great Recession and its aftermath.
- The Bank counts full-time, part-time, and seasonal work equally. But in fact, we don’t know how many of the jobs it supports are part-time or temporary. Furthermore, the Bank measures the number of jobs not the number of persons employed, so workers holding multiple jobs show up multiple times in the data.
The GAO report criticizes the Ex-Im bank for failing to specifically identify these limitation of its methodology. While the Ex-Im bank admits the number is an estimate, it owes it to the public to disclose significant sources of uncertainty in its estimate.
Wikileaks has made another big splash yesterday — not about spying, but about a multinational trade agreement currently being negotiated. Wikileaks published a draft chapter on intellectual property that is part of the Trans-Pacific Partnership Agreement (TPP), now being negotiated with 12 countries — Japan, Mexico, Canada, Australia, Malaysia, Chile, Singapore, Peru, Vietnam, New Zealand, and Brunei Darussalam.
The 95-page chapter, as a negotiating document, includes proposed provisions and language on a broad range of intellectual property issues, including copyrights, trademarks, patents, pharmaceuticals, and the Internet. The chapter also includes enforcement mechanisms for violations of the agreement. Individual countries’ initials next to the provisions or words in brackets show which countries support or oppose the particular language.
It’s a difficult document to parse, as many of the provisions reference other agreements and treaties, particularly the Agreement on Trade Related Aspects of Intellectual Property Rights, commonly known as TRIPS, which is administered by the World Trade Organization.
Intellectual property rights are likely to continue to be a difficult issue for the 12 countries to negotiate, as some countries are at the leading edge of technological developments, while others are hardly players. However, some of the developing countries are pushing for intellectual property rights in plant varieties — likely to be a contentious issue as well.
George Monbiot in The Guardian, in his usual hyperbolic and specious way, describes the proposed U.S.-EU trade agreement’s purpose as to attack national sovereignty through a secret plot by big businesses and corporate lawyers to sue governments and overturn nations’ laws.
Monbiot starts his diatribe by asking a set of rhetorical questions. A bit irritating, but maybe that’s his way of getting readers involved. Then comes his first substantive sentence: “The purpose of the Transatlantic Trade and Investment Partnership is to remove the regulatory differences between the U.S. and European nations.”
That is a misstatement. TTIP’s purpose is to promote freer trade between two of the largest trading blocs in the world by removing tariffs, addressing non-tariff barriers, and attempting to streamline differing regulatory schemes that impede trade. Through reducing or eliminating trade barriers, the overarching purpose is to increase economic growth and create new jobs on both sides of the Atlantic.
But Monbiot ignores those purposes, of course. Instead, he focuses on the nefarious goal of big business — “to kill regulations protecting people and the living planet” through promoting investor-state dispute settlement in TTIP. And Monbiot says that this mechanism is powerful, subtle, and secretive:
The remarkable ability it would grant big business to sue the living daylights out of governments which try to defend their citizens. It would allow a secretive panel of corporate lawyers to overrule the will of parliament and destroy our legal protections.
What Monbiot is referring to are investment treaties or provisions between countries that attempt to attract investment in those countries through providing clear and non-discrimatory rules for how one country treats investors from another country. Those investor-state rules obviously have to incorporate provisions dealing with disputes, that is, when an investor from another country believes his property has been expropriated or reduced in value by the other country’s actions. When that occurs, the dispute would be arbitrated, generally by an international panel.
Again, that approach makes sense. If the dispute were decided by the domestic courts of law, varying legal systems would complicate the process. Plus, there would be a greater likelihood of discriminatory treatment against the foreign country.