Antitrust Reform — From the Gilded Age to the Digital Age — Way Overdue.

Amy Klobuchar’s ANTITRUST (2021) reviews and assesses antitrust law and regulations from the “Gilded Age” to today’s “Digital Age.”

She declares ‘trickle down economics of Reaganism along with the Chicago School’s ‘law and economics” approach (focusing on shareholder wealth creation) brought only lax antitrust enforcement. And directly led to grotesque corporate concentration and structural economic inequality. Her remedy is to resuscitate government regulation, adopt new legislation, and to counter aggressively conservative federal judges. Especially those most recently appointed by Trump. New rules need to be adopted for domestic and global transactions in this new digital era of domestic and global commerce. Focusing on large multinationals and Internet firms. I agree.

The following are really interesting and instructive passages from her book:

Nowhere do the modern-day competition issue come into deeper focus than with today’s Big Tech companies.

America’s laws have not been updated to track the changes in America’s monopoly landscape. Our Congress refuses to do it. Our enforcement tools are getting rusty. Our competition enforcers don’t have enough resources to effectively take on multibillion-dollar, much less trillion-dollar companies. And American courts are increasingly populated by conservative judges, including on the U.S. Supreme Court.

The remedy? Our antitrust laws — and our enforcers — need to be as sophisticated as today’s corporate titans, and we need judges who will interpret the antitrust laws in a reasonable fashion, from the U.S. Supreme Court on down.

… Extremely complex antitrust issues exist in the international arena.

… International deals pose unique regulatory and national security concerns.

… In addition to national security consideration, the evaluation of proposed international deals means that antitrust agencies in more than one country is involved.

… One particular and pressing global challenge America faces on competition is China.

… Discrimination against foreign companies is forbidden under World Trade Organization rules, but it is difficult to prove.

… The challenge, of course, is how to make America’s antitrust laws, already corrupted by Robert Bork’s ideological worldview relevant once more in an ever-changing business environment. There is — to put it mildly — a major disconnect between marketplace realities and the U.S. Supreme Court’s jurisprudence. 

… Reasonable regulations work in tandem with antitrust laws to protect against abuse of power.  It is now crystal clear that the antitrust laws must be seriously updated and made relevant again.

… A rigorous competition policy evens that playing field, spurs innovation, and reduces consumer prices.

 

In conclusion, this new Gilded Age 2.0 requires serious antitrust reform. U.S. corporate tax laws (as to tax havens and offshore corporations) need to be significantly reformed in this new digital era. But that’s another story.

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Biden’s Global Trade Updates — Taxes, Sanctions, Human Rights and Technology.

The following items are those I listed on my website  concerning President Biden’s recent trade actions. ( http://www.globaltraderelations.net/ ) For the first 100 Days they amount to more than mere recalibration of Trump’s trade policies. They posit starting a newer path in addressing systemic issues in the global system and the U.S. interface with the international system.

 

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Linkage Between Federal Trade Policy and Rural Economic Revival — Looking at Martinsville, Virginia.

The conclusion of a recent study concerning Biden’s trade proposals and state economic development  is really important. It looked at one rural region economy in Virginia. It concluded there is an important link between U.S. trade policy and state economic development. The bottom line is there is a federal need to support rural communities and workers. Do not try to coerce foreign countries. That does not work. But Biden’s “worker-centric” policy will not be enough to get trade on a better track. A bolder approach is needed.

Here is a summary of that study that appeared just recently:

Unsurprisingly, Americans have complicated views on trade. Although a majority of voters see free trade as a good thing, barely one-third believe that it creates jobs or lowers prices.

Part of what made the surge in Chinese exports so painful for American workers was that many of them lived and worked in industry towns. When manufacturing jobs in those towns disappeared in response to rising import competition, it wasn’t just factory workers who suffered: everyone else did, too. Consider Martinsville, a small town in southern Virginia that is part of a manufacturing belt that stretches through North Carolina and into northern Georgia, Alabama, and Mississippi.

The Biden administration should focus on the consequences of job losses rather than their causes.

When considering how to promote job creation in distressed regions, it is important to acknowledge that most of the U.S. jobs that were lost to import competition (or to automation) are not coming back. The China trade shock ended almost a decade ago.

The Biden administration should instead try to help communities such as Martinsville thrive. Doing so will require ingenuity and experimentation. Federal officials should give their local and state counterparts wide latitude to pursue policies that are right for the places they serve. Conventional approaches won’t necessarily be the most effective.

Take tax incentives, for example, which officials often use to entice businesses to move to their states or municipalities. Economist have found that although such measures expand output in targeted industries, they appear to do little to raise local living standards. And for each job they create, such incentives impose costs that are nearly ten times as high as those of some other options for creating employment, such as redeveloping defunct industrial sites known as brownfields.

So what actually works? Evidence shows that active labor-market programs, designed to help young and disadvantaged workers succeed in the labor market, are a good bet.

Helping left-behind regions should be a core goal of Biden’s administration. But trying to undo three decades of structural change in the global economy isn’t the right way to get there.

Biden and his team need to be clear-eyed about what trade policy can and cannot do to help workers hurt by globalization. The damage has been done, and free trade isn’t going anywhere. Protectionist measures and narrow attempts to placate labor unions will do little to help workers who are already hurting or to help others avoid a similar fate.

Better to help the unemployed get back on their feet.

“Trade Wars & Globalization (Proposals for Biden).” Foreign Affairs (Special Issue) (May / June 2021). See second article — “Can Trade Help Workers.”

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Biden’s Int’l Tax Proposals — Helps Global Trade, Not Just U.S.

International tax and trade are inter-related. Biden’s corporate tax reforms and proposals will impact global trade. That’s good. Addressing global trade issues is not the primary purpose of Biden’s tax proposals, which seem to be aimed at paying for his domestic agenda.

But they are, to an extent, intentionally designed to impact also international trade and commerce transactions. In part, to make sure that global corporations pay their fair share and don’t stay as free-riders while everyone else pays income tax. Global firms especially internet firms have billions of dollars offshore and avoid paying most income taxes to the United States and the countries where real economic activity takes place.

Global tax havens and offshore LLCs need to be restricted. Real economic activity should be subject to national taxation. Transfer transactions, phoney routing of transactions and ownership of assets including intellectual property rights need to be addressed.

We are dealing with multinational corporations and a nation-based tax system. Bilateral tax treaties are outdated.

A multi-jurisdictional world need to cooperate for the benefit of all. Working with the OECD and our trading partners is a start, long overdue. Tax avoidance and tax evasion is not pretty. It’s time for us to catch up with actual trading patterns and technological changes. The U.S. should take the lead — it would help us internationally and domestically.

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Global Taxation and President Biden — Recalibration, Long Overdue.

The following summarizes President Biden’s recent tax proposal made to the OECD.

The Biden administration is calling for the world’s biggest multinational companies to pay taxes to national governments based on their sales in each country, as part of an ambitious proposal for a global minimum tax. The plan would apply to the global profits of the very largest companies, including big US technology groups, regardless of their physical presence in a given country. Biden hopes the promise of a more stable international tax system will stop the proliferation of national digital taxes and break the mold of tax avoidance and profit-shifting.

The offer from Washington reflects Biden’s broader goal of ending what officials have described as a race to the bottom on global taxation that has deprived governments of revenue needed to fund basic services and investments.  The Trump administration had insisted on a “safe harbour” provision that would make compliance by US technology groups voluntary. Biden dropped that demand, but this week’s proposal offers a new solution. 

“Biden’s Global Tax Plan.” Financial Times (April 9, 2021).

Arcane regulations have long shaped the financial structure of international companies, which exploit legitimate loopholes to save on tax. So there will probably be a big impact from Biden’s proposal to eliminate US tax deductions claimed by those companies that make payments to related parties in low-tax jurisdictions. Biden’s proposals present a unique opportunity to reform an outdated, opaque and unfair system of global corporate taxation.

Biden’s Global Corporate Tax Plans. Financial Times (April 10, 2021).

The following is what I wrote during the 2016 presidential race. It’s about time that the United States confronts global taxation. Biden’s proposals are a good start.

 Malawer, “Global Taxation and U.S. Politics. Richmond Times-Dispatch (April 17, 2016).

Global tax avoidance is a blight on our tax system. Multinational corporations have an obligation to the communities where they do business and to the country that sustains them. U.S. multinationals benefit from U.S. laws and diplomacy. They need to act responsibly.

Global Tax Reform — Two Articles.” Foreign Affairs (2020).

While  the trade war between China and the United States has hogged headlines and driven market anxieties over the past year, an equally large threat to the global economy has gotten little attention: a looming tax war. Since the early twentieth century, countries have largely agreed on how to tax income earned by multinational corporations that conduct business across borders. But this long-standing regime is coming apart, imperiling the broader international economic order.

Under historic international tax rules, governments taxed the profits of multinationals based on where intellectual property was owned, where financial risk was borne, where the parent of a multinational corporation was headquartered, and where management, research, and development took place. Countries such as China and India have long advocated major changes to the international tax system to allow more taxation of profits in “market jurisdictions”—where the customers of a corporation’s goods and services reside.

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Biden’s Trade Policies — Less Drama, New Directions.

After two months, what can be said concerning President Biden’s trade policies?

First, let’s reflect on President Trump’s trade policies, which were confrontational and unilateral. He turbo-charged reliance on a national security rationale in imposing trade restrictions and tariffs on China and our allies.  

At the very outset of President Biden’s term, I thought he would turn away from the tariff drama of the last four years, but there would be no wholesale change in trade or tariff policies. That meant various tariffs would be kept in place, and the use of trade sanctions would continue not out of any sense of grievance, but out of realistic reliance on the United States’ real national interests. In other words, we would have a significant recalibration of trade policy. 

It also seemed to me that President Biden would focus on workers’ rights and human rights, both of which were causes adopted by prior democratic presidents. I also believed he would use the national security rationale much less as a phony rationale for Section 232 tariffs and that he would support a rebalancing of congressional authority concerning trade. (Congress, of course, has the exclusive authority to regulate trade and to delegate that authority.) This has already been supported by Virginia Senator Tim Kaine.

So far, President Biden has imposed sanctions on Saudi officials because of the Khashoggi episode, on Russian officials due to the Navalny saga, and on Chinese officials for the Uyghur abuses. He has retained restrictions on Hong Kong by not reinstating its special status. He has also retained national security tariffs on steel and Section 301 tariffs on Chinese imports to counter restrictive Chinese intellectual property policies. He recently imposed new export controls on Chinese technology firms for national security and foreign policy reasons. He has continued an investigation of European digital taxation under Section 301. But he has stayed sanctions on the EU over Airbus. Thus, President Biden is continuing some of Trump’s trade measures. However, he is using trade measures to put a welcome and renewed emphasis on human rights.  Under President Biden the United States has rejoined the UN Human Rights Council.

President Biden’s policy  supports a rules-based global system. He obviously intends to ensure that China conforms to those rules, regarding both trade and human rights. His lifting of sanctions on officials of the International Criminal Court, rejoining the World Health Organization (WHO), supporting the selection of a new Director-General of the World Trade Organization (WTO), and rejoining the Paris Climate Agreement and the Nuclear talks with Iran are already clear indications of a foreign policy focused on participating in multilateral institutions. They are not viewed as violating U.S. sovereignty. 

It remains to be seen if President Biden will have the United States join the revised Trans-Pacific Partnership (TPP) now reconstituted as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). A new member of the WTO Appellate Body still needs to be appointed. Further actions are being considered concerning global supply chains (semiconductor chips), foreign investment controls, and ‘Buy American’ legislation. Most importantly, President Biden needs to determine how to transition from Trump’s disastrous trade and tariff wars and specifically move from confrontation to better economic competition with China.

In the future, I believe President Biden will use Section 301 retaliatory measures much less. Instead, he will favor filing more cases with the WTO, particularly those concerning China and its IPR laws and practices. (The new USTR representative was previously a WTO litigator in the USTR office.) President Biden will also attempt to use diplomacy and multilateral efforts more often with a range of countries confronting the newest issues of global commerce. For example, there is already an indication that he will work with the OECD to address  digital taxation and taxation of multinationals’ export and foreign income. Tax avoidance and tax shelters are now at the heart of Biden’s economic agenda.  

Some of my more generalized conclusions are as follows:  Trade and tariffs will not be in the headlines on a daily basis. The complex inter-connectiveness of the global economy has been once again highlighted by the recent Suez Canal fiasco. President Biden will engage in the global economy and strengthen the United States’ position in it by recalibrating the nation’s policies. He believes in a rules-based global trading system where rules are negotiated and adjudicated. Most importantly, he knows his roots and believes in American greatness. The Biden administration’s focus will be domestic and threefold: rebuilding the U.S. economy, eradicating COVID-19, and strengthening democracy at home. 

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Biden and National Security (and Trade) — New Era of American Crisis.

New article ———- Malawer, “Biden, National Security and Trade.” (2021).

                                    [Excerpt from conclusion …..)

In my view, one of the first issues that the Biden administration ought to
confront is the longtime delegation (since the 1930s) of trade authority from
Congress to the President, particularly in the area of national security, found
in various legislative enactments, especially Section 232 of the Trade Expansion Act and Section 1701 of the International Emergency Economic Powers Act.

While it may seem counterintuitive for Biden to restrict his own authority,  
necessary to ensure that the abuse and corruption of national security cannot
happen again. Recently proposed legislation by Virginia senator Tim Kaine, 
Reclaiming Congressional Trade Authority Act of 2019, did not gain much
traction, unfortunately. But its time has now come again. Such restriction would be something akin to post-Watergate legislation -passed in the aftermath of President Nixon’s abuses and criminal and unethical activities – that restricted presidential powers and reasserted Congressional authority, which worked to some extent.

Remember that Congress, not the President, has the exclusive authority to regulate trade. However, since  1780s, trade policy has increasingly been understood to have critical policy implications and has become central to foreign affairs. Of course, the President has extensive powers related to foreign affairs, including the ability to negotiate and withdraw from international agreements.

This balance of power between the branches needs to be recalibrated
now. The direction in which the WTO has moved in cases concerning national
security is not a good omen for the US. Recalibrating domestic law would 
likely preclude future quite questionable US actions from being contested (and ruled against) by the WTO and the global trading system. That is good.

But most importantly, first and foremost, President Biden needs to
revitalize American democracy in the post-Trump world and then reclaim
America’s global leadership.

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Biden — Law, National Security and Global Trade.

My new article — Malawer. “Biden — National Security, Law and Global Trade. China and WTO Review (Draft) (January 20, 2021). Some excerpts are below.

………………………………………

It is now up to President Biden to recalibrate the American approach to trade relations, particularly with China, and the relation between trade and national security – at least in the context of applying unilateral trade measures including tariffs and trade sanctions. The widening use of tariff exclusions over the last few years and the minimal impact of Trump’s trade war on the US manufacturing growth only served to increase the dysfunction of his protectionist trade measures. Those seemingly only led to managed trade, which led to domestic cronyism.

My general prediction is that the Biden administration will most likely draw more heavily on national security to guide the US trade and tariff policies than did administrations prior to the Trump administration, but using a much more restricted and circumspect approach than that of the Trump administration. Biden will do so in a broader and more rationally realistic way than has been seen in the last four years, and the process will observe domestic and international law more rigorously. Trade policies will be neither erratic nor punitive.

However, the Biden administration will not implement trade actions immediately. It will review Sections 232 and 301 tariffs methodically. The same can be said concerning the US-China trade relations and longstanding US-EU trade relations. This review will now include the recently concluded the EU-China investment treaty as well as bilateral trade relations with the UK as a result of Brexit.

Given the much more pressing domestic, legal and policy issues currently confronting the United States (COVID-19, alliance relations, the global climate and Iran, among others), the Biden administration will need to address those issues first. In addition, the traditional lack of consensus and conflict over trade issues within the Democratic Party will hamper a broader trade review as well as a more specific review of trade-based national security actions.

                                                  …………………………………

The following is my partial list of trade problems confronting Biden:

  • Trump’s tariff and trade wars, especially with China, raising the basic issues of confrontation or cooperative competition.
  • Rebuilding alliances and a multilateral global strategy which in particular addresses trade and political disputes relating to U.S.-China relations.
  • More specific China trade issues, such as China’s implementation of a Phase One agreement to purchase more U.S. products and commodities, the lifting of various 232 and §301 tariffs on Chinese exports to the United States and of various transactional sanctions, particularly on investments in Chinese firms, and issues of human rights—specifically the use of Uighurs as prison labor.
  • Legislative efforts to restrict and transfer some delegated tariff authorities back to the President and perhaps to the Treasury Department.
  • Trade relations with the EU and the UK after the recent Brexit deal, including the competing retaliatory tariffs resulting from the Boeing and Airbus cases, the digital taxation proposals emanating from the EU concerning global internet firms and issues concerning the newly announced EU-China investment treaty.
  • The global tax avoidance of global tech firms, global e-commerce and the threatened EU digital taxation.
  • WTO issues, especially the decimation of the Appellate Body by the Trump administration and the selection of a new WTO director-general.
  • Other WTO issues, including the growing reliance on litigation within the WTO and the continuing failure to negotiate new trade rules.
  • The Paris Climate Accord.
  • Sanctions related to the Iranian nuclear deal from which Trump withdrew.
  • Reconstitution of an Asian alliance and joining of the newly revised Comprehensive and Progressive TPP (CPTPP) to offset the Chinese-inspired Regional Comprehensive Economic Partnership (RCEP).
  • Renewal and expansion of the Trade Promotion Authority (TPA; formerly known as “fast track authority”).
  • Changes by the Trump administration to the duty-free tariff treatment of various nations under the Generalized System of Preferences (GSP).
  • Reconsideration of recent trade sanctions (for example, designating Cuba a State-Sponsor of Terrorism) in the last days of the Trump administration.

                                             ……………………………………………….

The appointment of a new trade, foreign policy and national security team by Biden seems very promising. To me, the team seem seasoned, experienced, professional and pragmatic, with a mature understanding of the US and global issues and interests. However, the greatest problems now confronting the new Biden administration are domestic.

In my view, one of the first issues that the Biden administration ought to confront is the longtime delegation (since the 1930s) of trade authority from Congress to the President, particularly in the area of national security, found in various legislative enactments, especially Section 232 of the Trade Expansion Act and Section 1701 International Emergency Economic Powers Act. While it may seem counterintuitive for Biden to restrict his own authority, it is necessary to ensure that the abuse and corruption of national security cannot happen again. Recently proposed legislation by Virginia senator Tim Kaine, The Reclaiming Congressional Trade Authority Act of 2019, did not gain much traction, unfortunately. But its time has now come again.

Such restriction would be something akin to post-Watergate legislation -passed in the aftermath of President Nixon’s abuses and criminal and unethical activities – that restricted presidential powers and reasserted Congressional authority, which worked to some extent. One needs to keep in mind that Congress, not President, has the exclusive authority to regulate trade. However, since the 1780s, trade policy has increasingly been understood to have foreign policy implications. Of course, the President has extensive powers related to foreign affairs, including the ability to negotiate and withdraw from international agreements.

            This balance of power between the branches needs to be recalibrated now. The direction in which the WTO has moved in cases concerning national security is not a good omen for the US. Recalibrating domestic law would most likely preclude future quite questionable US actions being contested (and ruled against) by the WTO and the global trading system. That is good for everyone. But most importantly, first and foremost, President Biden needs to revitalize American democracy in the post-Trump world.

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President Biden and a New Era for National Security and Trade.

 

While issues concerning national security and trade can be quite technical, they are exceedingly significant, and it is unfortunate that there has been little comment on a dual-track line of cases—those that involve national security in U.S. domestic courts and trade cases that raise the national security exception in the WTO’s dispute resolution system.

 

These dual-track cases seem to have been overshadowed by President Trump’s constant and broad claims of grievances, his bullying, and his protectionist policies from the very outset to the desperate, dying days of his administration.

 

For example, his trade actions  over the last days of his administration include a §301 action on Vietnam for alleged currency manipulation, which of course is not proscribed by GATT rules; duties and retaliatory duties on French wine included as part of the continuing Boeing-Airbus dispute over sanctions; extension of §201 safeguard tariffs on washer imports from China and efforts to delist Chinese telecom firms from US public markets, prohibiting U.S. private and state investment in Chinese companies, expanding the number of Chinese companies on the export blacklist—also known as the Entity List—and banning U.S. transactions with eight Chinese software apps. In a further flurry of last-minute restrictions, the Trump administration has issued new rules restricting import of Chinese technology. These actions have already resulted in a new Chinese blocking statute aimed at U.S. sanctions. The Trump administration initiated a total of 306 antidumping and countervailing duty investigations, 283% more than the Obama administration initiated.

 

It is now up to President Biden to recalibrate the American approach to trade relations, particularly with China, and the relation between trade and national security—at least in the context of applying unilateral trade measures including tariffs and trade sanctions. The widening use of tariff exclusions over the last few years and the minimal impact of Trump’s trade war on U.S. manufacturing growth only served to increase the dysfunction of his protectionist trade measures. Those seemingly only led to managed trade, which led to domestic cronyism.

 

My general prediction is that the Biden administration will most likely draw more heavily on national security to guide U.S. trade and tariff policies than did administrations prior to the Trump administration, but using a much more restricted and circumspect approach than that of the Trump administration. Biden will do so in a broader and more rationally realistic way than has been seen in the last four years, and the process will observe domestic and international law more rigorously. Trade policies will be neither erratic nor punitive.

 

However, the Biden administration will not implement trade actions immediately. It will review §232 and §301 tariffs methodically. The same can be said concerning US-China trade relations and longstanding US-EU trade relations. This  review will now include the recently concluded EU-China investment treaty as well as bilateral trade relations with the UK as a result of Brexit.

 

Given the much more pressing domestic, legal and policy issues currently confronting the United States (COVID-19, alliance relations, the global climate and Iran, among others), the Biden administration will need to address those issues first. In addition, the traditional lack of consensus and conflict over trade issues within the Democratic Party will hamper a broader trade review as well as a more specific review of trade-based national security actions.

 

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TRUMP & BIDEN — From Cronyism to Engagement, Hopefully.

[Recent  postings on Twitter since the Presidential Election as of January 1, 2021 ………… Stuart S. Malawer (@smalawer) / Twitter]

Good editorial on Tariffs and Tariff Exclusions. Downside of tariffs is more market distortion. Terrible Trump tariff and trade policy. Nationalistic protectionism doesn’t help anyone. Tariff cronyism is terrible. Biden needs to reject this asap. 12.29.20

 

Good Financial Times editorial. Need to fully engage with the global trading system. Trade & retraining are critical for economic development in rural areas. Negotiating & adjudicating rules by the WTO are important. Biden needs to reject Trump trade policies asap. 12.29.20.

 

More trade chaos from Trump’s dying days in office. We need cooperation and competition. Not confrontation. US-China relations are too important for foreign policy by personal grievance and nation-baiting. Use of the national security authority (under Commerce’s ‘Entity List’) to bar computer chip exports to China is really questionable. Part of Trump’s misguided & harmful trade policies. This is a continued distortion of national security authority delegated by the Congress.  12.19.20

Terribly NYT editorial. WTO crisis mainly caused by Trump’s nihilistic actions. Need engagement , not pathological destructiveness. Was US creation, building & adjudicating trade rules. Destroying domestic & int’l rules & institutions need to stop, now. 12.18.20
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Biden’s global trade agenda is huge. Critically important to move away from unilateralism & isolationism toward a rules-based system & multilateral organizations. Global problems need global resolutions and cooperation. Universities can help. 11.26.20

 

Yellen’s appointment as Secretary of Treasury is really important for international tax & trade sanction issues. Treasury Department’s authority in these areas is often overlooked, but growing rapidly. It is critical to US trade policy, foreign policy and national security. 11.25.20

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Just outrageous. Trump, on his way out imposed new investment restrictions on US investors in Chinese firms Under IEEPA and national security. He needs to step back & stop meddling. Now. 11.13.20
Good piece on trade issues Biden will face including the TPP & China. However, many more are in need of attention — existing tariffs, trade sanctions, WTO. A host of international institutions need close attention (the WHO, OECD, EU, NATO .. 11.6.20

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Trump’s Trade War’s a Failure. No increase in manufacturing or exports (merchandise or agricultural).No decrease in trade deficit. A lot of grievances, but no win. Worse trade relations with China & our allies. ‘America First Strategy” didn’t work. Period. 11.2.20
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