“Rules & Responsibilities” — For Corporations & Countries — A Policy Approach Long-Overdue.

     President Obama’s 2012 State of the Union Message can be summarized in part as a plea for “rules and responsibility.” If you would like this can be further summarized as an R2  approach to corporate and national governance. Unfortunately, many commentators underplayed this aspect of the President’s message.

President Obama focused much of his attention on promoting domestic manufacturing and U.S. exports in his State of the Union. But along with this he argued that corporations as well as countries need to follow rules that are fair and exercise responsibilities to the larger society that ensure a level playing field. Corporations and countries need to follow this approach as they participate in the domestic and the global marketplace.
Reflecting this dual emphasis on fair rules and a larger sense of responsibility the following is a list of proposals and statements President Obama made concerning global trade:
  • Remove tax breaks to corporations that outsource jobs.
  • Every multinational corporation should pay a basic minimum income tax.
  • Export sales need to be facilitated and made easier. (“I will go anywhere in the world to open new markets ….”)
  • Double U.S. exports over the next five years.
  • This export expansion will be helped in part by the new three bilateral trade agreements with Panama, Korea and Colombia
  • Create the “Trade Enforcement Unit” to investigate unfair trade practices.
  • Proclaims that his administration doubled the trade enforcement actions brought against China when compared to the Bush Administration of eight years. (Presumably referring to WTO litigation.)
  • Criticizes foreign subsidies.
  • Criticizes foreign piracy of intellectual property rights.
  • Will not allow foreign subsidies to preclude development of U.S. wind and solar industries.
  • Focuses on China as a target for new investigations of unfair trade practices.
  • Cites the successful imposition of safeguard measures on import of Chinese tires. (This was upheld by the WTO.)
  • More inspections of imports to restrict counterfeit goods.
  • General regulatory reform (meaning trade reorganization, although not specifically enumerated).
I suspect the President’s focus in the State of the Union message on domestic corruption, in the context of the Great Recession in the U.S., will soon be refocused to include greater efforts to confront corruption in the global marketplace.
Corruption by multinationals that distorts trade flows is as insidious as domestic corruption. It may be done overseas but it impacts us domestically. Foreign corruption often involves tax avoidance and use of secret bank accounts and tax havens by U.S. firms.
Greater public sector oversight is needed to prevent global corporate corruption and global tax evasion.  Greater enforcement of the fiduciary responsibilities of corporate board members is a good starting point.
In summary, the President’s reliance on “rules and responsibilities,” which was  overlooked by many commentators, is a long-overdue counterweight to an almost lawless approach some corporations and countries have taken in the last decade or so.
Rules and Responsibility, akin to law and morality, is the best regulation of competitive capitalism and global relations.
This newer policy approach to domestic  and global governance reflects the best in the U.S. character and diplomacy. It’s good public policy, both domestic and foreign.

About Stuart Malawer

Distinguished Service Professor of Law & International Trade at George Mason University (Schar School of Public Policy).
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