Understanding the Broad Range of Global Developments — Is There Some Coherence?

     Globe and Question (FT 5.5.14)
     An unusual broad range of articles have appeared recently discussing global trade, foreign policy and domestic politics. They continue to evidence the great variety of topics in global affairs that are so inter-related.  They leave one struggling to make sense of them in some coherent way as to understanding cross-border transactions in today’s global economy. They involve federal-state relations, U.S. – EU relations, the WTO, Russia, China, global taxation, state incentives, economic development, business competitiveness,  Obama’s foreign policy, the OECD, and more. Here’s my take on them.
     This anti-economic development article misses the point. State incentives to attract foreign business is a rationale decision. It is good public policy. It is a rationale choice to support economic development. State incentives are not necessarily subsidies. They are often tied to metrics which must be met to keep those payments — such as to number of new jobs created. Pointing to the WTO and OECD rules adds nothing to this debate. Those rules refer primarily to export subsidies. That is simply not the case here. State incentives in Virginia have clearly led to new businesses, to higher employment, and to improved welfare of Virginians. How to End State Subsidies.” New York Times (May 10, 2014). 
     Governor trade missions are essential to attracting new trade and investment to Virginia. Really essential for job creation. “Virginia Trade Mission with New Governor to Asia.” Richmond Times-Dispatch (May 10, 2014).
      Russia filed a new case in the WTO against the EU concerning its restrictions in the energy sector & involving import restrictions on natural gas. This could prove to be a huge case given current geopolitical issues. “Russia Files Dispute Against EU.” WTO News (April 30, 2014).
     This OECD tax convention is aimed at sharing information to limit multinational tax evasion. Switzerland just announced its intention to sign this agreement. This could prove to be a turning point in the traditional Swiss resistance to sharing such information. Global taxation is a highly politicized issue in today’s global trade relations. “Convention on Mutual Administrative Assistance in Tax Matters.” OECD website.
     The recent New York Times editorial is correct that President Obama is doing a better foreign-policy job than his critics say. He has run into a more chaotic world than his predecessors. This is because of continued globalization and multipolar dynamics. The New York Times is incorrect to argue that the United States alone can do much more or that he can do a much better job. Can you imagine if the U.S. actually got involved in war zones or potential ones from Syria, Ukraine, central Africa, the East China Sea ….. The first aspect of national security today is a strong U.S. economy and society. This should be our priority. Much will follow from that. “President Obama and the World.” New York Times.” (May 3, 2014).
     I agree that tax avoidance by multinationals has become a full-fledged corporate strategy (scam?). But the solution of doing away with all corporate taxation (domestic and foreign) is laughable. It only further accentuates gross inequality. We need more realistic policy proposals. We need better U.S. legislation (and enforcement), better international cooperation, and better OECD proposals.  “End Corporate Taxation.” New York Times (May 2, 2014).
     Export growth is essential to economic development and job creation. But current export growth is still not enough. Greater government – private partnership in this area would be very helpful. Greater federal and state cooperation is critical. Public universities helping their states would also be of significant assistance. Leveraging their international assets such as their foreign students and international programs remains an untapped endeavor. “U.S. International Trade Deficit.” CNBC (May 6, 2014).
     The evolving multipolar economic world is the principal challenge to U.S. foreign policy as it confronts changes to global trade & international institutions. “Uncertainty, Not China, is Replacing U.S. Power.” Financial Times (May 4, 2014).
     I wonder if this was an intentional signal by China to Japan or an isolated maritime case stemming back to WW II? “Ship Seizure in China.” Asian Review (April 22, 2014). 
     Here’s another former foreign-policy appointee complaining about U.S. foreign policy. I wonder where he was during the last presidential administration when U.S. foreign policy was really chaotic. It’s a messy world and foreign policy mirrors that reality, unfortunately. Our first priority is to focus on the U.S. economy and society as central to our national security. The world is changing and the U.S. needs to act via multilateral arrangements and alliances not unilaterally. That is a prescription for real chaos in the 21st century. “A Foreign Policy Flirting with Chaos.” New York Times (April 29, 2014).
       The U.S. battle over the valuation of the Yuan is not legally correct. This article tells you why it makes no political, economic or business sense. “China Bashing Will Backfire.” CNBC (April 29, 2014).

 

 

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About Stuart Malawer

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