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<body><div style="font-family:Arial;"><span class="font" style="font-family: arial, sans-serif, sans-serif;">Please excuse the cross post, but sharing Dean Baker's latest piece on trade</span><span class="font" style="font-family: arial, sans-serif, sans-serif;"><br></span></div>
<div style="font-family:Arial;"><span class="font" style="font-family: arial, sans-serif, sans-serif;"><br></span></div>
<div style="font-family:Arial;"><a href="http://cepr.net/publications/op-eds-columns/the-new-trade-agenda-deals-that-promote-equality-rather-than-inequality"><span class="font" style="font-family: arial, sans-serif, sans-serif;">http://cepr.net/publications/op-eds-columns/the-new-trade-agenda-deals-that-promote-equality-rather-than-inequality</span></a><span class="font" style="font-family: arial, sans-serif, sans-serif;"><br></span></div>
<p><span class="font" style="font-family: arial, sans-serif, sans-serif;">The New Trade Age: Deals that Promote Equality Rather than Inequality</span><span class="font" style="font-family: arial, sans-serif, sans-serif;"><br></span></p><div style="font-family:Arial;"><span class="font" style="font-family: arial, sans-serif, sans-serif;">With the Trans-Pacific Partnership now definitely dead and Donald
Trump pushing for a renegotiation of NAFTA, many progressives are
looking for a fundamental re-examination of trade deals. As supporters
of international cooperation rather than narrow nationalists,
progressives have often felt uncomfortable opposing trade deals.</span><span class="font" style="font-family: arial, sans-serif, sans-serif;"><br></span></div>
<p><span class="font" style="font-family: arial, sans-serif, sans-serif;">While there is no reason to be defensive about opposing trade deals
that favored business interests at the expense of workers, consumers,
and the environment in all the countries participating, it is worth
asking how trade deals can be crafted to promote a progressive agenda.
There really is no shortage of ideas in this area.</span><span class="font" style="font-family: arial, sans-serif, sans-serif;"><br></span></p><p><span class="font" style="font-family: arial, sans-serif, sans-serif;">To start, from a U.S. perspective, the items opened up for trade has
to be broadened. High-end professional services, such as physicians’ and
dentists’ services should be front and center in any future trade
deals. The U.S. has highly protectionist rules in this area. In the case
of physicians, foreign doctors are prohibited from practicing in the
United States unless they complete a U.S. residency program. Foreign
dentists must graduate from a U.S. dental school, although in recent
years graduates of Canadian schools have been allowed also.</span><span class="font" style="font-family: arial, sans-serif, sans-serif;"><br></span></p><p><span class="font" style="font-family: arial, sans-serif, sans-serif;">As a result of this protectionism, doctors in the United States earn
on average more than $250,000 a year, twice as much as their
counterparts in other wealthy countries. The potential gain to the
United States from standardizing licensing requirements in professional
services is at least $100 billion a year and quite likely close to $200
billion (0.5-1.0 percent of GDP). The goal need not be that all
countries have the same standard, but rather that licensing rules are
transparent and based on legitimate public interest, not protecting the
incomes of professionals.</span><span class="font" style="font-family: arial, sans-serif, sans-serif;"><br></span></p><p><span class="font" style="font-family: arial, sans-serif, sans-serif;">A central focus of recent trade deals has been making patent and
copyright protection stronger and longer. These forms of protectionism
are incredibly costly, often raising the price of the protected items by
many thousand percent above the free market price. This is especially
important in the case of prescription drugs, where patent monopolies can
raise the price of drugs from a few hundred dollars to a few hundred
thousand dollars. Modern trade deals should be pushing in the opposite
direction: trying to diffuse knowledge and cultural output as widely as
possible.</span><span class="font" style="font-family: arial, sans-serif, sans-serif;"><br></span></p><p><span class="font" style="font-family: arial, sans-serif, sans-serif;">Towards this end, trade deals should create more space for open
innovation and creative work. This would mean setting rules that would
allow parties to trade deals to share publicly funded work, while
excluding those who do not share in the funding. For example, if the
United States and South Korea were to both agree to spend 0.5 percent of
GDP on developing new drugs, a trade deal could give both countries
access to the output, while maintaining patent rights against the use by
other nations. Trade agreements of this sort could be a powerful
dynamic towards creating a world of open innovation and culture.</span><span class="font" style="font-family: arial, sans-serif, sans-serif;"><br></span></p><p><span class="font" style="font-family: arial, sans-serif, sans-serif;">Another area where trade deals can work to both increase efficiency
and reduce inequality would be by requiring greater transparency in
government dealings with the financial sector. In the United States this
is especially important with public pension funds. State and local
government pension funds have over $6 trillion in assets. They routinely
turn over management of these funds to investment advisers, private
equity funds and hedge funds. The terms of these arrangements are rarely
disclosed. As a result, pension funds often pay far more than necessary
for these services.</span><span class="font" style="font-family: arial, sans-serif, sans-serif;"><br></span></p><p><span class="font" style="font-family: arial, sans-serif, sans-serif;">Trade deals that required full transparency in these government
dealings with the financial sector would be a great win-win. They would
reduce the amount of money wasted (perhaps “stolen” is the better word)
by financial firms operating through political connections.</span><span class="font" style="font-family: arial, sans-serif, sans-serif;"><br></span></p><p><span class="font" style="font-family: arial, sans-serif, sans-serif;">Also, full transparency would open up the sector to more competition
both domestic and foreign. If we want the public to be able to fuller
benefit from open trade, we should want investment fund managers from
all over the world competing to invest the trillions of dollars held by
pension funds in the United States and elsewhere.</span><span class="font" style="font-family: arial, sans-serif, sans-serif;"><br></span></p><p><span class="font" style="font-family: arial, sans-serif, sans-serif;">In a similar vein, it would be a huge step forward to include
competition policy as an agenda item in future trade deals. The logic
here is straightforward. If a company is pursuing anti-competitive
policies to control the market and keep out domestic competitors, it is
also implicitly acting in a way to exclude potential foreign
competitors.</span><span class="font" style="font-family: arial, sans-serif, sans-serif;"><br></span></p><p><span class="font" style="font-family: arial, sans-serif, sans-serif;">The U.S. government has largely abandoned anti-trust policy in the
last four decades. Companies like Microsoft and Facebook have openly
engaged in practices that almost certainly would have led to anti-trust
actions in prior decades.</span><span class="font" style="font-family: arial, sans-serif, sans-serif;"><br></span></p><p><span class="font" style="font-family: arial, sans-serif, sans-serif;">In Microsoft’s case, it managed to lock up a near monopoly on
operating systems by signing contracts with manufacturers requiring them
to pay Microsoft for computers shipped with a competitor’s software.
Facebook openly sought to buy Snapchat and Whatsapp for the purpose of
eliminating a potential competitor. (Its buyout succeeded in the case of
Whatsapp.) It would be good policy and good trade policy to require
governments to take action against companies that are seeking to
monopolize markets.</span><span class="font" style="font-family: arial, sans-serif, sans-serif;"><br></span></p><p><span class="font" style="font-family: arial, sans-serif, sans-serif;">These are the sort of rules that we should be looking to include in
future trade agreements. There is no inherent reason that trade should
redistribute income upward. It only happens because the people designing
the deals want this outcome. That can change.</span><br></p><div style="font-family:Arial;"><br></div>
<div id="sig4939963"><div class="signature">--<br></div>
<div class="signature">Alan Barber<br></div>
<div class="signature">Director of Domestic Policy<br></div>
<div class="signature">Center for Economic and Policy Research<br></div>
<div class="signature">202-293-5380 x115 | 202-486-6180<br></div>
<div class="signature">barber@cepr.net<br></div>
<div class="signature"><br></div>
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