Trade Cases

Leibowitz on Trade: Commerce's 'Strategic Plan' Short on Specifics

Written by Lewis Leibowitz

The Commerce Department released a “strategic plan” to boost American competitiveness on March 28. It is long on buzzwords and short on specifics.

The plbalancean identifies some opportunities to boost American competitiveness. But it focuses too much on government subsidies and protection of entrenched domestic industries and not enough on playing to America’s most important asset—private initiative.

Given the current state of world affairs, the US needs to be the “indispensable nation” once again. If a vision of peace and prosperity are to be a beacon for the world, that requires focusing on and building on our greatest strength.

The “buzzwords” in the strategic plan are typical of government reports. To illustrate, the strategic plan lists five broad areas of focus:

  • Drive US Innovation and Global Competitiveness
  • Foster Inclusive Capitalism and Equitable Economic Growth
  • Address the Climate Crisis Through Mitigation, Adaptation, and Resilience Efforts
  • Expand Opportunity and Discovery Through Data
  • Provide 21st Century Service with 21st Century Capabilities.

Under each broad goal, there are “strategic objectives” for implementation. More buzzwords, I’m afraid. The report makes clear who is “driving,” who is “fostering,” who is “addressing:” the government.

The objectives sometimes work at cross purposes. Under these five broad goals, Commerce puts Strategic Objective 1.3 (“Increase international cooperation and commerce”) immediately before Strategic Objective 1.4 (“Protect national security interests and enforce trade rules”). Is it possible the Department does not know that one of the chief irritants frustrating international economic cooperation and commerce with our allies is the way the US enforces trade rules?

We have seen this over the past 50 years now, and it continues, with disputes over antidumping and countervailing duty laws, Section 232, Section 301, and Section 201 trade remedies. Greater economic cooperation with allies is a key goal to be sure. But to achieve that goal, some accommodation and compromise will be necessary between protecting the US market and increasing international trade. The report appears not to recognize the effect that protecting the US market has on international cooperation and commerce.

There are some good ideas in the report. For example, the Commerce Department wants to beef up production of semiconductors and other 21st-century products, thereby improving US competitiveness and making more resources available at home, especially when it comes to strategically important products. The report also vows to make broadband internet universally available, especially to “underserved” communities.

Another strategic objective is to increase foreign direct investment in the United States. If foreign companies build facilities or provide services (financial, logistical, legal) within the United States, increasing employment will result.

Through 2020, on a historical costs basis, the United States is a very attractive place for investment. The US, as a result of its two centuries of private sector growth, has achieved a greater level of investment abroad than foreign investment here. The numbers are truly impressive. In 2020, US investment abroad was about $6.1 trillion, while the US enjoyed $4.6 trillion in foreign direct investment.

The top five investment partners – countries who invest the US and in whom the US invests – are instructive because they show that investment both ways tends toward countries with which the US has close relations politically, economically, and strategically.

Foreign Investment in the United States (2020)

  • Japan: $647 billion
  • Canada: $490 billion
  • United Kingdom: $487 billion
  • Netherlands: $484 billion
  • Germany: $411 billion

United States outward investment (2020)

  • United Kingdom: $890 billion
  • Netherlands: $843 billion
  • Luxembourg: $751 billion
  • Canada: $422 billion
  • Ireland: $390 billion

These numbers do not tell the full story – major outward investment (and inward investment too) involve Bermuda and the British Caribbean islands, which do not boast much manufacturing. The United States welcomes foreign investment, and other countries welcome US investment too. The financial world is endlessly complicated – and Ireland boasts such large US investments because of a low tax system that the US government and the European Commission are trying to tame through international tax reform.

Looking at these numbers, it appears obvious who our most trusted economic partners are – and they are key strategic partners too. Increasing international cooperation and commerce with those nations, as the Commerce strategic plan proposes, should be easy—if we can negotiate through those irritating issues that divide us.

I was disappointed to see that Commerce’s strategic plan contained a reminder of the Cold War. It covers 2022-2026 – a US “five-year plan.” The Chinese still do their five-year plans, as they have since 1953. Are we adopting the Marxist tradition?

The report fails to consider that economic growth and US international competitiveness are overwhelmingly dependent on the ideas, initiatives, and energy of the private sector. When government involves itself in the affairs of private enterprise, it has been known to jam the gears of commerce. Government, of course, has an interest in the smooth functioning of private industry. But interference in the market always has a cost.

The initiatives in the Commerce report are based on alleged “market failures,” or cases where the private sector does not come to grips with problems – for example, climate change, income inequality, racial discrimination, gender equality, roads and bridges, taking care of the less fortunate, controlling the borders, etc. Those are all important considerations, but the energy of private enterprise is what makes us go. Private industry and government can be partners, not adversaries.

The war in Ukraine has given all people of good will a chance to work together for a common purpose – the restoration of peace through a condemnation of conquest by force of arms. On occasions such as this we may need to set priorities and ask for patience in addressing the problems that face us. We can’t solve them all at the same time. The Commerce Department’s five-year plan looks to be a political document that does make the hard choices we face.

Lewis Leibowitz

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Lewis Leibowitz, SMU Contributor

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