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1. U.S. Foreign Policy for the Middle Class: Perspectives From Nebraska

Author:
Salman Ahmed, Allison Gelman, Tarik Abdel-Monem, Wendy Cutler, Rozlyn Engel, David Gordon, Jennifer Harris, Douglas Lute, Jill O'Donnell, Daniel M. Price, David Rosenbaum, Christopher Smart, Jake Sullivan, Ashley J. Tellis, Eric Thompson, Janell C. Walther, and Tom Wyler
Publication Date:
05-2020
Content Type:
Special Report
Institution:
Carnegie Endowment for International Peace
Abstract:
U.S. foreign policy has not come up often in the 2020 presidential campaign. But when it has, candidates on both sides of the aisle frequently have stressed that U.S. foreign policy should not only keep the American people safe but also deliver more tangible economic benefits for the country’s middle class. The debate among the presidential contenders is not if that should happen but how to make it happen. All too often, this debate takes place within relatively small circles within Washington, DC, without the benefit of input from state and local officials, small business owners, community leaders, local labor representatives, and others on the front lines of addressing the challenges facing middle-class households. That is why the Carnegie Endowment for International Peace convened a bipartisan task force in late 2017 to lift up such voices and inject them into the ongoing debate. The task force partnered with university researchers to study the perceived and measurable economic effects of U.S. foreign policy on three politically and economically different states in the nation’s heartland—Colorado, Nebraska, and Ohio. The first two reports on Ohio and Colorado were published in December 2018 and November 2019, respectively. This third report on Nebraska has been prepared in partnership with a team of researchers at the University of Nebraska–Lincoln (UNL). To gauge perceptions of how Nebraska’s middle class is faring and the ways in which U.S. foreign policy might fit in, the Carnegie and UNL research teams reviewed household surveys and conducted individual interviews and focus groups, between July and August 2019, with over 130 Nebraskans in Columbus, Scottsbluff/Gering, Kearney, Lincoln, North Platte, and Omaha.
Topic:
Foreign Policy, Climate Change, Politics, Immigration, Economy, Domestic politics, Class, and Trade
Political Geography:
North America and United States of America

2. Curbing State-Driven Trade Policies: How to Craft New & Effective Approaches to Counter Distortive Practices

Author:
Wendy Cutler
Publication Date:
07-2020
Content Type:
Policy Brief
Institution:
Asia Society Policy Institute
Abstract:
Much attention has been focused on China’s unfair intellectual property practices and the imbalance in the U.S.-China trade relationship, but equally troubling are large-scale Chinese industrial subsidies, the behavior of state-owned enterprises (SOEs), and in general, the oversized and opaque role of the Chinese state in the economy. While the U.S-China phase one trade deal tackled some important sources of bilateral tension and aimed to boost Chinese purchases of U.S. goods and services, it was silent on industrial subsidies and related matters, leaving them for the next phase of negotiations, the fate of which is now in question. U.S. concerns on these matters are shared by other trading partners including the European Union (EU) and Japan. Yet despite widespread disapproval of such practices, building new global rules to combat subsidies has proven challenging. This is due to several factors, ranging from gridlock at the WTO, differences of views among like-minded countries on the required level of ambition, and uncertainty as to how best to approach the enormous complexities in China’s subsidies and related policies. The Organization for Economic Cooperation and Development (OECD) has sought to unpack this complexity, conducting recent studies of Chinese subsidies in two key sectors: aluminum and semiconductors. Both studies illustrate how Chinese subsidies are not simple cash handouts from the state to protected firms so that they can sell at favorable and distorting prices. The OECD finds subsidies can take various forms, including downstream or upstream help that trickles up or down to the firm that’s intended to benefit. They can take the form of favorable equity or debt purchases or bonds provided at below-market rates. And with interconnected global value chains, subsidies can effectively be granted covertly, intended to benefit one firm that might be several links away along the chain. In China, the problem is compounded by an opaque “party-state” structure that obscures not only the recipients of subsidies, but also the source. According to Mark Wu, a Harvard Law School professor who previously served as the Director for Intellectual Property in the Office of the U.S. Trade Representative, subsidies not only flow directly from government bodies in Beijing, but also indirectly through informal responses to directives — sometimes even left unsaid, but understood — from the Chinese Communist Party. Against this backdrop, the Asia Society Policy Institute (ASPI) convened two roundtables in the fall of 2019 and the spring of 2020 to discuss how best to build a new rules-based infrastructure that might combat such subsidies and prevent trade-distorting results such as unfair competition, market access barriers, and, above all, overcapacity in global markets. Experts from the private sector, think tanks, governments, and academia weighed in with possible solutions, which included: Negotiating new rules in the WTO; Using the WTO dispute settlement system, despite its often-discussed flaws; Forming ad hoc rules-based approaches, where possible, like the U.S-EU-Japan trilateral initiative; Plurilateral negotiations conducted on a sector-by-sector basis; Forming coalitions of like-minded trading partners to establish an alternative model, much in the way that the Trans-Pacific Partnership (TPP) was framed. During the roundtables, most experts agreed that there is no silver bullet that solves the subsidy and related issues on its own. And most agree that, left unaddressed, the problem is likely to deepen. The COVID-19 pandemic might even exacerbate it by leading to more state involvement in economies around the world and making it hard to discipline Beijing’s practices. Recognizing all of these real challenges that the international trade community faces, the roundtables reached the following key conclusions: Transparency on the scope, level, and nature of industrial subsidies is vital; Efforts to publicize the ongoing work in these areas, particularly that being done by the OECD, should accelerate; Turning research into tangible new policies is a key step; and Persuading China to agree to updated rules will be necessary, given that China is a singular contributor to overcapacity.
Topic:
International Trade and Finance, Treaties and Agreements, Trade, Industry, and WTO
Political Geography:
China, Asia, North America, and United States of America

3. U.S. Foreign Policy for the Middle Class: Perspectives from Colorado

Author:
Salman Ahmed, Allison Gelman, Wendy Cutler, Rozlyn Engel, David Gordon, Jennifer Harris, Brian Lewandowski, Douglas Lute, Daniel M. Price, Christopher Smart, Jake Sullivan, Ashley J. Tellis, Richard Wobbekind, and Tom Wyler
Publication Date:
11-2019
Content Type:
Special Report
Institution:
Carnegie Endowment for International Peace
Abstract:
The American middle class is already taking center stage in the 2020 presidential electoral campaign, even in relation to debates about foreign policy. While the U.S. economy has been growing and unemployment rates have fallen, too many Americans still struggle to sustain a middle-class lifestyle. Meanwhile, major multinational corporations, China, and other foreign competitors reap enormous benefits from a global economy that U.S. leadership and security has helped underwrite. Therefore, candidates on both sides of the aisle have ample cause for debating whether changes to U.S. foreign policy are required to better advance the economic well-being of America’s middle class, even if middle-class fortunes largely depend on domestic factors and policies. This debate will be relevant long after the electoral cycle is over, however, and will influence the trajectory of U.S. global leadership and international affairs for decades to come. National security and foreign policy professionals in government need to be fully involved in this discussion, yet many are understandably consumed by geopolitical and security developments abroad and are, therefore, often distant or disconnected from economic realities at home. They rarely get to hear what Americans beyond Washington, DC, think about how U.S. foreign policy–related efforts may or may not intersect with these realities. Thus, the Carnegie Endowment for International Peace initiated a new line of research on “foreign policy for the middle class” to help address this gap and bridge an important divide. In 2017, Carnegie convened a bipartisan task force of former senior policymakers to provide strategic direction to this research and ultimately make concrete recommendations. To inform these recommendations, the task force and a research team—including Carnegie scholars and university researchers—are gathering data on both the perceived and measurable economic effects of U.S. foreign policy on the middle class in three U.S. states in the nation’s heartland (Ohio, Colorado, and Nebraska). This report on Colorado, prepared with economists at the University of Colorado Boulder, is the second of the three case studies. The first study on Ohio, undertaken with The Ohio State University, was published in December 2018.1 Across multiple locales in Colorado, the research team conducted interviews and focus groups with state and local officials, economic developers, small business owners, employees, community leaders, teachers, nurses, tradesmen, and others who comprise, employ, and/or advance the interests of middle-class households. The conversation focused on how those interviewed assessed the economic well-being of Colorado’s middle class and whether they believed any significant changes in U.S. foreign policy could yield a better outcome. The interviews and focus groups took place between February and May of 2019, reflecting the events and policies up to that time.
Topic:
Foreign Policy, Politics, Economy, Class, and Defense Industry
Political Geography:
North America and United States of America

4. Trade in Trouble: How the Asia Pacific Can Step Up and Lead Reforms

Author:
Wendy Cutler, Peter Grey, Kim Jong-Hoon, Mari Pangestu, Yoichi Sozuki, and Tu Xinquan
Publication Date:
05-2019
Content Type:
Working Paper
Institution:
Asia Society Policy Institute
Abstract:
The U.S.-China trade dispute has dominated headlines over the past year, disrupting trade and investment flows and increasing uncertainty at a time when the global economy is already facing headwinds. The conflict has left many countries in the Asia Pacific feeling caught in the crossfire seeking to navigate the tensions without alienating either country. While the World Trade Organization (WTO) would ideally help reduce the frictions, it has not been up to the task. The paralysis at the WTO points to a deeper problem: it’s inability to keep up with the pace of change or address the challenges of new developments in advanced technologies and the digital economy. Simply put, the trade regime is in trouble and in need of reform. At this dynamic and uncertain time in trade, the Asia Society Policy Institute (ASPI) convened a group of leading trade experts and former trade officials from across the Asia Pacific, led by ASPI Vice President Wendy Cutler. In this issue paper, the authors examine the major developments in the international trading system, including the U.S.-China trade dispute, FTA activity in the Asia Pacific, and efforts to reform the WTO. In this challenging environment, the authors find that the Asia Pacific is uniquely well-positioned to lead reforms to get the system back on track. This paper is the latest product of the ASPI initiative, “Building a High Standard and Inclusive Asia-Pacific Trade Architecture.” It builds on the work of two previous reports published in March 2017 and January 2018.
Topic:
Economy, Trade Wars, Trade, and WTO
Political Geography:
China, Asia, North America, and United States of America

5. Advancing the U.S.-Korea Economic Agenda

Author:
Wendy Cutler and Hyemin Lee
Publication Date:
01-2019
Content Type:
Working Paper
Institution:
Asia Society Policy Institute
Abstract:
For nearly 70 years, the United States-Republic of Korea alliance has remained strong, built mainly on shared strategic and national security interests. While the North Korean nuclear threat has long dominated political discussions and media headlines, the economic pillar of the relationship is no less important. With amendments to the U.S.-Korea Free Trade Agreement (KORUS) now in place, it is an opportune time for both countries to look beyond KORUS and expand their bilateral economic engagement to new and evolving areas. This closer cooperation can serve as an engine for growth in a slowing Korean economy, as an opportunity for job creation in the United States, and as a vehicle for jointly writing the rules for the technologies of the Fourth Industrial Revolution. As policymakers in Washington and Seoul look to the future, the Asia Society Policy Institute (ASPI) charts a possible path forward in its newest issue paper, Advancing the U.S.-Korea Economic Agenda. This paper presents a range of concrete actions that the United States and South Korea can take to advance and strengthen their bilateral economic relationship in the areas of trade and investment, energy, digital economy and advanced technologies, infrastructure, and women’s economic empowerment. The recommendations included in this paper are based partly on two roundtables ASPI organized with South Korean and American experts in Seoul in June 2018, with support from the Korea Institute for International Economic Policy, and in Washington, D.C., in October 2018. The ideas are also based on discussions with government officials, business leaders, and think tank experts.
Topic:
National Security, Treaties and Agreements, Bilateral Relations, Alliance, and Trade
Political Geography:
Asia, South Korea, North America, and United States of America

6. Strength In Numbers

Author:
Wendy Cutler
Publication Date:
03-2019
Content Type:
Special Report
Institution:
Asia Society Policy Institute
Abstract:
Tensions in U.S.-China economic and trade relations have steadily increased over the past year, leading to the imposition of tariffs and counter-tariffs impacting nearly USD $400 billion in two-way trade. At the time of writing, a negotiated solution has yet to materialize, but the two sides have continued to make progress, with a deal seemingly imminent. At the heart of the conflict are challenges posed by China’s state-led economic model, including excessive and under-reported industrial subsidies and other financial assistance, operation of state-owned enterprises (SOEs), opaque regulatory measures that advantage domestic producers, forced technology transfer, and centrally directed strategic guidance
Topic:
International Political Economy and International Affairs
Political Geography:
Global Focus

7. U.S. Foreign Policy for the Middle Class: Perspectives From Ohio

Author:
Salman Ahmed, Karan Bhatia, Wendy Cutler, David Gordon, Jennifer Harris, Edward Hill, Douglas Lute, Daniel M. Price, William Shkurti, Christopher Smart, Fran Stewart, Jake Sullivan, Ashley J. Tellis, and Tom Wyler
Publication Date:
12-2018
Content Type:
Special Report
Institution:
Carnegie Endowment for International Peace
Abstract:
All U.S. administrations aim to conceive foreign policies that protect and enhance Americans’ safety, prosperity, and way of life. However, views now diverge considerably within and across political party lines about whether the U.S. role abroad is adequately advancing the economic well-being of the middle class at home. Today, even as the U.S. economy is growing and unemployment rates are falling, many households still struggle to sustain a middle-class standard of living. Meanwhile, America’s top earners accrue an increasing share of the nation’s income and wealth, and China and other economic competitors overseas reap increasing benefits from a global economy that U.S. security and leadership help underwrite. Policymakers need to explore ways to make U.S. foreign policy work better for America’s middle class, even if their economic fortunes depend largely on domestic factors and policies. However, before policymakers propose big foreign policy changes, they should first test their assumptions about who the middle class is, what economic problems they face, and how different aspects of U.S. foreign policy can cause or solve them. They need to examine how much issues like trade matter to these households’ economic fortunes relative to other foreign and domestic policies. They should acknowledge the trade-offs arising from policy changes that benefit some communities at the expense of others. And they should reach beyond the foreign policy establishment to hear from those in the nation’s heartland who have critical perspectives to offer, especially state and local officials, economic developers, small business owners, local labor representatives, community leaders, and working families. With these objectives in mind, the Carnegie Endowment for International Peace launched a series of state-level case studies to determine whether significant changes to U.S. foreign policy are needed to better advance the economic well-being of America’s middle class. Ohio was chosen for the inaugural study because of its economic and political diversity and its well-known status as a bellwether state. Carnegie partnered with researchers at OSU to conduct the study and convened a bipartisan task force comprised of former senior policymakers to provide strategic guidance and shape the findings. Interviews were conducted in Cleveland, Columbus, Coshocton, Dayton, Lima, and Marion to solicit views in diverse conditions across the state.
Topic:
Foreign Policy, Government, National Security, Politics, Class, and Domestic Policy
Political Geography:
North America and United States of America

8. Advancing the U.S.-Korea Economic Agenda

Author:
Wendy Cutler and Hyemin Lee
Publication Date:
01-2018
Content Type:
Special Report
Institution:
Asia Society Policy Institute
Abstract:
For nearly 70 years, the United StatesRepublic of Korea (hereafter, Korea) alliance has remained strong, built mainly on shared strategic and national security interests. While the North Korean nuclear threat has long dominated political discussions and media headlines, today the economic pillar of the relationship is no less important. Economic engagement and cooperation have been strengthened since the U.S.-Korea Free Trade Agreement (KORUS) went into effect in 2012, which in turn helped solidify the overall bilateral relationship.
Topic:
International Political Economy
Political Geography:
America and Korea