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Begin New Search Topic Subsidies Political Geography United States of America

1. To Regulate, or Not to Regulate? Subsidies for Foreign Enterprises, Climate Change, and Currency Undervaluation

Author:
Cheon-Kee Lee, Min Ji Kang, and Minjoo Kim
Publication Date:
06-2022
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
In response to today’s rapidly changing global trade environment, countries have continued to make changes to their policy objectives and instruments to address new and emerging issues such as supply chain restructuring and reshoring, climate change, and currency undervaluation. To this end subsidies have been playing a particularly important role, and are expected to be used more broadly across different sectors in the coming years. While controversies over government subsidization are likely to continue at the international level, the United States and the European Union have proposed at the domestic level to expand the scope of subsidy regulation and to tighten regulation on newly emerging subsidy types beyond the traditional boundaries set by international trade rules. Among a number of the latest developments on subsidy regulation, this Brief intends to primarily focus on (i) transnational subsidies granted by a government to enterprises active in other foreign countries (“foreign subsidies”); (ii) green subsidies for climate change mitigation; and (iii) subsidies related to currency undervaluation.
Topic:
Climate Change, Business, Currency, Trade, and Subsidies
Political Geography:
Europe, North America, United States of America, and European Union

2. Why the CHIPS Are Down: Stock Buybacks and Subsidies in the U.S. Semiconductor Industry

Author:
William Lazonick and Matt Hopkins
Publication Date:
09-2021
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
The Semiconductor Industry Association (SIA) is promoting the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act, introduced in Congress in June 2020. An SIA press release describes the bill as “bipartisan legislation that would invest tens of billions of dollars in semiconductor manufacturing incentives and research initiatives over the next 5-10 years to strengthen and sustain American leadership in chip technology, which is essential to our country’s economy and national security.” On June 8, 2021, the Senate approved $52 billion for the CHIPS for America Act, dedicated to supporting the U.S. semiconductor industry over the next decade. This paper highlights a curious paradox: Most of the SIA corporate members now lobbying for the CHIPS for America Act have squandered past support that the U.S. semiconductor industry has received from the U.S. government for decades by using their corporate cash to do buybacks to boost their own companies’ stock prices. Among the SIA corporate signatories of a letter to President Biden in February 2021, the five largest stock repurchasers—Intel, IBM, Qualcomm, Texas Instruments, and Broadcom—did a combined $249 billion in buybacks over the decade 2011-2020, equal to 71 percent of their profits and almost five times the subsidies over the next decade for which the SIA is lobbying. In addition, among the members of the Semiconductors in America Coalition (SIAC), formed specifically in May 2021 to lobby Congress for the passage of the CHIPS for America Act, are Apple, Microsoft, Cisco, and Google. These firms spent a combined $633 billion on buybacks during 2011-2020. That is about 12 times the government subsidies provided under the CHIPS for America Act to support semiconductor fabrication in the United States in the upcoming decade. If the Congress wants to achieve the legislation’s stated purpose of promoting major new investments in semiconductors, it needs to deal with this paradox. It could, for example, require the SIA and SIAC to extract pledges from its member corporations that they will cease doing stock buybacks as open-market repurchases over the next ten years. Such regulation could be a first step in rescinding Securities and Exchange Commission Rule 10b-18, which has since 1982 been a major cause of extreme income inequality and loss of global industrial competitiveness in the United States.
Topic:
Science and Technology, Regulation, Legislation, Strategic Competition, Subsidies, and Lobbying
Political Geography:
United States of America

3. Will industrial and agricultural subsidies ever be reformed?

Author:
Gary Clyde Hufbauer
Publication Date:
03-2021
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
Open Sub-navigation BackOpen Sub-navigation Publications Back Policy Briefs Working Papers Books PIIE Briefings Open Sub-navigation Commentary Back Op-Eds Testimonies Speeches and Papers Topics & Regions PIIE Charts What Is Globalization? Educational Resources Open Sub-navigation Back Senior Research Staff Research Analysts Trade Talks Open Sub-navigation Back RealTime Economic Issues Watch Trade & Investment Policy Watch China Economic Watch North Korea: Witness to Transformation 中文 Open Sub-navigation Back All Events Financial Statements Global Connections Global Economic Prospects Stavros Niarchos Foundation Lectures Trade Winds Open Sub-navigation Back News Releases Multimedia Media Center Open Sub-navigation Back Board of Directors Staff Employment Contact Annual Report Transparency Policy POLICY BRIEF VIEW SHARING OPTIONS Will industrial and agricultural subsidies ever be reformed? Gary Clyde Hufbauer (PIIE) Policy Brief21-5 March 2021 Photo Credit: REUTERS/Denis Balibouse One economic argument for government subsidies is that they are necessary to compensate firms and industries for benefits they provide to society at large but cannot capture in the prices they charge for goods or services. For example, subsidies to renewable energy are defended because renewable energy limits carbon emissions. When a major economy subsidizes extensively, however, its trading partners are drawn into the game, with losses all around. As the prisoner’s dilemma suggests, a better outcome would entail mutual restraint. But the goal of mutual restraint is no less difficult in international trade than it is in international arms control. Both the European Union and the US federal system try, in different ways, to regulate industrial subsidies. Hufbauer examines efforts to contain unjustifiable subsidies and proposes modest improvements, bearing in mind that as countries struggle to overcome the global economic downturn resulting from the COVID-19 pandemic, there is little appetite for restoring a free market economy—one in which firms compete with minimum government assistance or regulation. Selective upgrading of the rulebook may nevertheless be possible.
Topic:
Agriculture, Government, Reform, European Union, Regulation, Manufacturing, Industry, COVID-19, and Subsidies
Political Geography:
Europe, North America, and United States of America

4. Double Whammy: Implicit Subsidies and the Great Financial Crisis

Author:
Edward Kane
Publication Date:
09-2018
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
This paper concerns itself with the joint effect of implicit subsidies that are built into the US housing-finance system and financial safety net. These subsidies are implicit because they are channeled through the regulatory, supervisory, and tax systems in hard-to-observe ways. In the last two economic booms, the stealthy way banks have pursued these subsidies allowed hidden leverage and arcane loss exposures to build up to a disastrous degree. When lenders' safety-net support was finally tested by creditor runs, the struggle to reallocate losses and loss exposures away from the banks that had concealed them pushed the world's financial system into open crisis. Post-crisis regulatory reforms seem to have blunted the force of these subsidies, but the instruments assigned to this task are too weak to work for long. With the connivance of regulators, US megabanks are already re-establishing their ability to use dividends and stock buybacks to rebuild their leverage back to dangerous levels. Meantime a number of European megabanks (exemplified by Deutsche Bank) have remained in a zombie or near-zombie condition throughout the last decade. In the coming years, these banks' perilous condition and the possibility of extending safety-net coverage to support subsidized loans for bankrupt students, pension funds, and state and local entities could easily trigger another crisis. Besides trying to avoid future crises and directing bailouts when a crisis occurs, top regulators seem to believe that an important part of their job is to convince taxpayers that the next crash can be contained within the financial sector and won’t be allowed to hurt ordinary citizens in the ways that previous crises have. This paper seeks to convince readers that, until the law begins to hold individual bankers civilly and criminally responsible for using the safety net to enrich themselves by recklessly putting their banks' survival at risk, these rosy claims are bullsh*t.
Topic:
Political Economy, Financial Crisis, Reform, Subsidies, and Financial Safety
Political Geography:
North America and United States of America

5. Reforming the Cotton Trade Order? An Analysis of Cotton Subsidies and Implications for Sustainable Development

Author:
Christine M. Makori
Publication Date:
05-2005
Content Type:
Journal Article
Journal:
Journal of Public and International Affairs (JPIA)
Institution:
School of Public and International Affairs (SPIA), Princeton University
Abstract:
Cotton is the most widely produced cash crop in the developing world. It supports the livelihoods of numerous households in these countries and occupies a significant position both economically and politically. However, in the recent past, this sector has experienced a pricing crisis mainly attributed to subsidies of developed nations. This article analyzes the effects of cotton subsidies (the most controversial agricultural commodity in the ongoing trade negotiations) on sustainable development, focusing on the impacts of U.S. subsidies on four West African countries. Given that these support systems have political motivations, the article briefly surveys political challenges to subsidy reforms. In conclusion, the article makes specific recommendations to the WTO and national governments to promote free trade, enhance economic efficiency, and support the global fight against poverty.
Topic:
Sustainable Development Goals, Trade, WTO, Subsidies, and Cotton
Political Geography:
Africa, West Africa, and United States of America