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2571. Rules Against Earnings Stripping: Wrong Answer to Corporate Inversions

Author:
Gary Hufbauer and Ariel Assa
Publication Date:
05-2003
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The tax-driven expatriation of US corporations is a troubling phenomenon. In a “corporate inversion,” a new foreign corporation, typically located in a low-tax or no-tax country, replaces the existing US parent corporation of a multinational enterprise (MNE). The US corporation then becomes a subsidiary of the new foreign parent. Since the US tax treatment of an MNE operating in the United States is significantly less favorable when the top-tier parent corporation is a domestic rather than a foreign corporation, the inversion transaction averts a substantial amount of US tax. Inversions have attracted adverse attention from tax specialists, media, the US Treasury Department, and Congress. In the wake of September 11, it seemed downright unpatriotic for US firms to invert as a way of skimping on their tax payments.
Topic:
Economics, Government, and International Trade and Finance
Political Geography:
United States

2572. Steel Policy: The Good, the Bad, and the Ugly

Author:
Gary C. Hufbauer and Ben Goodrich
Publication Date:
01-2003
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
While the US steel industry has been in distress for decades, the “steel crisis” of 1999-2001 was particularly acute. More than 30 steel producing and steel processing firms fell into bankruptcy between 1997 and 2001, and most of the failures occurred after President Bush took office. During his presidential campaign, Bush promised steelworkers that he would not neglect them. As the crisis worsened, the steel industry and the United Steel Workers of America (USWA) pressed the Bush administration to make good on its campaign promise.
Topic:
Government, Industrial Policy, and International Trade and Finance
Political Geography:
United States and America

2573. Survival of the Best Fit: Exposure to Low-Wage Countries and the (Uneven) Growth of US Manufacturing Plants

Author:
J. Bradford Jensen, Andrew B. Bernard, and Peter K. Schott
Publication Date:
05-2003
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper examines the role of international trade in the reallocation of U.S. manufacturing activity within and across industries from 1977 to 1997. It introduces a new measure of industry exposure to international trade, motivated by the Heckscher-Ohlin model, which focuses on where imports originate rather than their overall level. Results demonstrate that plant survival as well as output and employment growth are negatively associated with the share of industry imports sourced from the world's lowest-wage countries. Within industries, activity is reallocated towards capital-intensive plants. Plants are also more likely to alter their product mix (i.e. switch industries) in response to trade with low-wage countries. Plants altering their product mix switch to industries that are more capital-and skill-intensive.
Topic:
Economics, Government, and International Trade and Finance
Political Geography:
United States

2574. Falling Trade Costs, Heterogeneous Firms, and Industry Dynamics

Author:
J. Bradford Jensen, Andrew B. Bernard, and Peter K. Schott
Publication Date:
05-2003
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper examines the response of industries and firms to changes in trade costs. Several new firm-level models of international trade with heterogeneous firms predict that industry productivity will rise as trade costs fall due to the reallocation of activity across plants within an industry. Using disaggregated U.S. import data, we create a new measure of trade costs over time and industries. As the models predict, productivity growth is faster in industries with falling trade costs. We also find evidence supporting the major hypotheses of the heterogenous- firm models. Plants in industries with falling trade costs are more likely to die or become exporters. Existing exporters increase their shipments abroad. The results do not apply equally across all sectors but are strongest for industries most likely to be producing horizontally-differentiated tradeable goods.
Topic:
Economics, Government, and International Trade and Finance
Political Geography:
United States

2575. Improving The Sovereign Debt Restructuring Process

Author:
Brad Setser and Nouriel Roubini
Publication Date:
03-2003
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The recent debate on reforming the international financial system has focused on the need to improve the sovereign debt restructuring process, and in particular on steps that could limit the risk that litigation could disrupt or delay a sovereign debt restructuring. This debate increasingly has focused on the debt restructuring process in those cases where debt reduction is needed to produce a sustainable debt profile. Less attention has been given to those cases where a sovereign lacks the reserves needed to cover its near-term obligations and, absent international support, has a clear need for debt rescheduling to push out near-term maturities.
Topic:
Economics, Government, and International Trade and Finance

2576. Basing Restrictions Shape Concept and Conduct of War

Author:
Michael Knights
Publication Date:
03-2003
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
With Saudi Arabian, Turkish, and Jordanian host-nation restrictions limiting coalition ground and air operations, the United States has begun to develop a range of Iraqi airfields as forward operating bases for combat aircraft. This is ironic considering that successive U.S. governments spent billions of dollars to develop an unparalleled basing environment to support U.S. power projection in the Gulf. Recent decisions by Saudi Arabia and Turkey -- key U.S. allies -- have arguably prevented Washington from waging a shorter and less costly war in terms of both blood and treasure. Yet, the United States has benefited greatly from its policy of diversifying basing assets in the smaller Gulf Cooperation Council (GCC) states, recognizing that Kuwait, Qatar, and Oman are dependable allies and that Iraq may one day replace Saudi Arabia as a key airbase provider.
Topic:
Security, Government, and Religion
Political Geography:
United States, Iraq, Washington, Turkey, Middle East, and Arab Countries

2577. An Accident on the Road to U.S.-Turkish Cooperation in Iraq: Implications for Turkey

Author:
Soner Cagaptay
Publication Date:
03-2003
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
In a dramatic session yesterday, the Turkish parliament convened to consider a motion sent by the Justice and Development Party (AKP) government, which had requested that a large U.S. force be permitted to use Turkish soil as a staging ground for a possible campaign in Iraq. The legislature refused to authorize the motion, however, blocking the creation of a northern front in the looming war. Of the 533 deputies in session, 264 voted for the motion, 250 voted against it, and 19 abstained, bringing the motion only three votes shy of the majority required by the constitution. AKP assurances that only 30 to 40 of its delegates would object to the motion crashed to a halt over the course of the session, with 99 of the party's deputies voting nay. Although the democratic will of the Turkish parliament should be respected, the fact remains that the AKP government failed to pass its agenda through the legislature. Some analysts argue that this spells trouble for both Turkey and AKP, with others speculating that U.S.-Turkish relations are now at a historical threshold.
Topic:
Security, Government, and Religion
Political Geography:
United States, Iraq, Turkey, Middle East, and Arabia

2578. Special Policy Forum Report: Iraq and the Middle East -- A View from Cairo

Author:
Osama el-Baz
Publication Date:
02-2003
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
U.S.-Egyptian relations always have been a critical aspect of American involvement in the Middle East. Although Washington and Cairo have disagreed on certain issues, they have nevertheless maintained a significant partnership. As regional tensions mount amid the possibility of war with Iraq and continued violence on the Israeli-Palestinian front, it is important to take a fresh look at this partnership. Recently, the Egyptian government has conveyed its concerns to the United States on two major issues: the potential for war in Iraq and Washington's role in attaining Arab-Israeli peace.
Topic:
Security, Government, and Religion
Political Geography:
Iraq, America, Washington, Middle East, Arabia, Egypt, and Cairo

2579. Special Policy Forum Report: The Bush Administration's Busy Year in the Middle East -- A Preview of 2003

Author:
Robert Satloff, Dennis Ross, E.J. Dionne, and Fred Barnes
Publication Date:
01-2003
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
Dilemmas for U.S. Middle East policy will arise in the immediate post-Saddam aftermath. Foremost will be America's preoccupation with stabilizing Iraq and transforming its new government into a democracy. Vague at present is whether U.S.-led forces will focus on existing institutions (e.g., the Iraqi military) or build new ones to achieve these goals. Such decisions will affect the degree and nature of Iraq's transformation, and the new regime's composition could be significantly different if the United States were to depend on a reformed Iraqi military to promote stability. Moreover, Iraqi transformation corresponds directly to a region-wide transformation, because increased efforts to transform Iraq with a broad-based, representative government will send signals of political reform to Iraq's neighbors. U.S. policy must stand ready to assist other Middle Eastern regimes in their transition to more responsible governments that offer their people hope and the prospect for change.
Topic:
Security, Government, and Religion
Political Geography:
United States, Iraq, Middle East, and Arabia

2580. Banning in Hizballah Activity in Canada

Author:
Matthew Levitt
Publication Date:
01-2003
Content Type:
Policy Brief
Institution:
The Washington Institute for Near East Policy
Abstract:
On December 11, 2002, the Canadian government banned Hizballah, labeling it a terrorist organization. Strangely, some in Canada are having second thoughts about this measure, likely under the assumption that Hizballah is not a terrorist group but a social and political organization engaged in armed struggle against Israel. Yet, evidence of Hizballah's international activity as a terrorist group of global reach is overwhelming.
Topic:
Security, Government, and Religion
Political Geography:
Middle East, Canada, and Arabia