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In America’s factories, jobs are inevitably disappearing, too. But despite the political rhetoric, the problem is not mainly globalization. Manufacturing jobs are on the decline in factories around the world. “The observation is uncontroversial,” said Joseph Stiglitz, the Nobel-winning economist at Columbia University. “Global employment in manufacturing is going down because productivity increases are exceeding increases in demand for manufactured products by a significant amount.” The consequences of this dynamic are often misunderstood, not least by politicians offering slogans to fix them. No matter how high the tariffs Mr. Trump wants to raise to encircle the American economy, he will not be able to produce a manufacturing renaissance at home. Neither would changing tax rules to limit corporate flight from the United States, as Mrs. Clinton proposes. “The likelihood that we will get a manufacturing recovery is close to nil,” Professor Stiglitz said. “We are more likely to have a smaller share of a shrinking pie.” Look at it this way: Over the course of the 20th century, farm employment in the United States dropped to 2 percent of the work force from 41 percent, even as output soared. Since 1950, manufacturing’s share has shrunk to 8.5 percent of nonfarm jobs, from 24 percent. It still has a ways to go. The shrinking of manufacturing employment is global. In other words, strategies to restore manufacturing jobs in one country will amount to destroying them in another, in a worldwide zero-sum game.

The push to bring manufacturing home is growing. A bill circulating in the U.S. House of Representatives would pay Intel and other semiconductor producers to set up chip foundries in the United States instead of Asia. Other efforts aim to boost domestic manufacturing of solar panels, electric batteries, and other building blocks for the clean-energy economy. Bolstering domestic production has other benefits too, starting with increasing the number of higher-paying jobs.

Yet it can become too much of a good thing. Production concentrated with a few U.S.-based manufacturers will make the country more vulnerable to shortages, rather than less. A rush to reshore production that U.S. companies long ago outsourced or in which they no longer hold cutting-edge expertise would be a recipe for mishaps and bottlenecks—also making Americans less safe, not more. And the sheer amount of subsidies required for any large-scale reshoring will create an open invitation to powerful corporations and their Washington lobbyists to game the system, favoring not the best or most innovative companies but the best-connected.

The CRISPR Cas9 gene editing technology has become the pinnacle of innovation in synthetic biology. It enables scientists to easily alter genomes while being cheaper and more versatile than previously present technologies. However, CRISPR Cas9 does have its limitations. It can easily cut any specific pieces of DNA, but creating desired mutations within this DNA can be tricky and often toxic to the cells.

Here are eight alternatives to CRISPR Cas9 gene editing technology:

The economic, political and security strategy that the United States has pursued for more than seven decades, under Democratic and Republican administrations alike, is today widely questioned by large segments of the American public and is under attack by leading political candidates in both parties. Many Americans no longer seem to value the liberal international order that the United States created after World War II and sustained throughout the Cold War and beyond. Or perhaps they take it for granted and have lost sight of the essential role the United States plays in supporting the international environment from which they benefit greatly. The unprecedented prosperity made possible by free and open markets and thriving international trade; the spread of democracy; and the avoidance of major conflict among great powers: All these remarkable accomplishments have depended on sustained U.S. engagement around the world. Yet politicians in both parties dangle before the public the vision of an America freed from the burdens of leadership.

What these politicians don’t say, perhaps because they don’t understand it themselves, is that the price of ending our engagement would far outweigh its costs. The international order created by the United States today faces challenges greater than at any time since the height of the Cold War. Rising authoritarian powers in Asia and Europe threaten to undermine the security structures that have kept the peace since World War II. Russia invaded Ukraine and has seized some of its territory. In East Asia, an increasingly aggressive China seeks to control the sea lanes through which a large share of global commerce flows. In the Middle East, Iran pursues hegemony by supporting Hezbollah and Hamas and the bloody tyranny in Syria. The Islamic State controls more territory than any terrorist group in history, brutally imposing its extreme vision of Islam and striking at targets throughout the Middle East, North Africa and Europe. None of these threats will simply go away. Nor will the United States be spared if the international order collapses, as it did twice in the 20th century. In the 21st century, oceans provide no security. Nor do walls along borders. Nor would cutting off the United States from the international economy by trashing trade agreements and erecting barriers to commerce.

("What is an Alternative to the Minimum Wage in Canada?: A Comprehensive Literature Review of Price Floors and Welfare Systems in Canada", International Journal of Policy Sciences and Law (IJPSL), https://ijpsl.in/wp-content/uploads/2022/06/What-is-an-Alternative-to-the-Minimum-Wage-in-Canada-A-Comprehensive-Literature-Review-of-Price-Floors-and-Welfare-Systems-in-Canada-merged.pdf)

Additionally, there was a finding by a Berkeley researcher which suggests that an NIT would force employers to bid up wages as it can make workers more selective when searching for employment. Thus, while an NIT can discourage work for certain individuals, it will incentivize firms to increase their wages without a government-driven price floor, such as the minimum wage. An NIT could provide $1.39 in benefits for every $1 government expenditure on this policy (Rothstein, 2009).

("What is an Alternative to the Minimum Wage in Canada?: A Comprehensive Literature Review of Price Floors and Welfare Systems in Canada", International Journal of Policy Sciences and Law (IJPSL), https://ijpsl.in/wp-content/uploads/2022/06/What-is-an-Alternative-to-the-Minimum-Wage-in-Canada-A-Comprehensive-Literature-Review-of-Price-Floors-and-Welfare-Systems-in-Canada-merged.pdf)

Some of these studies assert that the minimum wage can negatively impact our economy, particularly in Canada. For example, firms would be more reluctant to hire new workers, impacting their productivity levels. One study, however, proposes that the Negative Income Tax can be a plausible and feasible solution to a price floor like the minimum wage. There was even evidence that an NIT could increase work activity and productivity in Manitoba, contrary to the initial viewpoint that suggested an NIT would reduce worker productivity. The researchers could discern the relationship between an NIT and productivity for welfare participant groups, which amounted to a 35% increase in hours worked, so there was a positive labour response (Riddell & Riddell, 2021). Furthermore, an NIT can eliminate poverty, which will improve Canada's economy. Lastly, through various quantitative exercises, the data suggest that the annual individual consumption rate would increase by an average of 2.1% (Lopez-Daneri, 2016). Therefore, the argument remains consistent. Accordingly, the authorbelieves that all nations worldwide should seriously evaluate the positive impacts of an NIT and use it as an alternative to the minimum wage. One of the limitations of this particular literature review is that there needs to be additional research regarding the NIT worldwide. However, COVID-19 prompted numerous governments to implement basic income policies, so this should incentivize economists to analyze the effects of basic income policies in both the short and long run.

(Economic Advisor of former French Prime Minister and Korean president,"Why Not a Negative Income Tax?," City Journal, Winter 2011, https://www.city-journal.org/article/why-not-a-negative-income-tax)

But wouldn’t the NIT—in effect, a government-guaranteed income—still be a disincentive to work, just as no-questions-asked welfare benefits were before being reformed in the 1990s? “Any state intervention, any income redistribution, creates disincentives and distortions,” admits Gary Becker, a University of Chicago economist and Friedman disciple. “But if society decides that a certain level of redistribution must take place, the NIT is the best, the most minimally distorting, solution ever devised.” To limit the disincentive, Friedman argued, the NIT should be progressive. Say the government drew the income line at $10,000 for a family of four and the NIT was 50 percent, as most economists recommend. If the family had no income at all, it would receive $5,000—that is, 50 percent of the amount by which its income fell short of $10,000. If the family earned $2,000, it would get $4,000 from the government—again, 50 percent of its income shortfall—for a total post-tax income of $6,000. Bring in $4,000, and it would receive $3,000, for a total of $7,000. So as the family’s earnings rise, its post-tax income rises, too, preserving the work incentive. This is very different from many social welfare programs, in which a household either receives all of a benefit or, if it ceases to qualify, nothing at all. The all-or-nothing model encourages what social scientists call “poverty traps,” tempting the poor not to improve their situations. Robert Moffitt, an economist at Johns Hopkins University and a leading authority on the NIT, notes another advantage of the program over other forms of state assistance: “No stigma attaches to the NIT.” Everyone fills out the same forms, and no infantilizing government meddles with a household’s food, shelter, and health care, as under the current system. The NIT simply provides the poor with money, which they can use to meet their various needs. Friedman strongly believed that individuals have the capacity to promote their own interests. Yet another NIT advantage is a freer labor market. No minimum wage would be necessary, since a minimum income would now be guaranteed. This would boost employment: as economists recognize, a legal minimum wage tends to increase joblessness by discouraging employers from recruiting unskilled labor. The NIT would reduce illegal immigration, too. Managed by the IRS, it would apply only to citizens and legal residents, and since it would eliminate welfare programs, aliens would have less incentive to cross the border illegally for government benefits (though local authorities would still have to decide whether to grant them access to schools and hospitals). “From an economist’s perspective, the negative income tax is the perfect design,” Moffitt says. “The only reason an economist would oppose it would be from a strict libertarian perspective—opposition to any kind of government-managed welfare.”

[Gurgel is a research scientist at MIT and Wolf is a professor at Universidade Federal de Viçosa (UFV), “Welfare impacts of a negative income tax on regions of Brazil,” December 2021, (graph excluded) https://www.researchgate.net/profile/Leonardo-Cardoso-2/publication/357141243_Welfare_impacts_of_a_negative_income_tax_on_regions_of_Brazil/links/61d0eff5e669ee0f5c7db00a/Welfare-impacts-of-a-negative-income-tax-on-regions-of-Brazil.pdf accessed 7/18/23 NR]

The above suggests while social programs enhance the welfare of the Brazil’s poorest, their effects upon factor prices diminish the welfare benefits in the long run. It could be that an NIT could maintain the household welfare in the long run, while simultaneously reducing inequality and the relative size of government. Recall that NIT Scenario A eliminates existing social programs and conventional income tax, then sets an average tax rate of 25%, with the household income class 6 being tax-neutral; that is, in net, its households pay no federal taxes nor receive federal income supports. Scenario A results are shown in Table 8. The table shows the share of income paid as a tax or received as a social transfer before and after implementing the NIT. For example, in the North, the purchasing power of the income class 1 is 16.55% higher under Scenario A than currently exists. In all regions, the new policy’s welfare gain is much higher for class 1 households. Comparatively, in Brazil’s poorer regions (the North and Northeast), these households receive more than do equivalents in other regions. Currently, the poorest households receive a direct transfer from the government, regardless of their income. In Scenario A, they receive a portion of the income as a transfer that, in general, is larger than the value of the social programs they currently receive. That is, they would effectively gain welfare. The largest gains would be experienced by class 10 households in the Northeast (a 39.50% rise in welfare or US$ 10.147 billion). Meanwhile, the welfare of households of the same class in the South would rise by 12.82% or US$11.971 billion

While the U.S. Trade Representative (USTR) declines to participate in substantive market access negotiations, many countries around the globe are dashing ahead to conclude trade agreements that open markets to their exports. As a practical matter, due to new trade agreements among other countries, the United States’ approach to regulating sensitive commercial matters is becoming less globally relevant. To rejuvenate its global influence in commerce, international trade, and regulation, the United States needs to move forward now with the United Kingdom.

Resetting and reinvigorating its close relationship with the United Kingdom should improve the United States’ ability to work bilaterally to develop constructive plurilateral responses to strategic challenges posed by China, based on coalitions of the willing, which could be precursors to multilateral solutions. Collaboration with the United Kingdom will improve the United States’ vantage point and influence when combatting the China challenge, which includes: repression in Hong Kong; genocide in Xinjiang; coercion aimed at Taiwan, Australia, and other allies; unfair government subsidies; and widespread theft of cutting-edge Western intellectual property. The United Kingdom will be a valuable partner for the United States on a common and positive free market agenda for the global economy, while simultaneously mitigating the effects of rising bilateral tensions with China. Working together, with a shared commitment to the principles of the World Trade Organization (WTO), the United States and the United Kingdom may be able to reset the global rules of trade and regulation with a new advanced template, so that the system of global commerce functions better for workers and businesses alike.

Today the CBI published a report on trade between the European Union and the United States.

The CBI report makes a clear and important argument – a Free Trade Agreement between the EU and the US is good for businesses, good for consumers and will create new jobs both here in the UK and in the US. It would inject £100 billion into the European economy every year, and that is why I pressed to launch the negotiations at the UK G8 summit in Lough Erne, and it is why I have been making the case for this agreement ever since, and will continue to do so in Brussels today.

The discussion on the merits of adopting unconditional basic income programs is a long-dated debate that is gaining momentum at present. Several countries in Europe are exploring the possibility and some have already passed basic income proposals; in the United States, there are calls to reform the entire welfare system (Steuerle, 2012; Murray, 2006; Alexander, 2013; among others) and there is an ongoing debate on whether to expand the Earned Income Tax Credit (EITC) to a broader audience.1 Under an unconditional basic income program, all citizens are assured a minimum income and there are no means tests or work requirements on behalf of the recipients, making it an effective tool to fight poverty without the administration costs of the current web of welfare programs. Naturally, a universal basic income can be instrumented in several ways and, following Friedman (1962), a Negative Income Tax (NIT) stands out because of its simplicity and progressive structure, thus becoming a valid candidate to replace the actual income tax and welfare system. A NIT does not distort the price system, as other income policies do, like the minimum wages policies or price controls, and it is able to eradicate the so-called welfare cliffs.2 It is no coincidence that a NIT is considered “one of the fundamental ideas of modern analysis of welfare programs” (Moffit, 2003). However, the effects that a NIT has on the labor supply or the increase on tax rates necessary to fund this minimum income is not clear yet. These are not minor questions and they need to be analyzed in the light of a general equilibrium model. In this paper, I will make a case for a NIT and carry out the first, to the best of my knowledge, quantitative analysis of the tax in a general equilibrium setting. Specifically, I will answer the following questions: What are the macroeconomic effects of replacing the actual U.S. income tax and the welfare system with a NIT on income and earnings, labor supply, tax rates, savings, and welfare? Should we pick a NIT? The present state of affairs makes the NIT a relevant and timely tax reform. On the one hand, the federal income tax has become increasingly complex and distortionary. Its considerable number of tax credits, deductions and overlapping provisions creates differences in the amounts paid by households earning the same level of income which lessens its progressivity and creates a fair share of distortions at all income levels. On the other hand, the welfare system makes it harder for low- and middle-income households who see their marginal tax rates surge at particular income thresholds, as many of the welfare programs in place vanish as their income increase. According to the Congressional Budget Office (Congressional Budget Office, 2012), 51% of taxpayers below 450% of the Federal Poverty Line face marginal rates higher than 30%, and 8% of them are taxed with marginal rates higher than 50%.3 In contrast, only 5% of the high-income households are taxed at such high rates.4 In its simplest version, a NIT combines a constant marginal tax rate and fixed lump-sum transfer to all households. It works as follows. At the beginning of the fiscal year, all households receive a transfer from the government, say $2000, and all income made is taxed at a constant rate, say 20%. If a household has a yearly income of $50,000, then its total tax payments for the period will be $8000 ($50,000 20% – $2000). This means that households earning less than $10,000 ($2000C0.2) pay no taxes and receive a positive net transfer (negative tax). All households have a guaranteed minimum income, and as income increases, the effect of the transfer declines. To demonstrate a NIT's suitability, I study a life-cycle economy, in which agents are ex-ante homogeneous but grow different over time as a result of life uncertainty, together with age-independent and idiosyncratic productivity shocks. At any point in time, the resulting heterogeneity is characterized by the agents' shock history, their level of asset accumulation, and their age. Welfare payments are modeled as a non-linear function of income to capture the progressive structure of the U.S. welfare system. In addition, there is a social security system; once retired, agents receive benefits in the form of lumpsum payments.5 I calibrate this model to match several features of the U.S. economy, reproducing the actual distributions of labor earnings, wealth, federal income tax liabilities, and transfers. I focus on an equilibrium with transitional dynamics for an open economy and find the level of transfers and marginal tax rate such that the NIT reform is revenue-neutral and maximizes ex-ante welfare (i.e., expected utility prior to birth and revelation of agents’ types) for an agent born at the time of the reform, taking into account the transitional path to the new steady state. My findings can be summarized as follows. First and foremost, the NIT produces important welfare gains. A NIT with a marginal tax rate of 22% and a transfer of 11% of per-capita GDP – roughly, $5800 – implies a welfare gain equivalent to 2.1% annual increase in consumption. Low-ability agents in the bottom quintile of the productivity distribution benefit the most, with welfare gains that range up to 25%, but there are losers under the NIT: those in the upper level of the productivity distribution. Under an optimal NIT, the degree of redistribution is not trivial. Second, the size of the transfers plays an important role in the results. Indeed, a proportional tax – that is, a NIT with no transfers (a “non-negative income tax”) – has a welfare loss of 4.1% relative to the current tax system. This result is unsurprising; redistribution is an important feature of the U.S. income tax and welfare system. The elimination of transfers benefits only the most productive agents who, as a result, face a lower marginal tax rate. The way transfers are designed is also important. A competing scenario where the welfare system is kept unchanged and a flat tax is enacted (a “non-negative income tax” with a fixed deduction instead of a transfer) likewise underperforms the NIT. In particular, the optimal flat tax (characterized by a marginal tax rate of 15% and a fixed deduction of 29% of per-capita GDP, roughly $15,400) produces a 0.4% welfare gain. Third, there is a negative relationship between the magnitude of the NIT's transfer and per-capita GDP, which decreases by 9% under the optimal NIT. As leisure is a normal good, this drop in per-capita GDP does not automatically translate into a fall in welfare. Quite on the contrary, as the transfer insures agents against periods of low productivity, they are now able to work more hours when they are more productive, increasing their consumption of leisure and reducing their need to save in order to buffer the impact of negative income shocks. The savings rate drops 13% – implying a 22% reduction in the capital stock – and the composition of the labor force changes, where agents with high-productivity shocks are now working more hours than low-productivity agents. The immediate consequence is that the Gini coefficient for labor earnings increases to 0.57 from 0.55, but not consumption inequality, which is reduced due to the effect of the lump-sum transfer from the NIT. Finally, the optimal NIT has a strong support in the population. However, whether the tax may be transformed into a law is an open question. For the sake of understanding how sensitive to particular voting rules the NIT design is, I search for a NIT with a level of transfers and a tax rate that has the minimum required support in the population to be enacted (i.e. only 50% of the households favor the new tax), and I call it a “Popular NIT.” Even though I am not considering a political economy model, this “Popular NIT” shows that in order to gain support from wealthy capitalists and high-income earners, its rate and transfer have to be lower than the optimal NIT (19% tax rate and a 9% transfer). Interestingly, this NIT produces a considerable welfare gain of 1.7% and still outperforms a flat tax reform. The “Popular NIT” has a stronger role in the economy's efficiency, giving the most productive agents a reduction in tax rates. All productivity types but the second most productive are better off, and there are still considerable welfare gains for less productive agents. Capital and GDP fall by less than in the optimal NIT – 6% and 2% respectively – and the labor supply, measured in efficiency units, has no changes despite the 3% plunge in hours worked.

This chapter reviews the economic modeling of TTIP. It stresses commonalities across different studies and explains differences. A robust conclusion from the existing numerous studies is that TTIP promises long-run gains for the EU as a whole with the average estimate lying around 2%. However, there is substantial uncertainty, as the precise magnitude of the effect depends strongly on how ambitious the assumed scenario is. Also, while virtually all EU member states are consistently predicted to gain, there is substantial heterogeneity. The existing studies agree that TTIP can harm outsiders, in particular if there is a considerable overlap in exported products. But also regarding third countries, TTIP is likely to have very heterogeneous effects. Only if transatlantic cooperation also leads to lower trade costs elsewhere will TTIP yield substantial benefits for outsiders. Labor market effects of TTIP are likely to be weak, both regarding long run employment effects and net wage inequality. However, the agreement is bound to trigger reallocation of workers from shrinking firms and sectors to expanding ones. This transition can be dealt with using existing labor market instruments. Taking adjustment costs into account, TTIP still looks like a very promising investment for the EU.

As appealing as it seems, Friedman’s negative income tax is not so simple to implement. Obviously, minimum payments would need to recognize different households’ characteristics. Single individuals would get less than those families with multiple adults and children. Households with a disabled parent or child should be given more to cover additional costs. Those temporarily out of work, after earning a higher income, might need replacement income that would be significantly above the minimum payment. So, once we start differentiating people by their needs, we get back too many current programs – and the bureaucracy – to determine eligibility for various benefit payments. Nor is it clear voters would support the elimination of, tuition tax credits, property tax and rent credits, pension and RRSP deductions, age credits, refundable GST tax credits and other targeted relief measures, which all play a role in social policy. And if voters dislike a flat rate, a much higher marginal tax rate would be needed than 49 percent to make up for special preferences. But such high marginal tax rates would discourage work, saving and risk-taking, ultimately eroding the ability for an economy to sustain a guaranteed income. The idea of just giving out cash to relieve poverty also raises eyebrows for many voters who have to pay tax on their earnings from work. And there’s the unknown labour-supply effect: how many recipients might choose to stay at home, receiving $30,000 cheques, rather than work? That’s why many economists concerned about the working poor prefer wage subsidies instead of just handing cash to otherwise able workers. And cash alone isn’t a panacea for helping all low-income families: we would still need professionals to support those with mental or other health issues, social problems or who lack the basic skills to contend with daily life. As we begin to recover from this pandemic, the last form of intervention we need is to discourage people from pursuing new opportunities and jobs that will eventually become available. That is a lesson so far from the grand experiment we had to adopt in a hurry to help many people survive a severe recession. While necessary in the short term, if the federal government were to heed calls to continue this policy on a permanent basis it could disrupt recovery for years to come.

The increase of the probability of separation between employer/employees has for direct effect to raise the number of unemployed people but also to decrease the number of vacant jobs making lower the tightness in labour market. Moreover, as it involves a diminution of the expected jobs’ life duration, the increase of s has for effect to raise wage that workers claims leading to an increase in λ to keep implicitly jobs profitability. As a consequence, average productivity as average wage decrease. We have to note that the probability to fill a vacant job rises since λ increases but also because there are less vacant jobs for more applicants. However, even if it is not possible to determine the effect on the hiring probability, the evident increase of the term s/p involves, because of flow equilibrium condition, an increase of unemployment. 4.2.2.3. Vacant job cost. The increase of the costs of creation and maintenance of vacant job has for consequence to decrease the number of these because they are less profitable. So it appears that it has a negative effect on the tightness in labour market. Concerning the effect on matching limit, λ, combining equation (28) and (33), we deduce that the diminution of θ induces a diminution of equilibrium value of less efficient job productivity y(λ) and, as a consequence, means an increase in λ (remind that y(λ) is decreasing in λ). This increase in limit λ has for direct effect to decrease the equilibrium average values of productivity and wage. Moreover, the probability of filling a vacant job raises seeing that the tightness on market is lower ant the investigation area is more important. However, taking into account equations (28) and (33), we show that the increase of the cost of a vacant job leads to a diminution of the probability p to be hired and consequently, an increase of the level of unemployment and a diminution of global production. 5. SIMULATIONS 5.1. Presentation In this 5th part, we initiate simulations in order to specify the results we obtained with theoretical analysis but also and mainly in order to determine the effect of the measure on θ. Consequently, for these simulations, in addition to the hypothesises already held, we consider as an explicit function of workers productivity a simple linear function of the form: y l = y − dl 0 )( As we have already precised, the budget constraint imposes us: ∫ = )0( ( ) ( ) 0 W w t w dw λ If we consider a tax function of the form t(w) = -α + γw and given that w(λ)<w(0), the financing of this measure imposes : γ λ α = + 2 w( ) w )0( These simulations, made with the software “Matlab”, permit us to study particularly the effects of the reform on unemployment rate, on production and on surplus. 5.2. The results The simulations gave the results presented in tables 2, 3 and 4. Case 1 corresponds to the reference situation that is the reform’s setting up. Consequently, cases 2, 3, 4 and 5 present the results of the implementation of a Negative Income Tax. In all the cases, we held the following parameters: β=0,5 ; d=0,5 ; s=0,05 ; x=0,9 ; c=0,5 ; N=1 and y0 = 0,5. Besides, in addition to the other variables already defined, Y represents global production, SC, the collective surplus and ,0( 544) WE, the utility of the worker initially the poorest.

In the 21st century, agriculture is more technologically sophisticated than ever. And yet, the core challenge for the world's farmers is the same as it has always been: How to maximize the quality and quantity of our food supply while minimizing waste and environmental damage.

In a world teeming with people, the tradeoffs of many so-called "successes" in eradicating hunger are distressingly apparent.

Unfortunately, in this zealousness to rein in drug prices, policymakers risk imperiling future generations of biomedical innovation, to the detriment of both patients and the broader economy. That’s because the link between revenues and R&D investment is intrinsic to the biopharmaceutical industry. It’s why the OECD has found that “there exists a high degree of correlation between pharmaceutical sales revenues and R&D expenditures” and why there’s a statistically significant relationship between a biopharma enterprise’s revenues in the previous year and its R&D expenditures in the current year.222 Indeed, every $2.5 billion of additional biopharmaceutical revenue leads to one new drug approval.223

And this explains why academic studies consistently demonstrate that a reduction in current drug revenues leads to a decrease in future research and the number of new drug discoveries.224 For instance, one study found that a real 10 percent decrease in the growth of drug prices would be associated with an approximately 6 percent decrease in pharmaceutical R&D spending as a share of net revenues.225 Similarly, Columbia University’s Frank Lichtenberg found a 10-percent decrease in cancer drug prices would likely cause a 5- to 6-percent decline in both cancer regimens and research articles.226 Likewise, Golec and Vernon show that if the United States had used an EU-like drug pricing system from 1986-2004, this would have resulted in a decline in firms’ R&D expenditures of up to 33 percent and the development of 117 fewer new medicines.227

Biotech funding is the key driver of innovation in the pharmaceutical industry and is essential in supporting the healthcare ecosystem. More than 80% of drugs marketed by large pharmaceutical companies were discovered and initially developed by biotechs1. Biotech companies also discovered more than 60% of FDA-approved “priority” drugs, which treat life-threatening conditions and offer significant improvements over existing treatments2. In light of recent volatility in capital markets, we ask – are these vital funding flows at risk of being stemmed? 

The answer to this question will not only shape the future for biotechs and smaller pharma companies themselves – it will be critical also to the ecosystem of service providers to pharma who depend, one way or another, on the size of budgets for researching new drugs and then developing them to the point of launch. Even further downstream, the commercialisation sphere is dependent on new drugs being launched and marketed. In this way, a biotech funding crunch would represent a major risk to the growth plans of groups across several sectors who have been enjoying consistently benign market conditions for years.  

The increase in foreign interest has coincided with the rapid closure of more than 60,000 factories as well as the consolidation of the defense industrial base. After the end of the Cold War, the dramatic drawdown of U.S. military forces appeared to validate this consolidation given the sharp decline in defense spending. This was infamously marked by the so-called “last supper” in 1993, when Secretary of Defense Les Aspin and his deputy William Perry hosted all the major defense suppliers and informed them that the government was prepared to watch half of them go out of business unless they consolidated. This kicked off more than $55 billion in mergers over the next five years. Yet the industry became dominated by a handful of major defense contractors that performed increasingly specialized work. It is little wonder those in the Pentagon are wondering where their manufacturing resilience went. The decline in defense industrial base capacity has been exacerbated by foreign competition and investment from Asia, and China in particular. The legacy defense electronics base in the San Fernando Valley — the original Silicon Valley — has been shriveling up for years, as has American access to rare earth metals. Competition is a good thing, yet there is also a cost to bear when choosing between quality foreign components and maintaining warm assembly lines in the U.S. for defense needs. The executive order should focus on expanding programs like the manufacturing institutes to renew and broaden the production capacity of the defense industrial base. The review mandated by the president’s executive order would identify the raw materials and manufacturing capabilities that are essential to U.S. national security, as well as highlight contingencies that may be disrupting critical supply chains that support national security needs. America’s manufacturing resilience has always been one of its greatest strengths, but modern supply chains are sophisticated. The Pentagon’s ability to procure goods critical to the common defense will be hampered by an inability to obtain commercial sub-components indirectly related to national security. The executive order’s assessment will provide visibility into these sub-component suppliers; only then can the government make informed procurement decisions across the entire manufacturing base. Large U.S. firms that build major defense programs like the F-35 Joint Strike Fighter should be prepared to enable this executive order by embracing nontraditional, commercial suppliers. In recent years, smaller defense corporations have won an increasingly large share of the Pentagon’s research and development budget, often by converting commercial technologies into military applications. This is an opportunity for heritage defense firms to proactively engage both small R&D contractors and nontraditional suppliers alike to ensure defense-critical technologies are seamlessly incorporated into their supply chains. Tactically, the timing of the executive order is problematic. The assessment’s recommendations are due in April 2018, thus missing the window for the 2018 five-year budget planning cycle as well as the congressional debate over the Fiscal Year 2019 budget. Still, this directive could not come soon enough. Eisenhower understood, and cautioned, that America couldn’t be a global power without a resilient manufacturing base to support economic and military objectives. But it is a difficult balance to maintain. While many contemporary interpretations of his final speech latch onto his warning against the influence of the military-industrial complex, Eisenhower also valued a robust defense industrial base, saying: A vital element in keeping the peace is our military establishment. Our arms must be mighty, ready for instant action, so that no potential aggressor may be tempted to risk his own destruction…American makers of plowshares could, with time and as required, make swords as well. But now we can no longer risk emergency improvisation of national defense; we have been compelled to create a permanent armaments industry of vast proportions. Eisenhower was cautioning against winnowing out the commercial manufacturing that supported American national security objectives. The executive order by Trump is a step in the right direction towards Ike’s goal.

Even if America did not need a robust manufacturing base for balance of payments reasons—i.e., if the United States were to run a large enough trade surplus in services to offset the goods deficit—America would still need some manufacturing to support military capabilities. Wars are neither deterred nor won with services. Moreover, America’s military advantage has since WWII been based on technological superiority, not numerical superiority. This is why Obama administration Defense Secretaries Chuck Hagel and Ash Carter pursued the “third-offset strategy,” designed in part to develop next-generation, technology-enabled warfighting capabilities.57 This is critical because, according to Obama administration Deputy Defense Secretary Bob Work, China and Russia now “have theaterwide battle networks that are approaching parity with us.”58 Achieving the third offset depends on a robust advanced manufacturing innovation and production base in the United States. As the 2014 Quadrennial Defense Review stated, “U.S. innovations in warfighting, which have provided key capability advantages … are built on the continued strength of our defense industrial base.”59 But as the U.S. industrial base moves offshore, so does the defense industrial base. As Joel Yudken explains “Continued migration of manufacturing offshore is both undercutting U.S. technology leadership while enabling foreign countries to catch-up, if not leap-frog, U.S. capabilities in critical technologies important to national security.”60 Reliance on foreign manufacturers also increases U.S. vulnerability to receiving counterfeit goods. According to a study conducted by the Bureau of Industry and Security, in 2008 there were 9,356 incidents of counterfeit foreign products making their way into the Department of Defense supply line, a 142 percent increase over 2005.61 Therefore, if the U.S. defense industrial base is to retain its ability to develop the most technologically sophisticated defense platforms, the United States will need to be at the forefront of advanced-technology manufacturing capabilities in many areas, such as nanotechnology, advanced batteries, semiconductors, sensors, and autonomy. This means that any national manufacturing strategy has to pay particular attention to the current and future production and innovation needs of defense-based technologies and products, while at the same time ensuring that our potential adversaries, especially China, do not easily obtain key dual-use or military technologies. This will, of course, need to include ensuring that key weapons systems and components are made in the United States. But it will also mean that policy needs to ensure that America’s advanced-technology innovation and production base is healthy, as many defense capabilities depend on commercial innovations.

How exactly does IPR reform affect manufacturing offshoring by US firms? One of the main concerns of globally-operating firms is the leakage of their proprietary technology via imitation, which can occur through labor turnover, contacts with local producers, or reverse engineering by local firms. With stronger IPRs in place, US firms can more effectively protect their technology against imitators and thus will feel more inclined to engage in technology transfer abroad. More specifically, firms who own both local and foreign production facilities will feel more secure in sharing their technology with their foreign affiliates and thereby increase their acquisition of intermediate goods from them. Similarly, firms who work with subcontractors abroad will feel more confident about sharing their technology and thus put in more orders of intermediate goods from them. In addition, local suppliers can respond to IPR reform by upgrading their technology to render a wider range of intermediate goods appealing to US firms.10 In short, IPR reforms reduce the threat of imitation, raise the returns from technology transfer and thus are likely to lead to more offshoring either within the boundaries of the firm or outside the boundaries of the firm.11.

In our econometric approach we follow Branstetter et al. (2006, 6 2011) and incorporate the broad measure of IPR reform as a binary variable, which takes the value of zero before reform and one in the year of reform and thereafter. Even though this dummy variable embodies the common features of the IPR reform along the five dimensions listed above, it obviously misses the heterogeneity of reform across countries and along finer dimensions. For example, it is possible that patent length and patent coverage can vary across countries and across industries even within the same country. To study the responsiveness of offshoring along these finer dimensions, one can code up industry specific patent laws across countries and conduct an empirical analysis. This is a fruitful avenue for further research but lies beyond the scope of the current paper.