Now it's Apple's turn to ask localities for a huge handout
Apple headquarters in Cupertino, Calif., in Silicon Valley.
Adapted From Robert Whitcomb's "Digital Diary,'' in GoLocal24.com
Apple says it plans to build another corporate campus. It also says it will hire another 20,000 workers, in part because of the new U.S. tax law, which cuts corporate income taxes. (Not all of the windfall will go to investors in the form of stock buybacks and dividend increases!)_
Of course, Apple’s announcement means that various cities and states around America are already looking into how they can bribe the Cupertino, Calif., company to build its new campus in their jurisdiction. Presumably vast tax breaks, to be subsidized by the individuals and businesses already there, will be offered, along with very expensive physical-infrastructure improvements. As with Amazon, Greater Boston (which you might say now sort of includes northern Rhode Island) would be in the running because of the huge technology complex there. But would such legal bribery be worth it for the macro-economy of Greater Boston?
Local politicians’ and some business leaders’ obsession with luring huge, rich, sexy tech companies may be popular in the short term but the diversion of so many public resources to a few extremely profitable big companies could have a very big long-term cost. The problems of General Electric that were revealed after it was lured to set up its headquarters in Boston provide a useful caution sign.
Robert Whitcomb: FBI right about terrorist's iPhone
The U.S. government has the stronger argument in its battle with Apple over obtaining access to possible information about terrorism in the iPhone of Syed Rozwab Farook. That Islamic fanatic and his wife, Tashfeen Malik, murdered 14 people in San Bernardino, Calif., last Dec. 2 before police killed them.
The fact is, as Microsoft founder Bill Gates told the Financial Times, “This is a specific (emphasis is mine} case where the government is asking for access to information.’’
“They are not asking for some general thing; they are asking for a particular case.”
“It is no different than [the question of] should anybody ever have been able to tell the phone company to get information, should anybody be able to get at bank records” to investigate a crime, Mr. Gates added.
The government's case, backed by a federal judge, rests on long-established law holding that "no item -- not a home, not a file cabinet and not a smartphone -- lies beyond the reach of a judicial search warrant" in investigating crimes, Manhattan District Atty. Cyrus Vance has noted.
There exists no "right of privacy" to withhold evidence of a crime. The idea that the cellphone is a privileged device off-limits to law enforcement is absurd.
U.S. Magistrate Judge Sheri Pym is not telling Apple to create a “backdoor’’ that puts all users in new danger of being electronically violated. She has told Apple to help the FBI get into a single iPhone to obtain information that might save people from being murdered by ISIS-related terrorists.
We don’t want to break anyone’s encryption or set a master key loose on the land,” FBI Director James Comey has said.
Judge Pym has ordered Apple to create temporary software to let the FBI try many passwords on the phone without its data disappearing, which it normally would after 10 tries because of the company’s security walls.
Apple chief executive Tim Cook complains that such a “backdoor” could be used on other phones. But it stands to reason that Apple could control its software to unlock specific devices, after the government obtained warrants detailing compelling circumstances.
Apple’s hypocrisy in this is impressive.
Consider its close cooperation with China, a police state. There, Apple has moved its local user data onto servers run by state-owned China Telecom, which mines such information with abandon. And Apple submits to security audits by Chinese officials. But then, Apple hopes to continue enjoying 40 percent profit margins by expanding further in China -- the company’s second-largest market.
Apple – at least for public consumption -- worries that if the U.S. government forces it to let authorities into Farook’s phone that China will demand the same right, which might scare away some potential iPhone buyers there. But there’s little indication that Apple will not continue giving the dictatorship whatever it wants.
James Lewis, a senior fellow at the Center for Strategic and International Studies, noted in the Los Angeles Times:
"What's driving this is Apple's desire to persuade the global market, and particularly the China market, that the FBI can't just stroll in and ask for data. {But} I can't imagine the Chinese would tolerate end-to-end encryption or a refusal to cooperate with their police, particularly in a terrorism case."
Law enforcement must have the tools to keep up with criminals, who increasingly use such tools as encryption, Bitcoin currency and disappearing messages. In this case, Apple, rather than worrying that the publicity connected with letting the U.S. government get into a criminal’s cellphone might hurt profits, should focus on saving lives. (Do tech execs, shielded by wealth and gated communities, not feelquite as threatened by terrorists as the poorer people (e.g., in San Bernardino) who are usually the victims?)
Meanwhile, let’s worry more about how private-sector organizations such as Apple, Microsoft, Google and Yahoo, invade our privacy and follow us wherever we go. As Fortune magazine columnist Stanley Bing wrote: “It's just the beginning, guys. Every breath you take. Every move you make. Every bond you break, every step you take, Apple will be watching you.’’
Robert Whitcomb, a fellow of the Pell Center for International Relations and Public Policy, in Newport, R.I., is overseer of New England Diary and a former editor at the International Herald Tribune and The Wall Street Journal.
Gregory N. Hicks: U.S. must stay at the trade table
The Boston Tea Party remains one of the seminal events in American history, and it continues to resonate among political elites, because most Americans believe that the “Tea Party” was a protest about taxation without representation.
It really wasn’t. It was actually about the setting of rules for international commerce without representation. John Hancock, a signer of the Declaration of Independence, merchant, ship owner and one of wealthiest men in the colonies, along with the Sons of Liberty, instigated the Boston Tea Party because the British government had given the British East India Company a monopoly to transport tea to the colonies and sell it there, effectively excluding American merchants from competing in a trade in which they had been profitably engaged. From the very beginnings of our republic, Americans have demanded the opportunity to compete internationally on a level playing field.
Two thousand years ago, Roman Senator Marcus Tullius Cicero said “the sinews of power are money, money, and more money.” This observation is as true for the 21st Century as it was in the First Century BCE. National power comes from national prosperity.
Fifteen years into the 21st Century, it is clear that the international economy has entered a transition period similar to the change that occurred a century ago, when the United States emerged as the world’s leading economic power. When that occurred, the United States did not use its economic power to influence global events, instead adopting a foreign policy of isolationism and international disarmament.
“The business of America is business,” said President Coolidge, and America’s insistence on repayment of World War I debts contributed to economic instability in Europe. Isolationism led to the Smoot-Hawley Tariff, the Great Depression and World War II.
Fully cognizant of this history as well as the necessity of rebuilding the world’s economy after World War II, the U.S. government leveraged America’s overwhelming post-war economic superiority to establish the dollar as the dominant currency of international finance and trade and to found the multilateral institutions that are the girders of today’s rules-based international economic system. The relatively level playing field for international commerce that was created has led to 70 years of economic growth and prosperity that has lifted millions from poverty.
Economies rose from the ashes of World War II by adopting key aspects of the American economic model, but in 1990, the United States was still the world’s largest economy. Our nearest competitor, Japan, had a GDP only 40 percent the size of America’s; China’s GDP was less than one-sixth the size of ours.
Today, the United States is no longer the world’s largest economy; that status belongs to the European Union. Most economists project that China will soon overtake the United States as the world’s largest national economy, although some argue that milestone has already been passed. Meanwhile, India’s economy is not too far behind.
Despite the emergence of multiple global economic competitors, the United States remains the acknowledged leader and fulcrum of the international economy. Five major trends in the global economy – the internet impact on international commerce, the emergence of global value chains, the oil exploration technology revolution, the rebound in U.S. manufacturing, and the resilience of the dollar after the 2008 financial crisis – illustrate the centrality of the United States to both the international economy and international relations.
We’re all familiar with the Internet’s impact on our daily lives, and at work, we experience the internet’s effects on productivity, but on a larger scale, it is also transforming international trade opportunities. For instance, E-bay and Amazon are fostering an Internet-based international retail revolution. The first company makes it possible for any individual to engage in an international commercial transaction. Any American who offers a good on E-bay could find that it has been purchased by someone from Ghana or Fiji; and the reverse transaction is equally possible. For its part, Amazon, based on its global warehouse network and relationships with modern logistical companies, has built a virtual mall in which customers can buy almost anything and have it delivered to their doorstep within a few days.
Internet communication has also made cross-border vertical integration of production, or global value chains, possible. Pioneered by Nike and improved by Apple, the process is perhaps epitomized today by Gilead, a San Francisco-based pharmaceutical company that is saving thousands of lives by developing and lowering consumer drug prices through innovative production arrangements with pharmaceutical producers in a number of developing countries.
Global value chains are inducing a reconsideration of the statistical analysis of international trade, which is changing perspectives on international economic policy. Analysts are grasping the importance of trade in intermediate goods, i.e., components or partially finished goods that are moving across borders through vertically integrated production processes. For the United States, one-third of exports and three-fifths of imports are intra-firm trade in intermediate goods.
A recent International Monetary Fund study looked at the major economic powers from the standpoint of domestic value-added (DVA) and foreign value-added (FVA) in their national output. The study found that China’s economy is the most dependent on foreign value-added content of any of the major economies, while the United States is the least dependent. The study also suggested that if China let its currency, the Yuan, appreciate, it would both move up the value chain and reduce the dependence of its economy on foreign inputs. Perhaps tellingly, China’s leaders have been allowing the Yuan to appreciate steadily over the past decade.
“Fracking,” that uniquely American technological innovation, is also changing the international policy landscape, and if the U.S. resumes exporting oil and natural gas, could have an even greater impact. The current policies of Arab oil-producing states clearly reflect their unease with growing American energy independence, while Europe, through employing fracking to develop its own energy resources or importing American oil and gas, has the potential to reduce its energy dependence on Russia by substantial amounts.
The manufacturing sector provides the tools of national power, and a newly released Congressional Research Service study suggests that all the talk of the demise of U.S. manufacturing is premature. While China became the world’s top manufacturing country in 2010, the United States remains second by a wide margin. In addition, U.S. manufacturing output grew between 2005 and 2013 by 5 percent, despite the Great Recession. Much of this growth was powered by inward foreign direct investment, 39 percent of which has been landing in the manufacturing sector.
Despite setbacks to the dollar’s reputation arising from the international financial crisis, the dollar continues to symbolize American economic strength and prowess. The dollar’s central role in international finance and trade provides unique avenues for the United States to use economic power in lieu of military intervention or other forms of pressure to resolve international problems. Yet that unique role is under competitive pressure as China, the European Union, Japan, Russia, India and Brazil all seek to put their currencies on an equal footing with the dollar.
International economic policy offers the U.S. government a range of tools to advance U.S. foreign policy and commercial interests in an increasingly competitive, multipolar environment. Among those tools, preferential trade and investment agreements positively affect more aspects of economies than any other. Not only do trade agreements lock-in existing trading and investment patterns, they create new links by eliminating trade barriers through reducing taxes and writing new trade and investment rules that go beyond those found in the 1994 World Trade Organization agreement.
In national power, trade agreements not only generate economic growth, jobs, and tax revenue, but they also create economic interdependence among agreement parties. The voluntary acceptance of that interdependence is an unambiguous symbolic foreign-policy statement. In a multipolar world, such agreements are essential to economic competitiveness and peaceful coexistence.
Our competitors understand these characteristics very well, including the axiom, illustrated by the 1773 Tea Act that sparked the Boston Tea Party: “He who writes the rules, wins.” They are aggressively negotiating trade pacts around the world, changing the terms and rules of trade in their favor. Currently, the European Union, formed itself by a trade agreement, has 32 preferential trade agreements in place with 88 countries, and it is currently negotiating 12 agreements covering an additional 36 countries. India’s existing preferential trade network includes 26 countries via 14 agreements, and it is negotiating four new agreements covering 37 additional nations. Japan has implemented 14 agreements with 16 countries, and is negotiating three trade agreements covering 35 nations. China has 12 preferential trade pacts in force with 21 countries, and is negotiating three more agreements that would cover 14 additional states.
Completing both the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) negotiations would expand the U.S. preferential trade network consisting of 14 agreements covering 20 countries to an additional 33 nations. TPP and TTIP involve three of the world’s top four economies and cover a majority of the world’s existing trade.
Moreover, they seek to write new trade rules that facilitate the growth of 21st Century international trading patterns such as e-commerce, global value chains, and foreign investment, among others. As importantly, they revitalize longstanding strategic relationships with our Asian and European allies, an important signal to both China and Russia that the United States intends to remain a competitive actor in Asia and Europe. Conversely, failure to complete these agreements would be an act of unilateral economic-policy disarmament with long term consequences for U.S. economic growth and national power.
In a 21st Century world that is more multipolar, more complex, more integrated and more competitive than the United States has ever experienced in its history, U.S. competitors and strategic allies alike – Brazil, China, the European Union, Japan, India, and Russia – are seeking to amass economic power and to deploy it as a leading element of their foreign policies. In many cases, they seek strategic advantages through these efforts, often at the expense of U.S. interests.
International economic-policy tools such as trade negotiations provide an effective, peaceful means to compete with these challenges. If we do not participate in making the rules for international trade, others will write our companies out of the competition, many jobs will be lost and many more never created, and our national prosperity and national power will decline. If they were alive today, John Hancock and the Sons of Liberty would support the negotiation of TPP and TTIP. We should too.
Gregory N. Hicks is State Department Visiting Fellow at the Center for Strategic and International Studies, in Washington; an economist and a veteran U.S. diplomat. The views expressed in this article are those of the author and do not necessarily represent the views of the U.S. Department of State or the U.S. government. This piece stems from Mr. Hicks's remarks at the June 9 meeting of the Providence Committee on Foreign Relations (thepcfr.org)