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U.S. Foreign Policy and Intellectual Property Rights in Latin America

by Edgardo Buscagliavia Analysis
Tuesday, April 1, 1997

This essay presents a legal and economic analysis of U.S. foreign policy regarding the protection of U.S. intellectual property rights in Latin America. Piracy of U.S. intellectual property in foreign markets costs American businesses up to $80 billion in losses each year. U.S. companies are estimated to lose one dollar to inadequate protection of intellectual property rights for every three dollars of revenue gained from exported products.

First, we explain the forces behind the move to strengthen the protection of intellectual property rights in Latin America. We examine the double-sided problem of intellectual property rights reform: the lack of adequate standards for intellectual property protection and the weakness of enforcement mechanisms (i.e., courts and administrative authorities). We also explain how, under the Uruguay Round of the General Agreement on Tariffs and Trade, Latin American nations have committed to raising their standards of intellectual property protection.

Second, we explore current attempts at reform and the problems impeding further improvements, such as the lack of political stability, corruption within the legislatures, the use of intellectual property as an economic and foreign policy tool, the short-term incentives for politicians facing reelection to support local pirate industries, and the institutional failure of courts and administrative agencies throughout Latin America.

Finally, we outline the implications for U.S. foreign policy. Foreign economic pressures, coupled with regional trade pacts such as Mercosur, can be used to affect the costs and benefits of reform as perceived by Latin American politicians and business leaders. We conclude that although Latin American nations have traditionally considered intellectual property to be "the heritage of humanity" rather than a privately held asset, as they struggle to attract world-class technologies to their shores, Latin American countries are slowly realizing that they must reform their systems of intellectual property rights if they are to succeed in an age of high technology.

Nuclear Blackmail: The 1994 U.S.–Democratic People's Republic of Korea Agreed Framework on North Korea's Nuclear Program

via Analysis
Tuesday, April 1, 1997

In 1993 the Democratic People's Republic of Korea (DPRK) refused to let international inspectors see whether it had secretly separated plutonium for bombs. Subsequent negotiations led to a 1994 U.S.–DPRK Agreed Framework that stopped the North's plutonium production but at heavy political and financial cost. The 1994 agreement and its background are the subjects of this paper.

The United States will supply North Korea with two large nuclear power reactors worth more than $4 billion (mainly from South Korea and Japan) and a substantial fuel oil supply until the first power reactor begins to operate. North Korea has stopped running a small plutonium production reactor and constructing two larger ones. The disputed inspections were postponed until the United States supplied a substantial portion of the new reactors. The DPRK is supposed to have dismantled its indigenous facilities by the time both new reactors are completed.

The agreement leaves the United States subject to the continued threat of a restart of DPRK plutonium production. One way to limit this would be through "phased performance"--the progressive dismantling of DPRK facilities as the new reactors are built. Although the DPRK will object to starting to dismantle now, it will be in a stronger position to object when it has the new reactors.

The 1996 House Elections: Reaffirming the Conservative Trend

by John F. Cogan, David Bradyvia Analysis
Saturday, March 1, 1997

Before last November's election, the conventional wisdom was that Republicans would experience large losses in Congress. The party of Newt Gingrich had supposedly put its majority at risk by pursuing an aggressive legislative agenda that was too extreme for mainstream America. Many pundits argued that the Republican majority would suffer the same as its predecessors in 1948 and 1954: two years and out.
 

But the electorate confounded the experts by reelecting a GOP House majority for the first time since 1930. How did conventional wisdom miss the mark so badly? This essay provides an assessment of the November House elections.
 

Republicans in the 104th Congress had the most conservative voting record of any Congress in the post-World War II era. Its record for conservative voting shattered the previous record set by Republicans in 1949. Voters registered their overwhelming approval of this agenda by returning 92 percent of the incumbent House Republicans to office. Our statistical analysis reveals no evidence that House Republicans who did lose were defeated because of their support for conservative votes. In fact, Republican winners had slightly more conservative voting records than losers. This holds even when the analysis is confined to Republicans in moderate-to-liberal congressional districts. Likewise, there is no evidence that voting for the Contract with America harmed reelection prospects of Republicans from moderate-to-liberal districts. Finally, there is no statistical evidence that organized labor' s $35 million campaign had any impact on election outcomes involving Republican freshmen.
 

Continued conservative dominance of Congress seems likely for the remainder of this century. In every off-year presidential election since the Civil War, except one, the party of the president has lost seats in the House. Republicans continue to run well in southern and border states and are in a position to continue to gain seats in these regions. Democratic members are expected to continue to retire at higher rates than Republican members.

North Korea at a Crossroads

via Analysis
Wednesday, January 1, 1997

North Korea remains a country difficult for outsiders to analyze, given the paucity of hard data. Yet certain facts have been established. The economy is in crisis, a product not only of the Russian demise and the recent floods but of the inadequacies of a Stalinist economic strategy: autarky, imbalance, and overbureaucratization. A growing number of the elite now recognize these facts, and the momentum for reform is rising despite perceived political hazards. Whether it will be in time to prevent collapse is debated by outside observers.

Politically, the effort is to maintain the existing order by reproducing Kim Il Sung in his son, Kim Jong Il. Young Kim is cultivating the military assiduously and carefully replacing his father's guerrilla generation with individuals closer to his age, some of them relatives. There are no signs of cleavage at this point, but the decision-making structure remains difficult to discern. The goal, however, is clear: total unity under the leader and party.

The Democratic People's Republic of Korea's (DPRK's) foreign policy is rational from the North's perspective: achieve diplomatic relations with the United States and Japan while relegating the Republic of Korea (ROK) to the sidelines. Yet improvements in North-South relations will be essential if the broader goal is to be reached. Meanwhile, relations with China are relatively satisfactory but lack the old warmth, and those with Russia are still tepid not- withstanding Moscow's efforts.

Despite the uncertainties surrounding the DPRK's future, the interests of others, including the ROK and the United States, lie in seeing this state undergo an evolutionary process rather than a collapse. Thus policies should be directed toward that end, acknowledging that the outcome will depend heavily on North Korean leaders and their decisions.

Prospects for Democratic Development in Africa

by Larry Diamondvia Analysis
Wednesday, January 1, 1997

Although Africa has been one of the least democratic regions of the world, it has been experiencing widespread pressures for democratic change since 1990. Although pressure-from both domestic civil societies and international donors-has failed to bring about a transition to democracy in most cases, it has succeeded in many. Today, about a third of all African countries are at least electoral democracies, and virtually all regimes in sub-Saharan Africa have at least legalized opposition parties. Conventional political science theories view Africa's democratic prospects as grim because of its extreme poverty and deep ethnic divisions. This essay takes a more hopeful and "developmental" view. It argues that democratic change can occur in Africa and must if it is to develop economically. But this will inevitably involve a long-term process of political and social change and, in particular, institution building. African countries need new, more appropriate, and more effective institutions to control corruption, provide a market-oriented enabling environment for economic growth, and generate incentives for political parties to craft broad multiethnic appeals and constituencies. If institutions of governance, electoral politics, and civil society can be strengthened and innovatively designed, there is hope for democracy in Africa. But this will also require heavy international conditionality and pressure for more responsible policies and more effective institutions, as well as greater international support for those African regimes that appear serious about democracy and good governance. African societies are ready for a new democratic beginning, but they require the right institutional frameworks at home and vigorous engagement of the international community if deeply entrenched patterns of statism, corruption, repression, ethnic exclusion, and violence are to be overcome.

Clinton's Foreign Policy in Somalia, Bosnia, Haiti, and North Korea

by Thomas H. Henriksenvia Analysis
Tuesday, October 1, 1996

Half a decade has elapsed since the collapse of the Soviet Union, and nearly four years have passed since Bill Clinton became president of the United States. These two events, nearly simultaneous in occurrence, present a fitting time for an assessment of specific international policy decisions made by the White House. This juncture is particularly appropriate for an evaluation of President Clinton's handling of prominent foreign policy crises as he seeks a second term.

The Clinton administration has dealt with four high-profile problems- Somalia, Bosnia, Haiti, and North Korea-which demanded presidential attention, resulted in the deployment of U.S. military forces, and generated congressional and public controversy. All were small-scale operations when compared with U.S. involvement in major twentieth-century conflicts. Yet they are significant because the way they were handled may determine the way future large-scale emergencies are managed.

The Clinton administration displayed hesitation, vacillation, and ambivalence in addressing turmoil in Somalia, Bosnia, and Haiti, which carried international ramifications. Somalia emerges as a defining foreign policy decision for the Clinton administration. After suffering a setback in Somalia, the White House moved overcautiously and abdicated leadership in the Bosnian crisis. When Clinton intervened in Bosnia and Haiti, he first narrowed the operational scope, set rigid timetables, put undue restrictions on the missions, and finally emphasized exit strategies. The results of these American efforts, therefore, are likely to be transitory. In the case of North Korea, the White House has been correct to engage the decrepit but dangerous North Korean regime, but the administration's nuclear agreement is difficult to verify and has secured inadequate quid pro quos in return for American, Japanese, and South Korean inducements for cooperation. Most important, the Geneva Agreement set a bad international precedent in the fight against nuclear proliferation.

Whoever wins the national election and takes office as president must reassert America's moral and strategic leadership to bolster U.S. credibility in a world undergoing profound change. The next president must articulate with clarity and conviction for Congress and the public the importance of America's international responsibilities that accompany its power and influence. Among the specific recommendations for the incoming administration in 1997 are the eastward enlargement of the North Atlantic Treaty Organization, the construction of a missile defense system, and an increase in military spending to meet future crises, which are almost certain to be greater challenges than Somalia, Bosnia, Haiti, or North Korea.

Culture Wars in America

by Edward Paul Lazearvia Analysis
Monday, July 1, 1996

Economic necessity forces immigrants and minority members to acquire the culture and speak the language of the majority. A non-English speaker who lives in a community in which many speak the language of his native land may never learn English. The same person might learn English quickly were he or she to find him- or herself in a community where only English is spoken.

Culture wars threaten to diminish America's ability to absorb new immigrants and to benefit from the diversity already present in our country. Much of the conflict is generated by government policy that reduces the incentives to become assimilated and exacerbates differences in the population. Education in one's native language, unbalanced immigration policies that result in large and stable ghettos, welfare availability, and encouragement of a multilingual society by allowing citizens to vote in languages other than English all reduce incentives to become assimilated. This essay explores patterns of cultural assimilation over time and makes policy recommendations that may bring a quicker end to the culture wars.

The Economic Way of Looking at Behavior: The Nobel Lecture

by Gary S. Beckervia Analysis
Monday, July 1, 1996

On October 13, 1992, the Royal Swedish Academy announced the award of the Nobel Prize in economic sciences to Gary S. Becker, a senior fellow at the Hoover Institution and University Professor of Economics and Sociology at the University of Chicago. In announcing the award, Gary was cited for extending "the domain of microeconomic analysis to a wide range of human behavior and interaction, including nonmarket behavior."

In the lecture he delivered as part of the 1992 Nobel Prize award ceremony, Gary discussed four topics—discrimination against minorities, crime and punishment, the development and accumulation of human capital, and the structure of families—that are emblematic of his innovative approach to the economic analysis of social issues. We are pleased to reproduce Gary's Nobel lecture as a Classic in the Hoover Essays in Public Policy series.

John Raisian
Director, Hoover Institution
June 1996

North Korean Economic Reform and Political Stability

by Bruce Bueno de Mesquitavia Analysis
Saturday, June 1, 1996

Using a model with a strong track record of predictive accuracy, we posit the unraveling of Kim Jong-Il's hold over power in North Korea. Our analysis suggests that the North Korean military and leaders of heavy industry in North Korea are pivotal powers who control North Korea's destiny over the next few years. We infer from the evidence that Kim Jong-Il's family and the second generation of leaders are opportunists who are likely to break ranks with Kim Jong-Il to secure their own well-being. The result of their anticipated break with Kim Jong-Il is likely to be a slowing of economic reform and of economic openings to South Korea. North Korea is expected to enter a period of political instability that will render Kim Jong-Il little more than a figurehead. Barring strategic efforts by the partisans and some others with credible leverage, North Korea is unlikely to improve its economy or stabilize its government in the next two or three years.

Taxation and Economic Performance

via Analysis
Wednesday, May 1, 1996

Over the past two centuries, economists have debated whether or not higher rates of taxation lead to increased levels of government revenues. In the eighteenth century, Adam Smith pointed to a reduced level of revenues from substantially higher tariffs and duties on traded goods. In the twentieth century, the Laffer Curve postulated that there would be no government revenue at a taxation level of 100 percent or 0 percent. More recently, the debate focused on the tax increases of 1990 and 1993, which were designed to reduce the federal budget deficit through an increase in government revenues. In fact, the forecasted revenue generation following each tax increase fell short of the mark.

Increases in tax rates have not raised the desired additional revenues, but they have dampened economic activity. Higher tax rates tend to reduce the tax base as taxpayers have disincentives to work, produce, save, or invest. There are, however, incentives to hide, shelter, and underreport income as tax rates are raised. Thus, the economy as a whole tends to perform less well following a tax increase. Conversely, the economy tends to perform more favorably following a reduction in tax rates. In the postwar period, government revenues as a percentage of gross domestic product have averaged 19.5 percent despite marginal income tax rates as high as 92 percent and as low as 28 percent. Despite the historic record, policy makers continue to embrace the notion that an increase in marginal tax rates will raise revenues without any attendant adverse effects on economic growth, job creation, or standard of living.

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