Archive for category: Diversified Industries

Here’s What You Need To Know

As we gear up for July Fourth, we know everyone is busy planning for events that are sure to be full of loved ones, parades and fireworks, and grilling to celebrate freedom and our great nation. Besides pausing to reflect on those who have given their lives to secure this freedom throughout our nation’s history – and those who continue to do so – many Americans will also make big trips to the grocery store, as Americans spend a total of $6.8 billion dollars on food to fuel their Independence Day festivities.

Whether grilling burgers, hotdogs, or something else, cookouts are integral to Fourth of July celebrations. This year, however, is likely to include more plant-based “meat” alternatives on the grill than ever before. From people looking for healthier options to those abstaining from meat for moral, environmental, or religious reasons, more consumers are choosing to become “lessetarians.” In this special holiday edition of TL;DR, we explore the popular rise of plant-based meat and what it will mean for consumers, businesses, and regulators alike.

• Plant-Based Meat Rising: There are many more plant-based options than there were a few years ago, and they seem to have arrived in a big way. Beyond Meat’s blockbuster IPO in May proved to the world just how popular these plant-based meats have become. The company and its main rival Impossible Foods, backed by Bill Gates, are even facing supply shortages due to surges in demand. Impossible Burgers will be sold in at least 17,000 restaurants by the end of the year thanks to its partnership deal with Burger King. Other fast food chains such as White Castle and TGI Fridays are also looking to cash in on this trend, and food giants such as Nestlé and Tyson Foods are launching their own lines of alternative proteins targeted to these “lessertarians.”
   
• What Are Some Key Consequences Of This Trend? The growth of this industry will create consequences extending far beyond grocery store aisles. As we have discussed in a previous edition of TL;DR, the meat industry faces regulatory and public affairs challenges from environmentalists and health advocates. Now cattlemen and meat producers face competition from these alternatives. They need to figure out a plan for long-term relevance if Americans continue to eat less and less meat. The biggest consequence, however, may focus on the regulatory environment that has not yet fully grasped how to treat these new types of products. As alternatives have made their way into the meat aisle in what Beyond Meat calls an “absolutely critical” move, the USDA and FDA must come together to outline a framework to regulate these new products and determine just what exactly can be labeled as meat. Count on interests on both sides of this debate to invest heavily on influencing that framework.
   
• How Is The Meat Industry Responding? With these new developments, the meat industry is working with government agencies to protect their market. Cattlemen are attempting to persuade federal officials to closely regulate meat alternatives, and meat lobbyists are working to restrict the use of the word “meat” in similar plays that the dairy industry has used with milk alternatives. The meat industry has found success in some of its regulation efforts, as in 2018 the FDA expressed concern over a key ingredient in Impossible Foods that is linked with the formation of carcinogens in the gut, and raises broader discussion in the public arena that what is billed as a healthy option is in reality a very processed food.
   
• What Does The Future Hold? While these public policy fights will continue, with the competing industries seeking to influence future changes to the regulatory framework to their advantage, there may increasingly be upcoming fights within the plant-based sector itself. Many large companies see plant-based alternatives as a major growth opportunity (including some meat companies), and we can expect other startups to break into the market, as Beyond Meat and Impossible Foods cannot expect to hold onto their duopolistic grip forever. With increased competition, we can also expect lower prices, which could bring down costs for consumers and cause other companies to enter the market. Should this come to pass, we can speculate that “Big Plant-Based Meat” may act like legacy companies in other spaces by lobbying to increase regulation on its less mature competitors, and thereby leverage the hand of government to frustrate the growth of its competition.

While the Coney Island hot dog eating competition will likely not see a switch to any plant-based dogs in the near future, Americans should still expect to see a growing number of meat alternatives pop up in restaurants, grocery stores, and cookout spreads over the coming years. This means that although there are more meat alternatives than ever before, the beef between the meat industry and plant-based companies – and that within the latter space between competitors – is only just beginning.

Happy Fourth of July from all of us here at Delve.

Here’s What You Need To Know

Last week, voters across the European Union (EU) went to the polls to select their preferences for the bloc’s parliament. While readers in the United States may feel that the events across the pond have little or no bearing on the day-to-day operations of their company and the policy and regulatory issues important to it, the results of the EU elections could not only impact your interests now (particularly if your firm does business in Europe) but also foreshadow key trends that may appear stateside in the near future.

To help you prepare for the implications as the dust settles and a new EU emerges, here’s what the EU elections mean for your business interests:

• First, What Are The EU Elections? The EU elections occur every five years for citizens of EU Member States to choose their representatives in the 751-seat European Parliament, which gives them a say in the political debate and decision-making process at the EU level. The European Parliament is the second-largest democratic legislature in the world after India. For a supranational organization that regulates key policies ranging from data protection and privacy to immigration to trade and more, and with five-year terms for the elected Members of the European Parliament (MEPs) in which major unforeseen developments can unfold and need to be dealt with, the makeup of the body is crucial to influencing the policy outcomes that will follow in the near-term for both the EU and its Member States.
   
• The Pro-Business Middle Cedes Ground To The Populist Extremes: Approximately 50% of voters turned out in the bloc’s 28 countries (a 20-year high), and instead of the fear of many that the elections would result in a surge of far-right populists, the results were more “complicated.” Overall, there was a rise in the populist extremes with some countries seeing Eurosceptic parties gain ground to the detriment of more establishment parties such as in France, Italy and the U.K. In others, Greens and Socialists – just as the nationalist parties gained influence from the erosion of the traditional center-right parties – had strong showings, such as in Germany and Spain, to the detriment of the traditional center-right parties. For businesses, populist pressures from both ends of the political spectrum portend increased political risks from parties looking to deliver for their bases of support.
   
• Tech Is In The Crosshairs: Among the first targets for the new EU parliament may be the tech industry, which unites populist critics from the left and right in their desire to see more regulation. Indeed, EU commissioner for competition Margrethe Vestager – who has called to regulate and hold Big Tech accountable – is attracting broad support from across the political divide and could become the EU’s first female president. Should this come to pass, she could surely leverage her experience to elevate and implement tech regulation matters on the EU’s policy priorities. Coupled with the U.S. government’s gearing up for an antitrust probe of tech giants, companies in this space are facing risks from both sides of the Atlantic.  
   
• Broad Regulatory Levers May Shape Health Care Policy: Pharmaceutical companies and chemical manufacturers (and industry more broadly) are expected to face greater pressure from the new European Parliament. This could likely include a focus on lowering costs of medicines through coercive regulation, as well as attacks to weaken intellectual property rights. In addition, with victories by the Greens and others on the populist left, it is expected that there will be greater ties between environmental and public health issues to implement policies that explicitly target industrial farming, chemical producers, the energy industry, and the pharmaceutical sector in the name of improving health.
   
• How Is The Outlook For Financial Services? With more chaos and more populists from both the left and the right in the EU Parliament, the financial sector can anticipate more uncertainty when it comes to the impacts they face from the policy and regulatory environment. The waning influence of the traditional centrist parties to ambitious newcomers ensures it. While calls for divestment from fossil fuels will continue to persist (and even grow stronger) and new regulations on industries and trade will require businesses to adapt, a range of other reforms and institutional adjustments, from financial literacy to transparency in financial products to post-Brexit rebalances, will need to be addressed and will almost immediately put pressure on companies also.

A common pattern we’ve noticed in the monitoring and analysis work we’ve done for our clients is that policies and regulatory frameworks pushed by influencers and stakeholders in continental Europe that take hold in the EU often make their way to other industrialized democracies, such as Canada, and then attempt to gain influence in the U.S. Because of this pattern, anticipating these trends stemming from the EU elections and other challenges will help companies operating globally navigate this uncertainty well and gain a competitive advantage. For those proactive firms focused on their businesses in the United States, this provides an opportunity to better stay ahead of developments that may be impacting operations domestically in the near future.

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POLITICS DRIVING DEALS

You may have heard rumblings that French automaker Renault is considering merging with Fiat Chrysler—a rumor that caught many in the auto industry by surprise. But what if we told you the proposed merger is extremely politically calculated? By merging, Renault and Fiat Chrysler hope that their increased size will reduce the cost of complying with government mandates that require increasing electric-car production and improvements in battery technology.

Due to the added costs of compliance, many automakers (think: Toyota and Suzuki) have combined forces to take on Uncle Sam. Additionally, merging could allow Renault to avoid 25% tariffs on foreign autos that President Donald Trump has repeatably threatened. The potential Renault-Fiat Chrysler tie up is yet another example of politics and regulations driving companies in different industries to pursue mergers. And the result, of course, is less competition.

TROUBLE IN Y’ALLYWOOD

Netflix announced it will reconsider its “entire investment” in Georgia if a recently passed state law restricting abortion takes effect and has teamed up with the ACLU to fight the legislation in court. Georgia has recently become a hub for the film and TV industries and is the home of hit Netflix TV shows “Stranger Things” and “Ozark.” In fact, more than 450 film and TV projects were shot in Georgia last year, leading to over $4.5 billion in wages for an overall economic impact of $9.5 billion.

Prominent Hollywood stars such as Alyssa Milano, Amy Schumer, and Jason Bateman have already said they will “boycott Georgia” if the “heartbeat bill” goes into effect. It looks like Georgia could become the latest victim of America’s “boycott wars,” where people will gladly boycott a state or business over political differences. Netflix will keep filming in Georgia for now, but states and companies must realize it can only take a few activists to change the equation.

CRYPTO-MANIA

Representative Eric Swalwell (D-CA) recently became the second 2020 presidential candidate to begin accepting cryptocurrency donations, joining fellow presidential hopeful Andrew Yang. You read that right—presidential candidates are now accepting donations that cannot be traced back to the donor. Swalwell, who has been a fixture on cable news attacking the Trump campaign as “criminal” because of investigations into its inauguration spending, defended his campaign’s decision to accept difficult-to-track cryptocurrencies in a video claiming, “Government has to keep up with the times and the times have changed.”

Currently the cryptocurrency market in the U.S. is under very little oversight, but that could all change soon. Many U.S. regulators have called for a federal framework to oversee bitcoin and as more candidates accept cryptocurrency donations, Congress may be under increased pressure to act. For now, government transparency advocates and the public should be alarmed, and the cryptocurrency industry should worry about their reputational risk if foreign or corrupt sources use their systems to fund campaign activities illegally.

BRING ON THE VIRTUE SIGNALING

By now many of us have already weighed in on the “paper straw debate,” but what about Goldman Sachs’ decision to banish paper cups or candy-maker Mondelez’s efforts to make all wrappers recyclable by 2025? It seems that many companies are spearheading initiatives that, in the words of The Wall Street Journal’s Allysia Finley, are “costly and often counterproductive.” But why? Some would argue that they are trying to show employees, customers, and shareholders that they care about the environment.

Yet, there’s little evidence that these gestures benefit anyone or the environment – plastic straws only account for about 0.025% of the eight million tons of plastic that flow annually into the ocean (most of it from five countries in Asia). Companies not wanting to appease activists and shareholders citing environmental concerns could proactively message with these facts to illustrate the little impact such gestures have, to say nothing of the negative consequences “costly and often counterproductive” green initiatives can have on jobs.

Here’s What You Need To Know

Well, it’s that time of year again: Tax Day. As if that weren’t reason enough to trade political barbs from both sides of the partisan divide, the 2018 tax year is the first year that Republicans’ Tax Cuts and Jobs Act is fully in effect. As we wrote in our November 2017 analysis of the then-just-unveiled legislation that would become the tax law, even before the policy specifics were released the package was being slammed by opponents with false claims, which have only become more prevalent in the public arena as part of a “sustained and misleading effort … to brand [the tax law] as a broad middle-class tax increase.”

Much of the blistering, negative coverage on the effects of the law are false and the result of a well-orchestrated messaging campaign that convinced people “Trump raised their taxes.” This dominant narrative obfuscates the reality that caused The New York Times to implore its readers to “face it,” they likely received a tax cut. Meanwhile, a prominent journalist at Vox, which declares its aim to “candidly shepherd audiences through politics and policy,” was a bit too candid, when he praised the “messaging success” of  “progressive groups [who] did a really good job of convincing people that Trump raised their taxes when the facts say a clear majority got a tax cut.” So, in an effort to clear up the confusion, here are some key facts on what the tax law has actually done:

• First, Owing The Federal Government Money Doesn’t Mean Your Taxes Went Up: If your refund was less compared to prior years, or even if you owed money to the U.S. Treasury, that does not mean your taxes increased. As part of the new law, the Internal Revenue Service changed the withholding tables in December 2017 to reduce the amount of income tax employers deducted from paychecks. Throughout 2018, about 90 percent of American workers received bigger paychecks, yet one in five taxpayers did not adjust their W-4 forms to reflect this change in take-home pay, resulting in money being owed to the Treasury. Perspective is critical when hearing messaging from politicians and the media claiming people are getting less of a “refund,” not only because the federal government has no money of its own and is fully dependent on the hard-earned dollars of taxpayers for its expenditures in the first place, but because IRS data shows that individual tax refunds for 2018 on average were down only 1.1 percent – or $31 (not to mention what every CPA knows: tax refunds are bad). Ironically, the sources of such attacks are often the same political actors who called savings of thousands of dollars per year for middle-class families, or worker bonuses that were enabled by the law, “crumbs.”
   
• Most Americans Got A Tax Break: An analysis by the nonpartisan Tax Policy Center determined that 65 percent of Americans will pay less taxes because of the 2017 law, with six percent paying more, and the rest seeing little change. As The New York Times notes, studies (from nonpartisan ones to left-leaning think tanks) consistently show the law cutting taxes for most Americans. However, only 17 percent of Americans believe their taxes went down because of the law, while a plurality thinks their taxes have gone up – though not even one in ten households actually paid more. To reiterate the facts on tax reform we discussed in 2017, many concerns and narratives against the law focus on “which deductions are being eliminated or capped,” even though this focus is misguided because by simplifying and reducing the tax brackets, broadening the tax base, doubling the standard deduction, eliminating the Alternative Minimum Tax, and expanding the child tax credit, among other provisions, the large majority of taxpayers are seeing their tax liability go down. This reality held true even in high-cost, high-tax, blue states that worried about capping the deduction of state and local taxes (SALT) at $10,000. New York Governor Andrew Cuomo, a vociferous opponent of the tax law and the SALT deduction cap, paid less in federal income taxes last year thanks to the law he has attacked.
   
• Federal Revenues Hit An All-Time High In 2018:  Another key attack leveled against the law suggested that instead of increasing tax revenues by invigorating the economy and broadening the tax base, the law would increase the deficit and require the U.S. to take on more debt. However, individual income tax revenues climbed 6 percent in fiscal year 2018, up $14 billion dollars from the prior year, for an all-time high of $1.7 trillion. The only revenue category that was lower was corporate income taxes, which were down a substantial 31 percent. But, focusing on this decrease loses the forest through the trees because overall federal revenues were 0.5 percent higher than the previous fiscal year, a key fact contrary to partisan messaging, to say nothing of the benefits that people received from tax law-enabled bonuses or in the form of investments and retirement plans.
   
• The Overwhelming Majority Of Filers Will Get More Relief In 2019: The benefits from the law are not going away for the 2019 tax year. A report from Congress’s Joint Committee on Taxation (JCT) shows the overwhelming majority of filers will receive relief and that the law will provide tax cuts at every income level—including larger payouts in refundable credits even for people who pay no income taxes. Examining the JCT data, the Tax Foundation’s Scott Eastman noted that in 2019, the Trump tax law “will reduce aggregate tax liabilities across all income groups by an estimated $259 billion relative to prior law. For example, the group of taxpayers making between $30,000 and $40,000 in 2019 will pay an estimated $5.4 billion less, a 13.5 percent reduction compared to prior law.” Such statistics don’t include the benefits in job and wage gains resulting from the corporate income tax cut, which triggered a spike in business investment and a full employment economy.

An MSNBC report examining why some taxpayers are angry despite paying less in taxes noted, “psychologically, people feel the loss” of the smaller refund or bill from the IRS “so much more.” (For a psychology parallel, see the backlash from Apple’s generous giveaway of a free U2 album in 2014). The above facts, then, can be used not only to push back on false and misleading claims about the new tax law – of which there is a seemingly endless supply – but to help you and others you know feel better about their check, or bill, from Uncle Sam this year.

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VETTING THE VESTS

Wall Street was well on its way to trading power suits for fleece vests as its uniform du jour, but its chief supplier is now refusing their business. Patagonia, which makes power vests that have become a staple in closets of “finance bros” everywhere, is putting stricter guidelines on its corporate sales program, restricting which companies can buy its corporate logo vests. In accordance with Patagonia’s mission “to save our home planet,” the company will now only partner with B corps and “mission-driven companies that prioritize the planet.” In a statement about this change, Patagonia singled out oil and mining companies, political-affiliated and religious organizations, food groups, and financial institutions as becoming customers non grata.

Patagonia’s latest move is yet another example of corporate activism and the politicization of the business world that will ensnare unsuspecting companies in political risk, not only because of engaging in public policy debates, but even because of their desire to offer employees a branded vest. Whether employees prefer a vest made of hemp or filled with down from geese certified to not be live-plucked or force-fed, it seems that even a decision as personal as this will require executives to think through the negative consequences of political risk to their companies.

AN INCONVENIENT ANTI-PLASTIC TRUTH 

As the war against plastic bags rages on, the Foundation for Economic Education found that plastic’s replacements may actually cause even more harm to the environment. A study found that reusable bags must be used 131 times before it has a smaller global warming impact than a lightweight plastic bag used once. Reusable cotton bags create their own environmental damage, requiring energy, land, fertilizer, and pesticides to create the cotton. Reports have also found that they are “a breeding ground” for airborne illnesses due to harmful bacteria that thrive in the bags unless washed after every use (requiring water and detergents).

While the war on plastic continues to be an easy way to virtue-signal among environmentalists, it is important to remember the costs and benefits of a situation and weigh all the facts available – even and especially if they are inconvenient.

EYES ON THE ROAD

Our homes are watching us, and now our cars are, too. A late model car can generate about 4,000 gigabytes of data a day, which includes not only vehicle performance but also personal information including your weight, music preferences, restaurants, and other places you visit.

While this data is collected and wirelessly transmitted to the vehicle’s manufacturer, there is no legislation or clear ownership over this data – which consulting firm McKinsey estimates could be worth $750 billion by 2030. Therefore, privacy advocates, vehicle owners, non-owners who use vehicles, and third-parties such as auto repair shops all have another major public policy issue on their hands as the auto industry continues to undergo rapid technological advances.

COUNTERING CHINA’S EXPANDING BELT

The U.S. is taking a new approach to foreign diplomacy and its effort to counter Chinese influence around the world in acting as an economic advisor and dealmaker for developing countries. The U.S. Agency for International Development (USAID) led a pilot program in Myanmar to help the country renegotiate terms for a port built by China in the country as part of its multibillion-dollar Belt and Road Initiative to spread Chinese influence and infrastructure  around the world.

By working with officials to inspect contracts, flag concerning provisions, and highlight areas where better terms could be had, USAID helped Myanmar officials renegotiate the scope of the project and reduce the country’s future debt obligations – a program the U.S. hopes to replicate with other countries to counter China’s growing influence. As the negotiations for a U.S.-China trade deal continue, these impactful efforts to counter China’s expanding influence may provide added leverage in the home stretch. The program is also a reminder to China of a lesson the U.S. learned in the last century with the Panama Canal: such investments do not always guarantee a favorable future political environment for the lender.

Here’s What You Need To Know

Last week, it was revealed that Amazon lobbied more federal entities than any other American public company in 2018. Given the significant resources brought to bear, its strong popularity among consumers, and the successful public relations-frenzy that drove 238 cities and regions to compete to win the company’s HQ2 throughout most of the year, companies looking to emulate best practices for strengthening their brand’s reputation and standing in the public arena, as well as achieve key business objectives, might look to follow Amazon’s playbook.

However, with the Seattle-based e-commerce giant’s decision not to move forward with its Long Island City headquarters in New York due to political pressure, perhaps the lesson for other companies and organizations is not what Amazon did or did not do, but that political risk has arrived as a prime factor in corporate affairs. Delve CEO Jeff Berkowitz recently shared his thoughts with Morning Consult on what New York’s HQ2 fiasco means for those seeking to avoid a similar fate. Here are some of his key takeaways:

• Shoe-Leather Lobbying Is No Longer Enough: From healthcare to defense to labor regulation, Amazon contacted 40 different federal entities on 21 different general issue areas, spending $14.4 million to do so – second only behind Google parent company Alphabet’s $21 million. Despite a powerful influence machine in Washington and the support of a majority of New Yorkers, Amazon was criticized “day in and day out” by local politicians who refused to meet with the company and caused it to simply decide that the environment was not one it wanted to work in over the long term. Lobbyists walking the halls of power are no longer enough – instead, companies and other organizations requiring governmental and public support in order to achieve their objectives need new and better tools to combat public pressure driven by even a small minority of activists who can wield outsized influence in the public arena.
   
• Evaluate Strategies Through A Lens Of Political Risk: With politicization infusing everything from sportswear to chicken sandwiches, a company or organization’s strategy for achieving its objective must be viewed through a cohesive lens of political risk. This means assessing the political risk relating to a business decision by identifying the range of stakeholders who may engage on the issue, understanding the network of influence and its impact, and leveraging these insights to inform a strategy to overcome challenges and achieve the objective as developments unfold. When done proactively and in advance of key decisions, assessing political risk can prevent wasted time, money, and reputational damage in a futile endeavor.
   
• Leverage Opportunities By Having The Best Information: Assessing political risk as part of the due diligence process is not only about avoiding foreseeable public affairs challenges. It can also help identify and leverage opportunities. Analyzing the stakeholders and influencers surrounding a project, objective, or issue can become a force-multiplier for a company or organization, allowing it to focus on reaching out and engaging the constituencies that matter so that their message can be amplified with key decision-makers. Seizing such opportunities, and making the best decisions and identifying the best strategies, requires having the best information. In Amazon’s case, they could have identified political opponents in advance and mobilized the majority of New Yorkers who supported HQ2 in Queens to mitigate that opposition.
   
• The New Normal Is Heightened Political Risk: Whether something is good politics or not is an increasingly important consideration for organizations traditionally removed from politics, be they companies, investment firms, or nonprofits. While it is not clear that the public nature of the HQ2 competition was in part responsible for the political risk it attracted, and which ultimately defeated the New York headquarters, political risk has arrived as a crucial factor that must now be taken into account by companies and organizations when making key decisions. In addition to influencing smoke-filled rooms, then, they must now engage too in the fog of the public arena.

Your company or organization doesn’t need to be in the throes of a highly-public competition to choose a new headquarters in order to be adapting to political risk. Applying a framework to evaluate key decisions through the lens of political risk before they are made, or even as added due diligence for those that are already in process, can increase the likelihood of anticipating, mitigating, and overcoming the public affairs challenges that are common in today’s operating environment.

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FIZZLING OUT

It appears not even divine intervention can save La Croix. National Beverage Corporation, the maker of sparkling water beverage La Croix, recently announced a 40 percent drop in profits last quarter following an October lawsuit that accused the company of mislabeling its products as “all-natural” and claiming the company’s waters contain a synthetic compound “often found in cockroach insecticide,” among other chemicals.

The company’s poor performance sparked an odd response from CEO Nick Caporella, who claimed the losses were not the result of “negligence nor mismanagement nor woeful acts of God,” but instead “injustice!” While National Beverage announced in January an accredited lab found no synthetic additives in La Croix, that hasn’t spared the beverage from becoming a laughing stock on social media. Caporella’s response is unlikely to shift that perspective. Indeed, he would do well to heed his own advice that “Brands do not see or hear, so they are at the mercy of their owners or care providers.”

His comments, as well as the company’s financial and legal issues, provide another example of how reputational risks carry real costs and a company’s response can make things better, or in this case, worse.

WEWORK IS WATCHING YOU

You may think WeWork’s $47 billion valuation stems from its ability to provide shared workspaces for startups across the country. However, over the past year, WeWork has aggressively tried to generate more revenue by collecting and analyzing information about how people move and operate within these shared offices. For example, WeWork recently acquired Teem, which makes software that collects data on conference room bookings, and Euclid, a service that tracks smartphones in retail spaces.

WeWork is also testing several types of sensors with its own employees in order to learn how the intended use of office spaces compare to how workers actually use them. It looks as though WeWork’s future may be in selling customer data, which could bring with it a whole host of regulatory headaches and reputational concerns, even with WeWork’s Chief Product Officer Shiva Rajaraman’s assurance that the company aims to “defend privacy as well.”

CHINA’S OVER-INFLATION PROBLEM

It turns out China’s economy may not be so big after all. A new report from the Brookings Institution found that China’s economy is about 12 percent smaller than official figures estimate and its real growth has been overstated by about two percentage points annually. The report has sparked fresh concerns that China’s economic slowdown is more serious than previously acknowledged as the U.S. and China continue to negotiate a trade deal.

With a growing population demanding more middle-class privileges, China’s economic challenges may add additional pressures on Chinese President Xi Jinping to make a deal when he meets with President Trump at a summit tentatively planned for late-April. Trust but verify, indeed.

SHADOWY “STUDENT”-LED MOVEMENTS

As students eagerly pass out catchy political flyers to their campus colleagues, it is easy to dismiss them as student-led movements passionate about a cause. Yet these “grassroots” organizations are often times sophisticated political operations with billionaire backers on both the left and right. One such group, NextGen Rising, masquerades as a youth-led grassroots organizing movement but is in reality a subsidiary of the NextGen Climate Action Committee, a political-action committee formed by billionaire anti-Trump critic Tom Steyer.

Rather than provide professional development programs, these groups tend to be far more interested in instilling political ideologies in young college students. Groups like NextGen Rising serve as a reminder of the importance of understanding an organization’s funders in order to know the true motive of a movement.

Here’s What You Need To Know

In an October edition of TL;DR, we wrote about the “other machinations in Washington” that overshadowed the announcement of the United States-Mexico-Canada Agreement, or USMCA, which was negotiated to replace NAFTA. Since then, the agreement has stayed somewhat under the radar and in fact, the Administration has already moved its focus to trade negotiations with China, meaning that ratifying USMCA is no sure thing. With outside groups gearing up for what will be a major public policy fight, here is a look at the landscape of interests engaging on this issue and the challenges they are facing:

• But First, How Did We Get Here? Formal negotiations between the North American neighbors ended and an agreement was signed on November 30th, marking the start of the governments’ efforts to sell the deal to their domestic audiences and gain ratification from their respective legislatures. In the U.S., that process was complicated first by the midterm elections where the President’s party lost its majority in the House, and then by the longest government shutdown in U.S. history that delayed the publication of the agreement’s congressional assessment report, the next step of the ratification process. Despite these realities, the Administration appears to have a “shockingly optimistic forecast” on the fate of the deal, and although Speaker Pelosi shares this optimism that concerns can be addressed and an agreement passed, the reality of the challenge ahead suggests that companies, industry groups, and issue coalitions will need to vigorously engage in the debate to influence ratification in Congress, which is increasingly uncertain.
   
• The Reluctant Democrats: For Speaker Pelosi’s optimism for ratification to be well-founded, USMCA will have to gain the support of pro-trade members in her caucus. Several efforts to lobby these members are already taking form, including Trade Works for America, which was launched by influential Republicans to make their case to Democrats in traditional Republican and Trump districts, has already raised a third of its approximately $15-$20 million budget. Another group, Pass USMCA, is headed by Democrat Gary Locke, who served as Ambassador to China and Commerce Secretary under President Obama, and Rick Dearborn, who most recently served as Deputy Chief of Staff for President Trump. In bringing bipartisanship to bear in its efforts to push ratification, Pass USMCA is betting that Democrats and Republicans in Congress can be brought together in polarized Washington to ratify President Trump’s trade deal – despite Democrats’ seemingly increasing reluctance to do so.
   
• The NAFTA Warriors: Much of the declared opposition in Congress to USMCA is due to it being “too similar to NAFTA,” and this opposition includes some of the usual groups against trade deals who hold sway and influence with the Left’s liberal base. Environmental activists from Greenpeace to the Sierra Club have slammed USMCA for leaving intact “NAFTA’s bad rule book and the growth of the oil industry,” and Public Citizen and its Global Trade Watch has raised concerns over both environmental standards and labor standards that U.S. firms can use “to continue to outsource jobs to pay Mexican workers poverty wages.” For reluctant Democrats, the pressures from these groups make it politically difficult for them to support a deal that’s viewed as “more of the same,” not to mention the product of a President they are committed to resisting.
   
• The Strange Bedfellows: The opposition to USMCA in its current form is not just made up of usual activists, however – it also includes large corporate interests and conservative think tanks. Meds For America’s opposition is focused on pharmaceutical patents and the development of generic drugs. In a letter raising its concerns to the U.S. Trade Representative, Meds For America’s broad coalition of strange ideological bedfellows was on full display. Signatories included labor unions such as the SEIU, AFL-CIO, and American Federation of Teachers; powerful interest groups like AARP; major health care company Kaiser Permanente; and, conservative organizations such as FreedomWorks and R Street Institute. The presence of these organizations that usually influence Republican policy and pressure Republican lawmakers makes it more difficult for those on the Right, especially policymakers who opposed Trade Promotion Authority, to stand up for USMCA.

For those trying to achieve passage of USMCA in Congress, time is already short. Any further delays in the ratification process would make it more and more difficult for the USMCA to take effect, especially with Canadian federal elections later this year and the U.S. presidential election in full swing by then. And although NAFTA would remain in effect currently if the USMCA is not ratified, President Trump is adding additional uncertainty to this scenario by threatening to terminate NAFTA to pressure Congress to ratify USMCA – which a top Republican senator believes would make doing so “immeasurably harder.”

Those pushing ratification will need to thread a needle to navigate the challenges laid out above and build a broad, like-minded coalition that can get this deal done. To do so, they will need to pull back the layers and uncover insights into this network of opposition, including its funding, motivations, tactics, and coordination, so that they can identify potential allies – no matter how unlikely – and expose and undermine their opponents’ anti-USMCA message in the public and with policymakers.

News You Can Use

AI’S RISKY BUSINESS

As everyone from the Pope to President Trump seem to be going all-in on artificial intelligence (AI), two companies that should be its most ardent supporters are sending out warnings about this growth. In recent SEC filings, Google and Microsoft cautioned investors that AI technologies may create ethical and legal problems that could damage their brands and the demand for their products.

Microsoft’s list of potential problems includes flawed algorithms, insufficient datasets, biased information, and inappropriate or controversial data. Microsoft and Google appear to be asking for policymakers to create a regulatory framework to help make sense of this uncharted territory. The filings should also serve as a wakeup call to policymakers from companies, investors, and stakeholders, who can make headway on this issue now while the industry continues to grow – and before the challenges foreshadowed come to fruition.

GOING LOW

A Roll Call analysis found that Democratic senate candidates in 2018 who published more negative tweets were more likely to be victorious in their races, while Republican candidates were less likely to win when doing so. If this success is any hint as to the future, Republican candidates on the ballot in the 2020 election cycle can expect more of the same with withering tweets attacking them.

Additionally, because many media outlets tend to reinforce Democratic attacks while pushing back on or ignoring Republican attacks, Republican candidates will have to get started earlier with uncovering the research insights that can help their campaigns win, anticipate the inevitable negative attacks, and ensure their claims are thoroughly supported by undeniable facts that can withstand the intense, and sometimes biased, media scrutiny.

GREEN NEW DEAL WITH IT

Is the Green New Deal (GND) “immoral” and “unrealistic?” Even among Democrats, it depends on who you ask. When self-identified Democratic Socialist Representative Alexandria Ocasio-Cortez (NY)  posted details of the GND plan to her website, it called for the elimination of all fossil fuel energy production and nuclear power, the replacement of every “combustion-engine vehicle” within 10 years, and “retrofit[ting] every building in America” with “state of the art energy efficiency.”

The reception for the outlandish plan, which triggered backlash, resulted in a bungled rollout and the removal of the plan online, followed by arguments with critics in the media about whether the document was legitimate or not in the first place (spoiler: it was). If the press is going to automatically support the GND instead of ask critical questions about it, Republican policymakers and the companies and organizations concerned by its economic and policy implications may be underestimating the degree of difficulty in putting out the truth about the harmful and costly policies it promotes.

THE PEOPLE VS. TWITTER

With journalists rushing to tweet their latest scoops and the world’s eyes constantly on President Trump’s Twitter account, it is easy to think of the social media platform as a representative sampling of the public discussion. But what if Twitter’s impact is overblown or misleading? Twitter revealed in its fourth-quarter earnings report that the company has an average of 27 million daily active users in the United States, or 8.2% of the total population (assuming that each account is controlled by a different person, which is unlikely).

This data suggests that despite the site’s power to drive media narratives and news cycles, the “Twitterverse” is not an accurate representation of the public conversation. As more and more news stories are generated by the outrage, hashtags, and hot takes on Twitter, a misleading and dangerous trend is taking form where the 280-character antics in the “Twitterverse” are taking the place of actual fact-based information and broad public sentiments.