Is it a 'coordination trap' or are we just inventing new terminology for a cartel? When OPEC coordinates effectively, we are not under any illusions about how their collusion is cartel behavior that inhibits competition and distorts markets. But when powerful nations do so and use their immense power (soft influence via diplomacy, economic policy, etc.) to bring a large number of other countries onto their plan, suddenly we're not using the same terminology to describe the same behavior. Ultimately taxes going to zero is a good thing because it is a sign of competitiveness between tax structures favoring more efficient governments. This artificial agreement prevents that, just as a cartel of conglomerates colluding to set price floors would be eroding competition.

> are we just inventing new terminology for a cartel?

Sure, you can call it what you like; what matters is, does it deserve the same negative connotation as "cartel"? The answer to that depends on your position on:

> Ultimately taxes going to zero is a good thing because it is a sign of competitiveness between tax structures favoring more efficient governments.

...which is incorrect, because "efficiency" is not tax rate alone, it's tax rate compared to services offered. We're not talking about countries cutting their tax rate because they're more efficient; Ireland doesn't know how to build roads cheaper than England does. We're talking about countries that decide to cut their tax rate and cut services proportionally in order to entice immigrants. They aren't any more efficient the day after they do that than the day before, they're just selling a shoddier product at a lower price point.

And it's worth pointing out, if you think of government as a product and tax rates as the price, the reason we have this problem in the first place is that the market is broken by allowing corporations to "buy" one product but "use" another. For a company to primarily operate in the USA but pay corporate taxes to Bermuda is roughly equivalent to a man who drives off the lot in a new Benz but is making payments on a used Buick. If the market were functional - if the "price" a corporation chooses to pay in deciding where to be patriated were aligned with the "value" they receive in access to infrastructure and markets - we wouldn't be here discussing this agreement because it wouldn't be needed.

Low Corporate tax rates invite corporations into your country. This benefits poor countries more.

...until a poorer country adopts a lower rate, and the corporation leaves. That's the trap this avoids.

It's not a trap. The money will just never go to those countries now.

"trap" in this context means "coordination trap" which is a scenario in which competition forces individual actors to adopt policies they don't want, but can't avoid.

Imagine you and I are neighboring farmers who irrigate our fields from the same river. Our farms grow, as does our water use, until we're each using half the water. I buy a bigger water pump and start sucking up most of the water, leaving you with dying crops. So you go out and buy an even bigger pump; now you're getting most of the water, and some of my crops are dying.

What's the result? There are only two outcomes here: either we agree to split the water, or we spend more and more money on larger and larger pumps until neither of us has any profit left over. The latter outcome is the "trap" - neither of us wants to spend every spare dollar on pumps, but unless we come up with some agreement, that's what will happen.

No, this is another kind of US enforcement regime. It starts with setting a global minimum tax rate, and ends with the US pursuing and punishing developing nations to its advantage.

Also once the US can manage to get 130 countries to agree to its tax regime in one area, guaranteed it won't stop there.

I mean, sure, and this could describe almost any resource-sharing situation ever.

I'd say that this however is not a resource sharing situation. It's a competition for the magical money tree of corporation taxes. And that's a good thing, because "setting up an environment in which businesses cannot thrive" is often a vote winner, but is a terrible idea.

The key ingredient in a "race to the bottom" is not resource sharing, it's competition combined with a feedback mechanism. Resource sharing figures in a lot of examples, because "consume most of the resources" is a common way to win a competition, but it's not necessary; for example there's no resource being shared in the classic prisoner's dilemma.

Anyway, you're right that this a competition for corp tax money, and that it could be bad in theory if there was no competition for it, since e.g. we could all collectively agree to set the corp tax rate too high, which I agree would be bad. But there's no ratchet effect. All we have to do to avoid the "taxes too high" problem is be aware of it and decide not to do that, whereas we cannot avoid the "race to the bottom" problem by being aware of it, we need an agreement like the one described in the article.

> All we have to do to avoid the "taxes too high" problem is be aware of it and decide not to do that,

This method contains no incentives to do it (competition) and no way to establish what is "too high" (also competition).

Yeah, it won't cure baldness either. What it will do is solve a specific problem (countries undercutting each other and driving the tax rate to zero) which AFAIK has no other solution. The fact that it doesn't also solve a different problem we don't yet have is not a good reason to abandon it.

Joseph Stiglitz has written some interesting books on corporate behaviour in developing countries, such as "Globalization and its Discontents".

The argument is, is that poorer countries, especially those with natural resources, would do better nurturing their own corporations, rather than creating policies to attract foreign corporations.

The end result of preferring foreign corporations is a race-to-the-bottom where the end result is that corporations become a law unto themselves, operating as if they miniature states within the host state.

How does turning the poorest people in a country into wage slaves "benefit" those poor countries? Those poor people would be better off just being self sufficient farmers at that point. Workers at foxconn were literally killing themselves because of how bad the conditions were. When do we as a society decide that industrialization makes life worse for a huge percentage of the population? These multinationals go into poor countries with no worker protection laws specifically to exploit people. That only benefits those multinationals and their owners.

Would the workers at Foxconn be better off if we took away their option to work at Foxconn? In general, if they thought that was their best option, it's hard for me to accept at that step an argument that providing them that option is making their life worse [than it would otherwise be]. Maybe there are a few more steps in the argument that make that position stronger?

Pretty much every country had or will have an exploitation phase before they get wealthy. The only difference is that some countries still have their exploitation phase ahead of them.