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291. From the EMS to the EMU and...to China

Author:
Joseph Halevi
Publication Date:
11-2019
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
The paper highlights the position of German authorities, showing that they were quite lucid about the fundamental weaknesses inherent in a process that separated monetary from fiscal policies by giving priority to the centralization of the former. Instead of repeating the well known critiques levelled against the EMU – for which readers are referred to the unsurpassed treatment by Stiglitz, the essay highlights the splintering of Europe in the way in which it has unfolded during the 1990s and in the first decade of the present millennium. In particular the early economic and political origins of the terminal crisis of Italy are located between the late 1980s and the 1990s. France is shown to belong increasingly to the so-called European periphery by virtue of a weakening industrial structure and persistent balance of payments deficits. The paper argues that France regains its central role by political means and through its weight as an active nuclear military power centered on maintaining its imperial interests and posture especially in Africa. The first decade of the present millennium is portrayed as the period in which a distinct German economic area had been formed in the midst of Europe with a strong drive to the east with an increasingly powerful gravitational pull towards the People’s Republic of China.
Topic:
Economics, International Political Economy, Political Economy, History, and Macroeconomics
Political Geography:
Africa, China, Europe, Asia, Germany, and Global Focus

292. Labor Laws and Manufacturing Performance in India: How Priors Trump Evidence and Progress Gets Stalled

Author:
Servaas Storm
Publication Date:
02-2019
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
Strong labor protections for ordinary workers are often portrayed as a ‘luxury developing countries cannot afford’. No study has been more influential in propagating this perversity trope in the context of the Indian economy than the QJE article of Besley and Burgess (2004). Their article provides econometric evidence that pro-worker regulation resulted in lower output, employment, investment and productivity in India’s registered manufacturing sector. This paper reviews existing critiques of Besley and Burgess (2004), which highlight conceptual and measurement errors and uncover econometric weaknesses. The paper takes a step beyond these: it reports a failure to replicate Besley and Burgess’ findings and demonstrate the nonrobustness of their results. My deconstruction is not only about the econometrics, however. I show that Besley and Burgess’ findings are not just inconsistent with their theoretical priors, but also internally contradictory and empirically implausible, taxing any person’s capacity for belief. The paper, written by two ‘useful economists’, exhibits a gratuitous empiricism in which priors trump evidence. On all counts, it fails the test of being useful to the purpose of ‘evidence-based’ public policy advice.mp Evidence and Progress Gets Stalled
Topic:
Economics, Political Economy, Labor Issues, Inequality, and Labor Policies
Political Geography:
India and Asia

293. Demand-Driven Youth Training Programs: Experimental Evidence from Mongolia

Author:
José Galdo, Bayarmaa Dalkhjavd, Altantsetseg Batchuluun, Soyolmaa Batbekh, and Maria Laura Alzúa
Publication Date:
08-2019
Content Type:
Working Paper
Institution:
Center for Distributive, Labor and Social Studies (CEDLAS)
Abstract:
Because of its high incidence and potential threat to social cohesion, youth unemployment is a global concern. This study uses a randomized controlled trial to analyze the effectiveness of a demand-driven vocational training program for disadvantaged youth in Mongolia. Mongolia, a transitional country whose economic structure shifted from a communist, centrally planned economy to a free-market economy over a relatively short period, offers a new setting in which to test the effectiveness of standard active labor market policies. This study reports positive and statistically significant short-term effects of vocational training on monthly earnings, skills matching, and self-employment. Substantial heterogeneity emerges as relatively older, richer, and better-educated individuals drive these positive effects. A second intervention that randomly assigns participants to receive repetitive weekly newsletters with information on market returns to vocational training shows positive impacts on the length of exposure to and successful completion of the program. These positive effects, however, are only observed at the intensive margin and do not lead to higher employment or earnings outcomes.
Topic:
Development, Economics, Industrial Policy, Labor Issues, Employment, Youth, and Labor Policies
Political Geography:
Mongolia and Asia

294. What North Korea’s Push for Economic Development Means for Human Rights

Author:
Bradley O. Babson
Publication Date:
04-2019
Content Type:
Special Report
Institution:
Georgetown Journal of International Affairs
Abstract:
Since his first-annual New Year’s speech in 2012 setting North Korea’s policy priorities, Kim Jong Un has emphasized his commitment to economic development, notably promising his people that they will never have to tighten their belts again. The Byunjin policy of equally prioritizing economic development and security through nuclear and missile programs reflects Kim’s desire to assure regime stability by delivering broad-based economic development while establishing a security environment that deters external threats and potential domestic unrest. While United States policy has used sanctions and other pressures to stymie Kim’s ambitions, the Kim regime has nonetheless modestly furthered economic development and significantly advanced security through its nuclear and missile testing programs.
Topic:
Security, Development, Economics, Human Rights, and Sanctions
Political Geography:
Asia, North Korea, North America, and United States of America

295. East Asia's Decoupling

Author:
Roland Rajah
Publication Date:
01-2019
Content Type:
Commentary and Analysis
Institution:
Lowy Institute for International Policy
Abstract:
East Asia is no longer reliant on US or Western markets to fuel its growth, giving it more room to manage amid global trade tensions. Heightened global trade tensions and the US desire to ‘decouple’ from the Chinese economy for national security reasons pose significant risks to East Asia’s export-driven growth model. However, the latest data suggests East Asia is no longer so dependent on exporting to the West, with China in particular eclipsing the United States as the leading source of ‘final demand’ for the rest of the region’s exports. This gives East Asia much greater room to manoeuvre, as regional integration is now a more viable platform for growth while US decoupling efforts will likely struggle to find traction in the region.
Topic:
Economics, International Trade and Finance, Global Markets, and Exports
Political Geography:
China, East Asia, Asia, North America, and United States of America

296. The U.S. Indo-Pacific Strategy and Its Implications for U.S.-ASEAN Economic Governance Architecture

Author:
Kaewkamol Karen Pitakdumrongkit
Publication Date:
07-2019
Content Type:
Journal Article
Journal:
Joint U.S.-Korea Academic Studies
Institution:
Korea Economic Institute of America (KEI)
Abstract:
During his visit to Asia in November 2017, President Donald Trump announced his vision of a “Free and Open Indo-Pacific” as the U.S. approach to the region. The Department of State unveiled in detail the economic elements of the Indo-Pacific strategy in April 2018. These economic policies were reiterated by Vice President Mike Pence at the Asia-Pacific Economic Cooperation (APEC) CEO Summit in Papua New Guinea in November 2018. For instance, Pence maintained that Washington plans to “make bilateral trade agreements with any Indo-Pacific nation that wants to be our partner and that will abide by the principles of fair and reciprocal trade,” promote private sector investment, and assist regional states on sustainable infrastructure development. On December 31, Trump signed into law the Asia Reassurance Initiative Act (ARIA) passed by the U.S. Congress earlier that month. ARIA further advances the strategy by mandating the executive branch to “develop a long-term strategic vision and a comprehensive, multifaceted, and principled United States policy for the Indo-Pacific region.” Moreover, the text authorizes $1.5 billion to “the Department of State, United States Agency for International Development [USAID], and, as appropriate, the Department of Defense . . . for each of the fiscal years 2019 through 2023, which shall be used” to achieve several objectives including ensuring “the regulatory environments for trade, infrastructure, and investment in partner countries are transparent, open, and free of corruption.” Against this backdrop, this chapter examines the effects of the U.S. Indo-Pacific strategy on the future of U.S.-ASEAN economic governance architecture. “Strategy” refers to “the collection of plans and policies that comprise the state’s deliberate effort to harness political, military, diplomatic, and economic tools together to advance that state’s national interest.” Such a study is warranted for a few reasons. First, the jury is still out on the degree to which this strategy would align or clash with different approaches and policies supported by Southeast Asian governments. Clashes of ideas and policies can result in not only failed implementation of the U.S. strategy but also competing economic initiatives which could undermine the future of U.S.-ASEAN trade and investment ties. Therefore, this research is aimed at: 1) assessing how the U.S. Indo-Pacific strategy would interact with Southeast Asian nations’ policies to shape the future development of regional economic architectures, and 2) forging policy recommendations for the U.S. and ASEAN governments on how they could jointly pursue regional economic institution-building. The questions I explore include: 1) What are the economic components of the U.S. Indo-Pacific strategy? 2) How will this strategy and Southeast Asian countries’ economic agendas/policies interact to shape the future advancement of regional economic architecture? and 3) What should American and ASEAN governments do to foster cooperation and lessen conflict among their different policies regarding economic regionalism? The chapter is organized as follows. The next part discusses the economic components of the Indo-Pacific strategy under the Trump administration. The second section examines the interactions between this strategy and the economic agendas of the Association of Southeast Asian Nations (ASEAN) to highlight the areas of complementarities and clashes. The last section provides policy recommendations for American and Southeast Asian governments to augment synergies and ameliorate clashes among their policies.
Topic:
Foreign Policy, Economics, Governance, and ASEAN
Political Geography:
Asia, North America, United States of America, and Indo-Pacific

297. Redefining U.S.-Japan Trade Relations Under Trump

Author:
Shihoko Goto
Publication Date:
07-2019
Content Type:
Journal Article
Journal:
Joint U.S.-Korea Academic Studies
Institution:
Korea Economic Institute of America (KEI)
Abstract:
The Trump administration has had no qualms about going against conventional U.S. policy norms and long-established rules of engagement. Thinking outside of the box has not been without its merits; it has certainly led to much-needed reassessment of practices that could benefit from change. The greatest risk of such change, however, is when policy shifts are sudden, unexpected, and unexplained, especially with long-established partner nations. In the two years since President Donald Trump took office, the single biggest challenge for key U.S. allies has been to scramble to adapt to those drastic changes. That, in turn, has led them to reexamine and even alter their own longer-term strategies. For Japan, the pressure to adapt to such changes has been particularly intense, given its continued dependence on the United States for security in an increasingly unstable region on the one hand, and its reliance on robust trade relations with the world’s largest economy on the other. At the midway point of the Trump administration, Japan has actually emerged stronger over the past two years, at least on the trade front. Against the odds and defying expectations, it has succeeded in strengthening its position as a stabilizing force amid ongoing uncertainties in global trade rules. Yet, its success so far does not mean that the latter half of Trump’s tenure will be smooth sailing for Tokyo. In fact, Prime Minister Abe Shinzo’s balancing act of managing robust relations with the United States while ensuring Japan’s own economic interests may prove to be more difficult. The challenge is to further the gains it has made as an economic stabilizer, even as that outcome will redefine its broader role as a champion of the liberal international order, which has been put on shakier ground.
Topic:
Economics, Bilateral Relations, Trade, and Donald Trump
Political Geography:
Japan, Asia, and United States of America

298. The Trump Economic Impact on East Asia after Two Years: The Case of South Korea

Author:
Yoon Yeo-joon
Publication Date:
07-2019
Content Type:
Journal Article
Journal:
Joint U.S.-Korea Academic Studies
Institution:
Korea Economic Institute of America (KEI)
Abstract:
The U.S.-South Korea relationship has traditionally been characterized as a security alliance, meeting the interests of both countries for a stable Korean Peninsula. Economically, Korea was a major recipient of U.S. development assistance after the Korean War. The U.S. also provided non-reciprocal preferential trade treatment, which played an important role in Korea’s economic development. After Korea’s unprecedented economic development, the economic relationship between the two countries progressed from mere donor-recipient relations. The U.S.-Korea economic partnership culminated in the Korea-U.S. free trade agreement (KORUS FTA), which came into effect in 2012. During the past 70 years, the U.S. has become the second most important export destination and the third most important importer for Korea. Korea has also risen to be the sixth largest trading partner for the U.S. During these years, Korea has also benefited from common values shared with the U.S., such as democracy, rule of law, and an open and free market economy. Two years into the Trump administration, the U.S.-Korea economic relationship is facing another turning point. Trump is a game changer, trying to alter the global trading system and its relation to China. Korea has been only partially affected by his grand scheme so far. However, Trump specifically blamed the KORUS FTA as a major contributing factor to the U.S.’ huge trade deficit and domestic job losses in manufacturing. As a result, the KORUS FTA was amended. Various protectionist measures, such as Section 201 tariffs on washing machines and solar panels as well as Section 232 tariffs on steel and aluminum, could have a substantial impact on Korea. Rising protectionism in the U.S. is a grave concern for Korea considering the significance of the U.S. to the Korean economy. This chapter explores U.S.-Korea economic relations two years into the Trump administration—too short a time to make definitive statements such as whether the relationship has deteriorated or not. The chapter is organized as follows. Section 2 describes the economic relations between Korea and the U.S., focusing on trade and investment. Section 3 covers the KORUS FTA renegotiations, which were recently settled. It includes what was decided and the implications for the Korean economy. Section 4 summarizes the protectionist measures that the Trump administration has imposed and how these measures would impact Korea, adding a simple empirical analysis that investigates whether the U.S. trade balance with Korea improved over the two years. Section 5 concludes the chapter.
Topic:
Foreign Policy, Economics, Bilateral Relations, Trade, and Donald Trump
Political Geography:
Asia, South Korea, and United States of America

299. U.S.-China Economic Relations Under the Trump Administration at the 2-Year Mark

Author:
Peter Harrell
Publication Date:
07-2019
Content Type:
Journal Article
Journal:
Joint U.S.-Korea Academic Studies
Institution:
Korea Economic Institute of America (KEI)
Abstract:
Since entering office in 2017, President Trump has upended longstanding tenets of U.S. trade policy and launched the most aggressive set of new U.S. tariffs and trade restrictions since at least the Reagan administration in the 1980s. Actions include renegotiating the U.S.-Korea FTA (KORUS) and NAFTA, using “Section 232” of the Trade Expansion Act of 1962 to impose tariffs on most steel and aluminum imports into the U.S. in a bid to support U.S. smelters, using “Section 301” of the Trade Act of 1974 to impose tariffs on approximately half of U.S. imports from China, and threatening to use Section 232 to impose tariffs reportedly up to 25% on U.S. imports of automobiles. The administration’s aggressive stance on trade has upended diplomatic relationships and prompted multinational companies to re-consider aspects of their global supply chains. It has also brought retaliation, including Chinese tariffs on most Chinese imports of U.S. goods. European countries and other U.S. allies affected by Trump’s steel and aluminum tariffs have also retaliated with tariffs of their own against imports of U.S. goods, with many of the retaliatory tariffs targeting perceived politically important constituencies in the U.S., such as U.S. whisky distillers, who are heavily concentrated in the home state of Republican Senate Majority Leader Mitch McConnell. But Trump’s aggressive trade policies also began to deliver some successes in 2018, including a successful renegotiation of NAFTA, now renamed the U.S.-Mexico-Canada Trade Agreement (USMCA), a renegotiated Korea-U.S. FTA, and at least some willingness by European and Japanese officials to discuss greater market access for U.S. products. While many major U.S. importers and trade associations have complained about the tariffs, the tariffs continue to draw support from several of the key constituency groups that they are intended to assist, such as the U.S. steel industry. While U.S. tariffs against imports from allies are seemingly driven largely by the Trump administration’s general protectionist bent, Trump’s trade actions against China reflect a broader set of concerns that is more widely supported by members of the United States congress and American experts outside of government. These include both longstanding U.S. concerns over Chinese trade practices and market access barriers, and growing U.S. geopolitical competition with China—what the Trump administration’s National Security Strategy, released in December 2017, refers to as the return of “great power competition.” These geopolitical concerns have been central to the administration’s recent aggressive efforts to block the deployment of Huawei telecommunications technologies in new “5G” mobile communications networks around the world, and in the administration’s increasingly vociferous opposition to China’s “Belt and Road Initiative" (BRI). And because of increased U.S.-China geopolitical competition, U.S. use of targeted trade controls, investment restrictions, potential targeted sanctions, and other measures against China, will likely continue even if, as is widely expected, Trump and President Xi reach a broad agreement on many trade issues in the coming months and reduce some of the tariffs that are currently in place.
Topic:
Economics, Bilateral Relations, Tariffs, and Trade
Political Geography:
China, Asia, North America, and United States of America

300. Resurgent Asia: Diversity in Development

Author:
Deepak Nayyar
Publication Date:
09-2019
Content Type:
Policy Brief
Institution:
United Nations University
Abstract:
In 1820, Asia accounted for two-thirds of world population and over half of world income. The subsequent decline of Asia was attributable to its integration with a world economy shaped by colonialism and driven by imperialism. By 1970, Asia was the poorest continent in the world, marginal except for its large population. Its demographic and social indicators, among the worst anywhere, epitomized its underdevelopment. A deep pessimism about Asia’s economic prospects, voiced by Gunnar Myrdal in Asian Drama, was widespread at the time.
Topic:
Economics, History, Economic Growth, and Economic Transformation
Political Geography:
Asia