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72. Cutting through the Value Chain: The Long-Run Effects of Decoupling the East from the West
- Author:
- Gabriel Felbermayr, Alexander Sandkamp, and Hendrik Mahlkow
- Publication Date:
- 03-2022
- Content Type:
- Working Paper
- Institution:
- Kiel Institute for the World Economy (IfW)
- Abstract:
- With ever-increasing political tensions between China and Russia on one side and the EU and the US on the other, it only seems a matter of time until protectionist policies cause a decoupling of global value chains. This paper uses a computable general equilibrium trade model calibrated with the latest version of the GTAP database to simulate the effect of doubling non-tariff barriers - both unilateral and reciprocal - between the two blocks on trade and welfare. Imposing trade barriers almost completely eliminates bilateral imports. In addition, changes in price levels lead to higher imports and lower exports of the imposing country group from and to the rest of the world. The targeted country group increases exports to the rest of the world and reduces imports. Welfare falls in all countries involved, suggesting that governments should strive to cooperate rather than turning away from each other. By imposing a trade war on Russia, the political West could inflict severe damage on the Russian economy because of the latter’s smaller relative size.
- Topic:
- International Cooperation, International Trade and Finance, European Union, Conflict, Trade Wars, Protectionism, and Rivalry
- Political Geography:
- Russia, China, Europe, Asia, North America, and United States of America
73. Cyber Posture Trends in China, Russia, the United States and the European Union
- Author:
- Lora Saalman, Fei Su, and Larisa Saveleva Dovgal
- Publication Date:
- 12-2022
- Content Type:
- Special Report
- Institution:
- Stockholm International Peace Research Institute (SIPRI)
- Abstract:
- Current understanding of the cyber postures of China, Russia, the United States and the European Union (EU) merits re-evaluation. It is often assumed that China and Russia are aligned, yet this is not always the case. Unlike Russia, which has an ongoing focus on information security, China’s official documents incorporate both information security and cybersecurity concerns that are similar to those of the EU and the USA. Moreover, while often paired, the EU and the USA have differing regulatory structures in cyberspace. Further, both actors increasingly mirror Chinese and Russian concerns about the impact of information warfare on domestic stability. By examining key trends in each actor’s cyber posture, this SIPRI Research Report identifies points of convergence and divergence. Its conclusions will inform a broader SIPRI project that maps cyber posture trajectories and explores trilateral cyber dynamics among China, Russia and the USA to assist the EU in navigating future cyber escalation and enhancing global cyber stability.
- Topic:
- European Union, Cybersecurity, Geopolitics, Regulation, and Information Security
- Political Geography:
- Russia, China, Eurasia, Asia, and United States of America
74. How difficult is China’s business environment for European and American companies?
- Author:
- Uri Dadush and Pauline Weil
- Publication Date:
- 05-2021
- Content Type:
- Policy Brief
- Institution:
- Bruegel
- Abstract:
- Despite tensions over China’s discriminatory business practices, China’s trade continues to thrive, and the country has taken over from the United States as the first destination for foreign investment. American and European businesses continue to be engaged in China’s large and growing market, even amid a trade war between China and the United States. Drawing on surveys of companies and international comparisons, we show that – contrary to the prevailing narrative – China’s business practices have improved significantly in recent years. China’s business environment is today generally more favourable than that in other large countries at similar levels of development and, in some though certainly not all aspects, is in line with the Organisation for Economic Co-operation and Development average. Differences over geopolitics and human rights must be addressed, but it is clear that trade and investment agreements conditioned on accelerated reforms in China would yield substantial dividends. The benefits of such deals would accrue not only to foreign investors in China and exporters to China, but also to consumers and importers in the European Union and, especially, in the US, where punitive tariffs on China remain in effect. Critical aspects in the negotiations would include better access for American and European investors to China’s market for services and improved enforcement of rules and regulations in China. As in many middle-income countries, uneven enforcement of the law (rather than the law itself) remains a critical problem in China.
- Topic:
- Development, Bilateral Relations, European Union, Business, and Investment
- Political Geography:
- China, Europe, Asia, North America, and United States of America
75. Labor Market Impact of Immigration in the European Union
- Author:
- Dong-Hee Joe
- Publication Date:
- 04-2021
- Content Type:
- Policy Brief
- Institution:
- Korea Institute for International Economic Policy (KIEP)
- Abstract:
- Immigration is one of the factors often considered as the causes of Brexit. Researchers find evidences that regions with more immigrants from the new member states of the European Union (EU hereinafter) in eastern Europe tended to vote more in favor of Brexit in the 2016 referendum. Similar relations between the size of immigrant population and anti-immigration attitudes or far-right voting are found in other richer EU member states. A common explanation for this relation is the concern that immigrants negatively affect the outcome in the host labor market. Immigration is drawing attention in Korea too. Although immigrants' share in population is still substantially smaller in Korea than in the EU, its increase is noticeable. Also, certain industries in Korea are known to be already heavily reliant on immigrant labor. Recently, as entry into the country was tightened due to the COVID-19 pandemic, firms and farms are reported to have faced a disruption in production. This trend of increasing presence of immigrants in population and in the labor market, vis-à-vis the low fertility rate and rapid aging in Korea, is raising interest and concern on the socioeconomic impact of immigration. To offer some reference for the debates related to immigration in Korea, KIEP researchers (Joe et al. 2020 and Joe and Moon 2021) look at the EU, where immigrants' presence was much higher from much earlier on, and where the greater heterogeneity among the immigrants allows for richer analyses. This World Economy Brief presents some of their findings that are salient for Korea.
- Topic:
- Immigration, European Union, Brexit, and Labor Market
- Political Geography:
- Britain, Europe, Asia, and Korea
76. China’s FDI in Europe and Europe’s Policy Response
- Author:
- Pyoung Seob Yang, Cheol-Won Lee, Suyeob Na, Taehyn Oh, Young Sun Kim, Hyung Jun Yoon, and Yoo-Duk Ga
- Publication Date:
- 04-2021
- Content Type:
- Policy Brief
- Institution:
- Korea Institute for International Economic Policy (KIEP)
- Abstract:
- China’s investment in the European Union (EU) increased significantly during the European financial crisis, but has been on the decline in recent years. The surge of Chinese investment has raised concerns and demands for analysis on the negative effects it could have on the EU companies and industries. In this context, the present study aims to analyze the main characteristics of Chinese investment and M&A in Europe, major policy issues between the two sides, the EU’s policy responses, and prospects of Chinese future investment in Eu-rope, going on to draw important lessons for Korea. To summarize the main characteristics of China's investment in Europe, the study found that the EU's share of China's overseas direct investment has continued to increase until recently. Second, investment in the Central and Eastern European Countries (CEECs) is gradually increasing, although it is still insignificant compared to the top five destinations in the EU: Netherlands, Sweden, Germany, Luxembourg and France. Third, China's investment in the EU is being made in pursuit of innovation in manufacturing and to acquire high-tech technologies. When it comes to China's M&A in Europe, the study found that the proportion of indirect China's M&As (via third countries (e.g. Hong Kong) or Chinese subsidiaries already established in Europe) was relatively higher than direct ones. Empirical factor analysis of investment also shows that China's investment in the EU is strongly motivated by the pursuit of strategic assets. Other factors such as institutional-level and regulatory variables are found to have no significant impact, or have an effect contrary to expectations. This suggests that China's investment in the EU is based on the Chinese government's growth strategy, and accompanies an element of national capitalism Today, It is highly expected that the COVID-19 pandemic will have a reorganizing effect on the global value chain (GVC) and Foreign investment regulation in the high-tech sector motivated by national security is emerging as a global issue as the US and the EU are tightening their control. As Korean companies are not free from the risk of falling under such regulations, a thorough and careful response is required. And for the Korean government, it is necessary to prepare legal and institutional measures regulating foreign investment in reference to the US and the EU.
- Topic:
- Foreign Direct Investment, Financial Crisis, European Union, Economy, Economic Growth, Global Value Chains, and COVID-19
- Political Geography:
- China, Europe, Asia, Korea, and United States of America
77. Migration as a Leverage Tool in International Relations: Turkey as a Case Study
- Author:
- Ayhan Kaya
- Publication Date:
- 01-2021
- Content Type:
- Journal Article
- Journal:
- Uluslararasi Iliskiler
- Institution:
- International Relations Council of Turkey (UİK-IRCT)
- Abstract:
- Immigration, foreign policy and international relations have become embedded fields of study over the last few decades. There is a growing stream of research stressing how foreign policy impacts international migration, and how past migration flows impact foreign policy. This article reveals how the Justice and Development Party government in Turkey has leveraged migration as a tool in international relations. Based on the application of the findings of three different Horizon 2020 research projects, this article will depict the ways in which various domestic and international political drivers have so far impacted Turkey’s migration policy and relationship with the EU.
- Topic:
- Diplomacy, Migration, Immigration, and European Union
- Political Geography:
- Europe, Turkey, and Asia
78. EU’s Global Actorness in Question: A Debate over the EU-Turkey Migration Deal
- Author:
- Fatma Yilmaz-Elmas
- Publication Date:
- 01-2021
- Content Type:
- Journal Article
- Journal:
- Uluslararasi Iliskiler
- Institution:
- International Relations Council of Turkey (UİK-IRCT)
- Abstract:
- Addressing a close relationship between the EU’s role as a global actor and migration management, this article covers the 2016 EU-Turkey migration deal and endeavors to go beyond simple criticism of its efficiency. Following a review of the relevant literature and critical analysis of recent migration management process, interviews with field experts and policymakers were utilized to assess the policy dilemmas of the EU’s approach to the pressure from migration. The pressure the EU has long been experiencing is not a challenge that can be solved by asymmetric cooperation with third countries, characterized by an ignorance of divergences in perceptions and expectations. This may have subsequent impact on the EU’s enlargement policy and thereby on the stability of the region.
- Topic:
- Migration, Regional Cooperation, European Union, and Refugee Crisis
- Political Geography:
- Europe, Turkey, and Asia
79. Gains Associated with Linking the EU and Chinese ETS under Different Assumptions on Restrictions, Allowance Endowments, and international Trade
- Author:
- Malte Winkler, Sonja Peterson, and Sneha Thube
- Publication Date:
- 05-2021
- Content Type:
- Working Paper
- Institution:
- Kiel Institute for the World Economy (IfW)
- Abstract:
- Linking the EU and Chinese Emission Trading Systems (ETS) increases the cost-efficiency of reaching greenhouse gas mitigation targets, but both partners will benefit – if at all – to different degrees. Using the global computable-general equilibrium (CGE) model DART Kiel, we evaluate the effects of linking ETS in combination with 1) restricted allowances trading, 2) adjusted allowance endowments to compensate China, and 3) altered Armington elasticities when Nationally Determined Contribution (NDC) targets are met. We find that generally, both partners benefit from linking their respective trading systems. Yet, while the EU prefers full linking, China favors restricted allowance trading. Transfer payments through adjusted allowance endowments cannot sufficiently compensate China so as to make full linking as attractive as restricted trading. Gains associated with linking increase with higher Armington elasticities for China, but decrease for the EU. Overall, the EU and China favor differing options of linking ETS. Moreover, heterogeneous impacts across EU countries could cause dissent among EU regions, potentially increasing the difficulty of finding a linking solution favorable for all trading partners.
- Topic:
- Climate Change, Environment, International Trade and Finance, Regional Cooperation, and European Union
- Political Geography:
- China, Europe, and Asia
80. Trade Liberalization along the Firm Size Distribution: The Case of the EU-South Korea FTA
- Author:
- Sonali Chowdhry and Gabriel Felbermayr
- Publication Date:
- 07-2021
- Content Type:
- Working Paper
- Institution:
- Kiel Institute for the World Economy (IfW)
- Abstract:
- How do firms of different sizes react to trade liberalization? Leading theories suggest that, amongst continuing exporters, lower trade costs should boost exports of smaller firms by the same or a greater rate than those of larger firms. However, studying the entry into force of the ambitious EU-South Korea Free Trade Agreement (EUKFTA) with French customs data, we find robust evidence to the contrary. Applying a triple-difference framework, we report that the FTA increased sales in the top quartile of continuous exporters by 71 percentage points more than in the bottom quartile. More than 90 percent of that growth premium is driven by a stronger effective reduction in broadly defined non-tariff barriers (NTBs); the remainder by a higher sensitivity to trade costs. These findings have implications for both heterogeneous firm trade models and for the capacity of FTAs to magnify inequality. In contrast, on the entry margins, our results are in line with the literature with the FTA selecting intermediate-sized firms into exporting to South Korea.
- Topic:
- International Cooperation, European Union, Trade Liberalization, and Trade
- Political Geography:
- Europe, Asia, and South Korea