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1. Reconciling the European Union’s clean industrialisation goals with those of the Global South

Author:
Ben McWilliams, Simone Tagliapietra, and Jeromin Zettelmeyer
Publication Date:
07-2025
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Clean industrialisation is a political and economic priority for the European Union. For it to work, affordable clean energy is needed. However, producing this energy in Europe is constrained by limited renewable energy endowments (sunshine and wind) and land availability, while the transportation costs for imported clean energy (in the form of electricity or hydrogen) are much higher than for fossil fuels. An alternative way to fuel Europe’s clean industrial sector would to import energy-intensive primary tradeable products such as ammonia, methanol and reduced iron. We estimate that more than ten percent of total future EU clean energy demand will be met by such products. Public policy in Europe should aim to facilitate trade in energy-intensive intermediate inputs, which are cheaper to import than energy directly. Imports of these inputs could boost the competitiveness of downstream stages in the energy-intensive value chain (such as steel production). By lowering overall energy demand and thus electricity prices, such imports would also raise EU competitiveness more broadly. In many cases, they would replace imports of less energy-intensive commodities such as iron ore, therefore not adding to Europe’s overall import dependency. The direct economic impact in terms of jobs and value added that would be offshored is not substantial. The international benefit of such a strategy would be that it would embed third countries – especially emerging and developing economies – into clean industrial value chains. Stable European demand can help such countries develop export-driven, clean industrial strategies. Politically, this could be an important incentive that could offset the EU’s carbon border adjustment mechanism. Governments should therefore not use taxpayer money to fight the relocation of energy-intensive and tradeable primary products, beyond some minimum threshold that is desirable for economic security and innovation reasons. Meanwhile, ongoing negotiations with third countries to establish Clean Trade and Investment Partnerships should put trade in energy-intensive clean products at the core of new international clean supply chains.
Topic:
Industrial Policy, European Union, Global South, Industrialization, Decarbonization, Energy, and Emerging Economies
Political Geography:
Europe

2. The Anti-Circumvention Instrument: Another Roadblock on the Investment Development Path?

Author:
Weihuan Zhou and Victor Crochet
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
Centre for Trade and Economic Integration, The Graduate Institute (IHEID)
Abstract:
Companies from emerging economies, and China in particular, have started internationalizing their production operations. In doing so, they are following the same path as that taken by American, European and East Asian corporations before them, by setting up factories in third countries to serve their export markets from closer locations and produce more efficiently. Thus, it is no longer only developed countries’ multinationals which are moving their operations to developing countries, but emerging market companies that are increasingly engaging in production abroad. This phenomenon is having beneficial effects in countries where these companies invest and might help them start their own industrialization process. Yet, it has attracted the ire of developed countries, in particular the European Union. They are now targeting these downstream production plants abroad by using the so-called anti-circumvention instrument, resulting in trade defence duties imposed on the parent companies being extended to their foreign subsidiaries. This application of the anti-circumvention instrument departs from its historic rationale and might hinder the development of countries in need of foreign investment. Therefore, affected governments should consider taking international legal action to bring developed countries to the negotiating table to put a halt to this abuse of the anti-circumvention instrument.
Topic:
Development, Industrial Policy, Investment, Trade, Internationalization, Production, Emerging Economies, and Anti-Circumvention Instrument
Political Geography:
China, Europe, Global Focus, and United States of America

3. German Economy in Winter 2023: Public budget under stress – Recovery faces headwinds

Author:
Jens Boysen-Hogrefe, Dominik Groll, Timo Hoffmann, Nils Jannsen, Stefan Kooths, Nils Sonnenberg, and Vincent Stamer
Publication Date:
12-2023
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
The German economy is struggling to emerge from stagnation. GDP is likely to increase again in 2024, but the economic momentum will remain low. The strong growth in real disposable income will boost private consumption. However, the increases in interest rates continue to weigh on construction investment and there are no signs of large impulses from the world economy ahead. Moreover, the fiscal consolidation because of the Federal Constitutional Court's judgement on the supplementary budget for 2021 will slow economic expansion. There is uncertainty regarding the exact structuring of the reductions in expenditure as well as their economic impact. In the forecast, the additional savings will reduce growth in GDP by around 0.3 percentage points in 2024. Overall, we now expect GDP to increase by 0.9 percent in the coming year and thus at a slower pace than in our autumn forecast (1.3 percent). In 2025, economic output is likely to increase by 1.2 percent (autumn forecast: 1.5 percent). The decline in the current year of 0.3 percent will be slightly lower than expected in the autumn (-0.5 percent). Inflation has fallen significantly. For the next two years, we expect rates of 2.3 percent (2024) and 1.8 percent (2025), after 5.9 percent in the current year. The low economic momentum is leaving its mark on the labour market. However, demographic change and the associated shortage of skilled labour are counteracting this. The government's financing deficit is expected to fall from 2.5 percent relative to GDP in 2022 to 0.7 percent in 2025. The debt level will fall from 66.1 percent to 62.4 percent in the same period.
Topic:
Monetary Policy, GDP, Economy, Business, Energy Crisis, and Emerging Economies
Political Geography:
Europe and Germany

4. World Economy Winter 2022: Strong headwinds for global economic activity

Author:
Klaus-Jurgen Gern, Stefan Kooths, Ulrich Stolzenburg, Jan Reents, and Nils Sonnenberg
Publication Date:
12-2022
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Global growth has decelerated over the course of the year under the impact of high energy prices and great uncertainty. Monetary policy, which is being tightened very quickly in view of high inflationary pressure across the board, is now also putting a drag on economic activity. Overall, production remained on an upward trend into the fall, with impetus coming from easing supply bottlenecks and the continuing normalization of activity in those sectors of the economy particularly affected by the Covid-19 pandemic. Towards the end of the year, however, economic momentum weakened noticeably further. The major advanced economies in particular are currently facing a period of weak economic activity despite considerable fiscal support measures. At the same time, the problems for the Chinese economy remain significant. While global output (measured on a purchasing power parity basis) at 3.2 percent is expected to grow by 0.3 percentage points more this year than expected in September, we continue to forecast an increase of only 2.2 percent next year. For 2024, our expectation has even been reduced slightly to 3.2 percent, mainly because we do expect the US economy to recover slowly. Inflation is likely to have peaked and is expected to slow significantly over the forecast horizon thanks to lower commodity prices and easing economic tensions. However, underlying inflation is not likely to return to target levels until the end of the forecast period.
Topic:
Monetary Policy, Economy, Business, COVID-19, and Emerging Economies
Political Geography:
China, Europe, Asia, North America, and United States of America

5. German Economy Winter 2022: Inching through the energy crisis

Author:
Jens Boysen-Hogrefe, Dominik Groll, Nils Sonnenberg, Nils Jannsen, Stefan Kooths, Vincent Stamer, and Timo Hoffmann
Publication Date:
12-2022
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
Wholesale prices for gas and electricity have fallen significantly in recent months - even though they are still at a high level. In addition, the burdens on private households and companies caused by high energy costs are to be cushioned by so-called price brakes. Overall, inflation in 2023 will be much lower at 5.4 percent than we had expected in our autumn forecast (8.7 percent). Although real disposable income and, as a result, private consumption are likely to decrease next year, the decline will be much smaller than had been expected a few months ago. As a result, we now expect a slight increase in GDP of 0.3 percent for 2023 (autumn: -0.7 percent). In 2024, GDP is expected to grow somewhat more strongly again at 1.3 percent (autumn: 1.7 percent). The labour market is robust despite the economic slowdown, partly because companies are still desperately seeking skilled workers. The public fiscal balance is likely to deteriorate significantly in 2023 due to the aid packages in response to the energy crisis and displays a deficit of around 4 percent relative to GDP. With the expiry of the aid packages, the deficit will decrease again in 2024.
Topic:
Economics, Monetary Policy, Budget, Business, Labor Market, Energy Crisis, Emerging Economies, and Advanced Economies
Political Geography:
Europe and Germany

6. World Economy Autumn 2022: Global growth falters

Author:
Klaus-Jurgen Gern, Stefan Kooths, Ulrich Stolzenburg, Jan Reents, and Nils Sonnenberg
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
In spring 2022, world economic growth came to a standstill amid high inflation, persistent supply bottlenecks and elevated uncertainty. In many countries real wages are declining significantly dampening private consumption even though extra savings accumulated during the pandemic are still available to mitigate the adverse impact to some extent. At the same time financial conditions have also deteriorated as central banks tightened their policies. In China, the strict zero-covid policy and problems in the real estate sector are slowing economic activity. Against this backdrop, the outlook for the global economy has deteriorated further. We have, again, lowered our forecast and are now expecting global output to increase by only 2.9 percent this year and 2.2 percent next year (calculated on a purchasing power parity basis). The forecast assumes that commodity prices will gradually decline in line with forward prices, which will over time reduce the upward pressure on prices and provides the foundations for an economic upturn in 2024. However, the pass-through of higher commodity prices into consumer prices is probably not yet complete and wage increases are likely to intensify in many countries. Consequently, underlying inflation is likely to remain higher than in the years before the Covid crisis and remain above central bank targets over the forecast horizon.
Topic:
Monetary Policy, Business, COVID-19, Zero-COVID, Emerging Economies, and Advanced Economies
Political Geography:
China, Europe, Asia, North America, and United States of America

7. Operationalizing Growth Models

Author:
Lucio Baccaro and Sinisa Hadziabdic
Publication Date:
10-2022
Content Type:
Working Paper
Institution:
Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo)
Abstract:
We present a new methodology for operationalizing growth models based on importadjusted demand components. Applying the methodology to the latest release of OECD Input-Output Tables, we calculate the growth contributions of consumption, investment, government expenditures, and exports for sixty-six countries in the periods 1995 to 2007 and 2009 to 2018 and identify the respective growth models. We find that most countries are export-led or domestic demand-led and that other forms of growth are rare. Our results corroborate previous classifications in comparative political economy but also differ from them in significant respects. Importantly, our classification improves on previous ones by covering not just the advanced capitalist economies but also Central and Eastern European and South-East Asian and Latin American countries. In a further step, we illustrate how the new indicators can be used to analyze the “drivers” of different types of growth. This examination reveals that there is a clear trade-off between consumption- and export-led growth in advanced Western economies in the period 1995 to 2007 and a dependence of export-led growth in these countries on real exchange rate devaluation in the same period, while export complexity is not a significant predictor of export-led growth.
Topic:
Political Economy, Economy, Economic Growth, Exports, and Emerging Economies
Political Geography:
Europe, Latin America, and Southeast Asia