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1. Carbon leakage through supply chain adjustments

Author:
Hanyi Wang
Publication Date:
01-2025
Content Type:
Working Paper
Institution:
German Institute of Development and Sustainability (IDOS)
Abstract:
This paper examines carbon leakage through supply chain recalibration in response to European carbon policies. Using input-output data and a high-frequency identification approach for carbon policy shocks, this paper investigates whether stringent carbon regulations in Europe affect the imports of carbon-intensive inputs from major emerging economies lacking similar policies. The findings reveal a temporary increase in the rate of change of imports from emerging countries relative to all inputs in the carbon-intensive sectors following carbon policy shocks, with effects peaking after two years before dissipating. While not directly quantifying emissions transfer, this study suggests some evidence of short-term input substitution patterns consistent with carbon leakage through international supply chains.
Topic:
Carbon Emissions, Imports, and Supply Chains
Political Geography:
Europe

2. The e-commerce challenge: Is importing low-value consignments going to become more cumbersome in the EU and the US?

Author:
Anna Jerzewska
Publication Date:
04-2025
Content Type:
Working Paper
Institution:
European Policy Centre (EPC)
Abstract:
In the last few months, terms such as e-commerce and de minimis (threshold below which imported goods are not subject to tariffs) have made headlines both in the EU and in the US. The rapid growth of e-commerce exacerbated problems with this exemption both in the US and in the EU. The first problem is lack of control. Only a percentage of commercial goods are subject to physical border checks, and for e-commerce goods this number is even smaller. Then there is the issue of endangering the level-playing field. De minimis benefits consumers and businesses that rely on it, but harms domestic manufacturers and retail outlets that import in bulk (and thus are subject to full customs and product standards and safety requirements). But can the challenges around the rapid growth of e-commerce be solved by the removal of de minimis? And what would be the consequences of removing the exemption? The paper summarises recent attempts and proposals of removing de minimis in the EU and the US and the challenges faced by both administrations. In both cases, e-commerce is still under discussion and it’s not clear what the final solution will look like. However, there are already noticeable differences in approach.
Topic:
European Union, Trade, Imports, and E-Commerce
Political Geography:
Europe, North America, and United States of America

3. When Life Gives You Lemons: How EU Citrus Standards Can Limit Trade

Author:
Trinity Johnson
Publication Date:
04-2024
Content Type:
Journal Article
Journal:
Journal of Public and International Affairs (JPIA)
Institution:
School of Public and International Affairs (SPIA), Princeton University
Abstract:
In the early 2000s, the European Union (EU) created multiple standards on agricultural imports. This paper focuses on the effect of stricter maximum residue limits (MRLs) for pesticides on citrus fruit exports to the EU after the limits went into effect in 2005. Using a regression model on overall citrus fruit exports and an interaction term for country-level income, the data shows that the EU’s stricter MRLs hurt exports from high-income, lower-middle-income, and low-income countries. Exports from low-income countries declined the most after 2005, while only upper-middle-income countries saw an increase in exports. For product-specific models, low-income countries saw a reduction in exports to the EU for all citrus fruits, while results varied by fruit for other income classifications. The results of these models demonstrate that the EU’s tightened pesticide regulation hurt low-income countries the most. While the regulation is meant to maintain a standard of food quality in the EU, its impact on low-income countries raises important questions about the unintended effects of import regulations. The EU could maintain its quality of food while alleviating the burden on low-income countries by relaxing its MRL standards or by providing more assistance to developing nations to meet its standards.
Topic:
Agriculture, European Union, Regulation, and Imports
Political Geography:
Europe

4. Openness as Strength: The Win-Win in EU-US Digital Services Trade

Author:
Matthias Bauer, Dyuti Pandya, and Oscar du Roy
Publication Date:
03-2024
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
The discourse surrounding the EU’s supposed over-reliance on digital services imports from non-EU countries, particularly the US, has been a recurrent topic among some political circles. However, this viewpoint tends to oversimplify and misrepresent the nuanced and complex reality of the EU’s status within the global Information and Communication Technology (ICT) sector and digitally enabled trade. A thorough analysis of trade data and trends clearly illustrates that the EU’s engagement with foreign (non-EU) digital services, notably from the US, represents a strategic economic advantage, bolstering Europe’s competitiveness and fostering productivity growth. Below we underline the critical importance of openness to foreign innovation and technology diffusion for the EU’s economic future.
Topic:
European Union, Digital Economy, Strategic Competition, Imports, and Productivity
Political Geography:
Europe, North America, and United States of America

5. How to de-risk: European economic security in a world of interdependence

Author:
Jean Pisani-Ferry, Beatrice Weder di Mauro, and Jeromin Zettelmeyer
Publication Date:
05-2024
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Pandemic-related supply disruptions, the energy crisis provoked by Russia’s invasion of Ukraine and economic coercion by China have put economic security high on the European Union policy agenda. The question is how exactly the EU should ‘de-risk’ its external economic relationships without foregoing the benefits of trade. The standard answer is that it should identify product-level trade dependencies, mainly on the import side, and reduce them, mainly through diversification of suppliers, while otherwise maintaining maximum trade integration. This Policy Brief argues that this answer falls short. First, product-level dependencies cannot be identified reliably even with sophisticated analysis and data. As a result, both ‘missed dependencies’ and ‘false positives’ are inevitable. Second, external shocks and coercion could be propagated through exports, productive assets held abroad and financial channels as much as through imports. The analysis has five main implications Import de-risking should focus on a few product categories for which the costs of supply interruptions would be unquestionably large. This reduces false positives. De-risking and/or buffers to deal with exports and financial coercion require more attention. De-risking must be complemented by raising resilience against all shocks, whatever theirorigin. This requires a deeper and broader European single market. De-risking and resilience must be complemented by deterrence. A sufficiently high probability of chronic trade conflict – or one very large conflict – may justify reducing overall integration with a large trading partner, on both the export andimport sides. EU economic security policies have been right to emphasise the reduction of import dependence on chips and critical raw materials, and the creation of a powerful legal instrument to deter coercion (the Anti-Coercion Instrument). In most other respects, there is room for improvement.
Topic:
European Union, Risk, Trade, Imports, Economic Security, and Interdependence
Political Geography:
China and Europe

6. Using the financial system to enforce export controls

Author:
Benjamin Hilgenstock, Elina Ribakova, Guntram Wolff, and Anna Vlasyuk
Publication Date:
04-2024
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
Russian imports of battlefield goods that are subject to export controls, including from Western producers, have surged since mid-2022 and reached levels close to those prior to Russia’s full-scale invasion of Ukraine. Russia thus continues to be able to acquire critical foreign components that it needs for its military industry. These imports occur via mainland China, Hong Kong, Turkey and the United Arab Emirates, while other countries including Armenia, Georgia, Kazakhstan and the Kyrgyz Republic have also seen massive increases in imports from the EU and other coalition countries that likely end up in Russia. The implementation and enforcement of export controls faces major challenges, which are multifaceted and centre around complex supply chains, lack of transparency in documentation and opaque financial structures. The issues are familiar from anti money laundering (AML) and countering financing of terrorism (CFT) frameworks, where much progress has been made in the last two decades. A similar approach could help in rendering export controls effective. We propose: First, financial institutions could be tasked to play a role in the monitoring of the trade in export-controlled goods and the blocking of illicit transactions, building on their experience with due diligence in financial transactions. Second, non-financial companies could learn from banks’ efforts in the AML/CFT sphere to implement proper due-diligence procedures and to ensure export controls compliance. Public-sector investigations and appropriate fines are critical to increase the incentives for firms to act. Technology sanctions are going to be part of the economic statecraft toolbox for the foreseeable future. The Russia case will test their effectiveness and credibility, or lack thereof.
Topic:
Sanctions, European Union, Exports, Trade, Imports, Financial Systems, and Russia-Ukraine War
Political Geography:
Russia and Europe

7. Smarter European Union industrial policy for solar panels

Author:
Ben McWilliams, Simone Tagliapietra, and Cecilia Trasi
Publication Date:
02-2024
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
The European Union plans a major increase in solar PV capacity from 263 GW today to almost 600 GW by 2030. If nothing changes, this expansion will be based almost exclusively on solar panels imported from China, which supplies over 95 percent of solar panels used in the EU. This dependence has raised concerns about EU economic security and geopolitical vulnerabilities, especially in light of recent global disruption. The EU has agreed in principle a non-binding 40 percent self-sufficiency benchmark for solar panels and other identified strategic technologies, to be approached or achieved by 2030. However, for the solar sector specifically, there is no strong economic justification for an import-substitution approach. Such a strategy risks increasing the costs of solar panels, slowing deployment and creating industries that are over-reliant on subsidies. EU solar manufacturing subsidies are not appropriate based on criteria of European production alone. Subsidies could, however, be justified on innovation grounds, by supporting new solar products that have a real chance to develop into sustainable industries that contribute to climate goals. To address concerns about short-term dependence, alternative tools should be employed: accelerated solar deployment, strategic stockpiling and gradually diversifying import sources. In the longer term, recycling of solar panels deserves greater attention and funding. In terms of strengthening economic resilience relative to China, Europe should implement an industrial policy that intervenes in sectors that are more likely to contribute to sustainable economic growth and alleviate decarbonisation bottlenecks.
Topic:
Industrial Policy, European Union, Imports, Solar Power, Economic Security, and Energy Transition
Political Geography:
Europe

8. Russian Company Elmak Procures “High Priority” Items for Russia’s War Efforts via China

Author:
David Albright and Spencer Faragasso
Publication Date:
06-2024
Content Type:
Special Report
Institution:
Institute for Security and International Studies (ISIS)
Abstract:
Russian weapons, including bombs, missiles, and drones, depend on crucial electronic components, such as field programmable gate arrays (FPGA) and microcontrollers, many of which cannot be made by Russia. In many cases, produced only by Western companies, these essential components are being sourced by Russian electronics importers and trading companies in large quantities from, foremost, China. The Russian trading company Elmak LLC, aka Kometa LLC, has imported over $5 million of Western electronic goods, almost entirely via China. Over 90 percent of the items fall under Tier 1 of the Bureau of Industry and Security and European Union List of Common High Priority Items banned for export to Russia and at heightened risk of being diverted to Russia illegally due to “their importance to Russia’s war efforts.” China’s lack of action to prevent these sales justifies NATO’s recent labeling China as a “decisive enabler of Russia’s war against Ukraine,” 1 adding weight to calls for the application of more sanctions against Chinese suppliers and enabling banks. But U.S. and other Western companies need to do more. They should not ship to China any electronics known to be used in weapons against Ukraine. U.S. companies should show greater due diligence on the final use and end users of their products and simplify supply chains to prevent unauthorized transfers of electronics with restricted Harmonized System (HS) codes. At the very least, companies should agree not to export the most important electronic items to China, which have been identified in Russian weapons downed in Ukraine. Otherwise, as the war continues, with more U.S and other Western manufacturers’ electronics found in Russian weapons in Ukraine after causing casualties and destruction, these manufacturers look increasingly insensitive and powerless against their own complicity in supporting Russia’s illegal war.
Topic:
Sanctions, Weapons, Trade, Imports, and Russia-Ukraine War
Political Geography:
Russia, China, Europe, and Ukraine

9. The end of combustion engines: the cart before the horse!

Author:
Natalie Colin-Oesterlé
Publication Date:
05-2023
Content Type:
Working Paper
Institution:
Robert Schuman Foundation (RSF)
Abstract:
The European Union is often accused of being the great naïve of globalisation, imposing the highest standards on its companies but importing goods from third countries that do not meet them. In recent years, the paradigm has been changing: the introduction of a carbon tax on its borders, an energy roadmap to end our dependence on Russian fossil fuels (REPowerEU), and the beginnings of a European preference in the fields of defence and space for example. While this metamorphosis is real in some sectors, there are others where the European Union has chosen the opposite path. This is unfortunately the case for the automotive industry. After some last-minute changes, the Council formally adopted on 28 March, the new CO2 emissions standards for new cars and vans. From 2035 onwards, only new 100% electric and hydrogen fuel cell powered vehicles for private and commercial use will be allowed to be sold on the European market. Petrol, diesel, E85, LPG, CNG and hybrids, even rechargeable ones, will be banned from sale. This decision will have a major impact on an industry that generates 12.5 million jobs in Europe, including nearly 400,000 direct jobs in France.
Topic:
Budget, European Union, Carbon Tax, Imports, and Energy
Political Geography:
Europe

10. Corking Russian Gas: Global Economic and Political Ramifications

Author:
Scott Semet
Publication Date:
08-2023
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Awarm winter in 2022–2023, a purposive decline in consumption that caused the economy to cool, and frantic efforts to attract supplies of liquefied natural gas (LNG) obscured Europe’s enduring reliance on cheap Russian gas for economic growth. European winters will not always be warm, and there is not enough LNG to replace Russian gas in the short term. Efforts to wean Europe from Russian gas permanently defy economic logic. Should policymakers choose to do so, it would carry costs not only for Europe but also for the United States and the rest of the world.
Topic:
Gas, Economic Growth, Imports, Energy, and Regional Politics
Political Geography:
Russia, Europe, and United States of America