Search

Begin New Search Topic Trade Political Geography Europe

91. How trade cooperation by the United States, the European Union, and China can fight climate change

Author:
Chad P. Bown and Kimberly Clausing
Publication Date:
10-2023
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
Recent efforts to reduce greenhouse gas emissions have revealed different policy priorities; the United States and China have emphasized subsidy-based approaches, and the European Union has emphasized carbon pricing. These divergent policy choices—some lowering energy costs, others raising them—raise concerns about industry competitiveness and have implications for upstream and downstream firms in supply chains. This paper identifies the trade tensions resulting from varying climate policy approaches and describes policy efforts to address them. It then describes the role of a rules-based trading system in tackling the challenges that these distinct policy approaches create, examining World Trade Organization (WTO) rules on subsidies, border measures, and export restrictions. The authors suggest that the United States, the European Union, and China prioritize reforms to those rules as a path forward for cooperation on trade and climate. Such an approach would be an important starting point toward creating a functioning multilateral system.
Topic:
Climate Change, European Union, Trade, Cooperation, and Energy
Political Geography:
China, Europe, and United States of America

92. EU–ASEAN: Shared Objectives, Severed Trust

Author:
Hosuk Lee-Makiyama
Publication Date:
07-2023
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
After 45 years of diplomatic dialogue, EU-ASEAN relations continue to dawdle, lacking real ambition or political will from either side to invest more in the relationship. Even after a recent upgrade in the relationship to a strategic partnership (and continued pressure from the business communities on both sides to do more),the potentialof the EU-ASEAN relationship is still not well understood by policymakers. Due to factors that are largely outside of EU’s control, the region-to-region engagement has settled on incrementalism on technical issues (like air transport) or selective bilateral engagement on trade and digital economy. Meanwhile, China has been making inroads with its Belt and Road Initiative; Japan leans on CPTPP and bilateral assistance, and the Biden administration has launched the IPEF. Due to the many trade disputes, it was no surprise that ASEAN granted strategic partner status to even Russia and New Zealand before considering the EU. The palm oil conflict with ASEANs largest democracies (Indonesia, Malaysia) has been allowed to escalate to a point where it can no longer be compartmentalised to a trade issue. The absence of actual economic injury among Malaysian and Indonesian farmers also proves that the palm oil conflict is not an economic issue that can be settled financially, but about high politics and a matter of principles. New EU legislation on due diligence for deforestation and corporate sustainability, market regulation on forced labour, carbon border adjustment measures, foreign subsidies, and data governance are likely to result in further retaliation and escalation. Rightly or wrongly, ASEAN democracies do not perceive that the EU has yet earned the right to be heard. Hence, the EU needs to be aware of how it projects its values and interests in the region, understanding that it does not command moral authority; or that ASEAN operates differently based on personal engagement between leaders and shared interests. Conversely, ASEAN leaders should not simply write off EU-engagement as a middle-management preoccupation due to its technical nature, but rather see the EU as a counterweight in the region. ASEAN as a collective can serve as a strategic and transformative instrument. Washington, Beijing, Tokyo, and even London, are all shifting their focus to the region, concluding that the race for influence over the Indo-Pacific ultimately boils down to influence over ASEAN.
Topic:
Foreign Policy, Diplomacy, European Union, Trade, and ASEAN
Political Geography:
Europe, Asia, and Indo-Pacific

93. European Economic Security and Access to Critical Raw Materials: Trade, Diversification, and the Role of Mercosur

Author:
Oscar Guinea and Vanika Sharma
Publication Date:
07-2023
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
Access to secure and stable supply of critical raw materials (CRMs) is vital for Europe’s economic security. These raw materials, which are indispensable inputs for Europe’s modernisation, are supplied by a handful of countries. Among them, China and Russia are two of the most important European suppliers of CRMs. This dependency leaves the EU exposed to Chinese and Russian policies that may harm Europe’s economic and political interests. The European Commission has recently proposed a Critical Raw Materials Act with the objective of increasing domestic production of strategic raw materials (SRMs) – a subset of CRMs vital for the energy and digital transitions. However well-intentioned, most of the policies in the Act – which aim at producing more SRMs in Europe – are a red herring. While the EU needs to reduce its vulnerable dependence on some countries, the politics about the supply of CRMs have become hostage to manufacturing fetish, import-substitution ideas, and companies who want governments to subsidise their investments and growth. In reality, getting substantial amounts of Europe-produced SRMs to market will take years – if not decades – and new mines will face significant legal and environmental resistance. It is simply not realistic to expect that higher domestic production in the EU will reduce Europe’s current dependency on imported SRMs anytime soon. If it is economic security and reduced vulnerabilities that Europe wants, a different strategy is needed. There is a better alternative. Trade dependencies of CRMs can only be fought with more trade. One option exist already: the EU could diversify its supplies of CRMs away from China and Russia by trading more with other exporters of CRMs. Mercosur is an obvious partner to achieve this goal. Brazil, a member of Mercosur, is the largest supplier of SRMs to the EU by volume and the Mercosur countries are democratic market economies that are seeking deeper relations with Europe. To encourage trade and investment in CRMs across both regions, the EU-Mercosur Association Agreement includes binding provisions that will place the bilateral trade and investment relations under a more certain institutional arrangement. Other policies, such as those included in the EU’s CRM Act, can only complement but not substitute for a trade-oriented strategy to improve the structure of SRM supply.
Topic:
Treaties and Agreements, European Union, Trade, Economic Security, Mercosur, and Raw Materials
Political Geography:
Europe

94. Online Platform Regulation and Investment Attractiveness: A Look at the EU, the UK and Impacts on Small Open Economies

Author:
Matthias Bauer, Vanika Sharma, and Oscar du Roy
Publication Date:
08-2023
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
Small trade- and investment-oriented economies like the United Kingdom (UK) should carefully consider whether to regulate online platform services based on presumptions rather than evidence that consumers are being harmed. Flimsily enforced platform regulation can have a chilling effect on investments in business expansion and innovation, particularly in technology-adopting industries. Several countries around the world are designing new competition policies that specifically target large digital platforms. The theory behind these policies is grey. There are political concerns about the impact of various aspects of platforms on society, especially regarding the collection and safety of data. However, practices that harm consumers – traditionally a key motivation of competition enforcement – are very rare. Indeed, the success stories of large tech platforms demonstrate that they offer strong benefits and conveniences to millions of business users across a wide range of industries. Marginal costs of supply, high-quality services, continuous technological advancements, and platforms’ ability to drive productivity growth have enabled especially small businesses to thrive and compete in domestic and international markets. Against this background, it is highly questionable why some governments, with the backing of power-seeking competition regulators, are aiming to legally interfere in services provided by large technology companies. An important consequence that has so far received little attention from policymakers and competition authorities is the impact of platform regulation on a country’s investment attractiveness. It is obvious that bans and restrictions on corporate conduct cause regulated companies to abstain from investments and establish new business elsewhere. What is less clear is the effect of regulation on investments by companies that extensively adopt platform services to reduce costs, speed-up innovation, and expand market opportunities. In this policy brief, we argue that access to integrated and internationally traded platform services is increasingly important for a country’s investment attractiveness, even more so for smaller countries. Access to advanced technologies and the utilisation of network effects create a virtuous cycle of economic opportunities, investments, value creation, and trade. Discretionary and presumption-based competition enforcement, as adopted in the EU, risks hurting smaller countries in particular. The EU has chosen the path of proscriptive and protective policymaking with the DMA to achieve industrial and trade policy goals rather than defending competition in the Single Market. UK competition policy risks being driven by institutional interests and ideological considerations, which could potentially lead to the adoption of a regulatory landscape that is even more restrictive than that of the EU, undermining Britain’s ambitions for economic and innovation leadership.
Topic:
Markets, European Union, Regulation, Economy, Investment, Trade, and Online Platforms
Political Geography:
United Kingdom and Europe

95. The Art of the Mini-Deals: The Invisible Part of EU Trade Policy

Author:
Lucian Cernat
Publication Date:
10-2023
Content Type:
Working Paper
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
Trade policy is usually defined by the kinds of deals it can strike. Typically, the attention is focussed either on big multilateral trade rounds or on bilateral free trade agreements (FTAs). This policy brief goes beyond the conventional wisdom and sheds light on other trade agreements (trade mini-deals), which so far were less in the focus of EU trade experts and academics. The paper offers a preliminary assessment and a taxonomy of these trade mini-deals. The main takeaway is that there is a lot more going on than what meets the eye when it comes to EU trade policy. In reality, FTAs are just the tip of the trade policy iceberg. When taking a systematic look, it becomes apparent that FTAs are only one of the many trade policy instruments. Apart from FTAs, the EU has signed a much larger number of trade mini-deals that have, potentially, a significant impact on EU trade. The paper concludes with a short assessment of the role such mini-deals could play in the future, given the evolving nature of trade policy objectives and the growing complexity of international trade negotiations.
Topic:
Globalization, Treaties and Agreements, European Union, Trade, and WTO
Political Geography:
Europe

96. The Imperative of International Cooperation for EU Competitiveness and Resilience in Technology-Driven Industries

Author:
Matthias Bauer, Renata Zilli, and Dyuti Pandya
Publication Date:
11-2023
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
The EU must embrace international cooperation and collaboration in technology-driven industries to ensure competitiveness and global relevance, while also considering the drawbacks of isolationist policies. The EU’s commitment to open markets and global cooperation has historically been its strength, and EU policymakers should continue to prioritise on these principles. Global markets, international R&D collaboration and global industry-led standards are crucial for innovation and efficiency in technology-intensive industries. Various sectors, including pharmaceuticals, ICT, aerospace, and defence, heavily rely on global partnerships to stay competitive and advance technologically. International cooperation in economic and security affairs, as exemplified by EU participation in global value chains of advanced semiconductors, the traditional EU approach to industry-led technology standardisation, and EU involvement in the international F-35 fighter development program, is critical for leveraging industry expertise, sharing technological advancements, and collectively addressing challenges in strategic sectors, thereby enhancing Europe’s economic resilience and security capabilities. Trust and legal certainty form the foundation for international partnerships in high-tech and defence sectors. Collaborations among like-minded partners enable secure information sharing, intellectual property protection, financial commitments, and compliance with regulations, while ensuring adherence to key EU values like human rights and the rule of law.
Topic:
International Cooperation, Science and Technology, European Union, Trade, Resilience, and Competition
Political Geography:
Europe

97. Climate Change and Trade to the EU Priority Sectors for Policy Intervention in South Africa

Author:
Jason F. Bell, Sumayya Goga, and Nishal Robb
Publication Date:
07-2023
Content Type:
Policy Brief
Institution:
Centre for Business and Development Studies (CBDS), Copenhagen Business School
Abstract:
The deepening climate crisis has resulted in countries instituting a range of measures to curb emissions. The European Union (EU) has the most advanced climate policies, captured under the umbrella of its European Green Deal (EGD). While many of the measures being implemented impact countries within the EU, the measures are expected to impact Europe’s trading partners. The impacts on trading partners is occurring through changing regulations and policies such as the Carbon Border Adjustment Mechanism (CBAM), shifting consumer preferences, and impacts through value chains as a result of changing competitiveness of end products. EGD policies are forcing trading partners to the EU to adjust and decarbonise production processes, measure and report on emissions and other sustainability criteria, and, in some cases, even transform sectors to retain market share (the move towards electric vehicles). These policies include, among others, carbon taxes through the CBAM, the move towards electric vehicles in order to curb emissions, and a range of measures within the food sector. Together, these policies bring significant changes in the global trading system and the functioning of value chains. The costs associated with adjusting to these policies are high. Furthermore, these costs need to be borne by developing countries over and above the adaptation costs.
Topic:
Foreign Policy, Climate Change, Development, European Union, and Trade
Political Geography:
Africa, Europe, and South Africa

98. The Comeback of Industrial Policy. The Next Geopolitical Great Game

Author:
Alessandro Gili, Davide Tentori, and Paola Magri
Publication Date:
12-2023
Content Type:
Special Report
Institution:
Italian Institute for International Political Studies (ISPI)
Abstract:
Industrial policies are the key element underlying today’s geopolitical scramble and a pillar of national security. Reacting to Western weaknesses and bottlenecks in the global supply chains, highlighted by multiple shocks such as the pandemic, the war in Ukraine, and the recent Israel-Hamas war, the US in first place and the EU later have started to introduce new industrial legislation aimed at making up for lost ground with respect to other industrial powerhouses, such as China. Besides being policy tools to accelerate the green and digital transitions, however, the US Inflation Reduction Act and the Net Zero Industry Act, as well as the US and the EU Chips Acts, entail subsidies, local content requirements and export controls targeted at strengthening the domestic industrial base for critical technologies, fostering strategic autonomy and de-risking from excessive foreign dependencies. This race poses risks for the weaponisation of industrial policies and fragmentation of international trade and also potentially jeopardises technological development. How can we strike a balance between economic security and efficiency? Which sectors are the most critical and which ones are the leading global powers pursuing? What will the consequences be for global value chains and international trade? Is it possible to reach an agreement on rules for a new level playing field to prevent economic competition turning into economic warfare?
Topic:
Development, Industrial Policy, National Security, Science and Technology, European Union, Geopolitics, Trade, and Supply Chains
Political Geography:
China, Europe, and United States of America

99. 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

100. State Aid, R&D, and the Digital Content of Trade

Author:
Chiara Castelli, Dario Guarascio, Stefan Jestl, and Robert Stehrer
Publication Date:
11-2023
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
We test for the role of state aid as a driver of digital competitiveness at the industry level, focusing on the digital factor content of trade. Results show that state aid may increase digital competitiveness, particularly in R&D-intensive industries and in relation to the export of (digital) capital-intensive goods and services. Interestingly, aggregate state aid appears to be more effective than specific R&D funds in explaining the performance of country-industries in foreign markets.
Topic:
International Trade and Finance, European Union, Trade, Industry, Capital, and Research and Development
Political Geography:
Europe