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1. The Economic Consequences of Globalisation in the United States

Author:
Peter Petri and Meenal Banga
Publication Date:
01-2020
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
The unprecedented rise in global interdependence since World War II, especially since the 1970s, has been very productive. World gross domestic product (GDP) growth increased from around 2% per year in the 1970s to 4% per year before the global financial crisis. Globalisation helped to lift a billion people from extreme poverty and improved the lives of billions more. The United States also gained an estimated 11%–19% of its annual GDP. Yet many Americans are concerned about the fairness of these gains. We review evidence of increasing wage inequality and stubborn unemployment effects, even though, on balance, technological change has had a much greater impact on these outcomes than globalisation. Barriers against globalisation do not offer solutions to inequality – they reduce the size of the economic pie without necessarily improving its distribution. Policies should focus on redistributing gains from growth, increasing the productivity of all workers, and helping affected communities adapt socially and economically to rapid change.
Topic:
Globalization, Financial Crisis, Inequality, and Economic growth
Political Geography:
United States and North America

2. Implications of Foreign Direct Investment, Capital Formation and its Structure for Global Value Chains

Author:
Amat Adarov and Robert Stehrer
Publication Date:
11-2019
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
In the age of globalisation, international trade and foreign direct investment (FDI) have become integral elements of cross-country production sharing. In this paper we empirically assess the impact of FDI, as well as capital dynamics and structure, on the formation of global value chains (GVC) and trade in value added at country and sectoral levels based on a database constructed for a sample of European countries over the period 2000-2014. The analysis reveals that inward FDI is especially conducive to the formation of backward linkages while outward FDI facilitates forward GVC participation, especially in high-tech manufacturing sectors. A particularly robust influence of FDI and capital accumulation on GVC integration is identified in the textile and clothing industry. While capital accumulation in general intensifies GVC linkages for most sectors, ICT capital appears to be especially instrumental for backward integration of electrical and transportation equipment sectors.
Topic:
Globalization, International Trade and Finance, Foreign Direct Investment, Trade, and Global Value Chains
Political Geography:
United States, Japan, and Europe

3. Weaponized Interdependence: How Global Economic Networks Shape State Coercion

Author:
Henry Farrell and Abraham L. Newman
Publication Date:
07-2019
Content Type:
Journal Article
Journal:
International Security
Institution:
Belfer Center for Science and International Affairs, Harvard University
Abstract:
Liberals claim that globalization has led to fragmentation and decentralized networks of power relations. This does not explain how states increasingly “weaponize interdependence” by leveraging global networks of informational and financial exchange for strategic advantage. The theoretical literature on network topography shows how standard models predict that many networks grow asymmetrically so that some nodes are far more connected than others. This model nicely describes several key global economic networks, centering on the United States and a few other states. Highly asymmetric networks allow states with (1) effective jurisdiction over the central economic nodes and (2) appropriate domestic institutions and norms to weaponize these structural advantages for coercive ends. In particular, two mechanisms can be identified. First, states can employ the “panopticon effect” to gather strategically valuable information. Second, they can employ the “chokepoint effect” to deny network access to adversaries. Tests of the plausibility of these arguments across two extended case studies that provide variation both in the extent of U.S. jurisdiction and in the presence of domestic institutions—the SWIFT financial messaging system and the internet—confirm the framework's expectations. A better understanding of the policy implications of the use and potential overuse of these tools, as well as the response strategies of targeted states, will recast scholarly debates on the relationship between economic globalization and state coercion.
Topic:
International Relations, Globalization, Information Age, Global Security, and Weapons
Political Geography:
United States and Global Focus

4. Developing a More Inclusive US Trade Policy at Home and Abroad

Author:
Kimberly Ann Elliott
Publication Date:
06-2019
Content Type:
Working Paper
Institution:
Center for Global Development
Abstract:
American policymakers have failed to adequately respond to concerns about globalization’s effects and the resulting backlash has taken an ugly turn in recent years. While globalization is only one of many factors contributing to economic dislocation, sluggish wage growth and inequality in the United States, foreigners, and developing countries in particular, are frequently the target of those who are frustrated at being left behind. Yet few realize that US trade policy effectively discriminates against poorer countries. In addition, provisions in trade agreements that tilt the playing field in favor of business interests over those of American consumers and workers also often undermine development priorities in partner countries. American policymakers should rethink the substance and process of trade policy and negotiations to spread the benefits more broadly, at home and abroad.
Topic:
Globalization, International Trade and Finance, Inequality, and Domestic Policy
Political Geography:
United States and North America

5. The Impact of US LNG on Russian Natural Gas Export Policy

Author:
Tatianna Mitrova and Tim Boersma
Publication Date:
12-2018
Content Type:
Working Paper
Institution:
Center on Global Energy Policy
Abstract:
The United States and Russia have long been the world’s largest natural gas producers, but they traditionally have not faced off in direct competition in that market. The United States was expected to become a net importer of natural gas, while Russia’s state-owned Gazprom took a prominent position in the European market. The boom in US shale-gas production changed that. While the United States had been trading gas regionally by pipeline for decades, the shale boom allowed for the export of US liquefied natural gas, putting the two gas giants in competition. Even before the first molecule of US LNG shipped, rising US production had diverted LNG destined for the United States into the European Union. Facing increased competition pushed Russia toward a more market-oriented strategy, with Gazprom adjusting its long-term oil-linked contracts that had previously been the backbone of Russian sales to European customers to use more hybrid formulae. This was just the beginning. After a slow start, the competition brought on by US gas is to a large extent shaping the Russian natural gas strategy in Europe and beyond. For Europe, rising gas competition from new suppliers has both economic and energy security implications. Globally, it is also raising questions about how Gazprom will compete in Asia, where demand is growing and gas suppliers are looking to place future production, as well as in other markets. Understanding how Gazprom will react to US gas is thus a critical economic and geopolitical question for LNG importers and exporters worldwide. In this paper the authors examine how Gazprom will maneuver in global markets under specific circumstances. It opens with a discussion of how the US and Russian gas sectors developed and interacted in the period before shale gas. The paper then examines how Gazprom’s gas trade has been impacted by new US production and what changes may be coming as US exports continue to increase. It finds that the advent of US LNG has already reduced Russian gas revenue, undermined its oil-linked pricing model, forced contract renegotiations and accelerated domestic gas market liberalization and LNG development. The authors argue that Russia is in a good position to defend its market share in Europe and looks at some of the strategies that could be pursued under various market scenarios, including the following: High Asian demand and low oil prices: If oil-linked gas prices were pushed below spot prices, Gazprom would not need to further adjust its pricing policy (as was the case in 2015–2017). In certain situations Gazprom might even limit supplies to drive prices up and increase its rent, becoming the price maker. Such a strategy would be utilized cautiously to avoid demand destruction and prompting new FIDs for new (US) liquefaction capacity. High Asian demand and high oil prices: In this scenario Gazprom’s position would be well served in the short to medium term by strong revenues. In the longer term, however, high prices will attract more competitors to the markets (and prompt new FIDs), so it is important for Gazprom to keep its own prices competitive and to keep the margin of the aggregators, which are supplying the European market, below their margin in Asia. There are already almost no “pure” oil-linked contracts left, and Gazprom in Europe mainly has hybrid pricing, but this scenario will require a more fundamental shift in the pricing, with the share of spot-indexed prices becoming dominant. Low Asian demand and low oil prices: Gazprom may be forced to keep prices for its long-term contracts below short-run marginal costs of US LNG. Gazprom might voluntarily move to completely spot-indexed prices, simultaneously trying not only to find new markets for its gas (both in Asia and in Europe) but also to stimulate new demand. The company would need more flexible and creative marketing, and it would seek to improve the efficiency of its operations, both internationally and domestically. Should Gazprom start to see its market share decline, Moscow could decide to liberalize the pipeline export monopoly, a decision that would make Novatek and Rosneft more powerful players. Low Asian demand and high oil prices: Russia would feel competitive pressure not only from the United States but also from all existing low-cost LNG suppliers like Qatar, which may have to switch to Europe and keep gas prices at a low level. Gazprom would have to engage in this price competition as well, flooding the market using spare capacities and driving the prices down to the level of its short-run marginal costs, which will disincentive US LNG aggregators to offtake their LNG. Gazprom has considerable underutilized upstream capacities and huge spare transportation capacities, allowing it to drive down European prices below the level acceptable for US LNG suppliers. This scenario hurts everyone on the supply side, and it is warranted to ask how long it could be upheld. The study finds that even in scenarios where Gazprom sees gas revenues driven down to 2009 or 2016 levels, this should not prove catastrophic for Russia. For Moscow, facing more competition in Europe is a new situation that Gazprom and decisions makers in the Kremlin will have to deal with. Under normal circumstances, competition between various sources of supply can result in net benefits for the end consumer. In addition, this paper demonstrates that the changes in the global gas market have forced Gazprom to adjust its business practices. However, the increased politization of natural gas in the United States carries a risk of inflamed tensions between Moscow and Washington.
Topic:
Globalization, Natural Resources, European Union, and Gas
Political Geography:
Russia, United States, and Europe

6. Seven Chinas A Policy Framework

Author:
David Kelly
Publication Date:
02-2018
Content Type:
Working Paper
Institution:
Center for Strategic and International Studies
Abstract:
The debate about China’s changing role in global affairs is often framed as a dichotomous choice between a peacefully rising China that seeks to be a constructive stakeholder and an increasingly dangerous China that is challenging the status quo, both in terms of its norms and the place of the United States. The reality is more complicated. There are not only signs of both elements, but the foundations shaping Chinese behavior is multifold. Most international relations scholars examine China through one or another version of realism or liberalism. David Kelly, head of research at China Policy, offers an alternative approach that examines the nature of Chinese identity, or rather, Chinese identities, plural, and how they exhibit themselves in Chinese foreign policy. Using his renowned skills in reading Chinese-language official documents and the broader commentary, Kelly teases out seven narratives that Chinese tell themselves and the world, and he provides a codebook for explicating shifting Chinese behavior in different arenas. Kelly concludes that some of these narratives facilitate cooperation, but most point toward deep-seated tensions between China and the West in the years ahead.

Topic:
Foreign Policy, Globalization, Imperialism, and Conflict
Political Geography:
United States, China, Asia, North America, and Asia-Pacific

7. Recent Declines in Labor's Share in US Income: A Preliminary Neoclassical Account

Author:
Robert Z. Lawrence
Publication Date:
06-2015
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Over the past decade, the US economy has been plagued by sluggish wage growth and rising income inequality. The debate over inequality in the 1980s and 1990s focused on the growing disparity between the earnings of skilled and unskilled workers and the earnings of the super-rich. Growing inequality between capital and labor income has now been added to these concerns. Remarkably, the growth in real GDP per worker over the decade of the 2000s, which averaged 1.7 percent annually, was actually more rapid than in the 1970s, 1980s, or 1990s, yet in the 2000s workers saw almost no increase in their take-home pay. Consistent with this gap between labor productivity and wage growth was a pronounced decline in the share of US national income earned by workers. As labor's share has declined, the share of capital has risen and has been especially concentrated in corporate profits. As profits are far less equally distributed than wages, this increase has contributed to rising income inequality. There are several plausible reasons for this development—globalization, automation, weak bargaining power of labor, political capture, higher markups—but the natural starting point for explaining factor income shares is the neoclassical theory of the functional distribution of income enumerated by John Hicks and Joan Robinson in the 1930s. In this framework there are two possible explanations for labor's recent declining share. The first is that capital and labor are gross substitutes, and the second is that capital and labor are gross complements. Several papers have explained the recent decline in labor's share in income by claiming that capital has been substituted for labor. Lawrence puts forward the alternative "gross complements" explanation for the declining US labor share. He shows that despite a rise in measured capital-labor ratios, labor-augmenting technical change in the United States has been sufficiently rapid that effective capital-labor ratios have actually fallen in the sectors and industries that account for the largest portion of the declining labor share in income since 1980. In combination with estimates that corroborate the consensus in the literature that the elasticity of substitution is less than 1, these declines in the effective capital-labor ratio can account for much of the recent fall in labor's share in US income at both the aggregate and industry level. Paradoxically, these results also suggest that increased capital formation, ideally achieved through a progressive consumption tax, would raise labor's share in income.
Topic:
Economics, Globalization, Markets, and Labor Issues
Political Geography:
United States

8. Economic Statecraft: American Economic Power and the New Face of Financial Warfare

Author:
Elizabeth Rosenberg and Zachary K. Goldman
Publication Date:
06-2015
Content Type:
Policy Brief
Institution:
Center for a New American Security
Abstract:
The United States has long relied on its economic power to protect and advance its interests abroad. In an increasingly integrated international financial system, the U.S. economy and capital markets remain the largest in the world by almost every measure. This status affords the United States an important global leadership position and the ability to shape foreign policy outcomes with economic tools. The structure of the international trade and financial system, in which many significant banking and energy transactions as well as currency reserves are denominated in U.S. dollars, reinforces the central role of the United States.
Topic:
Foreign Policy, Economics, Globalization, International Trade and Finance, Markets, and Power Politics
Political Geography:
United States

9. The China-United States BIT negotiations: A Chinese perspective

Author:
Sheng Zhang
Publication Date:
01-2014
Content Type:
Policy Brief
Institution:
Columbia Center on Sustainable Investment
Abstract:
The China-US bilateral investment treaty (BIT) negotiations have attracted attention due to the relative size and weight of both economies. Despite broad consensus about the importance of such a treaty, there is considerable debate about its shape and content. The debate is reflected in two recent Columbia FDI Perspectives. Donnelly argued that a China-US BIT should be modeled on the US Model BIT without "splitting the difference between Chinese and US positions", and that the possibility of meaningful BIT negotiations are "really up to China at this point".
Topic:
Economics, Globalization, International Trade and Finance, Bilateral Relations, Foreign Direct Investment, and Governance
Political Geography:
United States, China, Europe, and Colombia

10. International Shifts and Their Security Impact on the Gulf: Quantifying Key Trends

Author:
Anthony H. Cordesman
Publication Date:
11-2014
Content Type:
Working Paper
Institution:
Center for Strategic and International Studies
Abstract:
I have been asked to help set the stage for this conference by looking at the broader issues that can address the issue of A World with No Axis? International Shifts and their Impact on the Gulf. I have spent enough time in the Gulf over the years to know how often people have strong opinions, interesting conspiracy theories, and a tendency to ignore hard numbers and facts. We all suffer from the same problems , but today I'm going to focus as much on facts and numbers as possible.
Topic:
Globalization, Bilateral Relations, and Hegemony
Political Geography:
United States and China