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1. Not yet Trump-proof: an evaluation of the European Commission’s emerging policy platform

Author:
Heather Grabbe and Jeromin Zettelmeyer
Publication Date:
01-2025
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
The economic strategy being defined by the 2024-2029 European Commission seems to follow the prescriptions on innovation and single market reform, and the expansive approach to industrial policy, set out by Mario Draghi in his September 2024 report on European Union competitiveness, with two important differences. First, the Commission stops short of calling for World Trade Organisation-prohibited subsidies – this is welcome. Second, the Commission proposes a new state aid framework for national industrial policy rather than expansion of EU-level public investment funding. This runs the risk of weakening the single market and harming competition, with the unintended consequence of protecting incumbents and inhibiting structural change. In terms of specific policies, on defence, the Commission is right to face up to the challenge of defining an EU procurement mechanism that offers sufficient speed and cost advantages to justify large-scale funding. On economic security and international partnerships, the Commission is right to take a broader approach than a foreign economic policy focused only on supply chains. What is lacking is a much greater commitment to providing support for climate mitigation in developing countries. The second Trump presidency creates risks for the Commission strategy. President Trump has gone further than expected in threatening territorial expansion and with the speed, aggression and disregard for the rule of law with which he has started to implement his policies. These factors will complicate the EU-United States relationship. The best defence against both Trump and the competitive and security threats posed by China is to accelerate policies that address the EU’s structural weaknesses: raising productivity growth, defence capacity and economic security. Economic security, in turn, requires more resilient trade relationships, less financial dependence on the US and an improved standing with emerging market and developing economies. The EU should also seize the opportunity offered by the shift in US policy from subsidies to deregulation. While the EU should not race Trump to the bottom on environmental or financial deregulation, it should rapidly improve its own regulatory framework while building on its core strengths: human capital and the rule of law. Unlike tariff wars or discriminatory subsidies, a competition to provide a good business environment is not a zero-sum game.
Topic:
Security, Economics, Industrial Policy, Budget, European Union, Digital Economy, Trade Policy, Donald Trump, Sustainability, European Commission, and Energy
Political Geography:
Europe and United States of America

2. How Huawei Weathered the Storm: Resilience, Market Conditions or Failed Sanctions?

Author:
Hosuk Lee-Makiyama and Robin Baker
Publication Date:
02-2024
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
Huawei is exhibiting stoic resilience in the face of US sanctions, economic downturns, and the slow pace of 5G investments. There is a narrative that the company has been propped up by the Chinese government, but the key to Huawei’s resilience is multifaceted. Through pre-emptive stockpiling and ingenuity, the company has continued to fulfil its base station orders and defend its market shares abroad. Concurrently, Huawei has made an autonomous business decision to reinvest its earnings and intensify R&D to secure its supply chains against political risks and diversify into new business areas. Successful forays into semiconductors, cloud services and energy grids have also been facilitated by a capital structure that lends itself to long-term planning. Huawei’s survival is not necessarily a lesson in the futility of sanctions to stifle technological progress. However, it does show that muddled political objectives and inconsistent implementation will yield potentially contrary outcomes. At the same time, factors that contribute to Huawei’s resilience also highlight the infighting and vulnerabilities of listed firms like Mavenir, Ericsson and Nokia.
Topic:
Markets, Sanctions, Digital Economy, Resilience, and Huawei
Political Geography:
China, North America, and United States of America

3. 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

4. ICT Beyond Borders: The Integral Role of US Tech in Europe’s Digital Economy

Author:
Matthias Bauer and Dyuti Pandya
Publication Date:
03-2024
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
Contrary to political assertions about the vulnerability of digital services provided by non-EU companies, the strong presence and sunk costs associated with US tech companies’ investments in data centres, skilled workforce development, and research facilities in Europe act as significant barriers to exit, highlighting the inherent symbiosis between US tech investments and Europe’s digital and non-digital sectors. These investments underscore a mutual inter-dependency that strengthens European economies, making the notion of “sudden cessation” of digital services by US companies implausible. Corporate data show a significant investment gap of approximately USD 1.36 trillion between US and EU ICT companies, attributing a competitive edge to US firms due to their heavy investment in ICT, cloud solutions, and R&D. Forecasted increases in ICT investments by US corporations outline a benchmark beyond reach for EU businesses. The notion of EU firms aligning with this growth path is rather fantastical, as it would call for immense government investment, ultimately draining financial resources from essential public services, such as healthcare, housing, and environmental policies. Substantial ICT investments across EU Member States together with a long-term commitment to the European market present an opportunity for the EU to leverage US continuous technological advancements, underscoring the potential for transatlantic collaboration to drive the EU’s digital transformation and innovation. EU-US partnerships not only fuel the EU’s digital transformation but also align with shared political values, reinforcing the significance of transatlantic collaboration in shaping a competitive and innovative digital future.
Topic:
Communications, European Union, Digital Economy, Investment, and Information Technology
Political Geography:
Europe, North America, and United States of America

5. Time to Reset the U.S. Trade Agenda

Author:
Peter Harrell
Publication Date:
05-2024
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
The strongest argument for rebooting U.S. trade policy ultimately may not be geopolitics, nor even the economic argument that trade deals will help an already-strong U.S economy. Instead, the best argument is that trade is a key element of solving global challenges that affect us all, like the green energy transition and the risks of AI and the digital economy.
Topic:
Treaties and Agreements, Geopolitics, Digital Economy, Artificial Intelligence, Trade Policy, and Green Transition
Political Geography:
North America and United States of America

6. Empires of Exceptionalism: Lessons from the EU AI Act and Attempts at AI Legislation in California

Author:
Hosuk Lee-Makiyama and Claudia Lozano
Publication Date:
11-2024
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
The EU AI Act, which passed after three years of negotiations and much ambivalence, sets a comprehensive regulatory framework that reflects the European Union’s unique needs that are not translatable to other jurisdictions. The proposed bill in California (SB 1047) illustrates this case in point. The bill could potentially mislead the public into thinking that AI is already under effective regulatory control. Lawmakers must recognize that the EU differs from other systems. The EU AI Act is not only shaped by the desire to slow down global AI development, allowing Europe to catch up with rivals like the US and China: The EU lacks an enforceable constitution, and the Act prohibits its governments to impose social scoring and discriminatory measures. SB 1047 only addressed humanity-ending disasters and had unclear practical value. Meanwhile, the EU AI Act was passed into law to prevent internal competition and Europe’s history of authoritarianism. Existing laws in California and the EU already regulate most AI use cases. In addition, the EU AI Act reviews existing regulations to ensure they are still fit for purpose, something California failed to do in SB 1047. A critical takeaway is to examine existing obligations or executive powers (including enforcement agencies and public funding) to achieve the desired policy objectives. The diverging outcomes of the two laws show the importance of avoiding mismatches between policy objectives and legislative scope. AI regulation cannot substitute for other policy objectives, like privacy and antitrust. Also, lawmakers must weigh the cost of failed regulation against the risks of non-regulation. California did not see any immediate costs of inaction, whereas delayed action by the EU might have led to the fragmentation of its internal market. Also, given its collective decision-making, the EU can escape accountability for policy failures due to premature laws in a way the leaders in other political systems cannot.
Topic:
European Union, Digital Economy, Legislation, and Artificial Intelligence
Political Geography:
Europe, California, North America, and United States of America

7. US-ASEAN Digital Economy Cooperation

Author:
Hanh Nguyen
Publication Date:
07-2023
Content Type:
Working Paper
Institution:
Pacific Forum
Abstract:
Long criticized for its lackluster record in economic engagement with Southeast Asia, the US is now looking to bolster digital economy cooperation with the region as part of its Indo-Pacific strategy. Both sides have already engaged in several cooperation initiatives to strengthen Southeast Asia’s digital capacities. These actions/engagements aim to help the region capture the immense benefit and respond to potential socioeconomic disruptions brought by the digital economic boom. However, US-ASEAN cooperation will have to deal with two challenges. First, China has already established a comprehensive and prevalent presence in the region’s digital economy, from hard infrastructure and customer-facing businesses to developing digital standards. Second, Southeast Asia’s diversity in economic development leads to varied capacities among its members. These attributes carry certain security complications for Southeast Asia and the US in the long run. Addressing them will require both sides to further boost cooperation, particularly in shaping regional digital standards.
Topic:
Economics, International Cooperation, Digital Economy, and ASEAN
Political Geography:
North America, Southeast Asia, United States of America, and Indo-Pacific

8. Network and Text Analysis on Digital Trade Agreements

Author:
Kyu Yub Lee, Cheon-Kee Lee, Won Seok Choi, Jyun-Hyun Eom, and Unjung Whang
Publication Date:
02-2023
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
We use the Trade Agreements Provisions on Electronic Commerce and Data and their corresponding texts to undertake network and text analysis on trade agreements with digital trade chapters to identify which countries are important in the network and how similar or different their texts of digital trade chapters are. centrality values reflect which countries are influential in the network, while values of similarity assess the level of similarity between the texts of digital trade chapters concluded by these countries. Centrality and similarity are complementary in assessing the relative positions of countries in the network, where the number of linkages between countries is significant in centrality and the quality of digital trade chapters is critical in similarity. We interpret this to mean that a country with a high degree of centrality is likely to be a rule-promoter in the network, whereas a country with a high degree of similarity is likely to be a rule-maker. The brief highlights three key findings from network and text analysis of digital trade agreements: (1) The U.S. has been the best rule-maker but not the best rule-promoter, whereas Singapore has been the best rule-promoter but not the best rule-maker. (2) China is a rule-maker, but to a weaker extent than the U.S., and Korea is a rule-promoter, although it is less active than Singapore. (3) Japan and Australia have served as both rule-makers and rule-promoters. Identification of countries’ relative positions in the network of digital trade agreements would be useful at the start of talks on digital trade policy.
Topic:
Science and Technology, Treaties and Agreements, Digital Economy, and Trade
Political Geography:
Japan, China, South Korea, Australia, and United States of America

9. Is CBDC Evolutionary or Revolutionary? What Economic History Can Teach Us

Author:
Pierre L. Siklos
Publication Date:
10-2023
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation (CIGI)
Abstract:
Looking at six historical examples, this paper explores the relationship between technology and monetary arrangements in the context of central bank digital currency (CBDC). The Industrial Revolution in the United Kingdom, the greenbacks era in the United States and the end of private money in Canada are among the examples that illustrate the role of the private sector in the development of money, the role of governments in overseeing key functions of money and the impact of economic crises. The author sees CBDC as an evolution, not a revolution, of the monetary system that can co-exist with traditional currency by performing the same core functions of notes and coins.
Topic:
History, Digital Economy, Private Sector, and Industrial Revolution
Political Geography:
Canada, North America, and United States of America

10. The Digital Silk Road and China’s Influence on Standard Setting

Author:
Alex He
Publication Date:
04-2022
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation (CIGI)
Abstract:
China is striving to become a leader in international standard setting, and the Digital Silk Road, part of China’s Belt and Road Initiative to expand its global infrastructure and markets, is key to realizing this goal. Both roads depend on standard connectivity, fuelled by Chinese private companies that are the driving force behind China’s growing role as a leader in technology development and shaping standards in both domestic and global markets. However, China faces strong competition to gain more influence in international standard-setting bodies, which are dominated by the European Union and the United States.
Topic:
Infrastructure, Digital Economy, Trade, Digital Culture, Silk Road, and Digitalization
Political Geography:
China, Europe, Asia, North America, and United States of America