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111. Strategic Implications of the China-Pakistan Economic Corridor

Author:
James Schwemlein
Publication Date:
12-2019
Content Type:
Special Report
Institution:
United States Institute of Peace
Abstract:
Great power politics is resurgent in South Asia today. China’s growing military ambition in the region is matched in financial terms by its Belt and Road Initiative, the largest and most advanced component of which is the China-Pakistan Economic Corridor. What remains unclear is how the United States should navigate the new dynamic. This report, which is based on research and consultations with experts worldwide, addresses the question of how the India-Pakistan rivalry will play into the emerging great power competition.
Topic:
Economics, Power Politics, Infrastructure, and Belt and Road Initiative (BRI)
Political Geography:
Pakistan, China, South Asia, Asia, North America, and United States of America

112. PG&E: Market and Policy Perspectives on the First Climate Change Bankruptcy

Author:
John Macwilliams, Sarah Lamonaca, and James Kobus
Publication Date:
08-2019
Content Type:
Working Paper
Institution:
Center on Global Energy Policy
Abstract:
The Pacific Gas and Electric (PG&E) bankruptcy, which was caused by liabilities resulting from massive wildfires, has widely been called the first climate change bankruptcy. It will likely not be the last, as climate change exacerbates natural disasters, leading to more frequent and intense wildfires, storms, and flooding. Wildfires alone could become up to 900 percent more destructive in certain regions by midcentury, and utility assets will also be increasingly exposed to threats stemming from hurricanes, rising sea levels, and other climate-related events. These extreme weather events will increase costs to utility-sector stakeholders, including investor-owned utilities, state and local governments, ratepayers, and taxpayers. These risks could place financial stress on utility companies, drive up electricity rates, crowd out essential investment in renewable energy and grid upgrades, and disrupt service. In this paper, Columbia University’s Center on Global Energy Policy reviews and analyzes the PG&E bankruptcy, assesses how capital markets have reacted to the bankruptcy through the lens of valuations in the US utility sector, and discusses policy implications of California’s recent legislative response to wildfire risk. This paper examines market indicators to assess investor expectations of climate risk exposure and likely cost allocation. Neither debt nor equity markets suggest widespread concern about climate risk in the utility sector. In the absence of strong market signals to encourage climate risk mitigation, the authors find that policy frameworks are needed to ensure that companies make necessary preventative investments and to define how costs will be allocated among stakeholders. This paper also reviews a recently passed California bill aimed at achieving these objectives and the lessons and best practices it offers for other policy makers. In short, the paper finds the following: Market indicators suggest that the California wildfires and subsequent PG&E bankruptcy have not caused imminent concern about climate risks in the utility sector. Equity valuations for the sector remain strong, with a utility stock index trading at a higher-than-average premium to the market benchmark. In credit markets, regulated utilities in the United States have raised more than $50 billion of corporate debt in 2019 to date, and borrowing spreads are currently below historical averages. There are several reasons why markets may not reflect widespread climate risk to utilities, despite the scientific evidence around likely future damage. Investors may believe that cost increases from climate change will occur too far in the future to materially impact the present value of their investments. Even if investors believe that climate change risks are material to valuation, they may also believe that such risks will not be considered by other investors for some time. Investors may be viewing wildfires as a California-specific risk, though the regional skew of wildfires is likely to shift significantly in coming years. They may lack the information or modeling tools for assessing the likelihood and geographic dispersion of high-impact tail events, such as the wildfires that PG&E faced. Financial markets may also reflect the belief that the costs of climate change in the utility sector will fall predominantly on ratepayers, insurance companies, and/or taxpayers rather than investors, and therefore investors may not view themselves as materially exposed. California’s recent creation of a wildfire insurance fund with contributions from both ratepayers and companies provides important policy lessons for designing comprehensive frameworks to allocate climate damage costs. These include the strengthening of both regulatory and corporate climate resilience expertise, mandating preventative investment as a prerequisite for cost-recovery mechanisms, defining utility financial exposure for climate damage situations, and providing cash for utilities to provide essential services when facing large disasters. The policy also presents some potential pitfalls that may be instructive for other state policy makers. The legislation sets aside large reserves for future damage, a necessary measure, but one that will result in higher electric bills. The bill does not allow utilities to earn a return on safety-related spending, which broadly diminishes incentives for proactive climate mitigation investment. The potential insufficiency of the wildfire fund also creates uncertainty about future cost allocation. Finally, failing to reform the California legal framework that allows utilities to be held liable for damages they did not cause perpetuates risks for companies and ratepayers. If the first climate change bankruptcy is indicative of a new reality, it is not that utilities are going to go bankrupt overnight. Rather, climate disasters will increasingly add financial stress to utility-sector stakeholders, as costs accumulate from both acute events and damaging extreme weather impacts. Adapting the regulatory bargain for a climate-exposed future will require lawmakers, regulators, and shareholders to develop new approaches and new incentive structures to ensure an accountable, robust utility sector. Moreover, while climate change is already presenting real financial challenges to utilities, it will not be the only sector to face large climate-driven costs. Other corporate actors can look to the utility experience to better understand how policy makers, investors, and companies will respond to the growing financial threat from climate change.
Topic:
Climate Change, Economics, Gas, and Electricity
Political Geography:
United States and California

113. National Models for Managing Trade of Strategic Goods

Author:
Kyaw Si Thu
Publication Date:
10-2019
Content Type:
Working Paper
Institution:
Pacific Forum
Abstract:
The largest country in mainland Southeast Asia with a population of 53 million and located strategically between China and India, Myanmar plays a significant role geographically, economically and politically in the most rapidly advancing region in the world. As Myanmar opens up, investment and trade have grown significantly. Trade policies have been, and continue to be, revised in line with regional and global commitments and in accordance with liberal principles. According to UNSCR 1540, UN member countries have a responsibility to control the transfer, transit and production of WMD and related materials. As a UN member country, Myanmar should implement UNSCR 1540 for regional and international peace and security through the trade sector.
Topic:
Economics, International Trade and Finance, Economic structure, Trade, and Trade Policy
Political Geography:
Southeast Asia, Myanmar, and Asia-Pacific

114. An Economic Analysis Of The Fall Of France In June 1940 Based On The Theory Of New Institutional Economics

Author:
Ioannis Salavrakos
Publication Date:
08-2019
Content Type:
Journal Article
Journal:
Journal of Military and Strategic Studies
Institution:
Centre for Military, Security and Strategic Studies
Abstract:
he paper challenges the view that the fall of France in June 1940 is attributed to military errors of the French High Command and with the brilliant German offense in the Ardennes. The paper highlights that the French security strategy after the end of World War I failed because the country lacked the economic basis to implement its strategy. Thus the paper argues that the French endorsed an internal and external balancing strategy against Germany. The internal balancing strategy was associated with the ability of France to sustain powerful armed forces and obviously this was associated with high defense spending and a strong economy. The second part was associated with external balancing which was associated with the creation of alliances in Eastern Europe in order to block any German expansion. Again this was associated with strong economic relations between France and these states. This strategy was implemented during the 1919-1929 period however after the global economic crisis erupted the deterioration of the French economy made the continuation of this strategy impossible. Thus France was forced to follow a defensive strategy at the military level and the privileged bilateral economic relations with Eastern European countries were abolished and Germany replaced France as the major economic and trading partner of these states.
Topic:
Economics, Regional Cooperation, Military Strategy, and World War II
Political Geography:
United Kingdom, Europe, France, and Germany

115. Russian and Iranian Economic Interests In Syria (Pre-2010 and intra-war period)

Author:
Hamidreza Azizi and Leonid Issaev
Publication Date:
02-2019
Content Type:
Working Paper
Institution:
The Geneva Centre for Security Policy
Abstract:
Discussion paper for the workshop on: “The Politics and Modalities of Reconstruction in Syria”, Geneva, Switzerland, 7-8 February 2019. There has historically been low levels of trade and investment from both Russia and Iran with Syria, with trade in military items being a notable exception. While the trade relationship between Syria and its two main allies predates the conflict, levels of trade had been remarkably low before the crisis, in contrast to mainstream perceptions. Yet, these figures cannot be confirmed due to unavailability of a comprehensive record of the Syrian bilateral relationship with Iran and Russia. Internationally imposed sanctions have discouraged Russian and Iranian companies from doing business with Syria. Lacking any other resources, the only way that Syrian could repay debts to its allies would be to grant exclusive access to energy and natural resources. This however would reduce the public revenue needed to rebuild state institutions, and also encourage foreign rivalry over economic opportunities. As Syria lacks any coordination mechanism for post-war economic reconstruction, Russia and Iran have set their eyes on the energy sector, where Russia has the upper hand. Yet, cooperation is also possible in other sectors, such as Syria’s rail sector. In order to understand the Russian and Iranian economic relationship with Syria, two factors should be considered. First is the informal relationship between Syria and its two allies, which has taken the form of unofficial agreements and trade. These would be important when sanctions are lifted. The second factor is military exports to Syria, expected to be large, given the scale of war and Syrian reliance on Russia and Iran. Due to lack of official data, this paper will not consider both issues.
Topic:
Economics, Sanctions, Conflict, Syrian War, Investment, and Trade
Political Geography:
Russia, Iran, Middle East, and Syria

116. Data Is a Development Issue

Author:
Susan Ariel Aaronson
Publication Date:
07-2019
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
Many wealthy states are transitioning to a new economy built on data. Individuals and firms in these states have expertise in using data to create new goods and services as well as in how to use data to solve complex problems. Other states may be rich in data but do not yet see their citizens’ personal data or their public data as an asset. Most states are learning how to govern and maintain trust in the data-driven economy; however, many developing countries are not well positioned to govern data in a way that encourages development. Meanwhile, some 76 countries are developing rules and exceptions to the rules governing cross-border data flows as part of new negotiations on e-commerce. This paper uses a wide range of metrics to show that most developing and middle-income countries are not ready or able to provide an environment where their citizens’ personal data is protected and where public data is open and readily accessible. Not surprisingly, greater wealth is associated with better scores on all the metrics. Yet, many industrialized countries are also struggling to govern the many different types and uses of data. The paper argues that data governance will be essential to development, and that donor nations have a responsibility to work with developing countries to improve their data governance.
Topic:
Development, Economics, Governance, and Data
Political Geography:
Global Focus

117. Canada’s Arctic Agenda: Into the Vortex

Author:
Centre for International Governance Innovation
Publication Date:
09-2019
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
Canada’s Arctic Agenda: Into the Vortex brings together leading Arctic thinkers to examine key elements of Canadian Arctic and Northern policy. These experts reflect on the progress that has been made in the past few years in Arctic policies and programs and consider the impact of powerful forces of change and division, both within Canada and abroad, which have produced a vortex of economic, security, environmental and identity challenges for the Canadian Arctic. Addressing the intense, if understated, debate on Canada’s Arctic agenda, this report’s contributors share the consistent message that Northerners must play a leadership role in creating and implementing the policies that affect them. The report also includes a collection of interviews with Jane Glassco Northern Fellows. These thoughtful Indigenous women from across the North in Canada share their perspectives and ideas on the policy issues that require urgent attention to ensure the prosperity of their Northern communities. The well-informed essays and interviews in this report will spark conversation about Canada’s Arctic policy priorities and provide concrete advice to inform the work of Canada’s policy makers moving forward.
Topic:
Security, Economics, Environment, and Identities
Political Geography:
Canada, North America, and Arctic

118. Emerging Countries in Global Financial Regulatory Standard Setting: What Is to Be Done?

Author:
Andrew Walter
Publication Date:
10-2019
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
This paper explores the role of emerging-country members in the Basel process, a key aspect of the global financial standard-setting process. It argues that this process has been significantly more politically resilient than adjacent aspects of global economic governance, in part because major emerging countries obtain continuing “intra-club” benefits from participation within it. The most important of these are learning benefits, but status and sometimes influence over standard-setting outcomes can also be valuable. The paper outlines how these benefits could be enhanced to secure the ongoing resilience of global financial regulatory governance. It recommends some modest reforms to further improve the position of emerging countries in the process and to bolster its perceived legitimacy among members and non-member countries.
Topic:
Economics, International Trade and Finance, Governance, and Regulation
Political Geography:
Global Focus

119. Hyperinflation in Venezuela: A Stabilization Handbook

Author:
Gonzalo Huertas
Publication Date:
09-2019
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The unrelenting surge in prices in Venezuela has crippled the economy and deepened the humanitarian crisis there. Huertas lays out a feasible stabilization plan to stop Venezuela’s hyperinflation. The extent of the humanitarian crisis and shortage of basic goods and services suggests that, on the fiscal side, a stabilization plan should focus primarily on reallocating rather than reducing spending. The authorities should avoid austerity policies and instead spend on taking care of the Venezuelan people. Stabilizing the price level while providing relief to the country’s population would require significant financial assistance from the rest of the world, so it is critical that Venezuela secure strong financial support from the international community. Successful stabilization requires a credible plan to transition to a responsible fiscal policy, the financial resources to carry it out, and the political will to sustain it.
Topic:
Security, Economics, Finance, Inflation, and Humanitarian Crisis
Political Geography:
South America and Venezuela

120. Global Dimensions of US Monetary Policy

Author:
Maurice Obstfeld
Publication Date:
10-2019
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper is a partial exploration of mechanisms through which global factors influence the tradeoffs that US monetary policy faces. It considers three main channels. The first is the determination of domestic inflation in a context where international prices and global competition play a role, alongside domestic slack and inflation expectations. The second channel is the determination of asset returns (including the natural real safe rate of interest) and financial conditions, given integration with global financial markets. The third channel, which is particular to the United States, is the potential spillback onto the US economy from the disproportionate impact of US monetary policy on the outside world. In themselves, global factors need not undermine a central bank’s ability to control the price level over the long term—after all, it is the monopoly issuer of the numeraire in which domestic prices are measured. Over shorter horizons, however, global factors do change the tradeoff between price-level control and other goals such as low unemployment and financial stability, thereby affecting the policy cost of attaining a given price path.
Topic:
Economics, Government, International Trade and Finance, and Monetary Policy
Political Geography:
North America and United States of America