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21. Post-Brexit imports, supply chains, and the effect on consumer prices

Author:
Jan David Bakker, Nikhil Datta, Josh de Lyon, Luisa Opitz, and Dilan Yang
Publication Date:
04-2022
Content Type:
Working Paper
Institution:
UK in a Changing Europe, King's College London
Abstract:
This report documents the decrease in imports and shows how the patterns of imports vary across sectors following the UK’s departure from the Single Market and Customs Unit at the end of 2020. The authors, Jan David Bakker, Nikhil Datta, Josh De Lyon, Luisa Opitz, and Dilan Yang, focus on comparisons between imports from the EU and imports from non-EU countries. Some products, such as fats, oils, and waxes, experienced a sizeable decrease in trade volumes with EU countries compared to those of non-EU countries in January 2021. Other products, such as minerals, experienced minimal deviation in imports from the EU versus non-EU. We also document that the timing of import changes varies across products: in some cases, the deviation occurs pre-TCA, and there is some evidence of stockpiling; in other cases, the changes only occur post-TCA, and can be either short term or persistent. The fall in imports from the EU will affect the UK economy through its impact on supply chains. Two-thirds of international trade is in products used as inputs to production. We show that imports from the EU fell for products that are used as inputs to production in many industries in the UK. For some sectors such as agriculture, fishing, and car manufacturing, there is evidence that imported inputs began to be sourced from non-EU countries pre-TCA. For others, including vegetable oil, animal fats, prepared animal feeds, and pharmaceuticals, the adjustments occurred post-TCA. Evidence suggests that increased access to intermediate inputs can boost productivity, so a reversal is likely to cause a fall in productivity. Imports also provide cheaper goods to consumers, as well as a wider variety of choice. Focussing on food products, we show that the drop in imports after Brexit caused an increase in prices. Products that were more heavily reliant on imports from the EU increased in price following the election of Boris Johnson in 2019, pre-TCA and then increased further post-TCA. This report therefore shows that changes in imports of goods from the EU have affected UK firms’ supply chains. Part of this change is driven by the adjustment costs incurred as part of the new trading relationship and is likely to be short term, but another part is likely to reflect a long-term increase in the cost of inputs from the EU, which make up a sizable contribution of total imports. This could have a knock-on effect for consumers who will face higher prices, and for workers whose jobs will be affected by adjustments in the supply chain.
Topic:
European Union, Brexit, Trade, Imports, and Supply Chains
Political Geography:
United Kingdom and Europe

22. Five Years after China’s Plastic Import Ban Have Europeans Taken Responsibility?

Author:
Eugénie Joltreau
Publication Date:
07-2022
Content Type:
Special Report
Institution:
Institut français des relations internationales (IFRI)
Abstract:
After the 2017 Chinese waste import ban, the international and European Union (EU) legislative framework on waste exports has been revised. • The amendment to the Basel Convention is stricter on the possibility to export plastic waste outside the EU, which has integrated the amendment in the waste shipment regulation (WSR) and is considering further export restrictions. Moreover, a Directive to reduce the use of single-use plastics and stimulate local demand for recycled plastics has been adopted. • The recycling rate of plastic packaging has been deteriorating since 2016 in view of the growing quantities of plastic packaging waste and limited export outlets, despite an increase in the tonnage recycled. Exports of plastic waste from the European Union have been reduced and partly redirected, with some negative environmental impacts reported. The EU demand for certain recycled plastics has boomed, encouraged by the new regulation, yet overall, EU plastic packaging consumption keeps increasing. • The debate on the export ban opposes a view of responsibility for the treatment of waste with the promotion of international waste trade as a means to achieve a global circular economy (for plastics). However, there is no evidence that the waste trade enables to increase the global recycling rate, reduces the use of virgin plastic, and reinforces sustainability. • The European Commission (EC) has released a new legislative proposal that tightens up waste export possibilities but does not ban it.
Topic:
Climate Change, Economy, Recycling, Waste, Imports, and Plastic
Political Geography:
China and Europe

23. Trade Flows Between the European Union and the Eastern Partnership Countries: Dynamics and Prospects

Author:
Tomasz Grodzicki
Publication Date:
12-2022
Content Type:
Journal Article
Journal:
Nowa Polityka Wschodnia
Institution:
Faculty of Political Science and International Studies, Nicolaus Copernicus University in Toruń
Abstract:
The Eastern Partnership is a part of the European Neighbourhood Policy focusing on the EU’s Eastern neighbours. Its main objective is to deepen the political and economic integration of the EU with six countries in Eastern Europe and the South Caucasus: Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine. The aim of this paper is to assess the development of EU trade relations with Eastern Partnership Countries from 2002 to 2021 and to indicate its prospects. The results show that the EU is in a group of main trading partners of the Eastern Partnership countries. The EU noticed both: a trade surplus with Belarus, Georgia, Moldova, Ukraine and Armenia (except in 2005); and a trade deficit with Azerbaijan. The volumes of imports and exports had increased over the years which also led to better economic integration with the EU. However, the future EU-Eastern Partnership trade characteristics and dynamics remain unknown due to the Russian invasion on Ukraine that caused troubles in trade flows in Ukraine and economic sanctions on Russia and Belarus.
Topic:
European Union, Partnerships, Exports, Trade, and Imports
Political Geography:
Europe, Ukraine, Moldova, Armenia, Azerbaijan, Georgia, and Belarus

24. Soaring demand is driving double-digit import price inflation in the United States

Author:
Caroline Freund
Publication Date:
10-2022
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics (PIIE)
Abstract:
At a time of soaring price increases in the United States, inflation in the US import sector has been soaring the most. Import price inflation in the first half of 2022 was in the double digits, above US consumer price index and personal consumption expenditures inflation. Excess demand for certain imported goods is playing a big role, but so are supply shortages caused by temporary business closures overseas and shipping delays associated with the COVID-19 pandemic. Correctly identifying the culprit for misaligned demand and supply, and hence rising prices, is central to understanding the type and extent of policy intervention needed. Using movements in prices and quantities of specific goods, the analysis presented in this Policy Brief shows that the increase in import price inflation has been driven to the same or a greater extent by demand compared with supply constraints. The results have important implications for policies to help reduce the supply and demand imbalance and thus tame inflation.
Topic:
Economics, Inflation, COVID-19, Imports, and Supply and Demand
Political Geography:
North America and United States of America

25. Should the EU Pursue a Strategic Ginseng Policy? Trade Dependency in the Brave New World of Geopolitics

Author:
Oscar Guinea and Vanika Sharma
Publication Date:
04-2022
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
Political leaders all over the world are calling for strategic autonomy. The removal of critical trade dependencies has become a guiding principle in most policy proposals, including the EU’s new industrial strategy. In making these decisions, it is important for policymakers to understand the reasons behind why shortages of critical goods and technologies have emerged in the first place. The instruments that new policies cerate should respond to real problems, not invented ones. For instance, if shortages are due to temporary mismatches of supply and demand, most of them will be fixed without the need of any policy intervention. On the other hand, shortages can also be engineered by countries using their dominance in the production of certain goods to coerce other countries. As the EU experienced first-hand after the Russian war on Ukraine in 2022, the concentration of market power in the production of any product carries geopolitical risks. For that purpose, it is crucial to understand the nature of trade dependencies. This policy brief presents indicators and a conceptual framework to measure trade dependency. The framework consists of two indicators: the first measures the share of EU imports from outside the EU over EU production proxied as the sum of imports and exports, while the second indicator considers the market concentration using the Herfindahl-Hirschman index (HHI). It then applies this framework to EU trade with the rest of the world in 2020 and elaborates on the product categories and partner countries behind these dependencies. From a total of more than 9,000 product categories, there were only 233 products that could be classified as dependent within our framework. In terms of values, they represented 1.5% of EU total imports or €50 billion. The major suppliers of these products to the EU were China, United States, Russia, and the United Kingdom. Imports of hydrocarbons from Russia are part of this list of trade dependencies, but so are many other goods which are not of strategic importance. A policy intervention should be tailored to the specific product and the specific export country. Given the small size of the EU imports in which the EU can be considered dependent, it is not advisable to base Europe’s new industrial policy on a general fear of dependency and apply new policies in many sectors. Many of these products are easy to substitute and the economy can function without them. For the select few products where dependency is an economic concern, our paper explores different measures that the EU can put in place to lower trade dependency and how this dependency can be reduced through international trade.
Topic:
International Trade and Finance, Treaties and Agreements, European Union, Geopolitics, and Imports
Political Geography:
Europe

26. The Russia-Ukraine War and addressing Africa's food security challenges

Author:
Stephen Buchanan-Clarke
Publication Date:
08-2022
Content Type:
Special Report
Institution:
Good Governance Africa (GGA)
Abstract:
The Russia-Ukraine war has highlighted and worsened systemic weaknesses in the current international food system which pose a disproportionate risk to African countries, and companies doing business in Africa, due in large part to their high dependence on fuel and food imports.
Topic:
Food Security, Business, Imports, and Russia-Ukraine War
Political Geography:
Africa, Russia, and Ukraine

27. The War in Ukraine and the Threat of a Global Food Crisis

Author:
Davit Natroshvili
Publication Date:
07-2022
Content Type:
Special Report
Institution:
Georgian Foundation for Strategic International Studies -GFSIS
Abstract:
The Russia-Ukraine war has been going on for five months, and it can be said that it is a war that has changed the world, and not only in military and security terms. In this edition of “The Security Review”, we will discuss the food, energy, and transportation aspects of this conflict. Davit Natroshvili analyzes Russia's use of food as a weapon of war and reviews the impact of the Kremlin's grain blockade on the world’s food security.
Topic:
Food Security, Imports, Instability, Food Crisis, and Russia-Ukraine War
Political Geography:
Russia, Ukraine, Eastern Europe, and Global Focus

28. Assessment of the role of Caspian Basin in reducing of EU's oil dependence in the light of Russian Ukraine War

Author:
CESD Research Team
Publication Date:
09-2022
Content Type:
Policy Brief
Institution:
Center for Economic and Social Development (CESD)
Abstract:
In the background of the Russian invasion of Ukraine, European Union (EU) agreed to ban the overwhelming majority of Russian oil imports. Since the beginning of the invasion, the West decided to make Moscow pay economically for its aggression. Nevertheless, the decision aimed at the energy sector was quite challenging since the bloc relies on Russia for 25% of its oil and 40% of its natural gas.
Topic:
Oil, European Union, Imports, Russia-Ukraine War, and Energy Sector
Political Geography:
Russia, Europe, Ukraine, and Caspian Sea

29. Arms-production Capabilities in the Indo-Pacific Region: Measuring Self-reliance

Author:
Lucie Béraud-Sudreau, Xiao Liang, Siemon T. Wezeman, and Ming Sun
Publication Date:
10-2022
Content Type:
Special Report
Institution:
Stockholm International Peace Research Institute (SIPRI)
Abstract:
Armed forces in the Indo-Pacific region remain dependent on weapon systems imported from foreign suppliers. This is despite the efforts of many governments in the Indo-Pacific to implement policies that support the development of local arms industrial capabilities with the aim of increasing self-reliance. This report develops three indicators to give a score and regional ranking of self-reliance in arms production to 12 jurisdictions in the Indo-Pacific region: Australia, China, India, Indonesia, Japan, South Korea, Malaysia, Pakistan, Singapore, Taiwan, Thailand and Viet Nam. Overall, this report contributes to knowledge and debates on armament trends and military modernization in the Indo-Pacific. In a region where tensions among neighbours are rising, it further contributes to transparency with regard to levels of self-reliance in domestic arms production, allowing for an independent assessment of the region’s respective arms industries.
Topic:
Security, Foreign Policy, Arms Control and Proliferation, Arms Trade, and Imports
Political Geography:
China, Australia, and Indo-Pacific

30. A Survey of Importers: Results of a Survey Conducted in Collaboration with the Ethiopian Economics Association

Author:
Ricardo Hausmann, Tim O'Brien, Tim Cheston, Nikita Taniparti, and Ibrahim Worku Hassen
Publication Date:
11-2022
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
Ethiopia suffers from a chronic shortage of foreign exchange (forex).[1] The resulting lack of access to imports prevents firms from accessing imported inputs required for production. This creates a vicious cycle as exporters are constrained by this same problem, which further reduces overall supply of foreign exchange in the Ethiopian economy. The inability to reliably access foreign exchange for imports affects firm decisions on sourcing, capacity, and output. While the cost of this constraint is known to be high on the Ethiopian economy and firms are known to use a range of measures to attempt to bypass this constraint, quantitative assessments of the problem and response actions by firms are limited. It is in this context that an importer survey was conducted with the goal of informing policy decisions. A total of 202 firms with an active importing license were interviewed in March-April 2022. These firms were randomly sampled from firms registered with an importer license. All firms interviewed reported that they were operating below capacity, often well below capacity. Foreign exchange shortages were the main reason respondent firms cited for not operating at full capacity (63% of firms reporting this as their biggest constraint). Forex shortages far surpass the second and third reasons cited for not operating at full capacity — constraints due to the conflict (13%) and COVID-19 restrictions (11%). Firms operating below capacity cited forex shortages as the main constraint, regardless of whether they imported or not in the previous year. This was the most pressing constraint reported by firms of all sizes and sectors surveyed. It was the most pressing constraint faced by exporters and by foreign-owned firms as well as non-exporters and domestic firms. Amongst the total sample of firms with a renewed importer license, more than one-third of respondent firms (37%) had not imported in FY2020-21. Overall, 74% of firms reported experiencing challenges in accessing forex. Access to forex was reported as most challenging for manufacturing firms and smaller firms but impacted all sectors and firm sizes. The losses attributed to forex scarcity at the firm level were largest for agricultural firms, for micro-firms, and for firms that did not import at all in the previous year. In general, the larger the firm sales, the higher the likelihood that they were able import. The survey found different types of imports for different sectors. Manufacturing firms imported a large share semi-finished goods as imports as compared to agricultural firms that primarily imported finished goods. The survey results find that foreign exchange shortages and an inability to import are most severe for the manufacturing and agriculture sectors, small and micro-sized firms, and all non-exporters. However, the constraint is also the top problem facing all firm types in the survey, including exporters and foreign-owned firms. The primary means of accessing foreign exchange where it did occur was through specialized forex accounts or ‘diaspora’ accounts. The second most common means of accessing foreign exchange was through retention accounts available to exporters. The black market featured in many responses, but questions across the survey suggest that self-reported use of the black market by survey participants is underreported versus actual usage. The ability to source foreign exchange differed significantly by firm size. Exporting firms primarily used retention account earnings, as compared to non-exporters, which relied more on forex accounts. For faster access to forex, most firms reported that they approach banks, followed by turning to the black market. Friends and family abroad also served as a source of forex for one-quarter of firm respondents, and that foreign exchange was often used immediately. Foreign exchange access from banks is nevertheless a major pain point for firms. Most firms (55%) requested forex from a bank in the past year. On average, fulfilled forex requests took three months to be processed when they were fulfilled, but many firms reported that they have an unfulfilled request that has been in the system for more than a year. These firms are especially likely to report foreign exchange access as their top challenge. The survey finds that individual firms do not tend to use both official and black-market foreign exchange sources but rather tend to access all their forex at the (lower) official rate or all at the (higher) black-market. Large firms import most of their products at the official rate. By contrast, most small and micro firms import through other means. Manufacturing firms are also more likely to import all their production through other means and outside of the banking system. Non-exporting firms tended to import through other means than the official rate and outside of the banking system at a higher prevalence than exporting firms. The survey gleaned new insights on the implicit exchange rate that firms face as they navigate official and black-market channels of foreign exchange access. The survey does not allow for a precise estimate of the transaction-weighted exchange rate facing the economy but finds firm-level estimates align with previous macro-level estimates. The implicit exchange rate was higher for non-exporting firms, which show a greater willingness to pay a higher exchange rate to access imports. This signals the importance of the retention account for exporters to guarantee an import price closer to the official exchange rate. When asked about the maximum rate firms would pay to guarantee access to forex, some groups of firms were willing to pay higher amounts, including all non-exporters, firms that imported in the past year, and those that declared forex access a challenge. When compared to the implied rate they paid in the past year, many firms are willing to pay more than the implied rate to guarantee access to forex. Firm perspectives on policy changes to the exchange rate underscored challenges faced by policymakers. Current policy has been one of a crawling peg, with changes within the last several years to increase the rate of devaluation. The survey asked respondents about their support for faster devaluation, for a one-off movement to unify the official rate with the black-market rate, or about alternative exchange rate systems such as a floating exchange rate. Most respondents (71%) opposed maintaining the current regime, yet no option received majority support. Most firms appear to want both a stronger exchange rate and easier access to foreign exchange despite a tradeoff between these two priorities. The largest share of support for policy change was to adjust the exchange rate such that the official rate matches the black-market rate.
Topic:
Development, Economics, Imports, and Collaboration
Political Geography:
Africa and Ethiopia