Search

Begin New Search Topic Markets Publication Year within 3 Years

41. Service Market Opening in Latin America and Its Effect on the Region's Manufacturing GVCs

Author:
Sungwoo Hong
Publication Date:
05-2024
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
Due to the accelerating digital transformation in the post-COVID-19 world, the share of service trade in the economies of major countries worldwide is expected to increase further. Services and participation in the global value chain (GVC) are closely related because services serve as a significant input factor in the manufacturing sector. The recent movement to open the service market in Latin American countries has an inherent policy goal of enhancing participation in the GVC centered on the manufacturing industry by facilitating the introduction of services within and outside the region in product trade. Korea’s exports are still concentrated on the trade of manufacturing-centered products, and improving competitiveness in the service sector is a challenge. In a situation where Korea's exports to the world are sluggish due to the spread of protectionism and delayed global economic recovery, the Korean government and companies need to move away from the traditional Korea-Latin America cooperation model that was focused on manufacturing-oriented product trade. In addition, they need to expand service trade and create new solutions in the service sector. Therefore, against this background, it is essential to understand the level of service market openness in major Latin American countries, provide information to governments and companies, and provide the logic for economic cooperation between Korea and Latin America in the service sector. This report briefly shows the status of service market opening in major countries in Lain America and empirical findings of relationships between service market opening and manufacturing GVCs of Latin America. As a result of reviewing the domestic laws of MERCOSUR and the Pacific Alliance in Latin America, the level of regulation on investment in the service sector has been lowered due to the past active policy of attracting foreign direct investment except for some cases. However, the level of service concessions in these countries was significantly lower than the level of investment liberalization based on domestic law. As a result of the empirical analysis, I found that when Latin American countries signed a bilateral service trade agreement with a Global North country, the agreement significantly strengthened the backward linkages of Latin American exporting countries. Among Latin American countries, when a country in the Global North concluded a service trade agreement with a Global North country, forward linkages of Latin American exporting countries also increased.
Topic:
Markets, Manufacturing, Trade, and Service Marketing
Political Geography:
South America and Latin America

42. The Letta and Draghi Reports: The Only Way to Go, Despite the Hurdles

Author:
Alekos Kritikos
Publication Date:
11-2024
Content Type:
Policy Brief
Institution:
Hellenic Foundation for European and Foreign Policy (ELIAMEP)
Abstract:
The Letta and Draghi reports begin with the same realisation, though they formulate it differently: that the international geopolitical environment has changed dramatically and that the EU must take immediate action as a result. The Letta report’s take-home message is that the Single Market must be transformed into something “much more than just a market”. Thus, research, innovation and education need to be integrated into its core, as a “fifth freedom”, and the Single Market extended to include the telecommunications, energy, financial services and defence sectors. There is fear at the heart of the Draghi report, fear of the “existential challenge” confronting the EU, which will require an extra €800 billion a year in investment. The report’s proposals are articulated around five major horizontal policies: closing the innovation gap, decarbonising the economy and making it more competitive, strengthening security and the defence sector and reducing dependencies in this area, financing investment, and strengthening EU governance. The Letta and Draghi reports agree on both the fields where intervention is required and the form such intervention should take. And while they differ in terms of the competition—and, still more, cohesion—policy they prescribe, they do so constructively while their proposals complement one another. In relation to Greece, the proposals made in both reports with respect to the defence industry, to reducing energy costs, and to the provision of generous funding for additional investment through —inter alia—joint borrowing, are of the utmost importance. No serious disagreement has been voiced with respect to the proposals made in the Letta and Draghi reports, apart from the predictable German reaction to additional funding and new joint borrowing, coupled with unfounded criticism of the proposals as ‘unfeasible’. The “New European Agreement on Competitiveness” adopted in Budapest on 8 November is a critical development, given that it adopts the bulk of the key approaches contained in the Letta and Draghi reports, and sets specific milestones for some, as well. The two reports stress that, even if certain recent developments around the world cannot be considered favourable for the EU (political crisis in Germany, economic problems in France, Trump’s election in the US), Europe still has the “weapons” it needs to reverse the situation. And while the Budapest summit decision may not have gone as far as the situation demands, it still adopted the bulk of the proposals made in the two reports, making it crystal clear that the European Union has taken the need to regain the initiative fully on board.
Topic:
Markets, European Union, Economy, Regional Integration, and Regional Economy
Political Geography:
Europe and Greece

43. An energy and sustainability road map for the Middle East

Author:
Ariel Ezrahi
Publication Date:
11-2024
Content Type:
Special Report
Institution:
Atlantic Council
Abstract:
Global warming is impacting the Middle East at more than twice the global average. In a region already beset by territorial and religious conflicts, this is alarming: Beyond the immediate human suffering from war, the region’s people face severe consequences of global warming. While it is uncertain if humanity can entirely avert this crisis, it is clear that mitigation and adaptation measures are essential to address its worst effects. Climate change respects no borders; for instance, nature does not distinguish between Areas A, B, and C in the West Bank, nor does it differentiate between the rising sea levels along the shores of Tel Aviv and Beirut. Cross-border cooperation will be critical to implementing effective mitigation and adaptation measures. As temperatures rise and extreme weather events, such as intense but infrequent rainfall, become more common, countries in the region must work together to optimize and expand sustainable energy and water resources. This report was partially written prior to the October 7, 2023, attack by Hamas on Israel, which triggered the ongoing Gaza war. Beyond the physical reconstruction required in Israel and the Gaza Strip, the traumas on both sides of the border could take decades to heal. Now, with the death of Hamas leader Yahya Sinwar and Hezbollah leader Hassan Nasrallah, the region has a rare opportunity for rebuilding and peace. On the Israeli side, it is clear that new Israeli leadership will be critical for rebuilding and unifying the country, as well as for mending relations with the Palestinians and the wider region. Saudi Arabia has indicated it would need to see a clear path for an independent Palestinian state for normalization of its relationship with Israel to proceed. Other regional powers, such as the United Arab Emirates, Egypt, Jordan, and Bahrain, have cooled relations with Israeli Prime Minister Benjamin Netanyahu’s government. For there to be a realistic possibility of building on the Abraham Accords—or even taking small steps to increase cooperation in the region—a “New Middle Eastern Order” will need to be established. A comprehensive new US plan could shape this new order. The United States, seen by some in the region as disengaging, now has an opportunity to counter that perception by helping to establish a “New Middle Eastern Order” based on a tangible plan for strong intra-regional energy and climate-related cooperation, alongside efforts to facilitate a permanent solution to the Israeli-Palestinian conflict. For example, the energy and climate component could form a cornerstone of the US strategy for the region. The alternative is a region increasingly mired in conflict due to dwindling resources in the face of a worsening climate crisis and a deepening of existing conflicts fueled by a destructive Iranian agenda. Furthermore, this alternative risks exacerbating global conflict-driven emissions and environmental disasters, as seen recently with the Houthi attacks in the Red Sea. Although tangible cooperation on energy- and climate-related issues has so far been limited, this can—and indeed must—change. The purpose of this piece is to highlight some specific areas where cooperation can be undertaken and advanced under the task force platform outlined below.1
Topic:
Climate Change, Environment, Markets, Governance, Sustainability, and Energy
Political Geography:
Middle East, Israel, and Gulf Nations

44. Future-proofing the EU’s Investment Attractiveness: A Bold Reform Agenda for Competition Enforcement, Taxation and Digital Policy

Author:
Matthias Bauer, Dyuti Pandya, and Oscar du Roy
Publication Date:
07-2024
Content Type:
Working Paper
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
Reducing the deterrent effects from EU and Member State laws in three key cross-sector policy areas – competition policy, business taxes and VAT, and digital policies – could significantly enhance the business environment within the Single Market and boost the EU’s attractiveness to both domestic and foreign investors. The EU’s future competitiveness is at risk due to a significant disparity in investments, particularly in technological innovation, compared to the US. Despite having a larger population and labour force, the EU lags behind in large business activities, with US firms consistently outspending their European counterparts in key tech-intensive sectors such as software, computer services, pharmaceuticals, and biotechnology. Moreover, China and other emerging nations are rapidly catching up, dramatically diminishing the EU’s relative economic and political influence on the global stage. The urgency for the EU to bridge these gaps is more critical than ever (Section 2). The EU’s profound investment gap highlights a systemic advantage for the US in fostering innovation and economic growth. The EU’s regulatory complexity, largely driven by legal fragmentation in horizontal policies, further exacerbate the situation, deterring cross-border activities reducing the region’s attractiveness to global investors (Section 3).
Topic:
Markets, Reform, European Union, Digital Economy, Investment, and Digital Policy
Political Geography:
Europe

45. A European circular single market for economic security and competitiveness

Author:
Heather Grabbe and Luca Léry Moffat
Publication Date:
09-2024
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
If the European Union is to achieve a sustainable net-zero economy, resources need to be used much more efficiently. Extraction from nature and processing of materials are the principal causes of biodiversity loss and are also major sources of pollution, water stress and greenhouse gas emissions. Resources are used inefficiently currently because market and government failures create a nexus of disincentives and barriers to firms and individuals, hindering them in making resource-efficient choices. The most prominent failure is the artificial cheapness of raw materials because the environmental and human costs of extraction are not including in their prices. A powerful way to improve resource efficiency is to increase circularity, so that fewer resources are used to meet the same level of human need. This can be done by extending the duration of use and reuse of materials, and by reducing resource demand from the start by designing products and systems for optimal efficiency. A circular single market would allow faster de-risking from toxic dependencies and economic coercion by authoritarian regimes. It would increase resilience in the context of fragile supply chains while reducing instability from volatile commodity prices. Firm competitiveness would also be enhanced, given that European companies operate on a continent that is poor in energy and natural resources, and are thus very exposed to future scarcity of resources when climate impacts will make water and land scarcer. If firms were to optimise production and consumption systems for efficiency now, they would be ahead of the curve. To develop the circular economy further, the EU will need to spur investment. Public policy that sets common standards and a predictable regulatory framework would accelerate the development of markets for inputs such as recyclates and services such as repair, both in the EU and in trade partners. The EU has established a legislative framework for the circular economy but it needs scaling up in the forthcoming Circular Economy Act.
Topic:
Climate Change, Environment, Markets, European Union, Economic Security, and Resources
Political Geography:
Europe

46. Catch-up with the US or prosper below the tech frontier? An EU artificial intelligence strategy

Author:
Bertin Martens
Publication Date:
10-2024
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
European Union policymakers want to close the artificial intelligence innovation gap with the United States, as a way to accelerate lagging productivity growth. The EU focus is on expanding an existing supercomputer network with more AI hardware and computing infrastructure, with taxpayer support. However, this computing infrastructure is not adapted to AI modelling. The cost of catching up with leading big tech AI computing centres is already prohibitive for EU budgets, and is set to become even more so. The hardware focus overlooks missing EU markets for complementary services that are required to set up a successful AI business: large-scale business outlets for frontier generative AI models to generate sufficient revenues to cover huge fixed model training costs, hyperscale cloud-computing infrastructure and private equity financing for AI start-ups. In the absence of (or with insufficient) complementary services markets in the EU, start-ups are forced to collaborate with US big tech firms. Injecting taxpayer subsidies to make up for these missing markets may further distort EU markets. Regulatory compliance costs, including uncertainty about the implementation arrangements for the EU Artificial Intelligence Act, add to market problems. The EU should address a wider range of market failures in its policy initiatives. It should strive to increase productivity growth below the AI technology frontier, by facilitating investment and applications of AI-driven services produced by derived and specialised generative AI models, or AI-applications that build on top of existing generative AI models. Building these below-frontier AI applications requires far less computing capacity and less heavy investment costs. Promoting the uptake of AI application services across a wide range of industries can substantially stimulate productivity growth. That requires a razor-sharp focus on pro-innovation guidelines, standards and implementation provisions for the EU AI Act, shortening the Act’s regulatory uncertainty horizon as much as possible, and facilitating collaborations between EU AI startups and big tech companies. Widening and deepening the EU private equity and venture capital market would also be very helpful.
Topic:
Markets, Science and Technology, European Union, Investment, and Artificial Intelligence
Political Geography:
Europe and United States of America

47. Building Resilience? The Cybersecurity, Economic & Trade Impacts of Cloud Immunity Requirements

Author:
Matthias Bauer
Publication Date:
03-2023
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
EU Member States should call on the EU’s Cybersecurity Agency (ENISA) and the European Commission to abandon immunity requirements in the proposed EU Cloud Certification Scheme (EUCS). With immunity requirements in the EUCS, the EU risks opening a Pandora’s box, paving the way for data localisation, foreign ownership restrictions, and local establishment requirements in digital industries globally leading to rising trade tensions. ENISA’s current proposal could increase policymakers’ appetite for data localisation in the EU. It would empower the European Commission and Member State authorities to exclude foreign businesses from domestic cloud services markets and set a dangerous precedent for any data-intensive sector. The list of “sectors of high criticality” could be logically extended to both existing services (e.g., financial services) and to new technologies and business models, such as IoT in the energy and healthcare sectors, and autonomous driving in the transport sector. Non-EU jurisdictions would be pressured to respond in kind. EUCS immunity requirements would increase cloud adopters’ exposure to cybersecurity risks. Data localisation often creates obstacles to an integrated management approach towards cybersecurity risks. Country of headquarter and foreign ownership restrictions in the proposed EUCS risk removing global frontier cybersecurity technologies from Member State markets. Excluding these and other EU and non-EU companies from EU Member States could result in a long-lasting security deficit of EU cloud adopters vis-à-vis organisations that are still able to use reliable and often best-practice cloud services offered by providers from outside EU Member States. Immunity requirements in the EUCS are discriminatory by design. They could provoke retaliatory measures by EU trading partners, either unilaterally or through WTO or bilateral FTA (e.g., UK-EU) Dispute Settlement. Local establishment requirements and foreign ownership restrictions would by design discriminate against foreign cloud providers. US-headquartered companies, which currently serve more than 75% of the EU market, would be most affected by EU immunity requirements.[1] Depending on US preferences and the scope of the proposed EUCS, the EU could be subject to retaliatory tariffs of up to USD 12 billion worth of EU goods exports or equivalent restrictions for EU services exports to the US. Other governments could lodge complaints via the WTO as well (e.g., Singapore, Japan, Canada and others, where cloud development is advancing rapidly). EU suppliers are currently in no position to manage a broad-based transition to cloud, and thus such requirements would delay significant efficiency and security gains that current foreign suppliers could offer. A blanket exclusion of non-EU cloud vendors would also likely undermine Europe’s objective to achieve a 75% cloud adoption rate for EU enterprises. Sensitive European businesses and public sector organisations would have to delay migration and make do with legacy systems for a very long time. Contrary to large countries, these negative impacts would be much more pronounced for smaller EU Member States, which lack the presence of large domestic incumbents and generally rely much more on an open international trading regime for digital services. ENISA’s cloud certification scheme should be limited to technical and transparency requirements. Immunity requirements for non-personal data should be addressed in bilateral initiatives such as the EU-US Trade and Technology Council (TTC) or agreements requiring a company that sought to offer services of the highest level of sensitivity to be headquartered in a country granted adequacy with EU data protection rules, or a country that is an adherent to the OECD’s Trusted Government Access principles, or (concerning the US) a participant in the upcoming Trans-Atlantic Data Privacy Framework. Excluding foreign companies from operating in the EU would have far-reaching consequences. If that is the intent, it should require a sound legal analysis and the decision should be taken through a formal legislative procedure at the EU level.
Topic:
Economics, Markets, European Union, Cybersecurity, Digital Economy, Trade, and Resilience
Political Geography:
Europe

48. In Support of Market-Driven Standards

Author:
Matthias Bauer, Fredrik Erixon, Oscar Guinea, and Vanika Sharma
Publication Date:
03-2023
Content Type:
Working Paper
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
The EU published its new Standardisation Strategy in 2022. The strategy contains some good ideas to improve the way European standards are set. However, in its attempt to gain more control over technical standards, the EU risks killing the goose that lays the golden egg. The primary motivation behind the strategy is the belief that the process governing the way CEN, CENELEC, and ETSI – the three European Standardisation Organisations – take decisions over EU standards favours non-EU multinationals. To address this perceived imbalance, EU National Standardisation Bodies will have the exclusive power to accept standardisation requests, and adopt, revise and withdraw European technical standards. These changes are particularly significant for ETSI, Europe’s Standardisation Body in charge of telecommunication standards and one of Europe’s most successful organisations. ETSI is a prime example of EU normative power since it hosts companies from more than 60 countries, while retaining a large membership of EU firms. The regulatory changes included in the strategy are not risk-free. There could be unintended consequences that may undermine a standardisation system that has delivered significant economic benefits for the EU and the world. First, giving more responsibility to EU’s National Standardisation Organisations will turn a European discussion into 30 (EU and EEA) national debates. As a consequence, small companies will not be able to contribute to each and every one of the National Standardisation Organisations, diluting their contribution, while multinational companies, with the resources needed to cooperate with a larger number of bodies, will benefit from an expanding role in the EU standard setting process. Second, if standards are fragmented along national borders and companies must multiply their efforts to take part in several Standardisation Development Organisations, there will be less resources for Research and Development spending. Finally, if each and every National Standardisation Organisation needs to have a position with regards to the acceptance of a standardisation request, or adoption, revision and withdrawal of European technical standards, the time period required to adopt a technical standard may be extended rather than shortened, which is the exact opposite of what the European Commission wants to achieve. The regulatory changes included in the EU Standardisation Strategy are akin to cracking a nut with a sledgehammer. If the European Commission is concerned about the influence of non-EU companies in European Standardisation Bodies, it does not need to overhaul their governance systems. Supporting greater participation of European firms in the European standard system will ease EU’s concerns without the downside risks associated with changing the rules of the game that govern Europe’s Standardisation Bodies. The success of the European standardisation system, which is market-driven and based on consensus, has had significant economic benefits in the development of specific industries, like the European Information and Communication Technologies (ICT). Technical standards in ICT have shaped a European industry that is not only dynamic and international but also enjoys some of the highest levels of wages and Research and Development spending. Moreover, if technical standards are not developed through an open, consensus-based, and industry-led voluntary process, they will be developed in different ways. For instance, governments and private companies can develop standards by themselves. Both solutions are inferior to the current market-driven approach that governs European standards. However, the European market-driven approach to set standards is voluntary, and its success and continuation must not be assumed. European policymakers should be worried about tinkering with a European standardisation system which has produced economic specialisation and innovation to the benefits of EU firms and consumers.
Topic:
Markets, European Union, Regulation, Economy, and Standardization
Political Geography:
Europe

49. What is Wrong with Europe’s Shattered Single Market? – Lessons from Policy Fragmentation and Misdirected Approaches to EU Competition Policy

Author:
Matthias Bauer
Publication Date:
04-2023
Content Type:
Working Paper
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
What is wrong with Europe’s Single Market? The brief answer to that question is that it does not really exist – it is unsingle. The Single Market is in many ways a political illusion. It exists only nominally. Any company doing business in Europe faces significant barriers to cross-border exchanges within the EU, and it is these barriers that hamper companies’ ability to scale and compete internationally on the back of innovation and economic integration. We outline that Brussels and national governments need to beat the drum for eliminating policy fragmentation in Europe’s internal market and at the same time change course in competition policy to sufficiently support investments in innovation, business growth, and the adoption of advanced technologies across industries. Major economic indicators show that Europe is caught in a protracted corporate and technology crisis. The EU has for a very long time now been tailing US corporate and innovation leadership. At the same time, competition with technology-intensive imports from China is getting increasingly intense. Europe’s underperformance is rooted in a legally fragmented internal market which is disincentivising business growth and innovation. On top of that, an outdated approach to competition policy is discouraging businesses from adopting innovation and scaling across national borders, risking that EU companies continue to lose clout and international competitiveness. 30 years have passed since the formal establishment of Europe’s Single Market. Data reveals that regulatory convergence has reversed or come to a halt in most policy areas. Recent policies for technologies and digital business models, which are key sources of cross-industry competitiveness, created new layers of regulation and legal uncertainty in EU and Member State law. Overall, EU policies have not significantly helped European companies, large and small, to do business in another Member State or use advanced technology-enabled services. EU competition policy does not live up to its promise to “enable the proper functioning of the EU’s internal market”. Europe’s competition policy is still fragmented along national borders and largely ignorant to dynamic effects of competition, especially investments in innovation. Due to mixed legal competences, competition rules are often enforced differently by Member States’ national authorities and can be appropriated to support protectionist industrial policy ambitions. The recently enacted Digital Market Act (DMA) demonstrates that the European Commission and Member State authorities favour protection and discretionary enforcement over innovation and economic disruption, without providing solid evidence of abusive business behaviour and consumer harm. With the DMA, the EU introduced legislation with serious ambiguities in objectives, concepts, and rules, and explicitly allows national Member States to regulate competition at their own discretion. A recent attempt by Germany’s competition authority, the Bundeskartellamt, to enforce its own rulebook for large digital companies (Section 19a of the German Competition Act) risks creating a patchwork of competition rules for large providers of advanced digital services across the EU. Local adopters of advanced digital services, particularly small businesses, that use advanced technology services to compete in their markets would be confronted with less choice and quality. Recently imposed policies under the umbrella of European Strategic Autonomy will hardly help policymakers in their ambition to achieve “innovation and technology leadership”. The paramount task for the EU and national governments is to eliminate policy fragmentation in Europe’s internal market, accompanied by an approach to competition policy that embraces investments in innovation and business growth while accounting for the substantial value created through the adoption of innovative technologies and disruptive business models across industries in the EU.
Topic:
Markets, European Union, Economy, and Competition
Political Geography:
Europe

50. Pro- and anti-competitive provisions in the proposed European Union Data Act

Author:
Bertin Martens
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
The proposed European Union Data Act gives users access and portability rights to the data generated by their use of tangible digital products and devices. This pro-competitive measure weakens the de-facto monopolistic control product manufacturers have over product data. However, the Data Act would also grant manufacturers a de-jure right to monopolistic pricing of data transfers to third-party service providers, restoring their control over data markets. Other anti-competitive provisions include restrictions on the use of data for competition purposes and a prohibition on transfering data to platforms identified as gatekeepers under the EU Digital Markets Act. Unnecessarily fuzzy definitions of products and data that fall under the Data Act would create uncertainty in implementation and incoherence with other EU data regulations. The Data Act should be simplified by dropping anti-competitive provisions and granting users and third-parties selected by users free access to all data generated by the use of a product or a service. This would increase competition in data-driven services and prevent users paying twice for their data. It would not disincentivise producers from investing in data-driven products and services. A further step could be the creation of a level playing field between producers and users in data-access rights. This can be achieved by introducing the principle of mutual exhaustion of data rights at point of sale. This would put all data co-generating parties in a position to generate economies of scale and scope in data aggregation, or data-driven externalities, to maximise innovation.
Topic:
Markets, Governance, European Union, and Digital Economy
Political Geography:
Europe