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331. Enhancing Technology Diffusion in the EU amid Tough Structural Challenges

Author:
Matthias Bauer, Elena Sisto, and Oscar du Roy
Publication Date:
09-2024
Content Type:
Working Paper
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
To remain globally competitive, the EU must empower firms to adopt the best technology solutions available on global markets. Building on a strong tradition of innovation, the EU relies on corporations across industries to drive the diffusion of technology through the commercialisation of technological innovations. Technology diffusion is crucial for embedding new technologies into society and is essential for sustaining industrial competitiveness. EU and Member State governments must prioritise enhancing the EU’s “diffusion capacity” – the ability to effectively spread and adopt innovations across Member States.
Topic:
Science and Technology, European Union, Digital Economy, and Services
Political Geography:
Europe

332. Is the European Union Deforestation Regulation WTO-Proof?

Author:
Bruno Capuzzi
Publication Date:
09-2024
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
The European Union Deforestation Regulation (EUDR) is set to take effect on 30th December 2024. While it aligns with EU’s climate goals under the European Green Deal, it has sparked concerns with EU partners regarding its compatibility with World Trade Organization (WTO) principles. Internally, some member-States and productive sectors fear that the lack of clarity in its rules could disrupt European supply chains. Products like coffee, chocolate, and leather are some examples where costs and price are expected to rise due to compliance requirements, documentation, and shipment segregation. Critics argue that the EUDR’s unilateral imposition of EU standards on third countries could be viewed as extraterritorial and more restrictive than necessary towards its objectives. This paper analyses lessons from WTO reports on US Shrimp/Turtle and US Tuna/Dolphin, which are relevant to discussions on non-product-related processes and production methods (PPMs). Key findings suggest that the EUDR could be justified under GATT exceptions clause (Article XX). However, for this to be successful, the Policy Brief proposes more flexibility in considering local realities of exporting countries. This would include shifting the EUDR approach to cooperating towards an outcome-based equivalence systems instead of rigid procedural requirements.
Topic:
Agriculture, European Union, Trade, WTO, Deforestation, and Mercosur
Political Geography:
Europe and Latin America

333. 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

334. Shared Liability: The European Parliament’s Misstep in Fighting Financial Fraud

Author:
Matthias Bauer, Andrea Dugo, and Dyuti Pandya
Publication Date:
11-2024
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
The rise in financial fraud has prompted regulatory proposals under the Payment Services Regulation in the form of a shared liability model provisioned under Article 59. The potential proposal by the European Parliament could now extend liability beyond Payment Service Providers to Electronic Communications Service Providers and online platforms. While the intent to address fraud is commendable, this model misallocates responsibilities by requiring non-financial entities to oversee fraudulent activities, despite their lack of visibility and technical control over financial transactions. Extending liability to non-financial entities risks undermining consumer vigilance and diluting payment services providers’ efforts to maintain fraud awareness. A shared liability regime covering non-financial entities would also disproportionately burden smaller “digital” firms, leading to legal uncertainties, costly legal disputes, and market exits. This would not only drive market concentration and reduce competition in digital services but also undermine EU and Member State efforts to support Europe’s lagging digital start-ups and scale-ups. The resulting harm to innovation and entrepreneurship would be a significant setback to the EU’s broader digital ambitions.
Topic:
European Union, Regulation, Services, European Parliament, Fraud, and Liability
Political Geography:
Europe

335. Securing Europe’s Future: Strengthening ICT Competitiveness for Economic and National Security

Author:
Fredrik Erixon, Oscar Guinea, and Dyuti Pandya
Publication Date:
12-2024
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
Europe’s Information and Communication Technology (ICT) sector, including ICT manufacturing such as telecom equipment and electronic components, as well as ICT services such as software, telecommunication services, and data processing, is no longer merely an economic pillar but a strategic asset essential for national security and defence capabilities. This paper identifies two concerns linking technology and national security: the exploitation of ICT as a gateway to critical infrastructure and the weaponisation of trade and technological dependencies in ICT by foreign nations. Addressing these two challenges requires tailored approaches, as they involve distinct nations and contexts. First, the EU should reduce its reliance on Chinese telecom equipment within its networks and accelerate the deployment of 5G. While phasing out Chinese telecom equipment will take years, a faster rollout of 5G can be achieved in the short term. To accomplish this, the EU should promote the scale and profitability of its telecom operators. Secondly, the EU relies heavily on US companies for a substantial share of its cloud-based online services. However, it is unlikely that the US would impose restrictions on these exports to the EU. Furthermore, replicating the infrastructure needed to deliver cloud-based online services would entail significant costs. To achieve technological leadership, the EU must prioritise emerging technologies such as 6G, XG, AI, quantum computing, and edge and hybrid computing, which will form the foundation of future commercial and military innovations. Thirdly, the EU should strengthen its leadership position in the development of technologies for advanced mobile communication, including 5G, 6G, and XG. Through significant effort and investment in R&D, European companies have secured a leading role in developing technical standards for cellular communication and telecom equipment. Large European firms such as Ericsson and Nokia, as well as EU SMEs that are champions in their fields, are among the most significant contributors to the technological standards. This hard-won position is one that EU policymakers must do their utmost to protect and develop. However, complacency is a recipe for disaster. The EU has the potential to foster companies that could lead in the technologies of tomorrow. It possesses the necessary fundamentals to drive technological innovation in the ICT sector, including high levels of human capital, firms operating at the technological frontier, and a market economy underpinned by strong institutions, the rule of law, and robust intellectual property protections. These constitute Europe’s comparative advantages, and the EU must adopt policies that recognise and reinforce them, rather than undermine them.
Topic:
Defense Policy, National Security, European Union, Digital Economy, Trade, and Competition
Political Geography:
Europe

336. Putting An End To World Hunger – The European Union’s role in transforming the global food system

Author:
Hanna Saarinen, Rebecca Varghese Buchholz, Bertram Zagema, and Chris Joseph
Publication Date:
12-2024
Content Type:
Policy Brief
Institution:
Oxfam Publishing
Abstract:
Farmers around the world produce more than enough to feed everyone on the planet, yet since 2017 hunger has increased sharply. Promoting food production and distribution that are socially equitable and environmentally sustainable is a necessity, in Europe and globally. This paper highlights the European Union’s role in addressing global hunger and supporting a sustainable and equitable global food system transformation. A new direction is needed and the EU can make a positive change. Smallholder farmers in the Global South offer enormous untapped potential for fighting global hunger but they must be better supported. The EU must also stand for climate justice by taking the climate change threat to food security seriously, limit the EU’s global land use footprint by stopping unsustainable and irresponsible land use that drives hunger and inequality, and balance the power in food systems by breaking corporate domination and enhancing equitable global food governance.
Topic:
Agriculture, Climate Change, European Union, Hunger, Land, and Farmers
Political Geography:
Europe and Global South

337. The Rise of Fragmentation. A New Economic Security Era?

Author:
Alessandro Gili and Filippo Fasulo
Publication Date:
09-2024
Content Type:
Special Report
Institution:
Italian Institute for International Political Studies (ISPI)
Abstract:
Multiple crises have shaken the foundations of the global economy, and the resulting instability has yet to recover. Instead, it has led to increasing fragmentation along political and ideological lines. The current geoeconomic order is increasingly defined by the use of advanced trade defense and economic security tools, such as tariffs, trade barriers, sanctions, and export restrictions, which have become more sophisticated. Major economies are adapting to this new reality by shaping their own definitions of economic security, particularly to safeguard critical and high-tech sectors. The EU, the US, and China are each calibrating their economic security strategies, seeking a balance between openness and protection that maximizes their respective advantages. However, in this shifting international landscape, new actors are emerging with the potential to influence the global balance of power. What type of "new globalization" is emerging? Could economic security tools become the new normal in the global economy? What are the key economic security strategies adopted by the world's leading economies?
Topic:
European Union, Economy, Ideology, Tariffs, Trade, Economic Security, Instability, Fragmentation, and Geoeconomics
Political Geography:
China, Europe, and United States of America

338. China’s influence at the United Nations: words and deeds

Author:
Alicia Garcia-Herrero, Théo Storella, and Pauline Weil
Publication Date:
11-2024
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
We investigate China’s influence at the United Nations by focusing on the promotion of its narratives (words) and its voting behaviour (deeds). For the former, we assess the extent to which China’s global initiatives have become embedded in UN discourse compared to Western initiatives. For the latter, we assess the degree to which countries, regions and voting coalitions align their UN General Assembly votes with China compared to the US. When it comes to words, China’s global initiatives are sometimes louder than the West’s. More specifically, the Belt and Road Initiative has had a much greater impact on UN discourse than any Western initiative. Other Chinese global initiatives do not clearly stand out from those of the West, with the Global Compact for Migration mentioned more frequently at the UN than any Chinese initiative other than the BRI. We also find that Chinese initiatives are more self-referential. Thematically, both Chinese and Western initiatives are very focused on security as well as aid and human rights. Moving to voting patterns, countries’ income levels are a key determinant of alignment in voting. Poorer countries are much more aligned with China than with the US. North America and the European Union, in that order, are generally more aligned with the US than with China and these trends are much more stable than one could expect given China’s growing economic influence.
Topic:
United Nations, Bilateral Relations, Governance, European Union, Economy, and Trade
Political Geography:
China, Europe, and Asia

339. Designing conditionality in the supply of European public goods

Author:
Roel Beetsma and Marco Buti
Publication Date:
12-2024
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
The European Union will need in the coming years to invest a substantial amount of resources in European public goods (EPGs), including for the digital and climate transitions, and for defence and security. Funding for this could be provided in a centralised way at EU level, via either a fund or from the EU budget, but for this to be politically viable, and to create the necessary trust, national budgetary policies need to comply with the common EU fiscal rules. Setting adequate conditions for access to central financing is, however, not straightforward. The tightness of the conditionality needs to balance the desirability of a country pursuing sound fiscal policies with the need to deliver on the provision of EPGs that benefit several or all EU countries. The optimal tightness should reassure fiscally-conservative countries that EU money would not result in opportunistic behaviour that results in less discipline at national level. More fiscally fragile countries should be reassured that their fiscal retrenchment efforts will be duly rewarded.
Topic:
Governance, Budget, European Union, Finance, and Macroeconomics
Political Geography:
Europe

340. The European Central Bank’s operational framework and what it is missing

Author:
Giulia Gotti and Francesco Papadia
Publication Date:
07-2024
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
In March 2024, the European Central Bank published the results of a review of its operational framework. After discussing how the ECB operational framework has changed since the Great Financial Crisis, we provide an assessment of the review, which we deem as premature and highlight some gaps it has not resolved. First, the choice of a hybrid system is attractive, but needs a precise specification. Second, the review did not specify the timing of the introduction of structural long-term refinancing operations and a structural portfolio of securities. We find that these measures should be implemented when the level of excess liquidity reaches between €1.3 trillion and €2 trillion, projected between mid-2026 and late 2027. Finally, as the introduction of a digital euro could impact bank liquidity, it is crucial to design a framework that can flexibly increase the supply of central bank liquidity.
Topic:
Monetary Policy, Governance, European Union, Macroeconomics, Fiscal Policy, European Central Bank, and Banking
Political Geography:
Europe