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41. An Analysis on the Regional Integration of Northeast Asia by Developing NARCI (Northeast Asia Regional Cooperation Index)

Author:
Ji Young Moon, Jehoon Park, and Sung-Hoon Park
Publication Date:
10-2023
Content Type:
Working Paper
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
This paper aims to develop an index to analyze regional cooperation in Northeast Asia, which is Northeast Asia Regional Cooperation Index(NARCI). NARCI evaluates intra-regional cooperation and integration in four areas, which are functional cooperation, politico-security cooperation, socio-cultural cooperation, and institutionalization, in order to identify the conflict and cooperation situation in the Northeast Asian region. The analysis of economic integration found that Northeast Asian regional cooperation is characterized by a high level of integration in goods trade and regional value chain cooperation, but a relatively low level of integration in intra-regional direct investment and energy supply chain cooperation. The analysis of the political and security cooperation shows that the intensification of U.S.-China competition and the factional confrontation between Korea, U.S., Japan, and North Korea, China, Russia have had a significant impact on regional cooperation in political and diplomatic security. The result shows that the level of integration is low, with all evaluation indicators being negative. The analysis of the socio-cultural integration shows a relatively low level of integration in civil society cooperation and intergovernmental exchanges, a relatively high level of integration in cultural and educational exchanges and study abroad, and a neutral level of integration in information technology cooperation, labor mobility, and the share of tourists in the region. Finally, the analysis of institutional integration shows a relatively high level of integration in the bilateral channels between governments and the institutionalization of regional cooperation in the socio-cultural field, and half of the countries had institutional integration in financial integration and regional cooperation in the economic field. The level of integration in the political and security field was low due to the existence of only multilateral meetings. The analysis of NARCI shows that the impact of geopolitical conflicts on the economy and socio-culture has been expanding in recent years. However, the low level of political and diplomatic cooperation in the region and related institutional deficiencies are considered to be insufficient to buffer these risks, and efforts are needed to address them.
Topic:
Economics, Industrial Policy, Regional Cooperation, Economic Growth, and Regional Integration
Political Geography:
Asia and Northeast Asia

42. Industrial Policy, Rise of Skilled Labor, and Firm Growth in the Early Stage of Economic Development

Author:
Sunghun Cho and Jaehyung Kim
Publication Date:
12-2023
Content Type:
Working Paper
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
This paper examines the role of education policy in raising specific human capital for industrialization during the period of economic miracle in Korea. As part of the Heavy and Chemical Industry (HCI) drive, the Korean gov-ernment built technical schools near industrial complexes, resulting in a prompt supply of skilled labor. With practical curricula and training, young and skilled workers were able to enter the new sector. We also document these two patterns by using the Technical School List and the Occupational Wage survey. This government-led education reform led to higher firm-level productivity and growth, which is one of the important aspects explaining the success of the industrial policy. Motivated by historical evidence, we combine the administrative Mining and Manufacturing survey with the Technical School List to study the effec-tiveness of industry-oriented education reform. We incorporate an education layer into the targeted industries under the HCI drive by exploiting the varia-tion in technical school openings at the county level. Our results show that plants in treated regions tend to employ and invest more than those in control regions, but value-added and labor productivity are negatively correlated with our interaction terms. This implies that firms in HCI sectors experienced disproportionate growth and should pay higher on-the-job costs for workers while education reform may reduce the overall cost of hiring industry-specific labor. In contrast, non-HCI sector firms ex-hibit a positive correlation with value added and labor productivity. These firms might benefit from the education reform that improved overall quality of skilled workers. Lastly, the effect of education reform was concentrated before the end of the HCI drive period and did not persist after 1980. In the era of emerging industrial policy, our paper presents a new mecha-nism that encourages more workers to enter a new sector targeted by gov-ernment-led plans. Our results serve as a starting point for re-evaluating con-temporary industrial policy and underscore the need to consider this addi-tional layer in future policy design.
Topic:
Industrial Policy, Economic Growth, Economic Development, and Skilled Labor
Political Geography:
Asia and South Korea

43. The Comeback of Industrial Policy. The Next Geopolitical Great Game

Author:
Alessandro Gili, Davide Tentori, and Paola Magri
Publication Date:
12-2023
Content Type:
Special Report
Institution:
Italian Institute for International Political Studies (ISPI)
Abstract:
Industrial policies are the key element underlying today’s geopolitical scramble and a pillar of national security. Reacting to Western weaknesses and bottlenecks in the global supply chains, highlighted by multiple shocks such as the pandemic, the war in Ukraine, and the recent Israel-Hamas war, the US in first place and the EU later have started to introduce new industrial legislation aimed at making up for lost ground with respect to other industrial powerhouses, such as China. Besides being policy tools to accelerate the green and digital transitions, however, the US Inflation Reduction Act and the Net Zero Industry Act, as well as the US and the EU Chips Acts, entail subsidies, local content requirements and export controls targeted at strengthening the domestic industrial base for critical technologies, fostering strategic autonomy and de-risking from excessive foreign dependencies. This race poses risks for the weaponisation of industrial policies and fragmentation of international trade and also potentially jeopardises technological development. How can we strike a balance between economic security and efficiency? Which sectors are the most critical and which ones are the leading global powers pursuing? What will the consequences be for global value chains and international trade? Is it possible to reach an agreement on rules for a new level playing field to prevent economic competition turning into economic warfare?
Topic:
Development, Industrial Policy, National Security, Science and Technology, European Union, Geopolitics, Trade, and Supply Chains
Political Geography:
China, Europe, and United States of America

44. The Anti-Circumvention Instrument: Another Roadblock on the Investment Development Path?

Author:
Weihuan Zhou and Victor Crochet
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
Centre for Trade and Economic Integration, The Graduate Institute (IHEID)
Abstract:
Companies from emerging economies, and China in particular, have started internationalizing their production operations. In doing so, they are following the same path as that taken by American, European and East Asian corporations before them, by setting up factories in third countries to serve their export markets from closer locations and produce more efficiently. Thus, it is no longer only developed countries’ multinationals which are moving their operations to developing countries, but emerging market companies that are increasingly engaging in production abroad. This phenomenon is having beneficial effects in countries where these companies invest and might help them start their own industrialization process. Yet, it has attracted the ire of developed countries, in particular the European Union. They are now targeting these downstream production plants abroad by using the so-called anti-circumvention instrument, resulting in trade defence duties imposed on the parent companies being extended to their foreign subsidiaries. This application of the anti-circumvention instrument departs from its historic rationale and might hinder the development of countries in need of foreign investment. Therefore, affected governments should consider taking international legal action to bring developed countries to the negotiating table to put a halt to this abuse of the anti-circumvention instrument.
Topic:
Development, Industrial Policy, Investment, Trade, Internationalization, Production, Emerging Economies, and Anti-Circumvention Instrument
Political Geography:
China, Europe, Global Focus, and United States of America

45. The Sunshine Problem: Climate Change and Managed Decline in the European Union

Author:
Timur Ergen and Luuk Schmitz
Publication Date:
06-2023
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
Decarbonization requires the winding down of – economically – fully viable, if not highly prosperous, lines of economic activity. Different from past episodes of industrial restructuring revolving around the managed decline of sunset industries, accelerating climate change requires reallocation away from economic activities where the metaphorical sun is still shining. Firms, owners, workers, regions, and polities structurally rely on these sources of prosperity and have interwoven their past and future lives with them. We argue that this problem has created a space for state actors to experiment with vertical industrial policies to manage the reallocation of resources from polluting to non-polluting activities. We illustrate this dynamic by investigating the least-likely case of the European Union, a polity heavily tilted towards market governance. European climate policymakers, we argue, have incrementally moved away from the primacy of regulatory, market-making tools and have introduced a plethora of vertical instruments to shift resources away from climate-harming fields. This experimentation with vertical policies unfolds against the backdrop of a thirty-year institutional legacy of single market-oriented policy in the energy field.
Topic:
Climate Change, Industrial Policy, European Union, Decarbonization, Green Transition, and Cohesion
Political Geography:
Europe

46. A shared EU-US economic agenda for the world: Engagement as an imperative

Author:
Lauri Tähtinen
Publication Date:
12-2023
Content Type:
Policy Brief
Institution:
Finnish Institute of International Affairs (FIIA)
Abstract:
It is time for the European Union and the United States to build a shared, positive economic agenda towards third countries. Such an agenda would build upon the bilateral relationship but not focus on it. It would still be shared, even if the parties may have distinct reasons for supporting different aspects of it. The first elements of a shared economic agenda are evident in the EU-US Trade and Technology Council projects for Jamaica and Kenya. However, the political window for further alignment between the US and the EU, as well as for European trade deals, may be closing in 2024. Future initiatives should take into account major economies such as Brazil, Mexico, and Indonesia. The entry into force of the EU-Mercosur agreement should be a high-level priority for both Washington and Brussels. The current state of the EU-US relationship is characterized by a divergence in technology, industrial policy, and environmental policy. To move onto a path of convergence, Washington must reassess its exaggerated fears regarding the regulatory power of the EU, and use the spread of European standards as a means towards shared ends.
Topic:
Environment, Industrial Policy, Science and Technology, Bilateral Relations, European Union, and Economic Policy
Political Geography:
Europe, Latin America, and United States of America

47. Industrial Feudalism and Wealth Inequalities

Author:
Hanna Szymborska and Jan Toporowski
Publication Date:
01-2022
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
The possibility, first raised by Rudolf Hilferding, of stabilizing a capitalist economy through the operations of a ‘general cartel’, leaving only social and political ‘contradictions’ to disturb the functioning of the system, gave rise to a discussion among Marxists not only on whether such a stabilization was at all possible, but also on the nature and scope of those contradictions. This discussion had been anticipated in the 1890s in the work of the Polish Marxist Ludwik Krzywicki (1859 – 1941). He put forward the idea that, in a capitalist economy stabilized in this way, a state of ‘industrial feudalism’ would prevail, in which society would become stratified into social classes without the possibility of mobility between those classes. This analysis was extended in 1940s by Oskar Lange (1904-1965) as he attempted to make sense of the American New Deal and rediscovered in the 1950s by Tadeusz Kowalik (1926-2012). This paper explains the concept of industrial feudalism and argues that the main mechanism for such a stratification today is the unequal distribution of wealth, in the context of declining welfare provision.
Topic:
Industrial Policy, Inequality, Feudalism, Industry, and Wealth
Political Geography:
North America and United States of America

48. How Does China’s Industrial Policy Support Specific Sectors?

Author:
Barry Naughton and Tai Ming Cheung
Publication Date:
11-2022
Content Type:
Policy Brief
Institution:
University of California Institute on Global Conflict and Cooperation (IGCC)
Abstract:
The brief summarizes discussions and findings from the workshop on China’s Industrial Policy: Sectors and Resources, which was hosted by the UC Institute on Global Conflict and Cooperation (IGCC) with support from the UC San Diego 21st Century China Center, on September 30–October 2, 2022. Held in La Jolla, California on the UC San Diego campus, the workshop examined Chinese industrial policies in the sectors in which China hopes to make the biggest technological leaps, including high-performance computing, artificial intelligence, electric vehicles, solar, robots, aerospace, and biotech. Participants from leading universities, think tanks, and industry, along with U.S. government representatives, shared their research and observations along China’s industrial policy life cycle, from formulation to implementation.
Topic:
Industrial Policy, Science and Technology, and Innovation
Political Geography:
China and Indo-Pacific

49. Inside China’s Techno-Security State

Author:
Tai Ming Cheung
Publication Date:
09-2022
Content Type:
Working Paper
Institution:
University of California Institute on Global Conflict and Cooperation (IGCC)
Abstract:
Since coming to power, Xi Jinping has significantly elevated the importance of national security and technological innovation in the country’s overall priorities. He has invested considerable time, effort, and political capital to establish an expansive techno-security state based upon his strategic and ideological vision. This brief examines the five major methods Xi’s administration has undertaken to develop its techno-security state: developing a national security state, innovation-driven development, military strengthening, military-civilian fusion, and economic securitization.
Topic:
Security, Defense Policy, Diplomacy, Industrial Policy, International Security, Innovation, Strategic Competition, and Regional Security
Political Geography:
China, Asia, and Indo-Pacific

50. China and the U.S. Compete for Global Techno-Security Dominance

Author:
Tai Ming Cheung
Publication Date:
07-2022
Content Type:
Policy Brief
Institution:
University of California Institute on Global Conflict and Cooperation (IGCC)
Abstract:
In the struggle for global geostrategic and geoeconomic supremacy between the United States and China, the technosecurity sphere where economics, technological innovation, and national security meet has become a principal battleground. Two contrasting models are pitted against each other: China’s state-led top-down approach and the United States’ market-driven bottom-up system. Which of them will ultimately prevail will depend on how capable, robust, and adept they are in meeting the challenge of rapid and disruptive change? This brief examines the underpinnings of U.S.-China great power technosecurity competition and assesses what the countries’ different approaches imply for future techno-security rivalry.
Topic:
Security, Industrial Policy, Science and Technology, Strategic Competition, and Geoeconomics
Political Geography:
China, Asia, North America, United States of America, and Indo-Pacific