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11. Twenty-five years of inflation-targeting in South Africa: Going from 6% to 3%?

Author:
Philippe Burger
Publication Date:
06-2025
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper proposes that the South African Reserve Bank should pursue a 3% inflation target, instead of the current 4.5% midpoint of a 3%-to-6% target range. Doing so may also result in lower inflation volatility, thereby reducing nominal exchange rate risk for investment and trade, and may thus support economic growth. Using a two-regime Markov-switching model, the analysis shows that since the global financial crisis, periods of higher inflation volatility are much shorter. Thus, inflation is relatively better anchored since the global financial crisis. But there are still shocks that coincide with periods of exchange rate volatility. Lastly, the analysis shows that the budget deficit/gross domestic product ratio, constraints on electricity supply, and administered prices contribute significantly to inflation, while the effect of real gross domestic product growth (as a demand variable) is limited. The analysis also argues that the sacrifice ratio, measuring the sacrifice of growth and employment that is required to reduce inflation, is of limited use once the potential role that other variables can play in the reduction of inflation and inflationary expectations is considered. The government has an especially significant role to play in supporting the South African Reserve Bank in lowering the inflation rate to an average of 3% by lowering the level and volatility of administered price inflation, reducing the budget deficit, and improving electricity supply.
Topic:
Budget, Investment, Inflation, Trade, and Deficit
Political Geography:
Africa and South Africa

12. India-China rapprochement: what are the long-term prospects?

Author:
Nayanima Basu and Alicia Garcia-Herrero
Publication Date:
05-2025
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
China-India relations, which have long been fraught, were further complicated by the 2020 military standoff on the Himalayan border. The political disruption had a significant impact on Chinese companies’ presence in India. And yet, India’s dependence on Chinese imports has increased since. The Indian economy is decelerating at a challenging time for Prime Minister Modi, who governs in a coalition. China could offer a partial solution to India’s economic woes by providing manufacturing FDI and creating jobs. The Modi-Xi ‘rapprochement’ after their encounter at the October 2024 BRICS summit signals that relations could improve. India may be willing to accept targeted investment from China, but relations are unlikely to fully normalise, particularly since the 2025 India-Pakistan military stand-off. There are three main reasons for this. First, the Indian army remains cautious about the situation at the border and security risks relating to China. Second, the United States under President Trump will exert pressure on Modi not to depend further on China. This is even more relevant in the context of Trump’s threat to impose tariffs on India. Third, Indian public opinion on China and the Belt and Road Initiative remains negative. India is predicted to experience greater growth than China in the coming decades, meaning China could lose its upper hand in economic relations between the two countries. This, however, will depend on how dependent India might have become on China for imports or for jobs through FDI and other channels. The militarised border, India’s asymmetric economic dependence on China and China’s leadership in the Global South will still shape the relationship even if the Indian economy grows to a similar size to China’s. India-China ‘rapprochement’ is possible but will remain fragile and unlikely to be maintained in the long run.
Topic:
Bilateral Relations, Governance, Economy, Economic Growth, Investment, and Trade
Political Geography:
China, India, and Asia

13. Breaking Barriers: The Link between Stronger IPRs and Trade in Services

Author:
Olena Ivus
Publication Date:
05-2024
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation (CIGI)
Abstract:
As innovation becomes more prevalent and systematically integrated into service industries, service firms increasingly turn to intellectual property rights (IPRs) as a means of safeguarding their intellectual assets. The reliance on these legal rights becomes even more pronounced when service companies endeavour to expand their global reach and tap into international markets where the protection of IPRs is relatively weak, and imitation is more widespread. Disparities in the level of IPRs protection and enforcement across countries can pose significant barriers to cross-border trade and investment in service sectors where the safeguarding of intellectual property (IP) is fundamental. The risk of IP infringement and the limited protection afforded to patents, copyrights and trademarks in certain countries can discourage the expansion of businesses into these markets, limiting the overall growth and accessibility of services in those areas. This paper studies the relationship between trade in services and the strength of IPRs protection at the international level. More specifically, it uses data for 94 countries over the period of 1990–2010 to put forward new empirical evidence about the impact of global strengthening of IPRs protection on cross-border trade in services.
Topic:
Intellectual Property/Copyright, Investment, Trade, and Protection
Political Geography:
Global Focus

14. How the International Investment Law Regime Undermines Access to Justice for Investment-Affected Stakeholders

Author:
Ladan Mehranvar
Publication Date:
01-2024
Content Type:
Special Report
Institution:
Columbia Center on Sustainable Investment
Abstract:
For over a decade now, the international investment law regime, which includes investment treaties and their central pillar, the investor-state dispute settlement (ISDS) mechanism, has been facing sustained calls for reform. These have largely centered on the concerns regarding the high costs of ISDS, the restrictions placed by the investment treaty regime on the right—or duty—of states to regulate in the public interest, and the questionable benefits arising from these treaties in the first place. Several states have taken proactive measures: some have revised investment treaty standards to better protect their regulatory powers;1 others have introduced new approaches to investment promotion, protection, and dispute settlement that more closely align with their sustainable development objectives;2 and some states have withdrawn from the investment treaty regime altogether.3 In addition, reforms to the regime are taking place at the multilateral level within the United Nations Commission on International Trade Law (UNCITRAL),4 the Organization for Economic Cooperation and Development (OECD),5 the World Trade Organization (WTO),6 and through other regional fora.7 Despite being the subject of extensive and prolonged public debate for several years, these reforms have continued to reinforce the binary structure of the regime. This structure restricts the focus of investment relations solely to investors and host states, disregarding the actual or potential impacts of investment projects, relations, disputes and awards on the rights and interests of other impacted stakeholders. In particular, large-scale, land-based investment projects involve a broad network of people and relations, and often intersect with local communities whose social identity, way of life, and livelihoods are intimately connected to the land and natural resources at stake.8 It is this category of investments, which result in the creation of a new “project” with a large land footprint, that is the topic of this paper. The consequences of these types of investments can be significant, as they often lead to land expropriations, negative human health consequences, water pollution, air contamination, deforestation, or shifts in migration patterns within the area,9 thereby impacting the rights and interests of people in these communities and the environment more broadly. From the perspective of investment-affected communities,10 foreign investments arise out of a partnership between the investor and the state.11 After all, it is the government that facilitates the establishment and development of these very projects. Meanwhile, these impacted people are often not consulted or involved in project establishment or development, and many may not even know that a project has been approved until after it has been approved or once it is operational. According to scholarship in this area,12 these affected individuals and communities often find themselves in a situation where they must assert their rights against the negative impacts of such projects, or resist these projects by mobilizing, protesting, or resorting to legal (and non-legal) measures against the investor and/or the state. This dynamic is frequently reflected in investment disputes, in which foreign investors challenge measures that state agencies have taken in response to, inter alia, local opposition to investments, in an attempt to safeguard their economic interests.13 However, even though the underlying investments, government measures, ISDS disputes, and any resulting awards often implicate local people and communities in profound ways, these stakeholders find it difficult, if not impossible, to assert their rights and have their concerns addressed in investment policy making, in the establishment or continuation of investment projects, and in any ensuing investor-state disputes that may arise under investment treaties (or investment contracts). In fact, the voices of investment-affected people are effectively, and in most cases, actually excluded from the “institutional logic” of the investment treaty regime.14 This is because of the narrow scope of the applicable treaties and the limited consideration given to human rights and domestic legal frameworks in ISDS proceedings. In addition, these communities often encounter legal and practical obstacles when seeking to protect their rights and interests under other instruments and fora, like international human rights law, or domestic and regional judicial systems. This is because victories won by investment-affected communities at these other fora are often pyrrhic since they may ultimately be undermined by the investment treaty regime if or when the investor succeeds in its ISDS claim. It is this local dimension, which has received little attention in public debate and action on reform at the global, regional, and national levels, that is the focus of this paper. We draw on a group of 13 investor-state claims (and two potential claims)15 that relate to the rights and interests of impacted communities and identify ways in which their access to justice is undermined, hampered or denied entirely by the ISDS mechanism.16 Before describing the ways that access to justice is undermined or denied in these ISDS cases, we first define the term “access to justice” below.
Topic:
Human Rights, Law, Investment, and Stakeholders
Political Geography:
Global Focus

15. Billion-Dollar Exposure: Investor-State Dispute Settlement in Mozambique’s Fossil Fuel Sector

Author:
Lea Di Salvatore and Maria Julia Gubeissi
Publication Date:
02-2024
Content Type:
Special Report
Institution:
Columbia Center on Sustainable Investment
Abstract:
Mozambique is endowed with extensive untapped natural resources, particularly gas and coal. The country’s gamble on fossil fuel-based economic growth comes with signiicant economic risks and crowds out investments in the country’s enormous renewable energy potential. ◆Mozambique faces a substantial economic risk due to its exposure to investor-state dispute settlement (ISDS) claims by foreign investors in its coal, oil, and gas sectors. The investment protections in the country’s international investment agreements and contracts, combined with ISDS, expose Mozambique to multi-billion-dollar financial liabilities. Even conservative estimations show that potential ISDS liabilities from oil and gas projects would cover almost a decade of Mozambique’s government expenditures for SDGs. ◆ Mozambique’s international investment agreements and publicly available oil, gas, and coal contracts allow foreign investors to bypass the national judicial system and bring multi-billion-dollar ISDS claims against Mozambique. Such claims can result in significant costs for the country, and they also have a considerable chilling effect on any new public-interest regulation in areas such as health, environment, community rights or labor protections. ISDS can undermine attempts to adopt meaningul legislation to transition away from fossil fuels and achieve sustainable development goals. This regime can therefore contribute to locking the country into a high-carbon economy. ◆In addition, multiple stabilization clauses in the analyzed contracts lock the operations into specific legal and fiscal regimes for the duration of the contracts. Stabilization clauses protect investments from unexpected regulatory changes or new fiscal rules. If a host state does introduce such changes, stabilization clauses allow investors to demand measures or compensation that would ensure their same profitability absent such changes. These clauses thus exacerbate the limits to – and chilling effect on – states’ public interest regulation. ◆Mozambique and other countries can take actions to remove ISDS from their contracts and treaties, replacing the mechanism with alternative dispute resolution mechanisms. They can also take steps to terminate investment agreements in force. Home countries of Mozambique’s foreign investors have a responsibility to support such action, especially as they, themselves, remove ISDS from their own treaties.
Topic:
Natural Resources, Gas, Investment, Fossil Fuels, Coal, and Disputes
Political Geography:
Africa and Mozambique

16. ICT Beyond Borders: The Integral Role of US Tech in Europe’s Digital Economy

Author:
Matthias Bauer and Dyuti Pandya
Publication Date:
03-2024
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
Contrary to political assertions about the vulnerability of digital services provided by non-EU companies, the strong presence and sunk costs associated with US tech companies’ investments in data centres, skilled workforce development, and research facilities in Europe act as significant barriers to exit, highlighting the inherent symbiosis between US tech investments and Europe’s digital and non-digital sectors. These investments underscore a mutual inter-dependency that strengthens European economies, making the notion of “sudden cessation” of digital services by US companies implausible. Corporate data show a significant investment gap of approximately USD 1.36 trillion between US and EU ICT companies, attributing a competitive edge to US firms due to their heavy investment in ICT, cloud solutions, and R&D. Forecasted increases in ICT investments by US corporations outline a benchmark beyond reach for EU businesses. The notion of EU firms aligning with this growth path is rather fantastical, as it would call for immense government investment, ultimately draining financial resources from essential public services, such as healthcare, housing, and environmental policies. Substantial ICT investments across EU Member States together with a long-term commitment to the European market present an opportunity for the EU to leverage US continuous technological advancements, underscoring the potential for transatlantic collaboration to drive the EU’s digital transformation and innovation. EU-US partnerships not only fuel the EU’s digital transformation but also align with shared political values, reinforcing the significance of transatlantic collaboration in shaping a competitive and innovative digital future.
Topic:
Communications, European Union, Digital Economy, Investment, and Information Technology
Political Geography:
Europe, North America, and United States of America

17. The implications of the European Union’s new fiscal rules

Author:
Zsolt Darvas, Lennard Welslau, and Jeromin Zettelmeyer
Publication Date:
06-2024
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
European Union countries are required by the EU Treaty to keep their budget deficits within 3 percent of GDP, and their public debt within 60 percent of GDP. A new framework to enforce these rules is based on country-specific debt sustainability analyses (DSA) and uses a single indicator, a measure of public expenditure, as the annual fiscal policy target. These changes are welcome. To assess the sustainability of public finances, it is much better to focus on the likely evolution of the debt path than to rely on simple numerical rules. Public expenditures net of changes to tax policy are a far better target for fiscal policy than the deficit, since they are under the control of the government and cannot give rise to pro-cyclical fiscal policy (excess spending in good times, fiscal cuts in bad times). These features could increase the framework’s efficiency and improve compliance. However, the new framework also contains numerical safeguards to ensure a minimum pace of debt and deficit reduction. These might overwrite the DSA-based requirements and could undermine the rationale for the new rules and the incentives for compliance. The safeguards could also introduce some pro-cyclicality and, more importantly, could hold back increases in public investment. Our calculations show that the new framework will require ambitious fiscal adjustments from high-debt countries, though less than would have been required by the previous framework. Numerical safeguards will not be a significant constraint in the first application of the framework in 2024, except in the case of Finland. In the next application, in 2028, they imply for France and Italy greater fiscal adjustment than required by the DSA and the 3 percent benchmark. There is ambiguity about the consistency of the new fiscal rules and the largely-unchanged excessive deficit procedure (EDP), and whether proposed reforms and investment will influence the DSA. This could interfere with the successful application of the framework. We recommend that the EDP should require the same adjustment as the DSA, a method- ology should be developed to estimate the quantitative impact of proposed investments and reforms, and the DSA methodology should be revised. In case EU countries’ investment plans on aggregate do not fill the green public-investment gap, we recommend a new EU facility to foster such investments.
Topic:
Budget, European Union, Investment, and Fiscal Policy
Political Geography:
Europe

18. The chicken-and-egg problem in the European Union Digital Markets Act

Author:
Fiona Scott Morton
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
The gatekeeper platforms regulated by the European Union’s Digital Markets Act (DMA) must comply with the law as of 6 March 2024. The DMA requires that core platform services create and make available interfaces that allow business users to access end users via the platform at lower cost and on better terms. For example, app developers will have the right to distribute on handsets through different app stores, using different payment services, directing users to purchase content on the web and charging different prices in different channels. The gatekeeper must provide the application programming interfaces, or APIs, to enable business users to take advantage of these rights. However, the DMA does not define exactly what those APIs should be. Rather, the law requires a gatekeeper’s interface to be “effective,” meaning business users can use it to enter, compete and innovate. Because such a design is not, in general, in the interest of the gatekeeper, the input of business users to both gatekeepers and the European Commission is critical for evaluating compliance with the law. Thus far there is little evidence of platforms interacting with business users or putting out interfaces for evaluation by business users, or of business users offering comments on what interfaces would be best for entry and competition. It may be that the interface must come first, and then its existence will stimulate entry of new business users or investment into new services that will use the interface. Rather like the chicken and the egg, which should come first? Business users are needed to help create useful interfaces, while useful interfaces are needed to justify investment and entry by business users.
Topic:
Markets, European Union, Investment, and Digital Markets Act (DMA)
Political Geography:
Europe

19. Gender in Strategic Competition: A Non-Traditional Strategy for Building Resilience in the Indo-Pacific

Author:
Charity Borg
Publication Date:
06-2024
Content Type:
Special Report
Institution:
Pacific Forum
Abstract:
Today’s era is defined by strategic competition with “autocrats [who] are working overtime to undermine democracy and export a model of governance marked by repression at home and coercion abroad.”[1] The People’s Republic of China (PRC) is the leading autocratic force, operating with both the intent to reshape the democratic rules-based international order and the resources to advance those aims. States interested in upholding the international rules-based order must enhance their ability to withstand PRC coercion and invest in cultivating a values-based security alliance against the spread of authoritarianism. International collaboration on the Women, Peace, and Security (WPS) agenda offers a low-cost, high-return opportunity to bolster national and regional resistance to authoritarian coercion while building a coalition of like-minded allies and partners. Increasing national resilience and building alliances that center on enhancing the security of women is a data-backed approach that ensures elevated state stability, democracy, and economic prosperity while increasing the likelihood of a coalition’s willingness to defend the current international rules-based order from those who seek to dismantle it. An overwhelming body of empirical analysis demonstrates a significant correlation between the security of women and the democratic or authoritarian tendencies of a state. That same analysis also finds that women’s security is a precondition for a state’s level of democracy. Otherwise stated, countries with higher levels of gender equality are more democratic, less corrupt, and more stable. Whereas “states with higher levels of violence against women are less peaceful [internally and] internationally, less compliant with international norms, and less likely to have good relations with neighboring states,” they are also more likely to align with autocratic governance structures.[1] Authoritarian states such as the PRC understand the benefits of empowered societies, which is why their actions on domestic and international fronts actively seek to suppress women. They fear that like-minded allies and partners will successfully improve security for fifty percent of the population and, as a result, will ultimately tip the scales of power and influence to preserve the values-based international order they desire to uproot. Interest and investment in the WPS agenda are growing around the globe, but not fast enough. Thus far, 18 Indo-Pacific states and one regional organization have sought meaningful engagement and integration of the WPS agenda by various means, opening a door for cooperation across the spectrum of civil, diplomatic, and military security cooperation engagements.[2] However, several transformative policy and operational measures must be implemented to achieve the desired end states. To be transformative and enable lasting change in governmental and national behavior, the thoughtful implementation of the WPS agenda at all levels, from national and subnational to the community and household, is required. First, domestic and international policymakers need to clearly define the security of women as a national security imperative. Second, implementing WPS in the defense sector should focus on training defense personnel to apply a gender perspective to enhance mission effectiveness. Last, those advancing WPS must take an inclusive, context-specific, and localized approach to its integration. To defend the current rules-based international order, like-minded countries must accelerate change and follow through by investing in women’s security.
Topic:
Security, Investment, Strategic Competition, Resilience, Gender, Women, Peace, and and Security (WPS)
Political Geography:
China, Asia, and Indo-Pacific

20. A Renewed Philippine-United States Alliance

Author:
Julio S. Amador III and Lisa Marie Palma
Publication Date:
01-2024
Content Type:
Special Report
Institution:
East-West Center
Abstract:
The Biden administration should keep in mind that domestic politics bears considerable implications for the alliance. Regarding economic relations, the United States needs to remain committed to policies that diversify supply chains and create opportunities for business and investment projects in the Philippines.
Topic:
Economics, Bilateral Relations, Alliance, and Investment
Political Geography:
Philippines, Asia-Pacific, and United States of America