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1. Reconciling the European Union’s clean industrialisation goals with those of the Global South

Author:
Ben McWilliams, Simone Tagliapietra, and Jeromin Zettelmeyer
Publication Date:
07-2025
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Clean industrialisation is a political and economic priority for the European Union. For it to work, affordable clean energy is needed. However, producing this energy in Europe is constrained by limited renewable energy endowments (sunshine and wind) and land availability, while the transportation costs for imported clean energy (in the form of electricity or hydrogen) are much higher than for fossil fuels. An alternative way to fuel Europe’s clean industrial sector would to import energy-intensive primary tradeable products such as ammonia, methanol and reduced iron. We estimate that more than ten percent of total future EU clean energy demand will be met by such products. Public policy in Europe should aim to facilitate trade in energy-intensive intermediate inputs, which are cheaper to import than energy directly. Imports of these inputs could boost the competitiveness of downstream stages in the energy-intensive value chain (such as steel production). By lowering overall energy demand and thus electricity prices, such imports would also raise EU competitiveness more broadly. In many cases, they would replace imports of less energy-intensive commodities such as iron ore, therefore not adding to Europe’s overall import dependency. The direct economic impact in terms of jobs and value added that would be offshored is not substantial. The international benefit of such a strategy would be that it would embed third countries – especially emerging and developing economies – into clean industrial value chains. Stable European demand can help such countries develop export-driven, clean industrial strategies. Politically, this could be an important incentive that could offset the EU’s carbon border adjustment mechanism. Governments should therefore not use taxpayer money to fight the relocation of energy-intensive and tradeable primary products, beyond some minimum threshold that is desirable for economic security and innovation reasons. Meanwhile, ongoing negotiations with third countries to establish Clean Trade and Investment Partnerships should put trade in energy-intensive clean products at the core of new international clean supply chains.
Topic:
Industrial Policy, European Union, Global South, Industrialization, Decarbonization, Energy, and Emerging Economies
Political Geography:
Europe

2. The Industrial Cost of Fixed Exchange Rate Regimes

Author:
Blaise Gnimassoun, Carl Grekou, and Valérie Mignon
Publication Date:
06-2024
Content Type:
Working Paper
Institution:
Centre d'Etudes Prospectives et d'Informations Internationales (CEPII)
Abstract:
Premature deindustrialization in most emerging and developing economies is one of the most striking stylized facts of the recent decades. In this paper, we provide solid empirical evidence supporting that the choice of a fixed exchange rate regime accelerates this phenomenon. Relying on a panel of 146 developed, emerging, and developing countries over the 1974-2019 period, we show that fixed exchange rate regimes have had a negative, significant, and robust effect on the size of the manufacturing sector —developing countries being the most affected by the industrial cost of such a regime. Additional gravity model regressions show that the impact of fixed regimes passes through the trade channel. In particular, this regime has kept countries with low relative productivity in a state of structural dependence on imports of manufactured products to the detriment of the emergence of a strong local manufacturing sector.
Topic:
Developing World, Manufacturing, Industrialization, Deindustrialization, Exchange Rates, and Emerging Economies
Political Geography:
Global Focus

3. The State of the European Union 2024: Integration vs. Nationalism

Author:
Diego López Garrido
Publication Date:
10-2024
Content Type:
Special Report
Institution:
Fundación Alternativas
Abstract:
In the new institutional cycle, the European Union is facing unprecedented challenges. This report studies and analyses some of the most outstanding aspects such as competitiveness and reindustrialisation in the light of competition from the USA and China; the transition to a decarbonised Europe; the need to defensively strengthen the Union and its foreign action; the migratory issue; the European social pillar or the rule of law. All this comes within a complex geopolitical context that helps to approach structural reforms to renewed institutions such as the European Parliament and the European Commission, where more conservative positions have thrived.
Topic:
Foreign Policy, European Union, Geopolitics, Industrialization, Economic Competition, and Green Transition
Political Geography:
Europe

4. Decarbonising for competitiveness: four ways to reduce European energy prices

Author:
Conall Heussaff
Publication Date:
12-2024
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Energy prices are higher in the European Union than in most other industrialised economies, presenting a fundamental competitiveness challenge. The price disparity stems from the EU’s reliance on imported fossil fuels, contrasting with the United States, which is a net exporter of energy. In 2024, EU gas wholesale prices were on average nearly five times those in the US. Average EU industrial electricity prices were roughly two and a half times higher than in the US. The transition to clean, domestically generated energy is therefore essential to reduce European energy costs. Despite rapid decarbonisation of the power sector, fossil fuels remain vital for electricity generation and continue to significantly influence final consumer costs. Additional factors influencing final prices include the fixed costs of supporting renewables and maintaining and expanding the energy networks, and consumption taxes and levies. However, the ongoing energy transition is reshaping cost dynamics. Renewables, with fixed capital costs and no fuel requirements, are increasingly transforming the electricity sector. The electrification of heating, transport and other energy services further reduces fossil-fuel demand, shifting overall energy costs from variable fuel expenses to fixed capital investments. As the energy transition progresses, EU energy costs can be expected to fall, but how far they fall and how they are shared will depend on policy choices in four main areas. In the short term, policymakers must allocate system costs fairly across energy consumers. Medium-term policies should encourage demand flexibility in electricity to improve system efficiency. In the long-term, coordinated investment at EU level and deeper cross-border interconnection will drive down final costs for all consumers.
Topic:
Climate Change, European Union, Economy, Industrialization, Decarbonization, Energy, and Competition
Political Geography:
Europe

5. Potential and Pitfalls for African Industrialization in Chinese-built Standard Gauge Railways

Author:
Yunnan Chen
Publication Date:
04-2023
Content Type:
Policy Brief
Institution:
Centre for Business and Development Studies (CBDS), Copenhagen Business School
Abstract:
Railway development has been a key feature of transport infrastructure investments in several African economies, with several new standard gauge railways (SGR) built in the last ten years in Ethiopia, Nigeria, and Kenya. These planned projects have also entailed substantial Chinese involvement through construction contractors, in financing, and in the operations and management, becoming part of the wider Chinese discourse of the Belt and Road Initiative (BRI). They also have significant potential in supporting the industrialization plans of African states, and in some cases, have been explicitly linked to plans for a green transformation. This brief draws from case studies across Africa with a focus on Ethiopia, to highlight the significant potential of railway investments as a low-cost, low-carbon transport for green industrialization, but also its pitfalls and challenges as an infrastructure for governance, and local technology transfer.
Topic:
Development, Belt and Road Initiative (BRI), Industrialization, and Railways
Political Geography:
China and Africa

6. Climate Change Mitigation for Late Industrialisers: The Role of Technology Intensity in Manufacturing

Author:
Elvis Korku Avenyo and Fiona Tregenna
Publication Date:
02-2023
Content Type:
Policy Brief
Institution:
Centre for Business and Development Studies (CBDS), Copenhagen Business School
Abstract:
Many developing countries now have a renewed focus on industrialisation and industrial policy. This is based on the recognition that industrialisation is a key driver of long-term economic progress and is the central route to improve the well-being of citizens in developing countries (Chenery, 1955; Tregenna, 2016; United Nations Industrial Development Organization [UNIDO], 2016). At the same time, the climate crisis poses an existential threat to the global economy and to humanity and has emerged as a challenge to the industrial development prospects and pathways of developing countries. This is because industrialisation is an important contributor to global warming, specifically to anthropogenic emissions of cardon dioxide (CO2.) (Adom et al., 2012; Han & Chatterjee, 1997). Late industrialisers thus face a dual challenge: industrialising while mitigating climate change (Altenburg & Rodrik, 2017). Hence, there is now a degree of tension as to how late industrialisers can achieve long-term economic development under paths involving heavy or intensive industrialisation, while mitigating emissions and environmental damage more broadly. An emerging discourse recognises the critical need for developing countries to push towards industrial development that, while generating growth in productivity and jobs, is also environmentally sustainable. This is especially important, as poorer countries are particularly vulnerable to the immediate effects of the climate crisis (Altenburg & Rodrik, 2017; Padilla, 2017). Thus, transforming towards sustainable production systems and green industrial policies offers developing countries opportunities to industrialise in an environmentally sustainable way while contributing to job creation and economic prosperity (Altenburg & Rodrik, 2017; Padilla, 2017; Rodrik, 2014). However, the high ‘green premia’ and new access barriers to the ‘green’ energy technologies from advanced economies directly threaten this potential sustainable industrial development pathway in developing countries.
Topic:
Climate Change, Development, Science and Technology, Manufacturing, Industrialization, Sustainability, and Carbon Emissions
Political Geography:
Global Focus

7. Structural transformation and international trade: Evidence from the China shock

Author:
Clément Nedoncelle and Julien Wolfersberger
Publication Date:
05-2023
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
How does international trade affect structural transformation in developing countries? We use data on sectoral allocation of labour and value-added in 46 developing economies over the period 1995–2017 and exploit for identification plausibly exogenous variation in manufacturing imports from China. We find that the so-called ‘China shock’ largely slows down the transformation of low- and middle-income economies out of agriculture. In our main specification industrialization decreases by 0.49 per cent on average for each additional per cent of manufacturing imports from China. It highlights a competition effect where exposure to Chinese imports is largely detrimental to structural transformation. These results hold across geographical regions, with a difference in Sub-Saharan Africa, where international trade causes an increase in the size of the services sector.
Topic:
Development, Economies, Trade, Industrialization, and Structural Transformation
Political Geography:
Global Focus

8. Digital de-industrialization, global value chains, and structural transformation: Empirical evidence from low- and middle-income countries

Author:
Karishma Banga, Pankhury Harbansh, and Surendar Singh
Publication Date:
05-2023
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Digitalization and shifting patterns of globalization are fast changing the rules of the game for countries embarking on a path of industrialization. In this study, we empirically examine the impact of digitalization and global value chains on structural transformation using a crosscountry panel of 51 economies in the GGDC/UNU-WIDER Economic Transformation Database for the period 1990–2018. The analysis is based on a novel cross-country panel combining information from the Economic Transformation Database with the UNCTAD EORA data set, World Development Indicators, and Penn World Tables. Structural transformation is examined through changes across three variables: changes in manufacturing labour productivity, manufacturing employment share, and country-level structural change. To address issues related to endogeneity and country fixed effects, we use methodologies of fixed effects with instrumental variables and the two-step system GMM estimator. Results indicate that digitalization has a positive impact on structural change and manufacturing labour productivity but a negative impact on manufacturing employment share, indicating a reallocation of labour from the agricultural sector into services. Overall global value chain participation, and particularly forward participation, has a positive impact on structural change and manufacturing labour productivity.
Topic:
Science and Technology, Industrialization, Global Value Chains, and Structural Transformation
Political Geography:
Global Focus

9. The Great Supply Chain Shift from China to South Asia?

Author:
Ganeshan Wignaraja
Publication Date:
07-2023
Content Type:
Research Paper
Institution:
Gateway House: Indian Council on Global Relations
Abstract:
Global supply chains connect world industry and international trade in manufactures. East Asia’s dominance with China as the preferred assembly hub in global supply chains has brought unprecedented regional prosperity, but South Asia remains a latecomer. However, pandemic-related and post-pandemic continuing disruptions to supply chains and slowing growth are being keenly felt, dampening China’s attractiveness. In an uncertain global economy, increasingly footloose foreign investors are looking for alternative production locations. Is it South Asia’s turn to prosper through supply chains in this uncertain world? This is the topical public policy question facing India and the others in South Asia. This paper discusses the concept of global supply chains, the industrial rise of East Asia, drivers of supply chain relocation from China, South Asia’s prospects, India as a complementary hub and policy lessons from East Asia’s industrial success. For the purposes of this paper, South Asia is broadly defined as the India and its contiguous countries: Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka.
Topic:
Industrial Policy, Monetary Policy, Foreign Direct Investment, Industrialization, COVID-19, Supply Chains, and Geoeconomics
Political Geography:
China, South Asia, Asia, Southeast Asia, and United States of America

10. Is “Inflation First” Really “Rentiers First”? The Taylor Rule and Rentier Income in Industrialized Countries

Author:
Mario Seccareccia and Guillermo Matamoros Romero
Publication Date:
07-2023
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
The Taylor rule has returned as a significant policy guide amid increasingly overt political pressures for its official (and not just its implicit) adoption at the US Fed as inflation fears have come to dominate monetary policy actions both in the US and internationally in recent times. Our paper analyzes the effect of monetary policy on the functional distribution of income by reconstructing how the post-1970s “inflation first” policy commitments of central banks came to be crystallized in the Taylor rule. While there are differences among the various specifications of this “rule”, the Taylor relation is merely an offshoot of what can be described generically as the family of Wicksellian reaction functions whose implications support rentier income over time. Because of the internal logic of the Taylor rule, this has led to different interpretations such as, for example, the more Keynesian Yellen rule, which depart from the strict sense of the Taylor rule. The paper also interprets the Taylor Rule in light of Wicksell’s formulation and analyzes the potential consequence of the differences. In contrast to the strict Wicksell rule of “proportional” adjustment, our econometric findings suggest evidence that central banks adjust “over-proportionally” the benchmark money interest rate in the presence of changes in the inflation rate for the complete “inflation first” era since the 1970s until the COVID-19 crisis. They thereby strongly favored rentier incomes in their reaction functions, with the possible exception of the post-financial crisis period. To limit the pro-rentier consequences of such inflation-targeting regimes, it is important that policymakers mandate multiple objectives for central banks, as exemplified in the current US Fed’s dual mandate.
Topic:
Economics, Inflation, Industrialization, and Rentierism
Political Geography:
North America and United States of America