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1. Prosperity and Resilience: Diverse Production and Comparative Advantage in Modern Economies

Author:
David Henig and Anna Guildea
Publication Date:
01-2022
Content Type:
Working Paper
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
A common version of trade theory suggests that countries will specialise in a limited number of products. Using the example of David Ricardo from 1817, England specialises in cloth and Portugal in producing wine – and then they trade with each other to mutual benefit. However, this is a crude version of comparative advantage that routinely leads to political concerns about trade. Today the prime concern is that Europe and other developed countries have become too dependent on China by allowing the logic of comparative advantage to work. In short, trade has made us vulnerable. The observed reality is different. Most advanced economies produce and export a broad range of goods and services. Their governments have similar aspirations to develop and support diverse manufacturing and services, including in the most traded global sectors such as pharmaceuticals, automotive, business services, and food and drink. Modern specialisation comes in countries producing various, but not all, products within global supply chains. Patterns of trade suggest such specialisation has allowed countries to both grow and become resilient to individual shocks. Knowledge and ownership of the whole supply chain is more important than producing everything.
Topic:
Globalization, Economy, Services, Resilience, WTO, and Production
Political Geography:
Europe and Global Focus

2. Free Trade Agreements Have Limited Impact (Because Manufactured Goods are a Perfect Market)

Author:
David Henig and Anna Guildea
Publication Date:
05-2021
Content Type:
Working Paper
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
Free Trade Agreements between two or more countries or parties have been the centrepiece of international trade policy since the formation of the World Trade Organisation 25 years ago. Since 1995, no major round of multilateral trade liberalisation has been concluded, but there has been a sharp rise in the number of bilateral trade agreements. While some of these agreements have real consequences for trade in services and some administrative rules for trade, most of them do not because they focus mainly on tariffs on industrial and agricultural goods. Yet the economic gains from these reductions are now extremely limited. In fact, it is now difficult to improve the global market in goods by cutting tariffs.
Topic:
Globalization, World Trade Organization, Global Markets, Trade Liberalization, and Free Trade
Political Geography:
Global Focus

3. Services Trade Needs to be Taken as Seriously as Goods Trade

Author:
Anna Guildea and David Henig
Publication Date:
07-2021
Content Type:
Working Paper
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
Services constitute at least a quarter of total trade. Between 2009 and 2019 global services trade increased by nearly 50%, compared to 18% for goods trade. Yet it is rarely taken as seriously as goods in global trade policy discourse. This is a problem when making the case for trade.
Topic:
Globalization, Services, Trade, and WTO
Political Geography:
Global Focus

4. The Future of EU Leadership in the Car Industry: Still Global

Author:
David Henig and Hosuk Lee-Makiyama
Publication Date:
12-2021
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
Automotive is Europe’s key export industry, an important contributor to the EU economy, from balance of payments to employment, and a manufacturing base to global and European brands; Balancing the EU’s climate ambitions (and its implied economic transformation) with a successful EU car industry is therefore crucially important. The car industry is at the forefront of new initiatives to tackle the climate emergency, shaped by these new regulations its products and infrastructure will be radically different in just a few years; Proposals within EU frameworks such as Green Deal, Fit for 55, and Next Generation EU are about reducing emissions and reshaping industry. Yet, the policy mix also leans towards increased regulatory costs and loss of competitiveness that can only be partially offset by climate subsidies and import substitution; This cumulation of measures also carries significant risk of retaliation from our key export markets for the car industry. In particular, attempts to apply green regulation extraterritorially are seen as provocative by third countries and unlikely to be accepted without response; Since the EU is the world’s largest exporter of passenger cars, it has most to lose if the global economy regresses into protected markets. Open global supply chains also enable EU manufacturing to retain competitiveness, and has also helped to keep the component and services portion of the industry going despite a relative decline of demand in motor vehicles in the EU; Consumer support for Green Deal initiatives will be lost if there are no affordable and sustainable alternatives for personal mobility – which also requires open markets. Thus, cars play a significant role in sustaining both EU macroeconomic stability and support for the Green Deal; The Green Deal and an open economy must not become a binary choice for Europe. The automotive industry is today global, digitised and electrified by default. The EU cannot mass-produce locally unless it can also compete globally – which entails facilitating industry transition, minimising retaliatory risks and understanding the biggest transition the industry is facing since Henry Ford’s invention of the assembly line.
Topic:
Globalization, European Union, WTO, Green Deal, and Automotive Industry
Political Geography:
Europe and Global Focus