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1. Green Industrial Policy: A Holistic Approach

Author:
Ilaria Mazzocco
Publication Date:
02-2024
Content Type:
Policy Brief
Institution:
Center for Strategic and International Studies (CSIS)
Abstract:
In the United States, the rise of the economic-climate agenda and green industrial policy has coincided with growing attention to supply chain resilience, economic security, and a deteriorating U.S.-China relationship. As a consequence, the interaction between trade, geopolitics, domestic economic policy, and climate policy demands a new holistic approach from policymakers and civil society to find more politically sustainable and effective policy solutions. More consideration should be given to the specifics of U.S. climate strategy when it comes to trade and international relations and how to integrate climate strategy with the Inflation Reduction Act and green industrial policy efforts.
Topic:
Economics, Industrial Policy, Geopolitics, Trade, Sustainability, and Green Economy
Political Geography:
China and Asia

2. Engines of Prosperity: The Promise of the Zones for Employment and Economic Development (ZEDEs) in Honduras Image

Author:
Ryan C. Berg and Matthew Carusi
Publication Date:
10-2022
Content Type:
Special Report
Institution:
Center for Strategic and International Studies (CSIS)
Abstract:
Special economic zones (SEZs) are autonomous zones designed to facilitate free-trade operations. SEZs can be broken down into the following types of zones: free-trade zones, which are duty-free areas to warehouse and transit goods; enterprise zones, which provide tax benefits to underperforming industries; specialized zones, which include technology parks; and freeports—the largest type of economic zones, combining work and residential spaces. A 2008 World Bank report defined SEZs as having the following characteristics: a geographically secured area, a single management system, eligibility for benefits based on the location within the zone, and a separate customs area. Advocates of SEZs argue that they can improve a country’s economic standing by making it more competitive on the global stage. One way to achieve this goal is by improving a country’s infrastructure. Building out more extensive road networks or port systems is beneficial not only for businesses operating inside the SEZ, but also for the entire country’s future economic trajectory. Another argument in favor of SEZs is that they strengthen a country’s institutional framework. In developing countries, this narrative can be particularly relevant because weak institutions often constrain foreign investors from making large-scale commitments. SEZs attempt to fill this gap by increasing the efficiency of the regulatory frameworks, property rights, and investment flows. Since a wealth of SEZs are awarded a certain level of legal autonomy, establishing these unique governance structures can be arranged. SEZs offer similar advantages for streamlining efficiency in the labor market. Wages can be more flexible and the process of hiring and firing employees can become easier. Workers can further be attracted by the availability of better healthcare and education systems, as well as by the availability of internet or phone services. All these factors are crucial in attracting the best possible talent, both domestically and internationally, giving them reasons to set up operations inside an SEZ. The intended results of these characteristics are that GDP per capita within the SEZ would increase substantially and that surrounding areas would be able to reap these rewards. These are known as spillover effects, wherein new influxes of foreign and intellectual capital would spill over into the surrounding communities. However, the verdict on this subject is less clear. According to a 2017 World Bank study, the literature on SEZs does not confirm a clear link between achieving widespread spillovers and increasing regional employment levels. There is more evidence to support the claim that limited spillover effects exist in surrounding areas up to 50 kilometers outside the SEZ.
Topic:
Development, Economics, Employment, and Special Economic Zones
Political Geography:
Central America, North America, and Honduras

3. How Innovative Financing Models Can Support the Scaling of Supply Chain Innovations

Author:
Allie Dichiara and John Simon
Publication Date:
10-2022
Content Type:
Special Report
Institution:
Center for Strategic and International Studies (CSIS)
Abstract:
Substantial progress has been made toward achieving Sustainable Development Goal (SDG) 3: Health and Well-Being for All. However, progress is plateauing as global health development funding decelerates, and much of the remaining gaps are among the hardest to address, especially for the most vulnerable and hardest-to-reach communities. A key element to reigniting progress toward SDG 3 is significantly improving the effectiveness of the current fragmented health commodity supply chain, through which billions in spending—approximately $6 billion in donor funds in 2015 and $50 billion in overall spending in 2017—flow each year to low- and lower-middle-income countries (LMICs). Fortunately, there is a growing number of innovative supply chain solutions available across sub-Saharan Africa that could have the potential to dramatically improve the underperforming status quo.
Topic:
Economics, Science and Technology, Innovation, and Supply Chains
Political Geography:
Africa

4. A Model Comprehensive MSME Policy for Indian States

Author:
Richard M. Rossow
Publication Date:
11-2022
Content Type:
Special Report
Institution:
Center for Strategic and International Studies (CSIS)
Abstract:
Small businesses are the job-creating engines of any healthy economy. Having a supportive policy environment can help high-potential businesses accelerate. Creating such an environment is a shared responsibility of both the central government and India’s 28 states. Many state governments in India have piecemeal policies and programs to support micro, small, and medium enterprises (MSMEs). About one-third of India’s states have worked to craft multifaceted and supportive policies and practices to encourage MSME growth. This paper reviews the ideas already enacted in different Indian states, as well as in national and subnational governments around the world. Developing a single comprehensive MSME policy is an effective approach for a state-level government to consider. It allows small firms to find policy incentives and programs in a single place, and perhaps most importantly, it allows a state to directly consider a range of intertwined incentives that can work together. This will maximize the positive impact to small firms that are poised for growth. Facilitating the growth of MSMEs will have a much wider impact on India’s job growth overall. The large multinational manufacturers that India hopes to lure to invest through programs like Make in India require a diverse and efficient network of suppliers. Supporting MSME growth can create a multiplier effect—driving new investment and employment generation by larger firms. The central government has affirmed a 25 percent target of gross domestic product (GDP) for manufacturing, up from around 14 percent today. This white paper provides leading international examples in the promotion of small businesses, while also enumerating best practices from Indian states’ MSME policies. The final section lays out the 30 elements commonly utilized by Indian states to offer targeted assistance to MSMEs as a roadmap for other states that want to provide best-in-class policy interventions.
Topic:
Development, Economics, Business, and Job Creation
Political Geography:
India and Asia

5. Untapped Innovation? The Racial and Gender Divides That Hinder the U.S. Knowledge Economy

Author:
Alexander Kersten and Gabrielle Athanasia
Publication Date:
05-2022
Content Type:
Special Report
Institution:
Center for Strategic and International Studies (CSIS)
Abstract:
The United States’ innovative spirit rests on a complex network of economic rules favoring market-based competition, predictable legal arrangements for patenting and securing intellectual property, and incentives for investors. It also relies on a robust university system that provides the requisite educational training and facilities to carry out research and development (R&D). Maintaining this network fundamentally requires a focus on early education, especially in science, technology, engineering, and mathematics (STEM). A more inclusive innovation economy also demands greater attention to communities of color, who are often poorly connected to the innovation economy; women, who are underrepresented in the innovation economy; and those in regions that do not yet share in the prosperity of the United States’ innovation clusters. To build a more inclusive innovation-based economy, policymakers should foster equitable access to early childhood STEM education. They should encourage the expansion of technology transfer programs across universities and colleges, including historically Black colleges and universities (HBCUs), and connect them to their regions’ economic growth. Policymakers, academia, and industry leaders should also encourage minorities and women to participate in the patenting and venture systems that support the innovation economy. Renewing American innovation means making opportunity as universal as the talent that seeks it.
Topic:
Economics, Gender Issues, Race, Labor Issues, Discrimination, and Innovation
Political Geography:
North America and United States of America

6. Red Ink: Estimating Chinese Industrial Policy Spending in Comparative Perspective

Author:
Gerard Dipippo, Ilaria Mazzocco, and Scott Kennedy
Publication Date:
05-2022
Content Type:
Special Report
Institution:
Center for Strategic and International Studies (CSIS)
Abstract:
A new report by the CSIS Economics Program and the Trustee Chair in Chinese Business and Economics quantifies the size of total industrial policy spending by China and compares it to seven other major economies: Brazil, France, Germany, Japan, South Korea, Taiwan, and the United States. Much of the existing research on industrial policy focuses on its effects, but there are few, if any, published studies that attempt a systematic comparison and quantification of overall industrial policy spending. The heart of the report is the careful calculation of total industrial policy spending by China and the other economies, combining estimates from multiple tools, among them direct subsidies, tax breaks, below-market credit, and state investment funds. The report provides additional context by examining the historical trajectory of industrial policy of these economies and the evolution of industrial policy across these economies for three industries—aluminum, semiconductors, and electric vehicles. The historical and sectoral analyses point to some similarities across economies, but they also demonstrate how distinctive China has been in terms of both quantifiable spending and non-quantifiable policy tools. Finally, this report discusses several important policy implications, including greater transparency and more harmonized reporting about industrial policy spending and the potential ways in which policymakers could employ these data to more effectively limit industrial policy spending by China and other economies.
Topic:
Economics, Industrial Policy, Industry, and Labor Market
Political Geography:
China and Asia

7. Sanctions, SWIFT, and China’s Cross-Border Interbank Payments System

Author:
Barry Eichengreen
Publication Date:
05-2022
Content Type:
Policy Brief
Institution:
Center for Strategic and International Studies (CSIS)
Abstract:
In response to Russia’s attack on Ukraine, the United States and a coalition of cooperating countries imposed harsh financial sanctions on the Russian government, corporations, and individuals.1 These sanctions bar Russian banks from using SWIFT (the Society for Worldwide Interbank Financial Telecommunications) to facilitate cross-border payments, prohibit banks from doing most forms of business with Russian entities, and freeze assets held abroad by the Central Bank of Russia in the form of treasury securities and bank deposits. These developments have led Russia, as well as other countries contemplating whether they might find themselves in the same position, to explore alternatives. Such options could include building a substitute for SWIFT to send instructions regarding cross-border interbank transactions; identifying financial counterparties other than Western banks with which to do international business and platforms other than Western clearinghouses through which to make payment; and finding a vehicle other than the dollar for denominating and executing transactions. Specifically, countries are looking to China, which has large internationally active banks, has created its own clearinghouse for cross-border transactions and is embarked on a campaign to encourage broader international use of its currency, the renminbi.2 This note investigates how far China has gone in creating alternatives to SWIFT, Western banks, and the dollar. It explores whether Russia and other countries might be drawn toward this parallel international financial universe and what economic and political implications this has—for the United States, for its geopolitical rivals, and for global economics and politics. China is making strides in fostering cross-border use of the renminbi and building a renminbi-based interbank payments system that can serve as an alternative to SWIFT and Western clearinghouses. However, these remain somewhat limited alternatives—for the moment. The situation could change faster if lent additional impetus by Western sanctions. Thus, countries such as the United States that employ financial sanctions should prepare for the development of alternative financial arrangements in China and possibly elsewhere. This may mean relying more heavily on nonfinancial measures insofar as financial sanctions eventually become less effective.
Topic:
Economics, Sanctions, Finance, Borders, and Banks
Political Geography:
China and Asia

8. Economic Security in Emerging Markets: A Look at India, Vietnam, and Indonesia

Author:
Matthew Goodman, Matthew Reynolds, and Julianne Fittipaldi
Publication Date:
05-2022
Content Type:
Policy Brief
Institution:
Center for Strategic and International Studies (CSIS)
Abstract:
With the outbreak of the Covid-19 pandemic, supply chain resilience has emerged as a policy priority of the United States and its allies. The issue of supply chains has also raised the profile of emerging economies that offer possible alternatives to China as production platforms for multinational firms. This report surveys economic security policy developments in three major emerging economies: India, Vietnam, and Indonesia. It finds that all are attempting to take advantage of this new focus on supply chain resilience, while (to varying degrees) balancing the economic security risks posed by China’s rise. The United States and its allies have an opportunity to work with these emerging economies to shape their decisions about trade, investment, and technology policies in ways that promote mutual economic security and enhance international economic rules and norms.
Topic:
Security, Economics, Emerging Markets, International Trade and Finance, and Markets
Political Geography:
Indonesia, India, Asia, Vietnam, and Asia-Pacific

9. How China’s Human Capital Impacts Its National Competitiveness

Author:
Briana Boland, Kevin Dong, Jude Blanchette, and Ryan Haas
Publication Date:
05-2022
Content Type:
Policy Brief
Institution:
Center for Strategic and International Studies (CSIS)
Abstract:
How will the strengths and weaknesses of China’s human capital impact national competitiveness? China’s efforts to maintain economic growth, strengthen supply chains, develop strategic science, technology, engineering, and mathematics (STEM) sectors, and secure a modern military edge hinges on the ability to cultivate and utilize human capital. As the United States and other countries increasingly engage in multidomain competition with China, it is critical to start from a clear-eyed understanding of China’s human capital and Beijing’s strategy for nurturing national talent. Investments in higher education, strategic STEM sectors, and military talent demonstrate key areas in which Beijing is focusing on cultivating human capital. However, China must overcome significant obstacles to innovate as it faces substantial demographic pressures, socio-economic inequalities, and challenges to attracting and retaining top talent both domestically and internationally.
Topic:
Economics, Labor Issues, Human Capital, and Strategic Competition
Political Geography:
China and Asia

10. The Indo-Pacific Economic Framework and Digital Trade in Southeast Asia

Author:
Andreyka Natalegawa and Gregory B. Poling
Publication Date:
05-2022
Content Type:
Special Report
Institution:
Center for Strategic and International Studies (CSIS)
Abstract:
In October 2021, the Biden administration announced the development of an Indo-Pacific Economic Framework (IPEF) with partner nations to “define our shared objectives around trade facilitation, standards for the digital economy and technology, supply chain resiliency, decarbonization and clean energy, infrastructure, worker standards, and other areas of shared interest.” Details on the framework are still being worked out, but it now seems that those six areas of focus have been distilled into four negotiating “pillars.” Deputy U.S. Trade Representative Sarah Bianchi said in early February that these would include “fair and resilient trade, supply chain resilience, infrastructure and decarbonization, and tax and anticorruption.” The Office of the U.S. Trade Representative (USTR) will likely lead negotiations on the first, while it appears that the Commerce Department will take the lead on the other three. The details of each pillar will be worked out in the months ahead, but the Biden administration is certain to face challenges and trade-offs across each, given the diversity of economies and political constraints across the region. USTR has said the trade pillar will be “high-ambition” and include binding commitments. But this will be complicated by the fact that the administration plans to roll out the IPEF through executive action rather than as a traditional trade deal requiring congressional approval. This pathway will help the framework sidestep political obstacles that agreements like the Trans-Pacific Partnership faced before Congress, but it also means that the administration cannot offer increased market access or any other concessions that would require changes to U.S. law. Moreover, moving forward with the IPEF through executive action has led to concerns among partners that the framework could be vulnerable to U.S. domestic politics or that a future administration may well roll back or abandon the framework. Given these self-imposed constraints, the administration will face headwinds trying to convince countries to sign on to high-standard provisions on digital trade, labor, and environmental standards that might run counter to their perceived short-term political or economic interests. One possible solution would have been to make the involvement in the other three pillars, where there are likely to be more tangible benefits for other countries, contingent on an agreement in the trade pillar. But that would run counter to the desire to get as many countries on board as possible. So, the administration has instead indicated that countries will be invited to engage in each pillar a la carte. And while like-mindedness in and of itself does not immediately guarantee their support for the IPEF, the likely result is that only Japan, Australia, New Zealand, Singapore, and perhaps South Korea—the most developed economies which already share U.S. standards on digital trade, environment, and labor—will engage with USTR on the trade pillar. But a wider array of economies will likely join the talks with the Commerce Department on the other three.
Topic:
Economics, International Trade and Finance, Digital Economy, and Economic Cooperation
Political Geography:
Asia, Southeast Asia, and Indo-Pacific