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1. Bold International Tax Reforms to Counteract the OECD Global Tax

Author:
Adam N. Michel
Publication Date:
02-2024
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Nearly 140 countries, including the United States, have endorsed a new global tax system proposed by the Organisation for Economic Co-operation and Development (OECD). This proposal, which aims to increase global business taxes and targets America’s most successful companies, threatens to undermine crucial features of the international corporate tax system. Congress will face a decision in 2025: conform to the OECD’s system or opt out and safeguard America’s position as the most attractive place to do business. The taxation of multinational businesses often raises concerns about a “race to the bottom” through harmful tax competition and businesses shifting profits to low-tax countries. Yet the magnitude and effect of these two phenomena are commonly misunderstood. Tax competition has allowed average statutory corporate tax rates to be cut in half over the past four decades, fueling investment and economic growth. Among OECD countries, revenues have increased while tax rates declined. The magnitude of profits shifted to low-tax countries is often inflated by researchers relying on data that overstate income in tax havens. A more comprehensive picture shows that about 8 percent of US corporate profits are reported in tax havens, only half of US multinationals have any presence in a tax haven, and they face higher effective tax rates than domestic competitors. Where it does exist, profit shifting acts as a tax cut on investment, boosting jobs and economic growth in both tax havens and higher-tax home markets. Following the long history of costly reforms to stop businesses from moving profits overseas, US policymakers should try a different approach. Instead of enacting new rules to stop income shifting out of the United States, Congress should focus exclusively on increasing the attractiveness of the United States as an investment destination.
Topic:
Reform, Business, Multinational Corporations, Tax Systems, OECD, and Competition
Political Geography:
Global Focus

2. Global Values Competition: From Post-Truth to Post-Reality

Author:
Oleg Dmitriyev and Dmitry Yevstafyev
Publication Date:
01-2024
Content Type:
Journal Article
Journal:
International Affairs: A Russian Journal of World Politics, Diplomacy and International Relations
Institution:
East View Information Services
Abstract:
At the Primakov Readings in November 2023, Russian Foreign Minister Sergey Lavrov discussed specific aspects of the formation of a polycentric world. He talked in part about the tools by which the US has so far managed to maintain relative, albeit fictitious, unity and present the collective West as a partially consolidated force. By the end of 2023, the cohesion of the coalition formed based on maintaining the stability of the “rules-based world,” which in essence aims to preserve the dominance of the collective West as the global regulator, had transformed following a series of extremely painful political and military-political conflicts. In a state of relative “calm,” the US had managed to maintain the stability of the system. But when mainstream Western media and think tanks started talking about the need for negotiations between Russia and Ukraine at the end of December 2023, the consistency of the conflict coverage by leading global media began to break down.1 Postindustrial capitalism might well be called “capitalism of sensory consumption.” The logic of its development dictated the primacy of communication (marketing, visual, sociocoercive) and control over socioinformational mechanisms. The transition in international politics from geoeconomic America-centrism to a model of “values competition” (with permissible chaotization in certain geopolitical spaces) only amplifies these trends. But what technologies will be used to wage this competition? The US assumed that controlling the information society and the most important global communication channels gave them a clear systemic advantage in the values competition. That assumption proved a bit flawed, if you look at trends from 2022 to 2024, when the sanctions regime against the Russian Federation seemed ineffective in many parts of the world, including Europe.2 This attests to a qualitative change in the structure of the global information society. The nature of these changes still needs to be analyzed and understood. But at this stage we can assert that the management of political and geoeconomic processes relies on the widespread use of technologies of “post-truth” that is gradually morphing into “post-reality.” Emerging competing post-realities are becoming the real political-ideological basis for making medium-term significant political decisions.
Topic:
Capitalism, Values, International Order, Geoeconomics, Competition, Post-Truth, and Post-Reality
Political Geography:
Global Focus

3. Panel Causality Analysis of the Relationship among the Rule of Law, Technological Advances, Competitiveness, and Value-Added

Author:
Doğan Keşap and Ali Rıza Sandalcılar
Publication Date:
01-2024
Content Type:
Journal Article
Journal:
Istanbul Journal of Economics
Institution:
Istanbul University Faculty of Economics
Abstract:
The status of countries within the global value chain varies depending on the importance of national production capabilities in the global economy. From this perspective, there is a need for a value-added production approach that focuses on innovation and competitiveness. Technological advances and institutions are considered to play a significant role in transforming the economy towards an innovation-driven one to meet these needs. The aim of this paper is to investigate the relationship among technological advances, the rule of law as a proxy for institutions, value-added production, and competitiveness in a way that reflects crosscountry divergence. Through an analysis employed independently of countries’ existing levels of development, it will be possible to evaluate whether the factors associated with institutions and innovation can produce similar results in all circumstances and for each country. In this context, a panel causality analysis that considers cross-sectional heterogeneity is employed. The analysis shows bidirectional causality between the variables, except for value-added to the rule of law. However, the results also support the existence of cross-country divergence. These findings suggest that future policy plans should be designed to consider the multidimensional nature of country-specific factors, alongside technological advances and the rule of law, and to ensure the integration of both national and international economic objectives.
Topic:
Economics, Science and Technology, Rule of Law, Competition, and Value-added Production
Political Geography:
Global Focus

4. Warlord-Islamist Competition: A Comparison of Support Structures

Author:
Hamza Deniz Kobus
Publication Date:
06-2024
Content Type:
Journal Article
Journal:
Journal of Military and Strategic Studies
Institution:
Centre for Military, Security and Strategic Studies
Abstract:
Warlord armies and Islamist groups are two types of violent non-state actors that frequently compete against each other in situations of internal conflict. This article strives to compare these actor types with regards to their internal and external sources of support. Examination of the consistent conflicts in Somalia and Afghanistan suggests that different support structures assist the armed groups with various resources for divergent reasons. The most salient pattern identifiable in the case studies indicates that local populations tend to support Islamist groups due to shared religious identities and desires for lasting governance. The non-ideological and pragmatic orientation of warlords on the other hand seems to attract backing primarily by international actors seeking influence in internal conflicts. While further research has to corroborate the findings, they indicate possible implications for military interventions in situations that are shaped by warlord-Islamist competition.
Topic:
Non State Actors, Governance, Islamism, Armed Conflict, Competition, and Warlords
Political Geography:
Global Focus

5. A model for a participative approach to digital competition regulation

Author:
Christophe Carugati
Publication Date:
02-2023
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Digital competition regulations often put in place participative approaches to ensure competition in digital markets. The participative approach aims to involve regulated firms, stakeholders and regulators in the design of compliance measures. The approach is particularly relevant in complex and fast-evolving digital markets, where whole industries often depend on the behaviours of the regulated firms. The participative approach enables stakeholders and regulated firms to design compliance measures that are optimal for all because they ensure legal certainty for regulated firms, save time for regulators and take into account the views of stakeholders. However, the participative approach is subject to regulatory capture. The regulated firms and stakeholders might try to promote their interests to the regulator. This could result in endless discussions at best, and the adoption of inappropriate solutions following intense lobbying at worst. A governance model is necessary to ensure that the participative approach works without risks of regulatory capture. The model should define clearly each participant's role, duties and rights. There should be: 1) equal and transparent access of all stakeholders to the dialogue; 2) the presentation of tangible and evidence-based solutions from stakeholders and regulated firms; 3) public decisions from the regulator that contain assessments of the proposed solutions, with guidance to clarify rules; and 4) compliance measures proposed by the regulated firm in line with the guidance. The model should provide an assessment framework for the proposed solutions to identify the most effective. The assessment should rely on the principle of proportionality to assess whether the proposed compliance measure is proportionate, to ensure the effectiveness of the regulation. Finally, the model should safeguard against regulatory capture thanks to transparency rules and external monitoring.
Topic:
Regulation, Digital Economy, Innovation, Stakeholders, and Competition
Political Geography:
Global Focus

6. How best to ensure international digital competition cooperation

Author:
Christophe Carugati
Publication Date:
02-2023
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Large digital firms pose similar competition issues worldwide, such as promoting their own services over those of rivals, or imposing unfair terms and conditions. Competition authorities have opened several antitrust investigations and policymakers have proposed digital competition regulations to tackle these issues. G7 competition authorities have called for several years for international cooperation on digital markets. They want competition cases and laws around the world that are consistent and work together. However, the question of how this can be done remains. A toolbox for international cooperation in competition enforcement already exists, but it does not provide for cooperation in competition policy and has shortcomings in relation to competition enforcement. Current and proposed legislation targets the largest digital firms to tackle the characteristics of digital markets, such as multi-sidedness, and the same or very similar behaviours, such as self-preferencing. Legislation in different jurisdictions addresses these issues with similar rules. While there is some convergence, some rules diverge in substance and some are at high risk of divergence in interpretation. Inconsistency is thus likely to arise from a divergence of interpretation rather than substance. The solution would be to ensure a coherent approach to competition in digital markets. This could be done by developing a framework based on four elements: (1) adoption of common legal phases for future digital competition laws to ensure clarity; (2) adoption of a common legal interpretation through guidance drafted by international forums, such as the International Competition Network (ICN); (3) adoption of common technical requirements developed in the context of ICN technical workshops, when the rules require it; and (4) the implementation of an international monitoring committee within the ICN to evaluate whether competition authorities and courts enforce the rules consistently. The impact of the framework might be limited because of the non-binding nature of the approach, and the focus on specific competition-related legislation, excluding laws that can also address the issues, such as civil law. Countries can overcome these limitations if they are willing to cooperate to ensure a consistent approach.
Topic:
Markets, Digital Economy, Digital Cooperation, and Competition
Political Geography:
Global Focus

7. Chips, subsidies, security, and great power competition

Author:
John Edwards
Publication Date:
05-2023
Content Type:
Commentary and Analysis
Institution:
Lowy Institute for International Policy
Abstract:
Government subsidies to industry in leading economies are large and growing, with potentially deep, wide-ranging, and unpredictable consequences for the world. It is not clear what rules, if any, will apply in this new era of industry competition, nor whether the measures will be effective in denying frontier technology to rival economies. The impacts of industry subsidies and export controls, including for countries such as Australia, hang on their implementation — beneficial in so far as they speed tech innovation, but detrimental if they split the global economy into competing blocs.
Topic:
Security, Economy, Subsidies, Competition, and Microchips
Political Geography:
Australia and Global Focus

8. Regulatory Convergence within Technical Barriers to Trade

Author:
Mahdi Ghodsi
Publication Date:
09-2023
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
This paper analyses how regulatory convergence in different categories of technical barriers to trade (TBTs) imposed on imports of goods in information and communications technology (ICT) globally affected the values, volumes, and unit values of imported goods during the period 1996-2019. Keywords cited in TBTs that are notified to the World Trade Organization (WTO) give an indication of the regulatory objectives behind the imposition of TBTs. MAST also classifies TBTs based on their applicability, procedural and administrative uses, factors which will also be taken into consideration in the analysis. However, objectives of TBTs may provide better insights to policymakers. TBTs are non-discriminatory measures that are imposed unilaterally on all trading partners and on domestic producers. It is not feasible to analyse unilateral TBTs in a gravity setting, as they are excluded by the introduction of country-product-time fixed effects that control for multilateral resistances. However, regulatory convergence in TBT categories is a bilateral time-varying variable that is analysed in a gravity model in this paper. The empirical results suggest that regulatory convergence between trading partners in some TBT categories stimulates import values and volumes. However, the impact is very heterogeneous across TBT objectives and classes and across ICT product categories.
Topic:
International Trade and Finance, Communications, World Trade Organization, Foreign Direct Investment, Regulation, Information Technology, and Competition
Political Geography:
Global Focus

9. Covid-19 Crisis and Shifts in the Corporate Competitive Landscape: Comparisons with Previous Economic Crises

Author:
Sang-Ha Yoon, Yaein Baek, Wontae Han, Yoonsoo Lee, and Daisoon Kim
Publication Date:
04-2023
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
In terms of economic fluctuations, it is well recognized that the effects of an economic crisis have a detrimental impact on the entry, growth, decline, and exit of firms. In addition, the magnitude of the impact varies both within and between industries depending on the size and other characteristics of the firm. The economy is going through significant changes due to the emergence of new industries and the decline or disappearance of current ones. This study looks at how big economic events like the COVID-19 pandemic and the global financial crisis have affected businesses and industries. After completing a study at several levels of top international corporations, larger domestic enterprises, and domestic small and medium-sized businesses, it attempts to draw policy implications. First, it is necessary to foster and support top-tier companies to defend against global economic fluctuations and strengthen international competitiveness. In particular, the institution in charge of competition policies domestically and the institution that helps companies improve their competitiveness are different and the focus of policies is distinctive, so comprehensive attention and perspective of policymakers are needed. Second, it is urgent to respond to new issues related to competition policy in the domestic market. The behavior of emerging big tech and platform companies is different from monopoly companies in the past, so consumer welfare is not impaired, but it burdens nearby and other market participants. Therefore, a view that deviates from the focus on monopoly pricing is also essential for competition policy. Third, measures to support global corporate growth and countermeasures against changes in the industrial landscape should be prepared. Investment and R&D expansion at the corporate level is essential for corporate growth, and measures are needed to boost investment in recently emerging intangible assets. In addition, it is important to revitalize the movement of economic resources to cope with changes in the inter-industry landscape accompanied by the crisis. Fourth, policies to revitalize start-ups and closures are required. The decline in new companies' market entry and exit rates is a symtom of an aging economy contributing to the overall decrease in productivity. Therefore, enhancing the revitalization of the corporate ecosystem and expanding the size of enterprises are essential to enhance the dynamics of the economy. Fifth, it is necessary to find an appropriate combination of government roles in times of crisis. In particular, it is important to grasp the detailed status of economic stabilization policies in relation to SMEs, and at the same time, clear judgments on the appropriate size of support measures, the period of support, and the timing of collection are urgently needed.
Topic:
Economics, COVID-19, Corporations, Economic Crisis, and Competition
Political Geography:
Global Focus

10. EXAMINATION OF DECISION-MAKING STRUCTURES’ PERCEPTIONS OF COMPONENTS ON THE INFLUENCES OF SME SUCCESS

Author:
Muhamet Spahiu and Esat A. Durguti
Publication Date:
03-2023
Content Type:
Journal Article
Journal:
Journal of Liberty and International Affairs
Institution:
Institute for Research and European Studies (IRES)
Abstract:
Small and medium-sized enterprises (SMEs) have succeeded in being the main and dynamic pillar of national and international economies. Education and work experience is essential in increasing SMEs’ efficiency and competitiveness. The changing business environment has created fierce competitiveness among SMEs, requiring active interaction between managers/owners and stakeholders. As a result, this study aims to explore the influence of education, experience, using a business plan, and barriers on the success of small and medium-sized businesses. This research employed an online questionnaire for scientific research. Through ordered logistic modeling, we observed 336 answers from businesses using the qualitative approach. The study’s findings reveal that education and work experience have a statistically favorable influence on the performance of SMEs, whereas barriers have a substantial adverse influence. Findings on barriers are noteworthy in the context of this study since the governing institutions throughout the pandemic and later situations experimented with the measures adopted. The study also benefits SMEs and legislation authorities in understanding the critical concerns that are perceived as barriers to the growth and expansion of SMEs, resulting in the creation of even more sophisticated infrastructures to support sustainable development.
Topic:
Development, Education, Economy, Business, and Competition
Political Geography:
Global Focus