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91. Developing Countries Can Help Restore the WTO's Dispute Settlement System

Author:
Ana González and Euijin Jung
Publication Date:
01-2020
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
By refusing to fill vacancies in the World Trade Organization’s (WTO) Appellate Body—the top body that hears appeals and rules on trade disputes—the Trump administration has paralyzed the key component of the dispute settlement system. No nation or group of nations has more at stake in salvaging this system than the world’s big emerging-market economies: Brazil, China, India, Indonesia, Korea, Mexico, and Thailand, among others. These countries have actively and successfully used the dispute settlement system to defend their commercial interests abroad and resolve inevitable trade conflicts. The authors suggest that even though the developing countries did not create the Appellate Body crisis, they may hold a key to unlock it. The Trump administration has also focused its ire on a longstanding WTO practice of giving these economies latitude to seek “special and differential treatment” in trade negotiations because of their developing-country status. The largest developing economies, which have a significant stake in preserving a two-step, rules-based mechanism for resolving trade disputes, could play a role in driving a potential bargain to save the appeals mechanism. They could unite to give up that special status in return for a US commitment to end its boycott of the nomination of Appellate Body members.
Topic:
Development, Government, World Trade Organization, Developing World, and Donald Trump
Political Geography:
China, Indonesia, India, South Korea, Brazil, North America, Mexico, Thailand, and United States of America

92. To what extent are tariffs offset by exchange rates?

Author:
Olivier Jeanne
Publication Date:
01-2020
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
In theory, tariffs are partially offset by a currency appreciation in the tariff-imposing country or by a depreciation in the country on which the tariff is imposed. Based on a calibrated model, this paper finds that US tariffs imposed in 2018 should not have had a large impact on the dollar but may have significantly depreciated the renminbi. This prediction is consistent with a high-frequency event analysis looking at the impact of tariff-related news on the dollar and the renminbi. Tariff-related news explains about one-third of the renminbi depreciation observed in 2018.
Topic:
Economics, Tariffs, Exchange Rate Policy, and Currency
Political Geography:
North America and United States of America

93. Automatic stabilizers in a low-rate environment

Author:
Olivier Blanchard and Lawrence H. Summers
Publication Date:
02-2020
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
With interest rates persistently low or even negative in advanced countries, policymakers have barely any room to ease monetary policy when the next recession hits. Fiscal policy will have to play a major and likely dominant role in stimulating the economy, requiring policymakers to fundamentally reconsider fiscal policy. Blanchard and Summers argue for the introduction of what they call “semiautomatic” stabilizers. Unlike purely automatic stabilizers (mechanisms built into government budgets that automatically—without discretionary government action or explicit triggers—increase spending or decrease taxes when the economy slows or enters a recession), semiautomatic stabilizers are targeted tax or spending measures that are triggered if, say, the output growth rate declines or the unemployment rate increases beyond a specified threshold. The authors argue that the trigger should be changes in unemployment rather than changes in output, and the design of semiautomatic stabilizers, whether they focus on mechanisms that rely primarily on income or on intertemporal substitution effects (changing the timing of consumption), depends crucially on the design of discretionary policy.
Topic:
Economics, Government, Monetary Policy, and Finance
Political Geography:
Global Focus and United States of America

94. A program for strengthening the Federal Reserve's ability to fight the next recession

Author:
David Reifschneider and David Wilcox
Publication Date:
03-2020
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
If the Federal Reserve does not decisively change the way it conducts monetary policy, it will probably not be capable of fighting recessions in the future as effectively as it fought them in the past. This reality helped motivate the Fed to undertake the policy framework review in which it is currently engaged. Researchers have suggested many steps the Fed could take to improve its recession-fighting ability; however, no consensus has emerged as to which of these steps would be both practical and maximally effective. This paper aims to fill that gap. It recommends that the Fed commit as soon as possible to a new approach for fighting recessions, involving two key elements. First, the Fed should commit that whenever it runs out of room to cut the federal funds rate further, it will leave the rate at its minimum level until the labor market recovers and inflation returns to 2 percent. Second, the Fed should commit that under the same circumstances, it will begin to purchase longer-term assets in volume and will continue such purchases until the labor market recovers. If the forces driving the next recession are not unusually severe, this framework might allow the Fed to be as effective at fighting that recession as it was in the past. If the next recession is more severe, however, the Fed will probably run out of ammunition even if it takes the two steps recommended here. Therefore, both monetary and fiscal policymakers should consider yet other steps they could take to enhance their ability to fight future recessions.
Topic:
Economics, Monetary Policy, and Federal Reserve
Political Geography:
North America, Global Focus, and United States of America

95. Why Trump shot the sheriffs: The end of WTO dispute settlement 1.0

Author:
Chad P. Bown and Soumaya Keynes
Publication Date:
03-2020
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
On December 10, 2019, the World Trade Organization’s (WTO) 25-year-old system of resolving disputes broke down. This paper explains why. It describes the dysfunctional system that preceded the WTO, when the United States dealt with politically troublesome imports by using voluntary export restraints and increasingly resorted to the “aggressively unilateral” Section 301 policy to resolve trade concerns. The WTO was a compromise between the rest of the world and the United States, whereby the latter accepted some constraints with the expectation that the new system of binding dispute settlement would serve its interests. But although the creation of the WTO resolved some concerns about American unilateralism in the short term, its system of handling disputes turned out to be politically unsustainable.
Topic:
Economics, World Trade Organization, Trade, and Donald Trump
Political Geography:
North America and United States of America

96. Court of Justice of the EU Ruling on Products from Territories Occupied by Israel

Author:
Michał Wojnarowicz and Szymon Zaręba
Publication Date:
01-2020
Content Type:
Special Report
Institution:
The Polish Institute of International Affairs
Abstract:
On 12 November 2019, the Court of Justice of the EU (CJEU) issued a judgment on products from Jewish settlements in the Israeli-occupied West Bank and Golan Heights. It states that EU members are required to ensure that the origin is properly marked. The implementation of this requirement may cause disputes in the EU because of differences in Member States’ policies towards Israel. Tensions in relations with the U.S. are also possible, especially in the context of that country’s recent change in policy favouring the Israeli position on settlements. Hence, it is advisable for the EU to develop a uniform policy regarding imports and labelling of products from all occupied territories.
Topic:
International Law, Territorial Disputes, European Union, Occupation, Judiciary, and Trade
Political Geography:
Europe, Middle East, Israel, Palestine, North America, United States of America, West Bank, and Golan Heights

97. Indo-Pacific as the Main Arena of the U.S.-China Rivalry

Author:
Patryk Kugiel
Publication Date:
01-2020
Content Type:
Special Report
Institution:
The Polish Institute of International Affairs
Abstract:
The Trump administration recognises the “Indo-Pacific” region—which in official terminology has replaced “Asia-Pacific”—as the most important area for maintaining U.S. global dominance by confronting China. The anti-China approach in the American strategy is not shared by other countries that also are developing Indo-Pacific policy because they are concerned about the negative effects of the U.S.-China rivalry. The Americans will put pressure on their NATO and EU allies to more strongly support the achievement of U.S. goals in the region. However, the EU approach is closer to that of the Asian countries in seeking cooperation and strengthening the stability of a cooperative and rules-based regional order.
Topic:
International Cooperation, Geopolitics, Grand Strategy, and Donald Trump
Political Geography:
China, Asia, North America, United States of America, European Union, and Indo-Pacific

98. The Future of U.S.-Russia Strategic Arms Control

Author:
Artur Kacprzyk
Publication Date:
01-2020
Content Type:
Special Report
Institution:
The Polish Institute of International Affairs
Abstract:
The Trump administration is sceptical about extending the New Strategic Arms Reduction Treaty (New START, NST), which is to expire in 2021. It wants to sign a new deal with Russia and China covering all kinds of nuclear weapons. It will not be possible, however, to negotiate such a complex agreement before NST expires. In effect, there is a growing risk of a collapse of U.S.-Russia strategic arms control, which would negatively affect NATO as well: it would deepen both the divisions over the future of deterrence policy within the Alliance and the differences in the U.S. Congress on the modernisation of America’s nuclear forces.
Topic:
NATO, Arms Control and Proliferation, Nuclear Weapons, Treaties and Agreements, and Military Strategy
Political Geography:
Russia, China, Eurasia, United States of America, and North America

99. Foreign Military Presence in Iraq in Light of the Iran-U.S. Rivalry

Author:
Sara Nowacka
Publication Date:
02-2020
Content Type:
Special Report
Institution:
The Polish Institute of International Affairs
Abstract:
Iraq remains an area of rivalry between the U.S. and Iran. The latest example was the assassination of Iranian Gen. Qasem Soleimani in Baghdad by the U.S. in January. The Iraqi parliament then demanded the withdrawal of all foreign military troops. However, the fear of the resurgence of the so-called Islamic State (ISIS) and continued protests against Iranian influence, ongoing since October 2019, may lead the Iraqi authorities to alter their position. An alternative option to request a NATO mission to take over some of the activities of the Global Coalition to Defeat ISIS may be a good solution.
Topic:
NATO, Military Affairs, Islamic State, Military Intervention, and Qassem Soleimani
Political Geography:
Iraq, Iran, Middle East, North America, and United States of America

100. The U.S. Fight against Coronavirus

Author:
Marek Wąsiński and Mateusz Piotrowski
Publication Date:
03-2020
Content Type:
Special Report
Institution:
The Polish Institute of International Affairs
Abstract:
The coronavirus outbreak is spreading throughout the United States. After its initial underestimation of the threat, the Trump administration has acted to fight against the pandemic, including the introduction of a national emergency. The effectiveness of these actions will be an important factor in whether Trump is re-elected. The limits on social life despite the enormous financial support from the government and the Federal Reserve have dramatically slowed the economy, heading into a recession. Public debt will increase much more rapidly, which may force budget cuts in the coming years.
Topic:
Economics, Government, Health, Financial Crisis, Health Care Policy, Crisis Management, Donald Trump, and Coronavirus
Political Geography:
North America and United States of America