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121. Why artificial intelligence is creating fundamental challenges for competition policy

Author:
Bertin Martens
Publication Date:
07-2024
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
The rapidly evolving market for artificial-intelligence services is apparently thriving and very competitive, with a growing number of AI start-ups and ever larger and more capable AI models. Investors are pouring large amounts of money into start-ups and into a few big tech firms that have the large financial resources and computing capacity that constitute key inputs to the production and running of AI-driven services. However, exponentially growing AI model training costs create a market entry barrier for AI start-ups, forcing them to cooperate with big tech firms to get access to computing infrastructure and end users. At the same time, their AI models compete with those of the big tech firms. Competition authorities investigate these co-opetition agreements, looking for market-distorting clauses. Beyond computing costs, other competition choke points in the AI supply chain include access to dedicated AI processor chips and training data. Strict enforcement of copyright on data may further tighten an already scarce supply of affordable training data. Policymakers have few, if any, effective tools to deal with these potential competition bottlenecks in AI industries. Co-opetition agreements are necessary to enable AI start-ups to access hyperscale and costly computing infrastructure. At the same time, the agreements give big tech privileged access to the latest AI models. Competition authorities can try to minimise market-distorting provisions in these agreements but there are technical and economic limits to the extent of fragmentation in the AI value chain that can be meaningfully imposed on big tech firms. Licensing fees for copyright-protected data further tighten the already scarce supply of affordable data. It is hard to implement a fair market-clearing mechanism for dedicated AI processors. If model training costs continue to grow exponentially, as appears to be the case for the foreseeable future, the entire competition policy setting for AI industries may need a revision, with collaboration, including between big tech firms, dominating competition to keep the pace of AI innovation going.
Topic:
Science and Technology, Governance, European Union, Microeconomics, and Artificial Intelligence
Political Geography:
Europe

122. The changing dynamics of the Western Balkans on the road to European Union membership: an update

Author:
Marek Dabrowski and Luca Léry Moffat
Publication Date:
07-2024
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
The slow pace of European Union enlargement to the Western Balkans can be attributed to EU member countries losing their political appetite for further enlargement in the 2010s and early 2020s, and to the fact that Western Balkan countries have failed to make visible progress in meeting the criteria for EU accession The income per capita convergence of Western Balkan countries towards the German level (as a proxy for the EU) has been rather slow, with some acceleration in the second half of the 2010s and early 2020s. However, Western Balkan countries continue to suffer from several socio-economic vulnerabilities, including high unemployment rates (especially of young people) and low rates of participation of women in the workforce. After the beginning of the war in Ukraine in 2022, the EU gave higher political priority to further enlargement. It opened a new eastern front of potential enlargement (Ukraine, Moldova and Georgia) and activated the stalled accession process in the Western Balkans. Bosnia and Herzegovina obtained candidate status in December 2022 and was approved for accession negotiations in March 2024. Accession negotiations with Albania and North Macedonia were started in July 2022. With the new government in Montenegro from the end of 2023, the accession negotiation with this most advanced candidate country moved forward. Overcoming the legacy of the tragic conflicts in the 1990s is another key geopolitical challenge in the region. This involves the normalisation of Serbia-Kosovo relations and the reconciliation process inside Bosnia and Herzegovina. In the economic sphere, speeding up income per capita convergence with the EU requires further domestic economic reforms, accelerating intra-regional economic integration and creating new EU initiatives to support growth and social cohesion in the Western Balkans. Accelerating EU accession negotiations with indicative target dates, at least for frontrunners, can reduce the perception of geopolitical and economic uncertainty and stimulate foreign direct investment inflows.
Topic:
Economics, Governance, Budget, European Union, Institutions, and Regional Politics
Political Geography:
Europe and Western Balkans

123. Joint public procurement as a tool for European Union industrial policy

Author:
Francesco Nicoli and Roel Beetsma
Publication Date:
07-2024
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Joint procurement is an important tool that is currently under-exploited at European Union level. It can greatly enhance the effectiveness of public spending in Europe, achieving greater coherence between spending across different countries, exploiting monopsony power, producing economies of scale, reducing downward competition between public authorities, improving the single market and producing a degree of solidarity without resulting in redistribution between EU countries. The EU has already implemented several joint-procurement projects, including for COVID-19 vaccines, gas supplies and ammunition for Ukraine. These previous experiences can work both as a blueprint and as a pilot for larger-scale actions. Joint procurement could be particularly relevant in sectors with substantial economies-of-scale and industry-government ties, such as defence. Despite some degree of political opposition, experimental public opinion studies have shown consistently that joint procurement in such areas can strongly improve public support for EU-level action. Measures that could expand European joint procurement in a politically sustainable way include the use of framework contracts, which allow for ad-hoc commitments tailored to the needs of different EU countries; reporting by countries of their future large public procurement plans as a part of the European Semester so that the European Commission could propose coordinated actions if necessary; and the use of staggered contracting and multiple-award strategies, which can ensure a level playing field among companies of similar market power, promoting market-building and supporting the entry of new competitors.
Topic:
Industrial Policy, Governance, European Union, Macroeconomics, and Public Spending
Political Geography:
Europe

124. An uphill struggle: a long-term perspective on the European public goods debate

Author:
Emmanuel Mourlon-Druol
Publication Date:
10-2024
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
The historical track record of centralisation of public expenditures at European Union level is patchy, and the prospects of agreement on future common spending are not good. However, Russia’s attack on Ukraine, NextGenerationEU, ensuring the stability of the euro and the climate crisis have been cited as justifying a further step-up in public spending at EU level. In recent years, the economic debate over the definition and provision of so-called European public goods (EPGs) has also revived and has put upfront the question of what to spend at EU level, based on an economic interpretation of where spending would be more efficient. To provide a counterpart to the more abstract debate on EPGs, this paper analyses major discussions that have taken place since the beginning of European integration about increasing the EU’s fiscal capacity. It shows how heavily EU agreements on what public expenditure should be centralised have relied on political considerations, in addition to, or instead of, reasoning about economic efficiency. These precedents should inform today’s discussions. In particular, it should be remembered that: (a) very specific historical and political contexts made proposals to centralise expenditure at EU level convincing and successful; (b) the notion of ‘fiscal federalism’ was and is occasionally invoked but rarely put into practice; (c) progress depends on clearly delineated issues; and (d) a political agreement on a ‘non-market definition of the common interest’ remains crucial to any change.
Topic:
Governance, Budget, European Union, Public Spending, and Public Goods
Political Geography:
Europe

125. Extra time for deforestation: lessons for future EU environmental legislation

Author:
Heather Grabbe and Luca Léry Moffat
Publication Date:
11-2024
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Forests are essential to regulating the climate, absorbing greenhouse gases and providing fresh water and habitats for biodiversity and indigenous peoples. If deforestation continues at current rates, large parts of the planet will become uninhabitable. The European Union has only 5.5 percent of the world’s population, but its demand drives 15 percent of the global forest destruction linked to trade. Therefore, the EU has introduced a law – the regulation on deforestation-free products, or deforestation regulation – to outlaw from its market products linked to deforestation. The regulation has triggered protest about its impact on trade partners, leading the European Commission to propose at short notice a delay in its implementation. However, the objectives of the regulation remain valid and important. Moreover, a large majority of EU consumers want to avoid buying products that result from deforestation and find it frustratingly difficult to find information on whether products are deforestation-free. Economic actors in most of the affected sectors support the objectives of the regulation, even though they criticise the way it has been implemented. To avoid this delay having a chilling effect on other green measures in future, the EU should learn lessons from this experience. The European Commission needs to develop a consistent and effective strategy for managing the external impact of the EU’s green policy agenda, with better diplomacy towards trade partners and specific financial assistance to help the poorer countries with compliance and the transition to more sustainable production. This Policy Brief sets out why the deforestation regulation has the right objectives but needed better design and preparation for implementation. In particular, the EU needs to provide more flanking support for developing countries to ease their transitions and improve forest protection. Economic actors along the whole of supply chains need more consultation during the design stage, and the Commission needs to provide clearer guidance by sector and a well-functioning system for compliance.
Topic:
Environment, Governance, European Union, Deforestation, Implementation, and Forests
Political Geography:
Europe

126. Key Takeaways for Enhancing Security Governance in the Amazon

Author:
Igarapé Institute
Publication Date:
12-2024
Content Type:
Special Report
Institution:
Igarapé Institute
Abstract:
The Amazon faces a variety of security challenges, ranging from historical issues such as high homicide rates, theft, drug trafficking, and violence against women to new threats to the region’s rich biodiversity, including deforestation, illegal logging, illegal mining, and land grabbing. Considering the complexity of these problems and the diversity of actors involved in seeking solutions, an effective governance agenda has become urgent. This publication seeks to address a gap in the discussion regarding initiatives that can enhance coordination among entities responsible for identifying, preventing, and combating environmental crimes in the Amazon region. It analyzes practical governance experiences and identifies key attributes that can improve the performance of national and subnational institutions in addressing crime and illegal activities. Additionally, it examines four governance cases that stand out in one or more of these key attributes, bringing relevant practices and lessons learned to strengthen security governance in the Amazon. In this context, where the Amazon region is subject to the alliances and conflicts that are inherent to organized crime dynamics and their intersections and exchanges with environmental crimes, we analyze alternatives for enhancing state (or institutional) capacities and provide recommendations for implementing security governance in the Amazon at three levels: local (municipalities), subnational (states), and regional. These measures aim to address the cross-border challenges of illicit activities and insecurity.
Topic:
Security, Governance, Biodiversity, and Environmental Crime
Political Geography:
South America and Amazon Basin

127. A beginner’s guide to general elections

Author:
Stephanie Luke and Sophie Stowers
Publication Date:
06-2024
Content Type:
Special Report
Institution:
UK in a Changing Europe, King's College London
Abstract:
This second instalment of UK in a Changing Europe’s series of ‘beginner’s guides’ covers UK general elections. ‘A beginner’s guide to general elections’ unpacks how they work, from prorogation to polling day. You will find everything you need to know about the dissolution of Parliament, the drawing up of constituencies, how candidates are selected, what they can and cannot do on the campaign trail, the laws which govern party spending, and what to expect on polling day – right down to how polling stations are set up. There’s even a section on what to expect in the days following the election, from government formation to the selection of the Speaker and the State Opening of Parliament. This guide is perfect for those who are learning about British politics and institutions for the first time, or those who, unfamiliar with the details, are being asked to write about them. The UKICE beginner’s guides aim to provide an accessible yet thorough overview of the most pressing issues, institutions and debates in politics and society today.
Topic:
Governance, Elections, Domestic Politics, and Institutions
Political Geography:
United Kingdom and Europe

128. Brexit and the state

Author:
Jill Rutter and Joël Reland
Publication Date:
03-2024
Content Type:
Special Report
Institution:
UK in a Changing Europe, King's College London
Abstract:
In 2019 Boris Johnson won an election promising to ‘get Brexit done’. Yet while the broad outlines of the UK’s long-term relationship with the EU may have been settled, ministers and officials are still grappling with the new demands Brexit has placed on the British state. This report assesses how, and how far, the UK state has adapted to Brexit. It examines how Brexit has changed the size and shape of the state, the new tasks, functions and policies it has to manage, and the impact on its relationships with key stakeholders. The report considers the degree to which policies and practice are now settled, with the right resources in place, and with the policy direction clear and roles and responsibilities well understood. It is based in part on interviews with people inside and outside government. The report finds a lack of strategic vision of what post-Brexit policymaking should look like, and that creating the post-Brexit state is still very much a work in progress.
Topic:
Government, Governance, Brexit, and Devolution
Political Geography:
United Kingdom and Europe