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41. What traders know: the (mis)perceptions of formal and informal cross-border traders

Author:
Paolo Falco and Eleanor Wiseman
Publication Date:
04-2024
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
ross-border traders face a choice between official and unofficial border crossings. The latter allow them to evade taxes, but expose them to other risks, such as bribes, fines, and arrest. We investigate the perceptions of cross-border traders about the risks of trading officially vs unofficially at the border between Kenya and Uganda. We find that traders overestimate the risks of trading officially relative to the same risks when trading unofficially. In reality, the measured risks of trading through the official border are lower.
Topic:
Borders, Risk, Trade, and Informal Economy
Political Geography:
Uganda, Kenya, and Africa

42. With the 2024 Mexican election looming, here are two major recommendations for the next president

Author:
Ignacia Ulloa Peters, Martin Cassinelli, Maria Fernanda Bozmoski, and Charlene Aguilera
Publication Date:
05-2024
Content Type:
Special Report
Institution:
Atlantic Council
Abstract:
Countries representing half the world’s population are voting in 2024. On June 2, just over five months before Election Day in the United States, Mexican voters will set a historic milestone with the election of the country’s first female president. Over the course of her six-year term, Mexico’s new president will face enormous challenges—internally and in the country’s relationship with the United States. But, like never before, there is also a unique opportunity to strengthen the commercial and economic ties that bind the two countries and reimagine how our shared border could better serve our shared interests. Although the United States and Mexico have long been economically intertwined, in 2023, Mexico became the United States’ most important trading partner. Now more than ever, with great geopolitical headwinds, the commercial ties that bind our two countries will be increasingly critical to advancing US economic interests globally. Here, greater border efficiency will yield economic gains alongside improvements in our shared security. The Atlantic Council’s Adrienne Arsht Latin America Center, in partnership with internal and external colleagues and partners, sought to envision the future of two key aspects of the US-Mexico relationship: commercial flows and investment. With extensive feedback and numerous consultations with border stakeholders, including business owners, truck drivers, port operators, civilians, and local and federal elected officials, we sought out fresh perspectives and actionable recommendations. Our goal with this report is to spark dialogue among policymakers, business leaders, and civil society in both countries on the urgent need to address the immediate challenges of border efficiency and investment attraction over the next Mexican president’s term while paving the way for a more prosperous and secure future in our countries. The Rio Grande and its surrounding towns are more than a physical barrier separating the United States and Mexico. Rather, they are a vibrant artery of commerce, migration, and cultural exchange. Livelihoods depend on our border, but inefficiencies prevent us from maximizing the possible economic opportunities and achieving the necessary security gains. The pages that follow build on previous center findings and emphasize the need for a nuanced approach to foreign investment, infrastructure development, and security measures that prioritize efficiency and our national interests. This publication also seeks to bring the human dimension to the forefront. Public policy, after all, should reflect how to improve everyday lives. We consolidate the stories of real people affected by the US-Mexico border daily. The combined stories we have gathered over the last two years remind us of the impact of policy decisions. That reminder is particularly poignant with the 2024 elections on both sides of the border. Indeed, we stand on the cusp of a new chapter in our shared history. This report is a call to action for visionary leadership and bold, pragmatic solutions to the complex issues facing the United States and Mexico. We urge policymakers to embrace policies and strategies that address immediate challenges while laying the groundwork for both an even more inclusive and prosperous future. Let’s seize this unique moment in time.
Topic:
Elections, Economy, Innovation, Trade, and Domestic Policy
Political Geography:
Latin America, North America, and Mexico

43. The Gini Trade Index: What Can We Learn from A New Trade Indicator?

Author:
Lucian Cernat
Publication Date:
01-2024
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
This Policy Brief introduces the Gini Trade Index (GTI) as a new trade synthetic key performance indicator capable of capturing the different distribution of trade values across firm characteristics and across countries. The new indicator replicates the well-known features of the traditional Gini Index, a widely used metric for the skewness of several socioeconomic indicators, in particular income inequality. The Policy Brief calculates the Gini Trade Index for all EU member states and contrasts the case of Slovakia and Cyprus, the EU countries situated at the opposite ends of the Gini Trade Index. The paper finds that the GTI has increased over time in most EU countries and offers a tentative range of optimal GTI values. The final section offers several examples of trade policy initiatives that can reduce trade concentration and lead to greater participation of small and medium enterprises in global trade.
Topic:
European Union, Trade, and Socioeconomics
Political Geography:
Europe, Cyprus, and Slovakia

44. Calling on the EU-US Trade and Technology Council: How to Deliver for the Planet and the Economy

Author:
Oscar Guinea, Vanika Sharma, Philipp Lamprecht, Dyuti Pandya, and Oscar du Roy
Publication Date:
02-2024
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
This Policy Brief proposes the establishment of an agreement on conformity assessment between the EU and the US that covers machinery and electrical equipment. The initiative aims to increase the number of European and US conformity assessment bodies authorized to test and certify EU and US machinery and electrical equipment for exports into each other’s markets, without recognizing the equivalency or otherwise altering the product requirements in regulation, standards, or other normative documents on either side. While this study focuses on the economic effects of an agreement on conformity assessment that includes machinery and electrical equipment, the scope of such an agreement could potentially be extended to several additional product categories, particularly those that are subject to requirements for mandatory third-party conformity assessment in both the EU and the US. The increase in the number of conformity assessment bodies is expected to reduce the costs and the time required to demonstrate conformity. If this policy succeeds as expected in achieving a reduction in trade costs between 2 and 6 percent, US exports to the EU are projected to increase between US$ 11 billion and US$ 32.5 billion while EU exports to the US are estimated to grow by between US$ 13.8 billion and US$ 42.2 billion. In percentage terms, US firms are anticipated to experience a larger increase in exports of machinery and electrical equipment than their EU counterparts. The increase in trade flows as a result of this agreement is estimated to be larger than the rise in trade flows achieved in other Free Trade Agreements signed by the EU or the US. Moreover, as an increasing number of EU regulations begin to mandate third-party conformity assessment, US firms will increasingly benefit from this agreement when exporting to the EU. Given China’s status as the largest supplier of machinery and electrical equipment to both the EU and the US, the implementation of an EU-US agreement on conformity assessment would not only improve conditions for transatlantic trade but also lead to reduced trade dependence for the EU and the US on China. The reduction in trade costs between the EU and the US on machinery and electrical equipment due to the agreement could lower Chinese exports to the EU and the US by between US$ 6.5 billion and US$ 19.4 billion. Importantly, machinery and electrical equipment are crucial inputs for some of the key technologies in which the EU and the US Administrations have identified trade dependencies on China. However, in contrast with other policies aimed at reducing reliance on Chinese imports, an agreement on conformity assessment for machinery and electrical equipment will not require public subsidies or impose any financial burden on taxpayers. This agreement also has the potential to benefit the environment. Machinery and electrical equipment are essential inputs for green technologies. Therefore, a reduction in the cost and time of conformity assessment in these industries will accelerate the adoption of green technologies. An agreement on conformity assessment between the EU and the US covering green goods and clean technologies could increase transatlantic exports between US$ 3.1 billion and US$ 9.2 billion. While this increase in exports is significant, broadening the scope of the agreement to include the entirety of machinery and electrical equipment, rather than just a subset, is projected to lead to trade effects eight times larger. Moreover, as green technologies rapidly evolve, an agreement on conformity assessment has the potential to serve as a dynamic instrument that evolves to accommodate future regulatory and economic developments on climate and the environment on both sides of the Atlantic.
Topic:
Science and Technology, European Union, Economy, and Trade
Political Geography:
Europe, North America, and United States of America

45. Time to Rethink Export Controls for Strengthened US-EU Cooperation and Global Trade Rules

Author:
Matthias Bauer and Dyuti Pandya
Publication Date:
04-2024
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
The escalation of broad export controls by the US, under the guise of national security and the aim to curb technological transfers to potential adversaries,[1] marks a new epoch of bureaucratic oversight. The US push for broad export controls also underscores a critical juncture in US-EU relations and global trade rules. Broad export restrictions not only challenge the very foundation of free trade but also contribute to the erosion of Western technology leadership.[2] Unilateral export controls may start strong but eventually lose effectiveness and become counterproductive,[3] pushing non-US companies, particularly in the semiconductor sector, to find alternatives to US components.
Topic:
International Cooperation, European Union, Regulation, Exports, Trade, and Semiconductors
Political Geography:
Europe and United States of America

46. Trading Up: An EU Trade Policy for Better Market Access and Resilient Sourcing

Author:
Fredrik Erixon, Oscar Guinea, Philipp Lamprecht, Oscar du Roy, Elena Sisto, and Renata Zilli
Publication Date:
05-2024
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
Europe’s competitiveness could be substantially improved by a trade policy that facilitates more trade and other forms of cross-border exchange. The evidence is clear: the EU trades less with the rest of the world than would be expected given the size of its economy. With 85 percent of global growth happening outside of the EU – and with an increasing share of all new technologies, innovations, patents, human capital, and R&D expenditure emerging in other parts of the world than Europe – the EU needs to find better ways to integrate with international markets. It is now becoming urgent for the EU to revive its international trade policy. Europe’s increasing detachment from global markets lead to two major economic concerns: deteriorating market access and less capability to build economic resilience. Market access can be defined as an export challenge, as EU firms face increasing trade barriers that hinder their ability to sell products and services abroad. These barriers ultimately limit the EU’s ability to scale up production, specialise, and increase R&D spending. Economic resilience is an import challenge. To become more resilient, the EU must diversify its sources of supply, particularly for critical raw materials, and secure a stable and frictionless access to foreign high-end goods, services, and technologies. The next five years present a critical opportunity for the EU to address the challenges limiting the contribution of international trade to EU’s competitiveness. This Policy Brief outlines seven trade policy recommendations that tackle the lack of market access and address the need for economic resilience. These policy recommendations are there for the EU to take: they are realistic and achievable. The EU has the power to make these seven policy recommendations a reality.
Topic:
Markets, Treaties and Agreements, European Union, Trade, and Resilience
Political Geography:
Europe

47. Trade in the Great Sea: A Brief State of Play of EU-Southern Neighbourhood Trade Relations

Author:
Jan A. Micallef
Publication Date:
05-2024
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
The Mediterranean is a vibrant economic geography that could grow significantly. This paper reviews the trade relations between the EU and Southern Neighbourhood Countries (SNCs) – their history and the current status of the bilateral trade agreements. While these agreements have many similarities, there are also some differences in scale and scope. The paper also looks at the development of trade between the EU and SNCs and concludes that developments have generally been positive.
Topic:
Treaties and Agreements, Bilateral Relations, European Union, and Trade
Political Geography:
Europe and Mediterranean

48. How to de-risk: European economic security in a world of interdependence

Author:
Jean Pisani-Ferry, Beatrice Weder di Mauro, and Jeromin Zettelmeyer
Publication Date:
05-2024
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Pandemic-related supply disruptions, the energy crisis provoked by Russia’s invasion of Ukraine and economic coercion by China have put economic security high on the European Union policy agenda. The question is how exactly the EU should ‘de-risk’ its external economic relationships without foregoing the benefits of trade. The standard answer is that it should identify product-level trade dependencies, mainly on the import side, and reduce them, mainly through diversification of suppliers, while otherwise maintaining maximum trade integration. This Policy Brief argues that this answer falls short. First, product-level dependencies cannot be identified reliably even with sophisticated analysis and data. As a result, both ‘missed dependencies’ and ‘false positives’ are inevitable. Second, external shocks and coercion could be propagated through exports, productive assets held abroad and financial channels as much as through imports. The analysis has five main implications Import de-risking should focus on a few product categories for which the costs of supply interruptions would be unquestionably large. This reduces false positives. De-risking and/or buffers to deal with exports and financial coercion require more attention. De-risking must be complemented by raising resilience against all shocks, whatever theirorigin. This requires a deeper and broader European single market. De-risking and resilience must be complemented by deterrence. A sufficiently high probability of chronic trade conflict – or one very large conflict – may justify reducing overall integration with a large trading partner, on both the export andimport sides. EU economic security policies have been right to emphasise the reduction of import dependence on chips and critical raw materials, and the creation of a powerful legal instrument to deter coercion (the Anti-Coercion Instrument). In most other respects, there is room for improvement.
Topic:
European Union, Risk, Trade, Imports, Economic Security, and Interdependence
Political Geography:
China and Europe

49. Using the financial system to enforce export controls

Author:
Benjamin Hilgenstock, Elina Ribakova, Guntram Wolff, and Anna Vlasyuk
Publication Date:
04-2024
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
Russian imports of battlefield goods that are subject to export controls, including from Western producers, have surged since mid-2022 and reached levels close to those prior to Russia’s full-scale invasion of Ukraine. Russia thus continues to be able to acquire critical foreign components that it needs for its military industry. These imports occur via mainland China, Hong Kong, Turkey and the United Arab Emirates, while other countries including Armenia, Georgia, Kazakhstan and the Kyrgyz Republic have also seen massive increases in imports from the EU and other coalition countries that likely end up in Russia. The implementation and enforcement of export controls faces major challenges, which are multifaceted and centre around complex supply chains, lack of transparency in documentation and opaque financial structures. The issues are familiar from anti money laundering (AML) and countering financing of terrorism (CFT) frameworks, where much progress has been made in the last two decades. A similar approach could help in rendering export controls effective. We propose: First, financial institutions could be tasked to play a role in the monitoring of the trade in export-controlled goods and the blocking of illicit transactions, building on their experience with due diligence in financial transactions. Second, non-financial companies could learn from banks’ efforts in the AML/CFT sphere to implement proper due-diligence procedures and to ensure export controls compliance. Public-sector investigations and appropriate fines are critical to increase the incentives for firms to act. Technology sanctions are going to be part of the economic statecraft toolbox for the foreseeable future. The Russia case will test their effectiveness and credibility, or lack thereof.
Topic:
Sanctions, European Union, Exports, Trade, Imports, Financial Systems, and Russia-Ukraine War
Political Geography:
Russia and Europe

50. Global supply chains: lessons from a decade of disruption

Author:
Luca Léry Moffat and Niclas Poitiers
Publication Date:
03-2024
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
This paper explores both the character and impact of three recent shocks to global supply chains: the COVID-19 pandemic, the Russian invasion of Ukraine and the US-China trade war. These were large shocks which have had significant impacts on domestic and international supply chains, but these impacts have differed in their longevity, economic impact and policy responses. We show that supply chains were remarkably resilient against shocks of such magnitude. However, this resilience was also achieved thanks to the equally remarkable size and scope of policy responses and global supply chain reorganisation. We recommend that pre-emptive policies may be justified to shield households and industry from future shocks. Given the entangled nature of these shocks and that their effects continue to reverberate, we emphasise the need for extensive future research to understand the nature of these shocks and the effectiveness of policy responses.
Topic:
Global Markets, Trade Wars, Trade, COVID-19, Supply Chains, and Russia-Ukraine War
Political Geography:
China, Global Focus, and United States of America