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51. Unpacking China’s industrial policy and its implications for Europe

Author:
Alicia Garcia-Herrero and Robin Schindowski
Publication Date:
05-2024
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
China is often credited with a successful application of industrial policy. One important particularity of China’s industrial policy is that it aims at levelling the playing field between the state economy and the private economy in access to finance, yet within a framework of strategic goals. This aim is not relevant for market economies, such as those of the European Union, but only for those where state enterprises are clearly privileged. Notwithstanding the difficulties in making valid comparisons, our analysis of how China conducts industrial policy in a variety of sectors points to success in some sectors but not all. More importantly, productivity growth in China has already been declining for two decades. Given the very large resources that China has put into industrial policy, with subsidies being only one part, it is surprising that success is not more evident. This relates partly to factors including cronyism and regional protectionism. While the former might be less relevant for the EU given the different institutional background, the latter certainly is relevant since the EU faces the potential consequences of member country-level industrial policy for its single market. A lesson from China seems to come from the sectoral focus, with a long-term and economic-security mindset. The EU is far from this, but it is in the process of linking economic security to industrial policy. Finally, responding to China’s industrial policy involves diverse investigations and challenges in measuring subsidies accurately. Understanding China’s very diverse and complex approach to helping companies achieve the government’s industrial policy goals is crucial for anticipating the consequences of China’s actions. These could be positive, such as cheaper imports of green technology, or negative, such as Chinese overcapacity spilling over to the EU single market.
Topic:
Industrial Policy, Markets, European Union, and Economy
Political Geography:
China, Europe, and Asia

52. The rocky road to EU accession for Western Balkan countries: obstacles and lessons from the Eastern Partnership

Author:
Armin Steinbach
Publication Date:
03-2024
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
The Western Balkan countries and the countries of the Eastern Partnership are moving towards European Union accession at different speeds. We explore whether and how the variable speed towards EU accession can be traced to different legal regimes governing European integration: Stabilisation and Association Agreements (SAA) for the Western Balkan countries, and Deep and Comprehensive Free Trade Agreements (DCFTA) for the countries of the Eastern Partnership (EaP). We find that DCFTAs apply more lenient conditionality to intra-regional cooperation. They subject non-tariff barriers to a more explicit regime than the Western Balkan SAAs. The DCFTAs also offer a more rigid and comprehensive approach to the approximation of laws than the SAAs, and the DCFTAs are more inclusive with regard to the role of civil society. However, there is no indication that the differences in legal governance have translated into stronger economic performance in the EaP countries or greater integration with the EU, compared to the Western Balkans. The Western Balkan countries remain significantly more integrated than the EaP countries with the EU in trade terms, while convergence with the EU has been stagnating both for the Western Balkan and the EaP countries. Economic shortcomings in the Western Balkan still need to be addressed. Conditionality attached to both integration into the EU single market and EU funding should be nuanced; the eradication of non-tariff barriers should be prioritised both inter-regionally and intra-regionally between Western Balkan countries; the need for stronger EU investment in the region is reinforced by geopolitical concerns about Chinese investments coming without EU-type conditionality attached; and governance should give a stronger role to civil society. In order to address the shortcomings in SAAs, a pragmatic solution is to use the existing governance framework under the SAAs.
Topic:
Treaties and Agreements, European Union, Economy, Regional Integration, and Eastern Partnership
Political Geography:
Europe and Balkans

53. The state of financial knowledge in the European Union

Author:
Maria Demertzis, Luca Léry Moffat, Annamaria Lusardi, and Juan Mejino Lopez
Publication Date:
02-2024
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
Only one in two individuals in the European Union, on average, is financially knowledgeable. In response to a 2023 survey containing five questions assessing basic financial knowledge, only half of the respondents answered at least three of the five questions correctly. This represents a low level of financial knowledge and an obstacle for individuals to invest in financial markets. The questions most often answered correctly by respondents measured understanding of inflation and the relationship between risk and return. By contrast, only one in five respondents answered a question on the relationship between interest rates and bond prices correctly. Regarding inflation, there is a large difference between the least and most educated respondents in terms of answering the relevant question correctly. Gaps in understanding the concept of inflation are also evident between the youngest (18-24) and oldest respondents (55+) and between the poorest and richest households. A gender gap is present in financial knowledge, with 18 percentage points more men than women answering at least three out of five questions correctly, on average in the EU. Those with greater financial knowledge are less financially fragile in that they can still cover their expenses if there is a sudden loss of income, and are more confident that they will have sufficient funds to sustain themselves during retirement. Countries with higher proportions of people who are financially knowledgeable have higher numbers of people who both save with and borrow from financial institutions, an indication that financial knowledge may improve financial inclusion. All EU countries have, or are in the process of putting together, a national financial literacy strategy. There is an urgent need to roll out these strategies, to monitor progress over time and to establish best practices. Particular attention needs to be given to how financial knowledge interacts with digital skills as financial services are increasingly digitalised. Financial literacy strategies should also help close gender and other gaps in knowledge among vulnerable groups, and should ensure that financial education starts early and in schools.
Topic:
European Union, Economy, Inflation, and Financial Literacy
Political Geography:
Europe

54. Slashing Tax Rates and Cutting Loopholes: Options for Tax Reform in the 119th Congress

Author:
Adam N. Michel
Publication Date:
06-2024
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
The 2017 Tax Cuts and Jobs Act (TCJA) marked a significant overhaul of the US tax system. It reduced taxes for individuals and businesses through the end of 2025 and boosted economic growth. However, beginning in 2026, Americans face an automatic tax increase of about 8 percent (more than $400 billion a year). In the context of the debate over the expiration of the TCJA, the next Congress has an unprecedented opportunity to cut tax rates to their lowest level in almost a century. The Cato Institute is putting forth this tax plan that pairs massively pro-growth tax cuts with the elimination of $1.4 trillion worth of annual tax loopholes, corporate welfare, and other special-interest tax subsidies. The plan would reduce the top income tax rate to 25 percent, the capital gains rate to 15 percent, and the corporate rate to 12 percent; enact full expensing for all investments; and repeal the estate tax, alternative minimum tax, and net investment income tax. The more aggressively Congress eliminates loopholes in the tax code and cuts spending, the deeper it can slash tax rates, eliminate the costliest taxes, and boost the economy.
Topic:
Reform, Economy, Economic Growth, and Tax Systems
Political Geography:
North America and United States of America

55. The Neo-Global World: Past Baggage, Present Challenges, Future Prospects

Author:
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:
THIS paper continues a series of articles on the neo-global world written by the author in recent years.1 It also examines problems stemming from attempts to simultaneously construct a new architecture of international relations and overcome the destabilizing legacy of the largely US-centric system of late globalization. The emerging multilevel dialectic in a number of regions, not always the most promising in terms of access to resources, forms “funnels of conflict” that lead to the destruction of the economic and sociopolitical systems previously formed there. The earlier proposed hypothesis about a “blank slate” in the space of international political and economic relations being necessary for the development of basic institutions and elements of the economic architecture of the new world is, unfortunately, confirmed. We are currently witnessing the simultaneous emergence of several potential spatial “blank slates” where differences between the world’s key powers are being resolved by military force, which could result in chains of small regional conflicts turning into a systemic crisis of the global political and economic architecture. Power factors of varying degrees of intensity (from hybrid wars to direct military confrontation of the world’s largest states) will play a decisive role in the development and management of this crisis. The need to resolve the crucial accumulated points of contention of the late-global world will be of paramount importance in the ongoing processes of not just transformations but global spatial transformations, as demonstrated by the political and military-political processes of 2020- 2022, which, for various reasons, including situational ones, have acquired an antagonistic nature in a number of cases.
Topic:
Economy, Ideology, International Order, and Geoeconomics
Political Geography:
Global Focus

56. 'I Don't Know What Tomorrow will Bring': Understanding COVID-19’s Impact on the United States’ Stateless Population

Author:
Ashley Walters, Taryn Painter, and Heidi Meyers
Publication Date:
02-2024
Content Type:
Journal Article
Journal:
Statelessness & Citizenship Review
Institution:
Peter McMullin Centre on Statelessness, Melbourne Law School
Abstract:
In March 2020, COVID-19 was declared by the World Health Organisation (‘WHO’) as a global pandemic. Since the WHO’s declaration, it has become increasingly clear that the most vulnerable communities have experienced the brunt of the pandemic. Though race, ethnicity and economic status are considered in a majority of reports on the social, physical and financial impacts of COVID-19, there is little to no information on the impact of COVID-19 on stateless communities within the United States (‘US’). This research endeavours to add to the understanding of statelessness in the US by determining the impacts of COVID-19 on stateless people in the US through a survey scoping project. Through anonymous questionnaires completed by stateless individuals (n=19) in the United States, this study explores how stateless individuals have been impacted by the pandemic, including experiencing economic hardships, mental health challenges, physical health concerns and issues with documentation and legal status.
Topic:
Health, Economy, Mental Health, Pandemic, COVID-19, Stateless Population, Vulnerability, Legal Status, and Documentation
Political Geography:
North America and United States of America

57. Embracing green tech innovation is part of a Saudi dual energy strategy

Author:
Maria-Louise Clausen
Publication Date:
04-2024
Content Type:
Policy Brief
Institution:
Danish Institute for International Studies (DIIS)
Abstract:
Saudi Arabia is one of the world’s largest oil exporters with a single-source economy heavily reliant on oil income, yet it simultaniously seeks to position itself as a leader in clean energy innovation. While this may be dismissed as nothing more than ‘greenwashing’, the country’s specific green energy pathway can be understood as part of a broader redesign of the Saudi national identity.
Topic:
Oil, Economy, Green Technology, Innovation, Identity, and Energy Transition
Political Geography:
Middle East and Saudi Arabia

58. Diaspora aid is crucial for emergency relief in the Somali regions

Author:
Nauja Kleist, Peter Albrecht, Mohamed Aden Hassan, and Karuti Kanyinga
Publication Date:
08-2024
Content Type:
Policy Brief
Institution:
Danish Institute for International Studies (DIIS)
Abstract:
Somali diaspora humanitarianism alleviates suffering and saves lives in the Somali regions that are affected by conflict, poverty and natural disasters. Its absence would exacerbate crises and significantly limit the impact of formal assistance.
Topic:
Development, Humanitarian Aid, Poverty, Natural Disasters, Diaspora, Fragile States, Economy, and Conflict
Political Geography:
Africa and Somalia

59. What Dilemma is Hampering Japan’s Rise to a Major World Power

Author:
FARAS
Publication Date:
03-2024
Content Type:
Policy Brief
Institution:
Future for Advanced Research and Studies (FARAS)
Abstract:
On January 1, 2024, Japanese Prime Minister Fumio Kishida vowed to propel Japan to the forefront of the international arena amongst nation-states that have a proactive role in key global affairs and issues. In his New Year's address, Kishida affirmed that he will “exert leadership unique to Japan" through summit diplomacy to "overcome challenges," citing issues such as Russia's war on Ukraine and the Israel-Hamas conflict. The Prime Minister’s comments come on the back of official figures released on February 15, 2024, showing that Japan’s economy has slipped to fourth place after being replaced by Germany as the world’s third largest economy. India is projected to overtake both Japan and Germany and become the world's third-largest economy during the current decade. Between Japan's aspirations to become a major global player and its evident economic decline, there are lingering questions about the obstacles it faces in transforming into a significant influential force in a world moving towards multipolarism.
Topic:
Foreign Policy, Diplomacy, Leadership, Economy, and Emerging Powers
Political Geography:
Japan and Asia

60. What are the Potential Consequences of the Current Crisis in Bangladesh?

Author:
FARAS
Publication Date:
08-2024
Content Type:
Policy Brief
Institution:
Future for Advanced Research and Studies (FARAS)
Abstract:
The sudden collapse of Sheikh Hasina's government after 15 years in power has left a dangerous void in Bangladesh, a nation of 170 million people. The long-standing Prime Minister resigned following violent demonstrations and fled to neighboring India after protesters stormed her official residence. The situation on the ground has become volatile amidst the power vacuum. The military has since appointed a caretaker government led by Nobel Peace Prize laureate and economist Muhammad Yunus, who was previously considered an opponent by Hasina's Awami League government and was accused of corruption. The conviction, however, was overturned by the court following the collapse of the Awami League's rule and Hasina's escape. The key question now is whether the military will play a role in the country's future or if Yunus, in collaboration with the nascent student movement, can tackle the political, economic, and regional challenges facing Bangladesh—especially since the economist has announced his intention to call for general elections after a period of "stability."
Topic:
Economy, Domestic Politics, Protests, Crisis Management, Civil Unrest, Military, and Sheikh Hasina
Political Geography:
Bangladesh and South Asia