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11321. The Good, the Bad and the Ugly: Taking Stock of Europe’s New Trade Policy Strategy

Author:
Fredrik Erixon
Publication Date:
04-2021
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
This Policy Brief takes stock of the EU Trade Policy Review – the Commission’s proposed strategy for trade. Despite appearances, the Review doesn’t come close to its billing as a strategy for the new geopolitics of trade. In fact, the Review is weak on key geopolitical developments and rather gives the impression that the EU doesn’t have an ambition to shape outcomes. Obviously, the Review is anchored in Europe’s general economic climate: defensiveness on globalization, competition and digitalization. It follows that Europe is getting increasingly detached from world developments. There are several good parts in the Review. The Commission wants to revive and reform the World Trade Organisation, and it’s clear about what factors that have made the Geneva-based trade body dysfunctional. The Review also acknowledges that the EU will seek a closer alliance with the United States and use that for constructive purposes. Finally, it is welcome that the Commission proposes some new instruments for dealing with market distortions caused by foreign subsidies and protectionism in government procurement. All these initiatives can achieve good outcomes. However, they all require that Europe makes changes in its own policies and positions. The bad parts in the Review are Europe’s weak agenda for getting better market access in the growth regions in the world and its continued passivity on matters related to China. Europe’s main trade-policy challenge in the next decade is to ensure that businesses and consumers in Europe get better integrated with a world-market dynamism that predominantly will come from the Asian region. Absent a realistic and medium-term strategy for dealing with challenges connected to the rise of China, Europe will have difficulties getting the EU-China Comprehensive Agreement on Investment approved. Europe needs an actionable agenda for addressing bilateral frictions with China and problems that occur outside bilateral trade. Finally, the ugly part of the trade strategy are all the commercial policies in the EU – with strong effects on trade – that aren’t recognized or only casually mentioned in the Review. The latter category includes the ambition to introduce an autonomous carbon border tax on imports. Such a policy comes at a high political and economic cost, and the measure’s effect on reducing global carbon emissions is at best very negligible.
Topic:
Globalization, International Political Economy, International Trade and Finance, Treaties and Agreements, European Union, Geopolitics, Digital Economy, and Trade
Political Geography:
Europe

11322. Economic Conditions and the Rise of Anti-Democratic Extremism

Author:
Benjamin Crost
Publication Date:
03-2021
Content Type:
Working Paper
Institution:
Empirical Studies of Conflict Project (ESOC)
Abstract:
This paper provides evidence that adverse economic conditions contributed to the rise of anti-democratic extremism in the United States. A state-level analysis shows that increases in the unemployment rate during the Great Recession led to a large increase in the number of anti democratic extremist groups. The effect is concentrated in states with high pre-existing racial resentment, as proxied by racist web searches, and strongest for the male unemployment rate and the white unemployment rate. If unemployment had remained at its pre-recession level, the increase in anti-democratic groups between 2007 and 2010 could have been reduced by more than 60%.
Topic:
Economics, Democracy, Inequality, Far Right, Economic Inequality, and Political Extremism
Political Geography:
United States

11323. Combating Unsafe Products: How to Improve Europe’s Safety Gate Alerts

Author:
Joana Purves and William Echikson
Publication Date:
04-2021
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
The European Union has built a one-stop-shop for its member state regulators to post product safety notifications – Safety Gate (European Commission 2021d). Constructed on top of the Rapid Alert System for Dangerous Non-Food Products, or RAPEX, the Safety Gate web portal is designed to make public the “quick exchange of information” between 31 European countries and the European Commission “about measures taken against dangerous non-food products.” While Safety Gate represents a significant achievement, our research revealed areas for improvement to increase its utility for manufacturers, marketplaces and consumers. Many product notifications published on the website lack details required to facilitate speedy removals and recalls. The study graded eight essential criteria for a total of 918 Safety Gate notifications published over eight months in 2020. The average notification score was a respectable 70 out of 100, but over 98% of the notifications omitted at least one key criterion. Only 14 notifications included all the information to enable efficient and accurate product identification.
Topic:
Health, Food, European Union, and Regulation
Political Geography:
Europe

11324. “Too Big to Care” or “Too Big to Share”: The Digital Services Act and the Consequences of Reforming Intermediary Liability Rules

Author:
Fredrik Erixon
Publication Date:
04-2021
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
This paper reviews the Digital Services Act (DSA), a package of new rules for platforms proposed by the European Commission late last year. The paper takes stock of current and future situations for rules on content moderation and takedowns, and discusses how the DSA addresses the balance between the desired culture of openness online, on the one hand, and more pressures to take down not just illegal but harmful and objectionable content, on the other hand. The DSA introduces a few new transparency rules that follow previous codes of conduct: they are straightforward and desirable. However, it also brings in new know-your-customer rules and exacerbate the ambiguity surrounding the definition of illegal content. These types of rules will most likely have the effect that platforms will minimize risk even more by taking down more content that is legal. Moreover, there is a risk that the DSA will create new access barriers to platforms – with the result of making it difficult for smaller sellers to engage in contracts on platforms. New regulatory demands to monitor and address “systemic risks” will likely have the same effect: platforms will reduce their exposure to penalty risks by taking down and denying access for content that is legal but associated with risks. The DSA’s differentiation between large platforms and very large platforms is disingenuous and contradicts the purpose of many DSA rules. Obviously, exposing some platforms to harder rules will lead to content offshoring – a trend that is already big. Objectionable content – not to mention illegal content – will move from some platforms to others and lead extremists and others to build online environments where there is much mess content moderation. Furthermore, the new regulatory risks that come with being a very large platform will likely become an incentive for some large platforms to stay large – and not become very large. While the DSA is often billed as a package of regulations that will reduce the power of big platforms, it is more likely to lead to the exact opposite. Very large platforms have all the resources needed to comply with the new regulation while many other platforms don’t. As a result, the incumbency advantages of very large platforms are likely to get stronger.
Topic:
Culture, Digital Economy, Internet, and Digital Policy
Political Geography:
Europe

11325. What is Wrong with the German Economy? The Case for Openness to Technology and Human Capital

Author:
Philipp Lamprecht
Publication Date:
04-2021
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
Advanced economies like Germany need to focus more on attracting foreign high-skilled labour and become better at importing foreign technology and business models. This might not sit well with current thinking of economic sovereignty in Berlin, but it is a necessary step for improving technology-penetration, competitiveness and productivity. Supply of high-skilled labour is getting more difficult to obtain and the cost of generating and adopting new ideas is increasing. Policymakers need to create the right conditions to open their markets to foreign technology and high-skilled labour. But openness alone is only a necessary condition – not a sufficient one. Policymakers also need to focus on creating the right environment domestically to attract a specialised and highly-skilled labour force, despite fierce competition from around the globe. The crucial question is to what extent companies make use of innovation capacities that can be obtained from international recruitment. Our analysis focuses on what German policymakers can do to increase openness for, and its attractiveness to, the high-skilled labour. Germany’s policy framework should focus on public policy initiatives aimed at increasing the incentives and removing obstacles for firms to attract the global high-skilled labour force. To stay attractive, Germany’s policies should also target issues of bottleneck regulation to facilitate field-testing new technologies and to support innovation sandbox processes of companies. And German policies should focus on the regulatory environment, notably the type of regulations that policymakers pursue. Many current regulations in Germany do not sufficiently allow for experimentation of technologies and ideas.
Topic:
International Political Economy, Science and Technology, Labor Issues, Regulation, Human Capital, Innovation, and Skilled Labor
Political Geography:
Europe and Germany

11326. No, China Does Not Make Everything!

Author:
David Henig and Anna Guildea
Publication Date:
03-2021
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
China is now the world’s leading manufacturer, with goods exports rising from $63 billion in 1990 to $2.5 trillion in 2018. The popular assumption is that everything is now made in China, and that falling manufacturing employment in the EU and US is due to this. The assumption is wrong. China is the world’s largest goods exporter, but other countries have also experienced increases. One reason is that China is also the world’s second largest importer of goods, at $2.1 trillion in 2018.
Topic:
International Political Economy, Exports, Manufacturing, and Trade
Political Geography:
China

11327. Digital Futures for Europe

Author:
Meelis Kitsing
Publication Date:
03-2021
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
There isn’t one model for success in the digital future; there are many. Europe is now debating what policies that could help to power entrepreneurship and growth in Europe’s economy, and some are arguing that Europe should make itself technologically sovereign – independent from the big platforms from the US. This is not the right approach – partly because there cannot be just one model applied in Europe if it is to become more successful in technology and competitiveness. This briefing paper argues that is far more important for Europe to create a better environment for companies to experiment and discover with new business models, and to learn from the past platform success while they do so. That requires a much greater space for entrepreneurship and that the EU and national governments stay away from excessive regulations that strain new business growth. Europe can be a powerful region that shapes rules and standards globally – “the Brussels effect”. But that isn’t the future for Europe if it ensnares entrepreneurs in red tape – “the Brussels defect”.
Topic:
International Political Economy, Digital Economy, Entrepreneurship, Economic Growth, and Digital Policy
Political Geography:
United States and Europe

11328. Covid-19 and the Danger of Self-sufficiency: How Europe’s Pandemic Resilience was Helped by an Open Economy

Author:
Johan Norberg
Publication Date:
03-2021
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
During the Covid-19 pandemic, Europe has benefitted strongly from being an open economy that can access goods and services from other parts of the world. Paradoxically, some politicians in Europe think that dependence on foreign supplies reduced the resilience of our economy – and argue that Europe now should wean itself off its dependence on other economies. In this Policy Brief, it is argued that self-sufficiency or less economic openness is a dangerous direction of policy. It would make Europe less resilient and less capable of responding to the next emergency. It is key that people, firms and governments can get supplies from other parts of the world. It is diversification, not concentration of production, that will make Europe more resilient when the next emergency hit. We don’t know where the next crisis will come from. Nature will throw nasty surprises at us, and we will make stupid mistakes, some of which will have devastating consequences. What we do know, though, is that we stand a better chance to fight the next emergency if we get richer and improve our technology. The best policy for resilience is one that encourages specialisation and innovation – and, when the emergency hit, allow for people to improvise in search for solutions. For that to happen, we need openness to goods, services and technology from abroad.
Topic:
Health, International Political Economy, Innovation, Economic Cooperation, Pandemic, and COVID-19
Political Geography:
Europe and Global Focus

11329. The EU Green Deal and Its Industrial and Political Significance

Author:
Hosuk Lee-Makiyama
Publication Date:
02-2021
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
The European Green Deal, the flagship initiative of the incumbent European Commission, aims to cut greenhouse gas (GHG) emissions to 55% by 2030 (from the current target of cutting 40% of 1990 levels) by overhauling fiscal, trading and regulatory regimes. Brussels is well-placed to deliver the interregional distribution or the minutiae of technical regulations that this challenge calls for. Energy diversification is also central to EU competitiveness and strategic autonomy. But this initiative is not costless: its official impact assessment points to a GDP loss of additional -0.3 to -0.7%, by 2030, relative to the previous level of ambition. The full loss could be up to -2.5%. These costs are also unevenly, and the inability to cushion asymmetrical shocks have nearly torn the Union apart in the past. A carbon-neutral Europe could also make losers out of today’s winners among stakeholders and give the EU a significantly different industrial structure, forcing over-exporting Northern Europe into reforms that are probably overdue. Most importantly, the gap between the financing needed and the financing available is unprecedented. The success of the European Green Deal and a cost-efficient transition hinge on the rapid and effective mobilisation of investments – as the diffusion period for new energy-related technology is 40-50 years. Therefore, a smart climate policy does not just distribute costs and investments between different groups, but also over time: The investments are needed now, if we are to reap their benefits before 2050.
Topic:
Environment, Industrial Policy, International Political Economy, European Union, Green Technology, Sustainability, and Green Deal
Political Geography:
Europe

11330. Global Trade Today is Global Value Chains

Author:
David Henig
Publication Date:
01-2021
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
In the last 25 years global value chains have come to dominate global trade in a way surprisingly little discussed or understood. To meet the policy challenges of today and the future we need to understand the key characteristics of this new global trade and how they came about. The OECD estimate around 70% of total trade takes place in global value chains. Using their definition as where “the different stages of the production process are located across different countries”, and considering both goods and services inputs, this may be an understatement. The example most commonly used is the automotive sector, with 30,000 parts and associated services like satellite navigation going into one car. However there are many others. Modern primary commodity production is optimised by technology developed in other countries, diverse services and goods are frequently combined to create new product offerings, and most international business to consumer transactions are facilitated by leading global platforms. Positively this new globalization has provided consumers with an unprecedented choice of products at affordable prices. More challengingly it has seen governments struggle with the question of how they can best influence modern trade, amid signs of a backlash and simple demands for ‘more domestic manufacturing’. The popular global narrative that feeds such demands is one that has a traditional view of trade as a set of simple primary or manufactured goods transactions. Policymakers must move on from this narrative, making their choices, and explaining them clearly, on the basis of global value chains.
Topic:
International Political Economy, International Trade and Finance, Trade, and Global Value Chains
Political Geography:
Global Focus