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  • 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, Trade
  • Political Geography: Europe
  • Author: Joana Purves, 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, Regulation
  • Political Geography: Europe
  • 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, Digital Policy
  • Political Geography: Europe
  • 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, Skilled Labor
  • Political Geography: Europe, Germany
  • 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, Digital Policy
  • Political Geography: United States, Europe
  • 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, COVID-19
  • Political Geography: Europe, Global Focus
  • 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, Green Deal
  • Political Geography: Europe
  • Author: Hosuk Lee-Makiyama, Florian Forsthuber
  • Publication Date: 10-2020
  • Content Type: Policy Brief
  • Institution: European Centre for International Political Economy (ECIPE)
  • Abstract: This policy brief explores the implications of Open RAN concept and its technical and political developments in the mobile network industry. Open RAN is not necessarily a new technology in itself, but represents a combination of existing technologies, e.g. virtualisation, AI, commercial off-the-shelf parts and open interfaces. Its proponents promise more secure networks without ‘high-risk vendors’ but Open RAN could introduce new systemic risks that must be addressed due to its reliance on open source software. While the proponents also promise significantly reduced costs, it is still inconclusive whether Open RAN in itself reduces the total costs of deploying a 5G network. Economic evidence shows that the equipment market is a buyers’ market due to a higher concentration amongst operators. The number of vendors is less critical for prices than the relative power between buyers and sellers. The network equipment market is the only ICT segment where the EU manufacturers are still global leaders. If various industry consortiums call for subsidies, the EU has the commercial policy instruments to countervail against them. Some industry voices suggest that a certain Open RAN specification could replace existing global specifications under 3GPP. However, as today’s market condition is not caused by the 3GPP standardisation, a solution is not to be found through developing alternative technical specifications. 3GPP is also more comprehensive than RAN. Thus, the question is whether Europe should try to sustain one common global umbrella of standards – or see the world balkanise into national or regional standards from 6G and onward. For better or worse, there will be regional fragmentation. The EU industrial policy could be facing a reality where network standards are politicised for commercial reasons – to pave way for an indigenous industry – which is unrelated to national security objectives. Also, EU operators may not react well if Open RAN open the door for cloud services to encroach into the telecom market. In conclusion, Open RAN has a raison d’etre as a promising new concept, even if it does not solve any geopolitical gambits. However, the EU have little to gain from government interventions in the RAN segment, which is just one element of the mobile network market.
  • Topic: International Political Economy, Science and Technology, Global Markets, Digital Economy, Industry, Information Technology
  • Political Geography: Europe
  • Author: Fredrik Erixon
  • Publication Date: 10-2020
  • Content Type: Policy Brief
  • Institution: European Centre for International Political Economy (ECIPE)
  • Abstract: Protectionism and mercantilism are yet again at the centre of global economic policy. “America First” is the guiding ethos in a good part of US international economic policy. Beijing is taking a larger stake in China’s economy and hand out privileges to domestic firms. Europe is increasingly occupied by achieving “strategic autonomy” and to create European champions at the expense of competition. Old and disreputed economic doctrines are getting a new lease on life. Behind this new orientation in international economic policy stands the old idea that a strong economy is an economy not dependent on others. Human prosperity – our story of rags to riches – tells a very different story. Prosperity is generated when people collaborate and improve our collective intelligence. Open economies are much better at creating wealth because they operate by the principle that people should work for others, not themselves. They specialize – and in the process, they get far more dependent on others. Dependency is a factor of success; economic sovereignty is a sure way of depriving people of opportunity and prosperity.
  • Topic: International Political Economy, International Trade and Finance, Global Markets, Strategic Competition
  • Political Geography: United States, China, Europe
  • Author: Matthias Bauer
  • Publication Date: 06-2020
  • Content Type: Policy Brief
  • Institution: European Centre for International Political Economy (ECIPE)
  • Abstract: The EU’s Mobility Package 1 legislative proposal was once intended to improve the working conditions of truck and small-van drivers in the EU. Initially, the European Commission also aimed at securing a smooth and non-discriminatory functioning of the Single Market. Some provisions of the current package may indeed have a positive impact on drivers’ working conditions, e.g. limits on working time and obligatory rest periods. However, over the past three years, the legislative procedure towards the current draft of the Mobility Package 1 was hijacked by the protectionist agenda of Western Europe’s haulage and logistics businesses. Spearheaded by the French government, some national governments and Members of the European Parliament called for tighter freight cabotage and return-to-home provisions to shield Western European transport markets against competition from other EU Member States. The proposed restrictions to cross-border trade in the European Single Market are up for a vote in the European Parliament in mid-2020. Learnings from the Covid-19 situation in the Single Market: In its response to Covid-19 border measures, the European Commission called on EU governments “to act immediately to temporarily suspend all types of road access restrictions in place in their territory (weekend bans, night bans, sectoral bans, etc.) for road freight transport and for the necessary free movement of transport workers.” These actions are step in the right direction and should continue even once the Covid-19 crisis is over, yet they are the exception not the rule in the EU. The rise of protectionist measures to Member States’ national transport markets vividly demonstrates the need to abolish freight cabotage restrictions in defence of the Single Market. For the sake of a greener, more inclusive and better functioning of the European Single Market, lawmakers need to abandon all existing restrictions on freight cabotage services in the EU27 and vote against new restrictions such as cooling-off periods and return-to-home policies. Maintaining legal restrictions on the freedom to provide transport services in the EU’s Single Market would increase tensions between economically less-developed countries in Central and Eastern Europe and more developed Western European countries – economically, mentally and politically. Discrimination on the basis of EU passport: Cabotage restrictions infringe upon the fundamental values stipulated in the Lisbon Treaty. Furthermore, data on transport flows and employment demonstrate that cabotage regulations disproportionately discriminate against Eastern European companies and citizens. Available data shows that Polish (4,574 enterprises), Romanian (1,864), Lithuanian (519), Hungarian (398), Slovakian (347), and Dutch (309) haulage companies are disproportionately affected by current EU-imposed cabotage restrictions. By contrast, only a very small number of French freight transport companies (an estimated number of 70 enterprises) directly depend on intra-EU cabotage services. In France, only about 800 workers employed in road freight transport services are directly affected by the restrictions. The numbers are substantially higher for other, particularly Central and Eastern European, countries: 20,100 persons in Poland, 9,800 in Romania, 6,300 in Lithuania, 3,400 in the Netherlands, 2,300 in Portugal, 2,200 in Hungary, and 2,100 in Germany. Exclusion from economic opportunity: Freight cabotage restrictions increase the administrative burden for internationally operating haulage companies across the EU. Industry assessments indicate that additional limitations on international freight transport services within Europe’s Single Market would raise the prices of transporting goods in Western Europe. Negative impacts are estimated for employment, wage growth and the process of economic convergence in Central and Eastern Europe. In addition to the EU’s existing freight cabotage restrictions, new limits on cross-border freight transport in the EU – such as EU law-imposed return-to-home trips and EU-mandated cooling-off periods – would deprive many Eastern European households of economic opportunities and impede the process of economic convergence and converging standards of living in the EU. Environmental harm: The return-to-home policies proposed in the latest Mobility Package 1 would require companies to send drivers back to operational centres or the driver’s place of residence. Return-to-home provisions would substantially increase the number of empty trailers on European roads. Accordingly, and adding to the adverse environmental impacts caused by existing freight cabotage restrictions, new EU-imposed return-to-home obligations would deteriorate Member States’ carbon emission footprints. The highest increases would take place in the EU’s major transit countries such as Germany, the Netherlands, Belgium and France. While this is recognised by the European Commission, the majority of the European Parliament’s Transport Committee is still pushing for such policies to be implemented as the EU law. How to save the EU’s fundamental values and the freedoms of the Single Market – lessons from aviation: In 1993, the EU completed the EU’s internal aviation market for passenger cabotage. Guided by the European Commission, EU lawmakers should follow the same rationale for freight cabotage services to render the Single Market more single and less discriminatory. In the process towards a real, more inclusive Single Market, EU lawmakers must abstain from catering Western European companies’ vested commercial interests, which stifle economic opportunity across the EU and stand in opposition to the EU’s fundamental principles for international trade and a competitive and social market economy.
  • Topic: International Political Economy, International Trade and Finance, Law, European Union, Global Markets, Legislation, Shipping, Protectionism
  • Political Geography: Europe