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51. 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

52. Openness as Strength: The Win-Win in EU-US Digital Services Trade

Author:
Matthias Bauer, Dyuti Pandya, and Oscar du Roy
Publication Date:
03-2024
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
The discourse surrounding the EU’s supposed over-reliance on digital services imports from non-EU countries, particularly the US, has been a recurrent topic among some political circles. However, this viewpoint tends to oversimplify and misrepresent the nuanced and complex reality of the EU’s status within the global Information and Communication Technology (ICT) sector and digitally enabled trade. A thorough analysis of trade data and trends clearly illustrates that the EU’s engagement with foreign (non-EU) digital services, notably from the US, represents a strategic economic advantage, bolstering Europe’s competitiveness and fostering productivity growth. Below we underline the critical importance of openness to foreign innovation and technology diffusion for the EU’s economic future.
Topic:
European Union, Digital Economy, Strategic Competition, Imports, and Productivity
Political Geography:
Europe, North America, and United States of America

53. ICT Beyond Borders: The Integral Role of US Tech in Europe’s Digital Economy

Author:
Matthias Bauer and Dyuti Pandya
Publication Date:
03-2024
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
Contrary to political assertions about the vulnerability of digital services provided by non-EU companies, the strong presence and sunk costs associated with US tech companies’ investments in data centres, skilled workforce development, and research facilities in Europe act as significant barriers to exit, highlighting the inherent symbiosis between US tech investments and Europe’s digital and non-digital sectors. These investments underscore a mutual inter-dependency that strengthens European economies, making the notion of “sudden cessation” of digital services by US companies implausible. Corporate data show a significant investment gap of approximately USD 1.36 trillion between US and EU ICT companies, attributing a competitive edge to US firms due to their heavy investment in ICT, cloud solutions, and R&D. Forecasted increases in ICT investments by US corporations outline a benchmark beyond reach for EU businesses. The notion of EU firms aligning with this growth path is rather fantastical, as it would call for immense government investment, ultimately draining financial resources from essential public services, such as healthcare, housing, and environmental policies. Substantial ICT investments across EU Member States together with a long-term commitment to the European market present an opportunity for the EU to leverage US continuous technological advancements, underscoring the potential for transatlantic collaboration to drive the EU’s digital transformation and innovation. EU-US partnerships not only fuel the EU’s digital transformation but also align with shared political values, reinforcing the significance of transatlantic collaboration in shaping a competitive and innovative digital future.
Topic:
Communications, European Union, Digital Economy, Investment, and Information Technology
Political Geography:
Europe, North America, and United States of America

54. 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

55. 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

56. Keeping Up with the US: Why Europe’s Productivity Is Falling Behind

Author:
Fredrik Erixon, Oscar Guinea, and Oscar du Roy
Publication Date:
05-2024
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
The European Union stands at a crossroads. For decades, the EU’s productivity growth has consistently lagged the United States, leading to slower growth in living standards and decline in global economic power. While short-term factors like the strong US fiscal expansion have widened the gap in nominal GDP growth in recent years, the fact is that Europe has trailed the US economic development for several decades and the root of the problem lies in deeper structural issues within the European economy. Four major forces fuel this productivity divide. Firstly, the EU’s investment in research and development (R&D) pales in comparison to the U.S., leading to fewer patents and a slower pace of technology-fuelled innovation. Secondly, Europe trails America in the stock and growth of intangible capital investments, which are crucial for adopting and diffusing new technologies that drive productivity. Thirdly, the EU market exhibits slower business creation and destruction compared to the US. This rigidity hinders the flow of resources towards the most productive firms. Lastly, despite boasting higher levels of trade openness, the EU attracts less Foreign Direct Investment (FDI) than the US, curbing its access to cutting-edge global technologies and expertise. To close the gap, European policymakers should implement a comprehensive strategy for faster productivity growth. The first step is turning up the dial on R&D spending, targeting 4-5 percent of GDP by 2040. Next, Europe should prioritise investments in intangible assets and lay down the digital infrastructure that will underpin future growth. Revitalising the single market is also crucial: reducing internal and external market barriers for services, the primary vehicle for trading intangible assets. Moreover, the EU should foster a market environment that encourages entrepreneurship and facilitate the entry and exit of firms so resources cascade towards the most productive sectors. By harnessing the strengths of the single market and implementing these recommendations, European policymakers can propel the EU towards a more competitive and prosperous future.
Topic:
Markets, European Union, Productivity, and Economic Competition
Political Geography:
Europe, North America, and United States of America

57. 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

58. Reinventing Europe’s Single Market: A Way Forward to Align Ideals and Action

Author:
Matthias Bauer, Dyuti Pandya, Vanika Sharma, and Elena Sisto
Publication Date:
06-2024
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
It is essential for EU institutions and Member State governments to shift their focus from the abstract concept of the “Single Market” to the concrete objective of “legal harmonisation in the EU.” This transition represents a strategic realignment towards more pragmatic policymaking. Adopting a 28th regime to address national regulation discrepancies would align with this goal and enhance the Single Market’s effectiveness in promoting economic growth and competitiveness. Given the EU’s ongoing loss of relative global economic clout, it is crucial to establish an ambitious timeline for implementing the most critical Single Market reforms. The Letta Report serves as a wake-up call to revitalise the EU’s Single Market, emphasising the need for decisive action. Its vision largely hinges on legal harmonisation within Europe, building on early efforts to liberalise markets and establish a truly integrated European market. Despite efforts, “integration fatigue” remains a significant challenge due to legal fragmentation across European economies. Previous reports, from the Cecchini Report in 1992 to the Europe 2020 Strategy, have highlighted persistent issues like regulatory divergences and declining political support for market integration. Despite numerous proposals, progress has been limited, and many challenges persist or have worsened (see Section 2). An analysis of EU reports reveals a shift in policy priorities over time. Initially, there was a strong focus on liberalisation and market opening, with less attention given to state aid and industrial policymaking. The Letta Report highlights the importance of regulatory convergence and harmonisation, reflecting a deeper understanding and recognition of the drivers of EU competitiveness. The rise of nationalism and a shift towards “Strategic Autonomy” within the EU have hindered crucial market reforms. This highlights the importance of aligning laws across Member States to strengthen and reinforce EU’s economic resilience and international competitiveness (see Section 3). EU institutions and Member State governments should set specific goals for “legal harmonisation in the EU.” This shift would address real challenges faced by businesses and citizens, and build political will for necessary reforms. Prioritising legal harmonisation would enhance internal cohesion and align national laws with Union-wide goals. An actionable roadmap – potentially with a 2028 deadline – is crucial to address the substantial gap between ambitious EU strategies and Europe’s economic realities. (see Section 4). Implementing sector-specific and horizontal policies in a new regulatory regime would improve cross-border operations and competitiveness. The Letta Report advocates for a European Code of Business Law to establish a unified regulatory framework, introducing a 28th legal regime to address national regulation discrepancies. Extending this regime to include tax and labour market policies would significantly enhance cross-border operations. The EU and Member State governments can eliminate substantial internal barriers by prioritising key horizontal policies affecting all businesses, such as fragmented tax laws, labour market policies, and social security systems. Simplifying and harmonising these policies on the basis of the facilitation of four freedoms is crucial for unlocking the Single Market’s potential for businesses and workers, boosting the EU’s global competitiveness. Allowing coalitions of willing countries to advance in certain areas of legal integration provides a viable solution to the long-standing Single Market “fatigue”. By enabling smaller groups of Member States to pursue integration in specific areas, the EU can bypass the constraints imposed by rigid voting requirements and achieve greater agility, accountability, and acceptance in EU law-making. This approach not only fosters flexibility but also upholds the fundamental principles and objectives of the EU. To ensure the integrity of the EU legal order and prevent unjustified barriers or discrimination against non-participating members, it is essential to establish safeguards and oversight mechanisms. These measures would maintain cohesion within the Union while allowing for progressive legal integration among willing Member States.
Topic:
Markets, European Union, Digital Economy, and Economic Integration
Political Geography:
Europe

59. Russia’s Influence and Disinformation Campaign in Armenia

Author:
David A. Grigorian
Publication Date:
06-2024
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
Often-overlooked developments in Armenia show how Western policy makers are failing to recognize and counteract the growing sophistication of Russia’s propaganda machine. There is much the West can do. Intelligence authorities can start sharing more information about Russia’s influence operations. We need media that can report with more knowledge from the region. Working more closely with the pro-Western opposition, Brussels and Washington, D.C. can help shape an agenda that is not just offering better conditions for Armenia but also leads to more credibility in a Western-oriented agenda. Finally, it is important for the West to acknowledge their own blunders over the settlements between Armenia and Azerbaijan, which led to continued ethnic cleansing.
Topic:
Propaganda, Disinformation, and Foreign Influence
Political Geography:
Russia and Armenia

60. Strategies for Assessing Triple Nexus Initiatives and Integrating Peace Aspects – Insights from Niger

Author:
Christina Plesner Volkdal
Publication Date:
02-2024
Content Type:
Policy Brief
Institution:
Centre for Business and Development Studies (CBDS), Copenhagen Business School
Abstract:
The Triple Nexus approach represents a paradigm shift in how international organizations, including UNICEF, address complex crises that span humanitarian, development, and peace dimensions. UNICEF must navigate the delicate balance between adhering to the humanitarian principles of neutrality, impartiality, independence, and humanity while engaging in development and peace-building activities that may require aligning with government policies and engaging in politically sensitive contexts. There is a significant challenge in developing metrics and methodologies to measure the synergies and outcomes of the Triple Nexus approach effectively. This includes quantifying how initiatives contribute to peace interacting with humanitarian and development outcomes. UNICEF's approach in Niger, implementing food security policies to respond to humanitarian needs while simultaneously operating as a development program, holds the potential to positively impact peace in the region, thus aligning with the Triple Nexus framework.
Topic:
Development, International Organization, Food Security, Crisis Management, and UNICEF
Political Geography:
Africa and Niger