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101. EU and Mercosur in the Twenty-First Century: Taking Stock of the Economic and Cultural Ties

Author:
Oscar Guinea and Vanika Sharma
Publication Date:
12-2021
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
This policy brief examines the latest developments in the EU-Mercosur economic relationship and outlines the existing non-economic relationship in order to contextualise the EU-Mercosur Association Agreement and its potential for strengthening common bonds between both regions. Trade between the EU and Mercosur is significant, with both regions holding an important place as large markets for each other’s exports. Currently, trade between the two is dominated by trade in machinery, agriculture, and chemicals. As relevant as these traditional sectors are, their trade is also increasingly supported by trade in services, which unlike trade in traditional agricultural products such as soya, beef and sugar that are either stable or declining, is rapidly increasing. In addition to trade, EU and Mercosur economic bonds are also supported by investments. EU member states hold a large stock of investment in the Mercosur countries while investment flows from Mercosur into the EU are also increasing. This increase has been particularly marked in high-tech sectors like R&D and computer software, emphasising again the changing economic relationship between the EU and Mercosur from traditional to advanced sectors. These trade and investment dynamics are complemented by changes in the EU-Mercosur supply chains. Over the past ten years, the effects one region has on the competitiveness of the other have increased and will continue to do so into the future. The EU is the largest contributor to Mercosur exports, meanwhile Mercosur countries provide the biggest value-added to EU agricultural products. A primary underlying trend found across all dimensions of the EU-Mercosur economic relationship has been the rise of China. In trade, it takes two to tango, and since 2015, it has been China, rather than the EU, that has risen to become Mercosur’s main trading partner. Over the past nine years, the amount of Chinese value-added embedded in Mercosur exports has more than tripled. Moreover, China has ramped up its investment into Mercosur countries, while also receiving increased investments from Mercosur. So, although the EU-Mercosur relationship is changing and bonds have deepened, the EU faces constant competition from China in its relationship with Mercosur. Despite these changes, the EU and Mercosur share a long history of close non-economic relationships. Both have been at the receiving end of large migration flows from each other. This has led to the development of kindred cultures, shared languages, and strong non-economic ties. These similarities have long supported the establishment of deep economic bonds through meaningful collaborations in science and technology, ease of doing business, and provisions for working professionals through various cooperation agreements. However, with the rapidly changing nature of their commercial relationship, these cultural links might not be enough to sustain the economic relationship between the two. These ties need to be complemented by the ratification of the EU-Mercosur Association Agreement to nurture their changing relationship.
Topic:
European Union, Economy, Trade, South American Union (UNASUR), and Mercosur
Political Geography:
Europe and South America

102. A new direction for the European Union’s half-hearted semiconductor strategy

Author:
Niclas Poitiers and Pauline Weil
Publication Date:
07-2021
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
A basic component in electronic devices, semiconductors are essential to the production of many products, from smartphones to cars. Securing reliable supplies of semiconductors to safeguard the production lines of a range of industries has thus become an important policy goal, especially in the context of an increasingly confrontational international environment in which high-technology leadership is also associated with military power and geopolitical reach. The semiconductor sector is highly concentrated, capital- and R&D-intensive, and particularly exposed to bottlenecks and political risks. High-end chip fabrication is centred in Asia, dominated by the duopoly of Taiwan’s TSMC and South Korea’s Samsung. In other parts of the supply chain, companies in the United States and Europe hold relative monopolies that have been leveraged for trade sanctions. The United States has taken steps to block the supply of chips and components to emerging tech giants in China, and to contain China’s ambitions of building its own cutting-edge chip production capacities. Heavy United states and Chinese investment poses a challenge to the European Union, which in response has set the goal of increasing European production beyond domestic demand. To increase its presence in this strategic and thriving sector, the EU needs a more targeted strategy that builds on its existing strengths while accommodating its relatively low domestic needs. Instead of investing public funds in a subsidy war over fabrication capacity, the EU should focus on inputs and chip design. However, no economy can hope to fully achieve independence in the sector and ensuring sustainable supply through diplomatic means should therefore also be a priority. Lastly, Europe’s small role in global semiconductor production is symptomatic of shortcomings in the European environment for high-tech innovation. These shortcomings should be addressed.
Topic:
Science and Technology, European Union, Economy, and Semiconductors
Political Geography:
China, Europe, and United States of America

103. Rethinking EU economic governance: The European Semester

Author:
Frederico Mollet
Publication Date:
12-2021
Content Type:
Policy Brief
Institution:
European Policy Centre (EPC)
Abstract:
In the debates over the future of the EU’s economic governance, the reform of the Stability and Growth Pact (SGP) usually takes centre stage. But the European Semester – the framework governing economic policy coordination and country surveillance – is also critical. Reforming and strengthening it is vital given the multiple challenges the EU faces, from the twin green and digital transitions to implementing the Recovery and Resilience Facility (RRF) and tackling the macroeconomic and structural scars left by COVID-19. This Policy Brief, the second in a series of EPC papers that reassess the EU's economic governance policies, sets out proposals for reforming the European Semester across three strands: (i) integrating the RRF into the Semester; (ii) drawing on the positive lessons of the RRF process; and (iii) improving the effectiveness of cross-cutting policy coordination and the Macroeconomic Imbalances Procedure (MIP).
Topic:
Governance, European Union, Economy, COVID-19, and Economic Recovery
Political Geography:
Europe

104. Appeasement and Autonomy: Armenian-Russian relations from revolution to war

Author:
Narek Sukiasyan
Publication Date:
02-2021
Content Type:
Policy Brief
Institution:
European Union Institute for Security Studies
Abstract:
Armenia’s foreign policy and its role in the post-Soviet space are often characterised as ‘pro-Russian’. While such a description is partially true, it is overly simplistic. This Brief analysis the main trends and evolutions in Armenia’s Russia policy after the 2018 Velvet Revolution: how the changes have influenced Russia’s approach towards Armenia, how these dynamics affect Armenia’s autonomy and what the consequences of the 2020 Nagorno-Karabakh war are for Armenia’s regional security and alliances. After the revolution and up until the 2020 Nagorno-Karabakh war, no substantial strategic changes were made to Armenian foreign policy. The leadership has avoided framing its external affairs in geopolitical ‘pro or against’ terms, promoting a ‘pro-Armenian’ policy that aims to maintain good relations in all directions and prioritises sovereignty as a foreign policy principle. Instead, the revolutionary ambitions of the new leadership have been directed towards domestic issues such as fighting corruption, reforming the judiciary and law enforcement bodies, improving the business environment and addressing social issues.
Topic:
Foreign Policy, Economy, Conflict, Regional Integration, Nagorno-Karabakh Conflict, and Appeasement
Political Geography:
Russia, Europe, Eurasia, and Armenia

105. Burning ambition: Egypt’s return to regional leadership and how Europe should respond

Author:
Hafsa Halawa
Publication Date:
10-2021
Content Type:
Policy Brief
Institution:
European Council on Foreign Relations (ECFR)
Abstract:
After a decade of domestic turmoil, Egypt is looking to regain its former role as a major regional player. Growing stability at home, improving economic prospects, and recent détente across the Middle East have boosted Cairo’s feelings of self-assurance. In particular, Egypt is distancing itself from the anti-Islamist alliance it had joined with the UAE and Saudi Arabia and is engaged in dialogue with former adversaries Qatar and Turkey. Major threats along Egypt’s borders, including water security concerns to its south and the war in Libya, have prompted Cairo to re-engage with its European partners – which it expects to help on these issues. American and European fears that Egypt is “too big to fail” further boost Cairo’s confidence. The Egyptian regime has become somewhat more open to discussing matters such as human rights than Western capitals sometimes assume. Europeans should seize this opportunity as part of a wide-ranging engagement addressing European regional interests as well as ongoing concern about the domestic situation in Egypt.
Topic:
International Relations, Foreign Policy, Economy, Political stability, Alliance, Regional Integration, and Regional Power
Political Geography:
Europe, North Africa, and Egypt

106. Home advantage: How China’s protected market threatens Europe’s economic power

Author:
Agatha Kratz and Janka Oertel
Publication Date:
04-2021
Content Type:
Policy Brief
Institution:
European Council on Foreign Relations (ECFR)
Abstract:
China’s vast yet protected home market has allowed some of its firms to acquire a scale that provides them with significant advantages when they compete in other markets. These firms are able to undercut European companies both in the EU and around the world, including in sectors key to Europe’s future economy and security, from energy to telecommunications. The EU urgently needs to incorporate the concept and reality of this ‘protected home market advantage’ into its thinking on China. Europe can defend its own industries by adopting an integrated policy approach, working with like-minded partners around the world, and even prising open closed parts of China’s domestic market. The EU should also look to enhance its single market – both as a defensive measure and a way to improve its strategic sovereignty.
Topic:
Markets, European Union, Economy, Business, and Industry
Political Geography:
China and Europe

107. Leveraging Extractive Industries to Address Ghana’s Fiscal Challenges: Lessons From the Pandemic

Author:
Andrew Bauer and Denis Gyeyir
Publication Date:
02-2021
Content Type:
Policy Brief
Institution:
Natural Resource Governance Institute
Abstract:
Ghana’s economy and public finances have been hard hit by the dual shocks of the coronavirus pandemic and the oil price crash. Despite the downturn, the government has managed the pandemic better than most countries. Ghana's early response to the pandemic means the country is expected to be one of the world’s few economies that may continue to grow this year in nominal terms. Importantly for public finances, the Ghanaian government is becoming more dependent on extractive production. Just four years ago, in 2016, extractive revenues represented just 5 percent of fiscal revenues. In 2018, mineral revenues represented more than 3 percent of non-aid fiscal revenues. In 2019, oil revenues represented nearly 10 percent of non-aid fiscal revenues. The government expects oil, gas and mineral receipts to double between now and 2022, which would constitute a five-fold increase in resource dependence in six years unless other sources of revenue can be mobilized. Revenue mobilization is essential since Ghana remains a country at high risk of debt distress. Any further economic or financial shock could draw the government into a debt spiral and default. The Ghanaian government has responded in three ways: committing to macroeconomic stability and fiscal discipline, debt monetization and working to mobilize revenues. In this briefing, the authors discuss each of these strategies and offer recommendations for the government's current debt management policy.
Topic:
Oil, Finance, Economy, and COVID-19
Political Geography:
Africa and Ghana

108. Lithuania, China and EU lawfare to counter economic coercion

Author:
Steven Blockmans
Publication Date:
12-2021
Content Type:
Policy Brief
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
Without any formal notification, China recently declined customs clearances for shipments from Lithuanian firms in the pharmaceutical, electronics, and food sectors, and warned multinationals of secondary sanctions if they did not sever their ties with Lithuania. These covert actions were taken in response to Lithuania’s invitation to Taiwan, which the People’s Republic of China (PRC) claims as its own territory, to open a ‘representative office’ in Vilnius. No other country has ever found itself at the receiving end of such intense and politically motivated Chinese economic pressure. These actions on the part of the PRC are politically explosive because it raises serious questions about the international conduct of the Chinese Communist Party (CCP). If it can simply wipe a country off its trade book, a state belonging to the EU’s customs territory no less, then what does it mean to be a member of the WTO, or a signatory to any other number of international agreements? And, given the lamentable state the WTO is in: could the European Commission’s newly proposed anti-coercion instrument bring any solace to Lithuania and the EU?
Topic:
Law, European Union, Economy, Trade, and Coercion
Political Geography:
China, Europe, Asia, and Lithuania

109. Discrimination, Managers, and Firm Performance: Evidence from “Aryanizations” in Nazi Germany

Author:
Killian Huber, Volker Lindenthal, and Fabian Waldinger
Publication Date:
10-2021
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Large‐​scale increases in discrimination can lead to dismissals of highly qualified business leaders and managers. Discriminatory expulsions of individuals holding important positions in the economy have occurred repeatedly, both historically and in modern times. Recent political developments have renewed interest in the economic effects of this type of discrimination. For instance, the U.S. travel ban on citizens of seven Muslim‐​majority countries has raised fears among large corporations that increasing discrimination will leave them unable to retain talent.
Topic:
History, Economy, Business, Discrimination, and Nazi Germany
Political Geography:
Germany and United States of America

110. Maritime Dispute: Lebanon’s Options for Responding to Israel’s Deal with Halliburton

Author:
FARAS
Publication Date:
09-2021
Content Type:
Policy Brief
Institution:
Future for Advanced Research and Studies (FARAS)
Abstract:
US-based oilfield services group Halliburton said on September 14 that it was awarded a contract to drill as many as five wells off the coast of Israel. Halliburton, which will conduct the work for London-based Energean, will deliver all services including project management, production enhancement, and subsea services. Halliburton previously executed a four-well campaign at Energean’s Karish and Karish North gas fields offshore Israel.
Topic:
Oil, Economy, Business, and Maritime
Political Geography:
Middle East, Israel, and Lebanon