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  • Author: Sonali Chowdhry, Gabriel Felbermayr
  • Publication Date: 02-2021
  • Content Type: Working Paper
  • Institution: Kiel Institute for the World Economy (IfW)
  • Abstract: In 2011, the EU-South Korea Free Trade Agreement (EUKFTA) entered into force. With its focus on non-tariff barriers (NTBs), it is a leading example of a deep new generation agreement. Using detailed French customs data for the period 2000 to 2016, we investigate how exporters of different size have gained from the agreement. Applying a diff-in-diff strategy that makes use of the rich dimensionality of the data, we find that firms with larger pre-FTA sizes benefit more from the FTA than firms at the lower end of the size distribution, both at the extensive (product) and the intensive margins of trade. The latter finding is in surprising contrast to leading theories of firm-level behavior. Moreover, we find that our main result is driven by NTB reductions rather than tariff cuts. In shedding light on the distributional effects of trade agreements within exporters, our findings highlight the need for effective SME-chapters in FTAs.
  • Topic: Economics, International Political Economy, Treaties and Agreements, Tariffs, Trade
  • Political Geography: Europe, South Korea, European Union
  • Author: Jens Velten
  • Publication Date: 01-2020
  • Content Type: Working Paper
  • Institution: Centre for Trade and Economic Integration, The Graduate Institute (IHEID)
  • Abstract: The EU adopted Regulation 2019/452 (Regulation) as part of a more robust Common commercial policy to strengthen and defend its interests in a shifting global order. More concretely, the Regulation has two objectives: protecting domestic assets from harmful foreign investor interests, and equipping the EU with leverage to achieve more favourable treatment of EU investors abroad. Therefore, the Regulation provides Member States with an option to adopt foreign direct investment (FDI) screening mechanisms on the grounds of “security or public order”. However, the Regulation misses its objectives. The Regulation’s vague screening ground “security or public order” must be interpreted in accordance with WTO law. A detailed analysis finds that the relevant WTO notions of essential security interests and public order are rather narrow. The Regulation’s screening ground “security or public order” therefore only allows the screening of a few, high-profile cases of FDI. Such a narrow scope undermines the Regulation’s objectives.
  • Topic: International Political Economy, International Trade and Finance, Foreign Direct Investment, WTO
  • Political Geography: Europe, European Union
  • Author: Stefan Jestl, Roman Römisch
  • Publication Date: 08-2020
  • Content Type: Working Paper
  • Institution: The Vienna Institute for International Economic Studies (WIIW)
  • Abstract: This paper analyses the economic effects of a reallocation of Cohesion Policy expenditures across EU countries. We evaluate a shift from stronger (i.e. older) Member States to less-developed EU economies (i.e. CEE countries) and vice versa. On top of that, we also assess the effects of a general reduction in the Cohesion Policy budget. For evaluation, we construct a demand-driven macroeconomic model which spans country models of 21 EU economies and is calibrated based on empirical data for the period 1995-2018. Our results suggest that a shift of Cohesion Policy funds to more (less) developed countries would result in a higher (lower) overall economic performance. However, the reallocation would affect economic outcomes in EU economies unevenly. In addition to direct effects on demand and production, it is pivotal to take into account indirect effects via trade as well. As a result, Cohesion Policy seems to be confronted with a trade-off between long-run convergence and short-run economic performance.
  • Topic: Economics, International Political Economy, European Union, Economic Growth, Investment, Economic Cooperation
  • Political Geography: Europe, European Union
  • Author: Liza Archanskaia, Johannes Van Biesebroeck, Gerald Willmann
  • Publication Date: 04-2020
  • Content Type: Working Paper
  • Institution: Kiel Institute for the World Economy (IfW)
  • Abstract: We illustrate a new source of comparative advantage that is generated by countries’ different ability to adjust to technological change. Our model introduces substitution of workers in codifiable (routine) tasks with more efficient machines, a process extensively documented in the labor literature, into a canonical 2 × 2 × 2 Heckscher-Ohlin model. Our key hypothesis is that labor reallocation across tasks is subject to frictions, the importance of which varies by country. The arrival of capital-augmenting innovations triggers the movement of workers out of routine tasks, and countries with low labor market frictions become relatively abundant in non-routine labor. In the new equilibrium, more flexible countries specialize in producing goods that use non-routine labor more intensively. We document empirically that the ranking of countries with respect to the routine intensity of their exports is strongly related to labor market institutions and to cultural norms that influence adjustment to technological change, such as risk aversion or long-term orientation. The explanatory power of this mechanism for trade flows is especially strong for intra-EU trade.
  • Topic: International Political Economy, Science and Technology, Innovation, Trade, Trade Policy
  • Political Geography: Global Focus, European Union
  • Author: August Reinisch
  • Publication Date: 03-2016
  • Content Type: Working Paper
  • Institution: Centre for International Governance Innovation
  • Abstract: Since the transfer of foreign direct investment powers from the European Union member states to the European Union itself in the 2009 Treaty of Lisbon, the European Commission, the main external trade actor for the European Union, has started to negotiate international investment agreements as well as investment chapters in enlarged free trade agreements (FTAs). Both contain substantive protection standards and enforcement mechanisms in case of disputes, usually both state–state and investor–state arbitration (ISA). With regard to the latter, it was unclear whether the European Commission, the European Union’s experienced World Trade Organization (WTO) litigator, would continue to use the interstate template of trade disputes or venture into ISA. After an initial orientation period, the European Commission rmly endorsed ISA, as demonstrated by the negotiations with Canada on the Comprehensive Economic and Trade Agreement (CETA) and with the United States on the Transatlantic Trade and Investment Partnership (TTIP). Meanwhile, however, public opposition to the TTIP, and to ISA in particular, has formed in unexpected dimensions. It even led the European Commission to partially interrupt its trade negotiations with the United States in order to conduct a public consultation on the investment aspects of the TTIP. Ever since, ISA has remained one of the most controversial parts of the planned trade agreements. Most recently, the European Commission tabled a TTIP proposal to set up a permanent investment court that would replace the system of ad hoc ISA. This paper analyzes in detail the development of the European Union’s position toward the use of ISA as a means for settling investor-state disputes.
  • Topic: International Political Economy, International Trade and Finance
  • Political Geography: European Union
  • Author: Volodymyr Dubovyk
  • Publication Date: 05-2015
  • Content Type: Working Paper
  • Institution: Arnold A. Saltzman Institute of War and Peace Studies
  • Abstract: Since the beginning of Euromaidan (Maidan II), Ukraine finds itself entangled in a deep crisis, which, while not necessarily existential, dramatically alters the country’s internal dynamics and international positioning vis-à-vis its neighbors and other significant regional and global players. To handle this crisis, Ukraine must find the right method of dealing with international players, especially the Russian Federation, the European Union and the United States of America. Ukraine should take certain actions against the new super-assertive and aggressive Russia. The European Union unquestionably has provided significant aid to Ukraine during these turbulent times. However, there remains great potential for cooperation, and questions linger regarding whether the EU is prepared to foot the bill for pulling Ukraine’s economy away from the brink indefinitely. Finally, the United States should by all means continue doing its good work in bringing attention to the situation in and around Ukraine in a variety of ways, including multilateral venues, unilateral initiatives, and bilateral frameworks. The fact that Ukraine is located in Europe does not make this crisis a mere European problem but a conflict with global repercussions.
  • Topic: International Relations, International Political Economy, International Security, Geopolitics
  • Political Geography: Russia, Ukraine, European Union
  • Author: Grigoriy Shamborovskyi
  • Publication Date: 05-2015
  • Content Type: Working Paper
  • Institution: Arnold A. Saltzman Institute of War and Peace Studies
  • Abstract: This paper explores topics related to Ukraine’s Relations with Russia, the EU, and the US. These relationships are explored in terms of international trade, security issues and institution building. Finally, the existence of internal political and socioeconomic divisions is discussed.
  • Topic: International Political Economy, International Trade and Finance, International Security, Political and institutional effectiveness
  • Political Geography: Russia, America, Ukraine, European Union