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241. The effect of lawful crossing on unlawful crossing at the US southwest border

Author:
Michael A. Clemens
Publication Date:
04-2024
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
An increasing number of migrants attempt to cross the US Southwest border without obtaining a visa or any other prior authorization. 2.5 million migrants did so in 2023. In recent years, responding to this influx, US officials have expanded lawful channels for a limited number of these migrants to cross the border, but only at official ports of entry. These expanded lawful channels were intended to divert migrants away from crossing between ports of entry, by foot or across rivers, thereby reducing unlawful crossings. On the other hand, some have argued that expanding lawful entry would encourage more migrants to cross unlawfully. This study seeks to shed light on that debate by assessing the net effect of lawful channels on unlawful crossings. It considers almost 11 million migrants (men, women, and children) encountered at the border crossing the border without prior permission or authorization. Using statistical methods designed to distinguish causation from simple correlation, it finds that a policy of expanding lawful channels to cross the border by 10 percent in a given month causes a net reduction of about 3 percent in unlawful crossings several months later. Fluctuations in the constraints on lawful crossings can explain roughly 9 percent of the month-to-month variation in unlawful crossings. The data thus suggest that policies expanding access to lawful crossing can serve as a partial but substantial deterrent to unlawful crossing and that expanding access can serve as an important tool for more secure and regulated borders.
Topic:
Security, Migration, and Borders
Political Geography:
North America, Mexico, and United States of America

242. Tackling the UK's regional economic inequality: Binding constraints and avenues for policy intervention

Author:
Anna Stansbury, Dan Turner, and Ed Balls
Publication Date:
05-2024
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper analyzes binding constraints to productivity growth in the United Kingdom’s regions outside London and the greater South East. These analyses challenge a number of common arguments about the UK’s regional economic inequality problem. The authors find little evidence consistent with the hypotheses (i) that low shares of university graduates remain the primary constraint on growth for the UK’s regions; (ii) that there is a generalized issue with access to finance for firms outside the South East; or (iii) that low or falling regional migration rates are to blame for the persistence of the UK’s regional economic inequalities. Instead, they find evidence consistent with (i) a specific relative shortage of STEM degrees; (ii) binding transport infrastructure constraints within major non-London conurbations; (iii) a failure of public innovation policy to support clusters beyond the South East, in particular through the regional distribution of public support for research and development (R&D); and (iv) missed opportunities for higher internal mobility due to London’s overheating housing market. The authors also find some suggestive evidence consistent with constraints on access to early-stage equity financing for high growth-potential small and medium-sized enterprises in certain regions.
Topic:
Finance, Economic Growth, Economic Inequality, and Productivity
Political Geography:
United Kingdom and Europe

243. The El Niño Southern Oscillation and Geopolitical Risk

Author:
Cullen Hendrix
Publication Date:
05-2024
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper investigates whether the El Niño Southern Oscillation (ENSO)—the warming and cooling cycle in the central and eastern Pacific Ocean that affects both global atmospheric and ocean conditions—is a driver of geopolitical risk at the global scale. Using nonlinear cross-convergent mapping, a technique for characterizing causal relationships in dynamic systems, it finds ENSO is causally related to geopolitical risk at the global level, but that finding is not replicated at the country level for countries whose economies are most strongly influenced by ENSO cycles. Put differently, ENSO-related geopolitical risk is an emergent phenomenon evident only at the Earth system level. Then, using monthly observations of ENSO and geopolitical risk, the paper reports a curvilinear, contemporaneous relationship between ENSO and risk, with La Niña conditions associated with lessened geopolitical risk relative to El Niño and neutral climate conditions. The effects are statistically and substantively significant, and the relationship is demonstrated to be stronger in more recent decades (post-1990). The effect for geopolitical risk of transitioning from La Niña to neutral ENSO conditions is of similar magnitude to that of the outbreak of a major interstate war.
Topic:
Security, Agriculture, Climate Change, Politics, Geopolitics, Risk, Weather, and El Niño
Political Geography:
Global Focus

244. The Evolving Landscape of U.S. Economic Security: The Confluence of Trade, Technology, and National Security

Author:
Andrea Viski
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
Korea Economic Institute of America (KEI)
Abstract:
This paper examines the current evolution of U.S. economic security discourse to demonstrate the implications, challenges, and shortcomings of U.S. economic security tools and the catalyzing impact of technology. While component economic security considerations are broad and encompass issues from natural disaster planning to cybersecurity, this paper focuses specifically on the impact of trade and technology in the economic security context. It discusses the main influences and features of U.S. economic security policy as it relates to trade, technology, and the security of the supply chain. The paper includes sections on evolving notions of the dual-use concept; the need to manage and respond to technology flows with more effective strategies, and new foreign policy efforts and tools to strengthen economic security. The paper focuses on the trends forging the path for the United States to define economic security so closely with national security, and in exploring these trends, it delineates how the United States has implemented policies and adopted, reoriented, or created new policy tools designed to strengthen economic security. The paper also explores why the rapid evolution of emerging technologies has played such a defining role. Finally, the paper examines the effectiveness of the U.S. approach to economic security and its challenges and offers insights into how it can be strengthened in the future
Topic:
National Security, Science and Technology, Trade, and Economic Security
Political Geography:
North America and United States of America

245. Japanese Economic Security as “Derisking”

Author:
Kazuto Suzuki
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
Korea Economic Institute of America (KEI)
Abstract:
This paper examines the concept of “derisking” and how the Japanese Economic Security Promotion Act (ESPA) has responded to it within the framework of deterrence theory. It explores how ESPA allows deterrence by denial against economic coercion by other states and is itself a derisking measure. It contends that deterrence by denial, which means reducing dependency and improving resilience, could include stockpiling strategic materials, diversifying sources of supply, developing alternative materials, and developing alternative products. However, this paper argues that there is a need to strengthen the mechanism for collaborative deterrence by denial, such as the “Coordination Platform” presented at the G7 Hiroshima Summit. As for other forms of deterrence, such as institutional deterrence and deterrence by punishment, their effectiveness is insufficient, and they face many implementation problems. Therefore, this paper argues that the most optimal derisking strategy at this point is the combination of ESPA and the “Coordination Platform” to strengthen the capabilities of deterrence by denial.
Topic:
Risk, Deterrence, Economic Security, and Coercion
Political Geography:
Japan and Asia

246. Is Economic Security National Security? Defining South Korea’s Economic Security for Future Industries

Author:
June Park
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
Korea Economic Institute of America (KEI)
Abstract:
This paper explores how South Korea defines “economic security.” Amidst geopolitical turbulence, the framing of this concept by governments and policy circles around the globe is reflective of the changes in the global economy post-pandemic and the ongoing war in Ukraine, two critical junctures that have revealed the geo-economic impact of weaponized interdependence. While the Biden administration has laid out U.S. policy intent to combine national security with economic security, specifically on future industries of dual-use nature ranging from chips to EVs, batteries, and generative AI, countries that are on the receiving end of policy implementation are formulating their response to the shifting geoeconomics. This paper unravels South Korea’s framing of economic security and policy response by analyzing legislation on future industries that is critical to the country’s economic growth and standing and the concerted efforts by the state bureaucracy and industry in shaping the concept. The paper draws specifically upon semiconductors in addition to other future industries that are central to the South Korean economy and related legislation in the South Korean National Assembly. It argues that South Korea’s policy response and framing of its economic security has more to do with the protection of industries for the future amid geopolitical turbulence and the reshuffling of global supply chains than traditional security issues related to the U.S.-ROK alliance. Moreover, public anxiety on the pressures toward U.S.-driven trilateral cooperation reveals concerns on a possible backlash from China and the lagging potential of Japan in future industries.
Topic:
National Security, Geopolitics, Industry, and Economic Security
Political Geography:
Asia, South Korea, and United States of America

247. China’s Perspective on Economic Security

Author:
Audrye Wong
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
Korea Economic Institute of America (KEI)
Abstract:
This paper examines how Beijing views economic security as well as other countries’ actions in this realm. Economic security is not a new or foreign concept to Chinese thinkers and policymakers, but the emphases, concerns, and priorities have evolved, due in part to changes in the international environment as well as in China’s own economic and geopolitical situation. This paper examines how Chinese leaders and scholars have approached the definition and scope of economic security, as well as recent and proposed policy responses. It draws on a range of Chinese-language official documents and scholarly writings, as well as broader secondary source analyses. The paper explores that while Chinese discussions of economic security tend to be framed as ensuring economic development and stability, development is implicitly and explicitly linked to national security. Many writings emphasize that economics is the foundation for national strength (including military capabilities). As such, it is more than just economic survival and growth for the economy’s sake; it also has implications for China’s geopolitical position in the international order. In that respect, economic stability and national security may be hard to separate. Indeed, we see a resurgence in today’s rhetoric about the notions of development and security as inextricably linked, along with the need to coordinate the two—and in service of maintaining CCP rule and regime stability. Finally, the paper shows Beijing is taking concrete steps toward increased legalization and institutionalization of economic security measures. This represents a shift, at least in the domain of retaliatory countermeasures, from its usually more “informal” approach to economic coercion, which has afforded more flexibility and minimized political costs for the regime. At the same time, actual implementation has been relatively limited thus far.
Topic:
Foreign Policy, Development, National Security, Trade Wars, and Economic Security
Political Geography:
China and Asia

248. South Korea: Caught in the Crosshairs of U.S.−China Competition Over Semiconductors

Author:
Paul Triolo
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
Korea Economic Institute of America (KEI)
Abstract:
This paper explores how countries with advanced semiconductor industries are caught in the middle of the growing U.S.-China competition in technology that is focused on advanced computing. Among them, South Korea and its national champions, Samsung and SK Hynix, have arguably incurred some of the most significant pressure. This paper explores how those firms have billions of dollars of sunk investment in China-based facilities producing cutting-edge memory, and the future of these facilities remains in doubt after a series of U.S. export control measures unleashed by the U.S. Commerce Department starting in October 2022. South Korean companies are also players in other parts of the global semiconductor supply chain, including semiconductor manufacturing tools, and China remains an important market for both components and electronic devices. This paper argues that each country caught between the United States and China in technology competition faces difficult trade-offs in determining how best to support its leading companies while navigating changing and often what is viewed as arbitrary decisions coming from Washington that have already significantly disrupted global supply chains. Finally, at the same time as U.S. export controls are having a major impact on the ability of South Korean companies to retain business operations and market access in China, major front-end manufacturers, particularly Samsung, are also looking to expand their operations in the United States and benefit from U.S. CHIPS Act funding. This paper argues that all of the above dynamics put South Korea in one of the more complex positions as the industry faces continued restructuring, buffeted by both export controls and industrial policies.
Topic:
Supply Chains, Economic Security, Semiconductors, and Economic Competition
Political Geography:
China, Asia, South Korea, and United States of America

249. The Raw Materials of Economic Security: South Korea’s Evolving Energy and Critical Minerals Policies in an Era of Disruption

Author:
James Bowen
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
Korea Economic Institute of America (KEI)
Abstract:
This paper argues that resource security is central to South Korea’s broader economic security and President Yoon Suk-yeol’s Strategy for a Free, Peaceful, and Prosperous Indo-Pacific Region. The paper contends that postwar Korea has maintained an energy and minerals-intensive economy despite domestic resource scarcity and import dependence. Recent disruptions have, however, threatened the resilience of this relationship. These disruptions include COVID-19, Russia’s war in Ukraine, the escalating climate change crisis and energy transition, and the geoeconomic and geopolitical erosion of the liberal order. Korea’s most important energy security priority is diversifying its energy mix towards cleaner energy—what this paper calls “green security.” This will be a difficult task given the intense national dependence on fossil fuels and policymakers’ desire to avoid disrupting Korea’s manufacturing-heavy, export-focused development model. Korea’s idiosyncratic decarbonization pathway, including a strong presence of hydrogen and, under Yoon, a downgrading of renewables in favor of nuclear, could provide additional challenges. Critical minerals are another rising resource security concern for Seoul. The major priority is to accelerate the development and diversification of international supply chains, particularly away from China. A major obstacle to progress is intense competition across the value chain, influenced by disparate economic and strategic priorities. The paper argues that Seoul must find ways to manage its energy and critical minerals security challenges in a way that is consistent with its preferred development model. The alternative is to accept a new equilibrium in which it has less domestic dependence on foreign resources and on resources-intensive economic activity in aggregate.
Topic:
Geopolitics, Strategic Competition, Minerals, Economic Security, and Energy
Political Geography:
Asia and South Korea

250. Economic Security and U.S.-China Competition: The View from North Korea

Author:
Rachel Minyoung Lee
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
Korea Economic Institute of America (KEI)
Abstract:
This paper argues that while North Korea does not discuss “economic security” in domestic contexts or have an established definition of the term, it thoroughly understands that the economy and national security are inseparable. North Korea is essentially unaffected by the typical economic issues that many major economies are grappling with in relation to economic security, but like other countries, it has closely tracked economic security developments and deepening U.S.-China strategic competition for potential political fallout and what opportunities and challenges that may generate. The paper shows that U.S.-China strategic competition has offered unique opportunities to North Korea, including China’s cover against fresh and existing sanctions against North Korea, and economic assistance. Moreover, deteriorating U.S.-China ties provide Pyongyang extra space to consider and put into motion alternative foreign and economic policy paths, namely, shifting away from its three-decade policy of nonalignment with China and normalization of relations with the United States. Also, China appears to be a factor in North Korea’s shift to a more conservative economic policy. Despite the opportunities presented by the U.S.-China divide, however, North Korea is wary of the risks of dependence on China and has tried to build economic resilience at home, for example by launching a national campaign on domestic production and recycling. North Korea’s somewhat cooler handling of China and its proportionately warm treatment of Russia since the Armistice Day celebrations in July is a clear example of North Korea’s China dilemma. This is where North Korea’s recent strengthening of ties with Russia comes into the picture. The paper contends that it is hard to conclude at this point whether North Korea’s moves are aimed at short-term, tactical gains or are part of a longer-term, strategic calculus, but we can be certain of this: it has just as much to gain or lose as any other country affected by economic security and U.S.-China strategic competition, though not in the same ways as other countries.
Topic:
Foreign Policy, Strategic Competition, and Economic Security
Political Geography:
China, Asia, North Korea, and United States of America

251. Emerging public debt challenges in sub-Saharan Africa

Author:
Maureen Were
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Sub-Saharan Africa (SSA)’s public debt burden remains a challenge to development. Key drivers of public debt include large-scale financing of infrastructure development, adverse impact of multiple shocks including COVID-19 pandemic, maturity mismatches, and high vulnerability to exchange rate and interest rate volatility. The tight financial conditions following interest rate hikes in advanced economies have exacerbated the debt burden and heightened debt sustainability risks. Half of the SSA low-income countries are either in debt distress or at high risk of it. Countries in debt distress include middle-income economies. Given the high cost of debt servicing and lack of fiscal space, achievement of sustainable development goals is in jeopardy. A long-term sustainable solution requires a multi-pronged approach. The G20 Common Framework for debt treatment remains limited in scope, coverage, and impact. More needs to be done including consideration for debt relief. Other strategies include access to long-term concessional finance, domestic resource mobilization, and improved efficiency in public spending and fiscal management.
Topic:
Development, Infrastructure, Sustainability, Public Debt, and Public Spending
Political Geography:
Africa and Sub-Saharan Africa

252. Institutions and governance in Mozambique :A bird’s eye view based on existing databases

Author:
Ines A. Ferreira
Publication Date:
01-2024
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Using publicly available databases and drawing on a wide range of indicators, this paper reviews the institutional performance of Mozambique across seven broad categories: rule of law and judicial independence; voice and freedom of expression/association; political participation; accountability and transparency; political instability and violence, and external relations; state legitimacy and political leadership; and governance and state capacity. Overall, the selected indicators point to similar trends within each dimension and suggest limited progress during the last decades. Still, it is fundamental that these insights and the scores presented by the indicators are put into context, and that we understand the historical path of Mozambique, the internal and external factors at play, and the fact that it takes time for progress achieved to be reflected in this type of data.
Topic:
Governance, Leadership, Freedom of Expression, Rule of Law, Accountability, Institutions, Judiciary, Instability, and Political Participation
Political Geography:
Africa and Mozambique

253. Cultivating change: the long-term impact of forced labour in Mozambique

Author:
Margherita Bove, Rute Martins Caeiro, Rachel Coelho, Sam Jones, and Patricia Justino
Publication Date:
02-2024
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Following the abolition of slavery, various forms of compulsory labour were adopted by colonial powers to develop their economies. This paper analyses the contemporary consequences of compulsory cotton production—a forced labour system that operated in colonial Mozambique from 1926 to 1961. During this period, the Portuguese colonial government granted geographic concessions to private companies, within which smallholder farmers were forced to cultivate cotton for payment in cash. Women bore the brunt of this regime, but in doing so often took on responsibilities traditionally reserved for men and engaged in active resistance strategies. Employing a spatial regression discontinuity, we explore the enduring impact of this exposure to forced cotton cultivation on present-day human and social capital, focusing specifically on rural southern Mozambique. Our estimation strategy relies on the arbitrarily defined historical borders of the concessions, which reflected the tendency of concessionaires to absorb as much territory as possible, often ignoring agronomic conditions. Drawing on bespoke individual-level survey data collected along the concession border, we find lower educational outcomes among women in former concession areas. However, this is counterbalanced by positive effects on social capital, in the form of higher levels of civil participation, more progressive attitudes towards gender norms, and an increased presence of women in leadership positions. These results suggest that exogenous ruptures that push women outside traditional boundaries can help to reinforce their role in society.
Topic:
History, Women, Colonialism, Human Capital, Social Capital, Forced Labor, and Cotton
Political Geography:
Africa and Mozambique

254. What traders know: the (mis)perceptions of formal and informal cross-border traders

Author:
Paolo Falco and Eleanor Wiseman
Publication Date:
04-2024
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
ross-border traders face a choice between official and unofficial border crossings. The latter allow them to evade taxes, but expose them to other risks, such as bribes, fines, and arrest. We investigate the perceptions of cross-border traders about the risks of trading officially vs unofficially at the border between Kenya and Uganda. We find that traders overestimate the risks of trading officially relative to the same risks when trading unofficially. In reality, the measured risks of trading through the official border are lower.
Topic:
Borders, Risk, Trade, and Informal Economy
Political Geography:
Uganda, Kenya, and Africa

255. Watts happening to work? The labour market effects of South Africa’s electricity crisis

Author:
Haroon Bhorat and Timothy Köhler
Publication Date:
04-2024
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Frequent electricity outages threaten to impede the benefits of expanded access achieved by many developing countries in recent decades. A large literature documents these negative effects, however almost none consider labour market effects. This paper merges labour force survey microdata with high-frequency electricity supply and demand data to provide the first estimates of the relationships between outages and labour market outcomes in South Africa, a country characterized by frequent, severe outages referred to as load shedding. Exploiting temporal variation in outage incidence and intensity, we find that load shedding is associated with significantly lower employment rates, working hours, and earnings on average. Employment appears more sensitive relative to intensive margin outcomes, threatening job creation and preservation efforts. These negative relationships, however, are not evident for low levels of load shedding, but their strength markedly increases with load shedding intensity. We document further heterogeneity by firm size and industry, highlighting the vulnerability of jobs in manufacturing. Overall, our findings suggest that the South African labour market is largely insensitive to relatively low levels of load shedding; however, high levels appear especially costly.
Topic:
Employment, Economy, Electricity, and Labor Market
Political Geography:
Africa and South Africa

256. Labour market inequality in two Asian giants Indonesia and India compared

Author:
Kunal Sen
Publication Date:
05-2024
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
We examine the nature of labour market inequality in Indonesia and India, using a common conceptual approach drawing from the job ladder framework. In the framework, we differentiate between self-employment and wage-informal and between formal, upper tier informal, and lower tier informal jobs. We find that both countries have a large proportion of workers in lower tier jobs, though the importance of wage-employment is larger in Indonesia. There are more workers in formal wage-employment in Indonesia than India. There are also sharp disparities in the earnings of workers in different tiers of the labour market in Indonesia and India, and there is limited evidence of convergence of the earnings of the lower tier informal workers to that of formal workers, at least for Indonesia. We also find that gender and educational level are important correlates of work status in both countries. Females and less educated workers occupy the lower tiers of the labour markets in the two countries.
Topic:
Employment, Inequality, Economy, Labor Market, and Informal Economy
Political Geography:
South Asia, Indonesia, India, and Asia

257. Faraway, so close: the impact of the Russia–Ukraine war on political violence in Asian countries

Author:
Michele Di Maio, Valerio Leone Sciabolazza, Patricia Justino, and Cecilia Nardi
Publication Date:
05-2024
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
We show that the Russia–Ukraine-war-induced changes in the international price of wheat affected political violence in Asia. Using data from 13 countries and more than four million cell-level observations, we show that a higher wheat price increases political violence in areas that are more suitable to produce that crop. We interpret this evidence as consistent with a rapacity effect being at play: the higher value of agricultural output increases the incentive to violently appropriate it. Our result is robust to a number of falsification and robustness tests. The effect is heterogeneous across countries and cell types: in line with our interpretation of the empirical findings, the effect is larger in countries that are net exporters of wheat and in cells that are rural. We also show that a higher price of wheat increases political violence more in countries that are low-income, fragile, and characterized by the presence of anti-government or terrorist groups, indicating that a higher value of crop production is more likely to fuel violence in areas that are poor or not politically stable.
Topic:
Political Violence, Instability, Russia-Ukraine War, and Wheat
Political Geography:
Asia

258. Market power and merger control in South Africa

Author:
C. Friedrich Kreuser, Michael Kilumelume, and Rulof Burger
Publication Date:
05-2024
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
We estimate structural, materials, and labour markups for the South African economy at the three-digit industry level for 2012–19. The fall in structural labour and materials markups found for the numerical majority of industries are generally isolated to smaller industries, with industries accounting for a higher proportion of sales generally experiencing smaller downward shifts. We show that materials-based markups are increasing over this period. Upward markup pressure in structural and labour markups are primarily driven by compositional shifts of surviving firms, while materials markup growth is driven by the average firm in a given sector. We show that merger intensity is positively related to structural markup growth, with a 1% increase in the proportion of cumulative mergers over 2013–18 being related to around a 0.27% increase in structural markup growth over the period from 2012 to 2019. We find that large vertical mergers are positively related to structural and materials markup growth while being negatively related to labour markup growth. Large horizontal mergers generally increase labour and structural markups.
Topic:
Markets, Economy, Industry, and Mergers and Acquisitions
Political Geography:
Africa and South Africa

259. A Vision for Regional – International Partnership for Gaza Rebuilding and Palestinian Economic Leap

Author:
Yitzhak Gal and Maya Sion-Tzidkiyahu
Publication Date:
05-2024
Content Type:
Working Paper
Institution:
Mitvim: The Israeli Institute for Regional Foreign Policies
Abstract:
The immense extent of destruction in the Gaza Strip caused by the 2023-2024 Gaza War, requires massive rebuilding. This paper sets a vision of a long-term economic rebuilding plan, which is aimed at ending the humanitarian crisis and creating a functioning and sustainable economy. The rebuilding of the Gazan economy, and the Palestinian economy at large, should be planned and designed as part of an international-regional political and economic vision of stabilizing, strengthening and improving Israeli-Palestinian and Israeli-Arab relations, in the broader context of strengthening stability and prosperity in the Middle East.
Topic:
Reconstruction, Political stability, Humanitarian Crisis, Armed Conflict, and 2023 Gaza War
Political Geography:
Middle East, Israel, Palestine, and Gaza

260. EU Autonomy, the Brussels Effect, and the Rise of Global Economic Protectionism

Author:
Matthias Bauer and Dyuti Pandya
Publication Date:
02-2024
Content Type:
Working Paper
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
The Brussels Effect, once emblematic of the EU’s alleged influence in shaping global regulations, has now become a factor contributing to global regulatory fragmentation. The EU must recalibrate its trajectory towards a liberal and rules-based trading order, prioritising widespread regulatory liberalisation to counteract the risks of global protectionism and regulatory spirals. A holistic approach, both internally and globally, is crucial to prevent regulatory and subsidy spirals on a global scale. This recalibration is essential to keep global markets open and enhance the EU’s own economic and technological competitiveness. In response to the 2008 financial crises, the EU underwent a shift in its approach to global trade, transitioning towards Strategic Autonomy. However, this gradual move away from a liberal global trade order has led to increased regulatory burdens and regulatory fragmentation, impacting businesses within and beyond the EU. The Brussels Effect, as denoted in this paper, highlights the EU’s signalling effect on other governments in considering and implementing regulations. This effect has contributed to increased trade restrictiveness and regulatory fragmentation globally. The EU’s insistence on “autonomy” and “European values” not only empowers others to follow suit, contributing to the rise in global protectionism, but also contradicts the EU’s historical support for open trade principles and its commitment to a highly competitive social market economy. A wealth of EU regulatory data reveals a stagnation and, in many cases, a regression in regulatory cooperation within the Single Market. This is evident from rising trade restrictiveness and a tendency towards increased legal fragmentation instead of convergence across the EU. The evolving regulatory acquis of the EU, coupled with insufficient cooperation and stalled trade agreements, poses risks beyond its borders. The EU’s paradigm shift towards autonomy contributes to global regulatory spirals and protectionist measures, particularly evident in services trade. Despite the EU’s historical commitment to harmonisation and liberalisation, many sectors, such as transport and logistics, telecoms, and digital services, have witnessed the imposition of new laws and rules that hinder trade. With the EU’s share of global GDP expected to decrease to 9% by 2050, there is a critical need for EU governments to enhance its regulatory capabilities and foster innovation. To wield influence in global economic diplomacy, EU policymakers must prioritise policies that unleash the collective ingenuity of individuals and businesses that help to maintain high levels of productivity, competitiveness, and prosperity.
Topic:
Globalization, European Union, Economy, Autonomy, Protectionism, and WTO
Political Geography:
Europe