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1. Section 232 reloaded: the false promise of the transatlantic ‘climate club’ for steel and aluminium

Author:
David Kleimann
Publication Date:
07-2023
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
In using the removal of Section 232 ‘national security’ tariffs on steel and aluminium imports as a bargaining chip, the United States demands that the European Union engage in negotiations on “global steel and aluminium arrangements to restore market-oriented conditions and address carbon intensity”. The US demand has reportedly been inspired by a blueprint that would establish an international institutional arrangement – labelled a ‘climate club’ – which would externalise market-access restrictions afforded by US Section 232 tariffs to the customs borders of club members. While the declared objective is to incentivise non-members to adopt low-carbon steel (and aluminium) production methods the US blueprint suffers from various design flaws including inefficient incentives, WTO inconsistency and incompatibility with the EU Carbon Border Adjustment Mechanism. The effectiveness of the proposed US scheme is severely compromised by the plethora of policy objectives it pursues, which go far beyond the goal of incentivising industrial decarbonisation in third countries, including secondary (ie protectionism) and tertiary (ie global power competition with China) objectives. The initial negotiation proposal submitted by the United States Trade Representative (USTR) to European Commission trade negotiators incorporates many if not all the problematic elements of this blueprint, setting the US on a collision course with the negotiation proposal put forward by the European Commission. This paper concludes that the adoption of the scheme proposed by USTR would result in a step backwards for international climate and trade cooperation, whereas not adopting the EU proposal would make for a missed opportunity. Given the sharply diverging negotiation positions and associated respective domestic constraints on both sides, however, policymakers should start to engage stakeholders now to manage expectations towards a low-ambition negotiation result, if any.
Topic:
Security, Climate Change, Industrial Policy, Governance, European Union, Economy, Trade Policy, and Transatlantic Relations
Political Geography:
Global Focus

2. A new measure of aggregate trade restrictions: cyclical drivers and macro effects

Author:
Julia Estefania-Flores, Davide Furceri, Swarnali A. Hannan, Jonathan Ostry, and Andrew K. Rose
Publication Date:
06-2023
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
This paper presents a new measure of aggregate trade restrictions (MATR) using data from the International Monetary Fund’s Annual Report on Exchange Arrangements and Exchange Restrictions. MATR is strongly correlated with existing measures of trade restrictiveness but is more comprehensive in terms of country and time coverage. It is available for an unbalanced sample of up to 157 countries during 1949-2019. We use MATR to re-examine how trade restrictiveness varies with the business cycle, and how the macroeconomy looks in the aftermath of changes in trade restrictiveness. For the sample as a whole, MATR is typically a-cyclical but this average finding is heterogeneous across income groups: aggregate trade restrictions are a-cyclical in advanced economies but are counter-cyclical in emerging market and developing economies, especially in response to increases in unemployment. As to macroeconomic effects, increases in MATR are robustly associated with declines in GDP and in labour productivity (as well as being adverse for a range of other macroeconomic indicators).
Topic:
Industrial Policy, Economy, Multilateralism, and Trade Policy
Political Geography:
Global Focus

3. The hidden inequalities of digitalisation in the post-pandemic context

Author:
Cristiano Cadagnone and Maria Savona
Publication Date:
01-2023
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
Digitalisation has a ‘hidden’ impact on employment, particularly on the invisible conditions of some jobs, as perceived by workers, that are relatively less explored in the literature and that could represent a substantial social cost, particularly in the aftermath of the financial crisis and the COVID-19 pandemic. We start by summarising a few main challenges of digitalisation, with a focus on the additional challenges brought about by the pandemic, the rise of platforms and alternative work arrangements, and the current attempts to regulate these. We then discuss the hidden aspects of inequality linked to the unmeasured side effects of digitalisation. Mental health in particular should be taken into account, particularly in the post-pandemic context, which has led to a significant amount of working from home. Also, the reduction of tasks previously done in the workplace in favour of remote working might limit social interactions, creativity and innovation potential. We conclude by suggesting areas for policy interventions.
Topic:
Labor Issues, Economy, Automation, and COVID-19
Political Geography:
Europe and Global Focus