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1. Mirror, Mirror on the Wall, Who Has the Fairest Clauses of Us All? Stress-testing the Application of Mirror Clauses to Pesticides

Author:
Emily Rees
Publication Date:
03-2022
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
In less than six months, ‘mirror clauses’ have taken EU trade policy by storm. To inject ‘reciprocity’ in trading terms, the French Presidency of the Council is proposing that imported food and feed be produced under the exact same sanitary, phytosanitary, welfare and environmental standards as those imposed on domestic products within the European Union. The international trade rulebook is both complex and yet relatively straightforward in ensuring that process and production methods applied to imports respond to legitimate justifications and do not result in a disguised barrier to trade. The European Union may learn from the United States’ playbook to ensure that mirror clauses are negotiated with trading partners bilaterally, rather than imposed on them unilaterally. As part of its Farm to Fork strategy, the European Commission has announced two pesticides reduction targets to be attained by 2030, and it is in this framework that questions relating to plant health and international trade have been gaining traction. With pesticides targets set to raise costs for European farmers and productivity levels likely compromised, there are genuine concerns that domestic products will be competitively undercut by imports produced ‘less sustainably’. To grasp the complexity of mirror clauses applied to the phytosanitary sphere, understanding how the European Food Safety Agency authorises and bans active molecules and bio solutions is vital. Appreciating the daily efforts of national customs agents in checking imports for pesticides residues, and coordinating efforts of Member States on rejected food and feed imports that do not meet EU requirements, is also paramount. There are warranted societal justifications to impose measures to protect humans, animals, plants and ecosystems. To remain legitimate under international law however, mirror clauses should be ‘stress-tested’ to avoid being applied as a means to gain competitiveness. Countries are unequal when it comes to the risk of pests and climate change is already intensifying their distribution with potentially dramatic impact for global food security. When it comes to protecting plant health, regional conditions must be considered to not only avoid inconsistency with WTO rules but also to ensure that mirror clauses do not result in a practical ban on imports from developing countries impacting livelihoods worldwide.
Topic:
Agriculture, International Trade and Finance, Treaties and Agreements, European Union, Mercosur, and Pesticides
Political Geography:
Europe

2. Should the EU Pursue a Strategic Ginseng Policy? Trade Dependency in the Brave New World of Geopolitics

Author:
Oscar Guinea and Vanika Sharma
Publication Date:
04-2022
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
Political leaders all over the world are calling for strategic autonomy. The removal of critical trade dependencies has become a guiding principle in most policy proposals, including the EU’s new industrial strategy. In making these decisions, it is important for policymakers to understand the reasons behind why shortages of critical goods and technologies have emerged in the first place. The instruments that new policies cerate should respond to real problems, not invented ones. For instance, if shortages are due to temporary mismatches of supply and demand, most of them will be fixed without the need of any policy intervention. On the other hand, shortages can also be engineered by countries using their dominance in the production of certain goods to coerce other countries. As the EU experienced first-hand after the Russian war on Ukraine in 2022, the concentration of market power in the production of any product carries geopolitical risks. For that purpose, it is crucial to understand the nature of trade dependencies. This policy brief presents indicators and a conceptual framework to measure trade dependency. The framework consists of two indicators: the first measures the share of EU imports from outside the EU over EU production proxied as the sum of imports and exports, while the second indicator considers the market concentration using the Herfindahl-Hirschman index (HHI). It then applies this framework to EU trade with the rest of the world in 2020 and elaborates on the product categories and partner countries behind these dependencies. From a total of more than 9,000 product categories, there were only 233 products that could be classified as dependent within our framework. In terms of values, they represented 1.5% of EU total imports or €50 billion. The major suppliers of these products to the EU were China, United States, Russia, and the United Kingdom. Imports of hydrocarbons from Russia are part of this list of trade dependencies, but so are many other goods which are not of strategic importance. A policy intervention should be tailored to the specific product and the specific export country. Given the small size of the EU imports in which the EU can be considered dependent, it is not advisable to base Europe’s new industrial policy on a general fear of dependency and apply new policies in many sectors. Many of these products are easy to substitute and the economy can function without them. For the select few products where dependency is an economic concern, our paper explores different measures that the EU can put in place to lower trade dependency and how this dependency can be reduced through international trade.
Topic:
International Trade and Finance, Treaties and Agreements, European Union, Geopolitics, and Imports
Political Geography:
Europe

3. Has Globalisation Really Peaked for Europe?

Author:
Lucian Cernat
Publication Date:
11-2022
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
This paper builds on the recent arguments put forward by Richard Baldwin and others debunking the myth that we enter a period of de-globalisation. The paper argues that globalisation is a complex phenomenon that requires detailed, firm-level indicators going beyond simple aggregate metrics. When using such indicators, the picture is much more nuanced and, in the case of Europe, the role of global trade is as important as ever for hundreds of thousands of companies and millions of jobs supported by global trade flows. A strong participation in the “new globalisation” is also key for the future EU competitiveness in technology-driven sectors.
Topic:
Globalization, International Trade and Finance, Science and Technology, European Union, and Trade
Political Geography:
Europe

4. The Good, the Bad and the Ugly: Taking Stock of Europe’s New Trade Policy Strategy

Author:
Fredrik Erixon
Publication Date:
04-2021
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
This Policy Brief takes stock of the EU Trade Policy Review – the Commission’s proposed strategy for trade. Despite appearances, the Review doesn’t come close to its billing as a strategy for the new geopolitics of trade. In fact, the Review is weak on key geopolitical developments and rather gives the impression that the EU doesn’t have an ambition to shape outcomes. Obviously, the Review is anchored in Europe’s general economic climate: defensiveness on globalization, competition and digitalization. It follows that Europe is getting increasingly detached from world developments. There are several good parts in the Review. The Commission wants to revive and reform the World Trade Organisation, and it’s clear about what factors that have made the Geneva-based trade body dysfunctional. The Review also acknowledges that the EU will seek a closer alliance with the United States and use that for constructive purposes. Finally, it is welcome that the Commission proposes some new instruments for dealing with market distortions caused by foreign subsidies and protectionism in government procurement. All these initiatives can achieve good outcomes. However, they all require that Europe makes changes in its own policies and positions. The bad parts in the Review are Europe’s weak agenda for getting better market access in the growth regions in the world and its continued passivity on matters related to China. Europe’s main trade-policy challenge in the next decade is to ensure that businesses and consumers in Europe get better integrated with a world-market dynamism that predominantly will come from the Asian region. Absent a realistic and medium-term strategy for dealing with challenges connected to the rise of China, Europe will have difficulties getting the EU-China Comprehensive Agreement on Investment approved. Europe needs an actionable agenda for addressing bilateral frictions with China and problems that occur outside bilateral trade. Finally, the ugly part of the trade strategy are all the commercial policies in the EU – with strong effects on trade – that aren’t recognized or only casually mentioned in the Review. The latter category includes the ambition to introduce an autonomous carbon border tax on imports. Such a policy comes at a high political and economic cost, and the measure’s effect on reducing global carbon emissions is at best very negligible.
Topic:
Globalization, International Political Economy, International Trade and Finance, Treaties and Agreements, European Union, Geopolitics, Digital Economy, and Trade
Political Geography:
Europe

5. Global Trade Today is Global Value Chains

Author:
David Henig
Publication Date:
01-2021
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
In the last 25 years global value chains have come to dominate global trade in a way surprisingly little discussed or understood. To meet the policy challenges of today and the future we need to understand the key characteristics of this new global trade and how they came about. The OECD estimate around 70% of total trade takes place in global value chains. Using their definition as where “the different stages of the production process are located across different countries”, and considering both goods and services inputs, this may be an understatement. The example most commonly used is the automotive sector, with 30,000 parts and associated services like satellite navigation going into one car. However there are many others. Modern primary commodity production is optimised by technology developed in other countries, diverse services and goods are frequently combined to create new product offerings, and most international business to consumer transactions are facilitated by leading global platforms. Positively this new globalization has provided consumers with an unprecedented choice of products at affordable prices. More challengingly it has seen governments struggle with the question of how they can best influence modern trade, amid signs of a backlash and simple demands for ‘more domestic manufacturing’. The popular global narrative that feeds such demands is one that has a traditional view of trade as a set of simple primary or manufactured goods transactions. Policymakers must move on from this narrative, making their choices, and explaining them clearly, on the basis of global value chains.
Topic:
International Political Economy, International Trade and Finance, Trade, and Global Value Chains
Political Geography:
Global Focus

6. Work for Others, not Yourself: Globalization, Protectionism and Europe’s Quest for Strategic Autonomy

Author:
Fredrik Erixon
Publication Date:
10-2020
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
Protectionism and mercantilism are yet again at the centre of global economic policy. “America First” is the guiding ethos in a good part of US international economic policy. Beijing is taking a larger stake in China’s economy and hand out privileges to domestic firms. Europe is increasingly occupied by achieving “strategic autonomy” and to create European champions at the expense of competition. Old and disreputed economic doctrines are getting a new lease on life. Behind this new orientation in international economic policy stands the old idea that a strong economy is an economy not dependent on others. Human prosperity – our story of rags to riches – tells a very different story. Prosperity is generated when people collaborate and improve our collective intelligence. Open economies are much better at creating wealth because they operate by the principle that people should work for others, not themselves. They specialize – and in the process, they get far more dependent on others. Dependency is a factor of success; economic sovereignty is a sure way of depriving people of opportunity and prosperity.
Topic:
International Political Economy, International Trade and Finance, Global Markets, and Strategic Competition
Political Geography:
United States, China, and Europe

7. Globalization Comes to the Rescue: How Dependency Makes Us More Resilient

Author:
Florian Forsthuber and Oscar Guinea
Publication Date:
09-2020
Content Type:
Research Paper
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
A new consensus is growing across the European Union – and other parts of the world too: that globalization has gone too far. The argument goes as follows: as an exchange for higher efficiency and lower prices, Europe has sacrificed its ability to take care of itself and protect its own citizens. The Covid-19 crisis has revealed how much Europe depends on the rest of the world for products like medical goods and medicines. Therefore, if Europe does not want to live through another shortage of essential supplies, the lesson of the Covid-19 crisis is that the EU has to produce these products itself. This conclusion may sound intuitive but it is fundamentally wrong. Europe is not overly dependent on the rest of the world because most trade in the EU is done within its own borders. New evidence presented in this paper shows that there were only 112 products, making just 1.2% of the value of EU total imports, for which the four largest suppliers were non-EU countries as compared to more than two thousand products for which the four largest suppliers were from EU member states. And while not every product is equally important in the face of a global pandemic, there is not a single Covid-19 related good for which all EU imports only came from non-EU countries. This paper debunks the idea that the EU is too reliant on other countries. Instead, our analysis shows that imports from the rest of the world make every EU member state more resilient by diversifying its sources of supply. Because of their geographical location and economic integration, if there was to be a shock like a pandemic, a plague, or a nuclear disaster, groups of EU countries are likely to be hit simultaneously. Having sources of supply outside the EU is therefore critical to reduce Europe’s vulnerability to these shocks. Europe’s recent experience has shown that international trade is a strength, not a weakness, and the EU was blessed to be able to tap into the manufacturing capacity of the rest of the world to buy urgently needed medical goods from abroad during the hardest months of the pandemic. Preparing for future crisis like Covid-19 is extremely complex. Nobody knows which type of shock will come after Covid-19, which economic activities will be impacted, or what kind of goods will be needed to protect our citizens. Yet, any debate about the merits of re-shoring should be based on figures and not on narratives. This paper analyzes EU imports on more than 9,000 products and concludes that Europe should not build its resilience by the mandatory re-shoring of economic activities. That is the opposite of diversification. Besides, re-shoring will increase costs and hit citizens in the poorest countries the hardest. An economy that is served by multiple firms across multiple locations is more resilient to random shocks than one where goods are produced by fewer firms in the same location. While re-shoring may bring the illusion of control, in reality, the EU will be more vulnerable and dependent on fewer and larger companies. This is why globalization and the EU’s reliance on the rest of the world is what makes the EU more resilient.
Topic:
Globalization, International Political Economy, International Trade and Finance, and Economic Development
Political Geography:
Europe

8. Globalization Isn’t in Decline: It’s Changing

Author:
Erik van der Marel
Publication Date:
08-2020
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
Globalization isn’t in decline; it is simply changing. Although the COVID-19 crisis has seen a dramatic decline in goods trade, investments and the movement of people, a new type of globalization is emerging. This “new globalization” is based on digital services, research and development, data, ideas, and other intangibles. This development has been going on for a while and has evolved more rapidly after the previous global financial crisis (GFC) in 2008-9. For instance, the GFC caused digital services trade to significantly “de-link” from goods-related services trade. This pattern illustrates that the COVID-19 crisis will likely mark another break in trade patterns and that future growth in globalization will depend crucially on digital trade and cross-border exchange in intangibles.
Topic:
Globalization, International Political Economy, International Trade and Finance, Digital Economy, R&D, Data, and COVID-19
Political Geography:
Global Focus

9. Shifting into Digital Services: Does a Crisis Matter and for Who?

Author:
Erik van der Marel
Publication Date:
08-2020
Content Type:
Working Paper
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
How do trade patterns change after an external shock such as an economic crisis, and is this shift structural? This paper uses a Difference-in-Difference (DID) approach to investigate whether services trade became more digital after the Global Financial Crisis (GFC) in 2008. It finds that the GFC formed an independent break from the previous period that turned services trade to become more digital – although there are signs that this somewhat already happened before 2008. Software-intense services such as R&D services, information services, computer services and charges for Intellectual Property Rights (IPR) saw on average a 6 percent higher increase in global exports compared to other non-digital sectors post-2008. Countries with higher internet usage and with already comparative advantage in these sectors saw this higher increase in digital trade. More striking is that in particular upper-middle income countries and countries with high manufacturing activity saw the sharpest shift into digital services trade after the GFC. These significant outcomes forecast a direction into which patterns of services trade are likely to turn after the current economic crisis resulting from COVID-19.
Topic:
International Political Economy, International Trade and Finance, Digital Economy, Global Financial Crisis, Exports, and Digital Policy
Political Geography:
Global Focus

10. Ambition on Unstable Foundations: The UK Trade Policy Readiness Assessment 2020

Author:
David Henig
Publication Date:
07-2020
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
The UK’s road to an independent trade policy has reached a critical moment. Within the next six months Free Trade Agreements (FTAs) containing long term arrangements and rules could be finalised with the United States and / or European Union, who between them constitute around 65% of UK trade. Talks have also started with Japan, Australia, and New Zealand. Our updated Trade Policy Readiness Assessment suggests that the UK government is not fully ready for this activity. On a scale where 1 suggests no work being undertaken, 3 a stable position to begin talks, and 5 successful delivery, we find problems in seeking consensus, expanding priorities beyond the traditional tariff reduction, and putting in place a realistic implementation plan.
Topic:
International Political Economy, International Trade and Finance, Treaties and Agreements, Free Trade, and Trade
Political Geography:
United Kingdom