Search

Begin New Search Topic Economics Content Type Policy Brief

1. Promoting diaspora investment in fragile settings: The case of Somalia

Author:
Guido Lanfranchi
Publication Date:
08-2023
Content Type:
Policy Brief
Institution:
Clingendael Netherlands Institute of International Relations
Abstract:
This policy brief analyses the extent to which diaspora investment can support economic development and livelihoods, with a particular focus on fragile settings. Using the case study of Somalia, the brief explores some of the main advantages and risks associated with this tool. On the one hand, diaspora investment can channel finance into productive activities in the diaspora’s country of origin, supporting the creation of revenue streams, while also generating returns for diaspora investors. On the other hand, particularly in fragile settings, these investments can also undermine social cohesion and even increase the likelihood of violent conflict, especially if they are channelled along identity lines. On the basis of this analysis, the brief offers the following recommendations to donor governments interested in promoting diaspora investment in Somalia and beyond: (i) to ensure effectiveness, donors should gather comprehensive, in-depth data on the needs and preferences of both potential investors in the diaspora and investees in the country of origin; (ii) to avoid exacerbating tensions and conflict, donors should be as inclusive and transparent as possible in their engagement with stakeholders, most notably in the selection of beneficiaries; (iii) any efforts to promote diaspora investment in fragile settings should be grounded in a thorough understanding of the specific context in which they are implemented, in order to understand both the economic and political implications of such investment.
Topic:
Economics, Politics, Diaspora, Investment, and Fragility
Political Geography:
Africa and Somalia

2. Power and potential: The economics of Egyptian construction and ICT

Author:
Matteo Colombo
Publication Date:
05-2023
Content Type:
Policy Brief
Institution:
Clingendael Netherlands Institute of International Relations
Abstract:
Young Egyptians’ dissatisfaction with their employment prospects was a key driver of protests in 2011 and 2013. Since then, the country’s political authorities have worked hard to create job opportunities for young Egyptians by boosting growth in the construction sector (infrastructure and public works), among other things. Since the sector also generates substantial revenues for the country’s power elite, this has been a win-win strategy in the short-term. But overreliance on the construction sector has also created too many informal and unstable jobs that are a poor match for Egypt’s many well-educated graduates. Cairo’s growth strategy has not addressed some of the country’s long-standing economic problems, such as informality and a low overall employment rate. Giving the country’s promising ICT sector a boost similar to that of the construction sector to address such deficiencies and anticipate a looming debt crisis requires a paradigm shift with two elements. First, a deal between Egypt’s political authorities and the power elite that buys time in exchange for future rents. Second, facilitation of private sector dynamism through regulatory encouragement and public seed funding for new business activity.
Topic:
Development, Economics, Employment, and Construction
Political Geography:
Middle East and Egypt

3. Why the proposed Brussels buyers club to procure critical minerals is a bad idea

Author:
Cullen Hendrix
Publication Date:
05-2023
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Concerned about critical mineral supply chains and its own strategic vulnerabilities, the European Union is advancing a buyers club to procure minerals critical to the clean energy transition, such as bauxite, cobalt, lithium, and nickel. The European Union is deeply dependent on imports of both raw and processed critical minerals and materials and thus highly exposed to global price volatility. The door appears to be open for the United States or other EU trading partners and like-minded countries to join this club. Decarbonization is not the only impetus behind the proposed Brussels buyers club. Both the European Union and United States view China’s dominance of critical mineral supply chains as a national security issue, because these minerals are key inputs to modern military technology. Hendrix agrees that supply chains for critical minerals desperately need widening to meet projected global demand and tackle climate change mitigation, but he warns that a purchasers club would not be a step in the right direction. A buyers club would be prone to free riding, set up distributive conflicts within the European Union, and reduce the share of climate mitigation benefits accruing to critical mineral–producing countries, many of which are developing and middle-income economies.
Topic:
Economics, National Security, European Union, Supply Chains, and Minerals
Political Geography:
China and Europe

4. Can the World Trade Organization be saved? Should it?

Author:
Alan Wm. Wolff
Publication Date:
05-2023
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
Heads of state, trade ministers, and academics have repeatedly called for reforming the World Trade Organization (WTO), the institution charged with the stewardship of the global trading system. The durability and worth of the WTO are being increasingly questioned despite the fact that by almost all objective measures, it has been a great success, with world trade growing much faster than global GDP over the last 75 years. However, past success does not guarantee future performance. This Policy Brief examines the institution’s most serious defects and the multitude of challenges it faces. It suggests the institution needs to evolve to reach broad-based international trade agreements, adding much needed new rules to the world trade rulebook and developing effective means to settle disputes that would render the rules of the system enforceable once again.
Topic:
Economics, International Trade and Finance, Treaties and Agreements, and World Trade Organization
Political Geography:
Global Focus

5. The international tax agreement of 2021: Why it’s needed, what it does, and what comes next?

Author:
Kimberly Clausing
Publication Date:
04-2023
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
In 2021, more than 135 jurisdictions agreed on transformative new international tax rules that would establish a minimum tax rate of 15 percent on multinational corporate income regardless of where it was reported. In December 2022, the European Union unanimously moved forward to implement this minimum tax, and other countries, including South Korea, Japan, Australia, Canada, and the United Kingdom, are also either implementing the tax or taking substantial steps toward implementation. In tandem, the United States should also reform its international tax system and adopt a stronger minimum tax. While the future of the international agreement is uncertain, it has important implications for the ability of governments worldwide to create tax systems that are administrable, fair, and efficient. The agreement also demonstrates important guiding principles for the future of multilateral cooperation on global collective action problems, including efforts to protect public health from future pandemics, address nuclear proliferation, and resolve territorial conflicts. US progress on international tax reform would enhance much needed international cooperation on these issues.
Topic:
Economics, Treaties and Agreements, Reform, European Union, and Tax Systems
Political Geography:
Europe and Global Focus

6. Will China's impending overhaul of its financial regulatory system make a difference?

Author:
Martin Chorzempa and Nicolas Véron
Publication Date:
03-2023
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
China's reshuffle of its financial supervisory architecture announced in March, like previous changes, appears incremental rather than radical. It will not, however, resolve the main challenge hobbling China’s financial system, which is not linked to specific choices of supervisory architecture but rather to the unfinished transition from a state-directed to a market-based financial system and the way the Chinese Communist Party's pervasive role creates obstacles to good corporate governance of individual financial firms and to the independence of supervisory authorities. Too often, political authorities and sometimes the supervisors themselves intervene directly in financial firms’ decisions to allocate capital and credit, occasionally resulting in failures of risk control and risk management. The authors argue that Chinese reformers should aim at a clearer and more rigorous division of responsibilities, in which financial firms manage financial opportunities and risks, and supervisors are exclusively focused on their respective public policy mandates.
Topic:
Economics, Regulation, Finance, and Corporate Governance
Political Geography:
China and Asia

7. Building Resilience? The Cybersecurity, Economic & Trade Impacts of Cloud Immunity Requirements

Author:
Matthias Bauer
Publication Date:
03-2023
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
EU Member States should call on the EU’s Cybersecurity Agency (ENISA) and the European Commission to abandon immunity requirements in the proposed EU Cloud Certification Scheme (EUCS). With immunity requirements in the EUCS, the EU risks opening a Pandora’s box, paving the way for data localisation, foreign ownership restrictions, and local establishment requirements in digital industries globally leading to rising trade tensions. ENISA’s current proposal could increase policymakers’ appetite for data localisation in the EU. It would empower the European Commission and Member State authorities to exclude foreign businesses from domestic cloud services markets and set a dangerous precedent for any data-intensive sector. The list of “sectors of high criticality” could be logically extended to both existing services (e.g., financial services) and to new technologies and business models, such as IoT in the energy and healthcare sectors, and autonomous driving in the transport sector. Non-EU jurisdictions would be pressured to respond in kind. EUCS immunity requirements would increase cloud adopters’ exposure to cybersecurity risks. Data localisation often creates obstacles to an integrated management approach towards cybersecurity risks. Country of headquarter and foreign ownership restrictions in the proposed EUCS risk removing global frontier cybersecurity technologies from Member State markets. Excluding these and other EU and non-EU companies from EU Member States could result in a long-lasting security deficit of EU cloud adopters vis-à-vis organisations that are still able to use reliable and often best-practice cloud services offered by providers from outside EU Member States. Immunity requirements in the EUCS are discriminatory by design. They could provoke retaliatory measures by EU trading partners, either unilaterally or through WTO or bilateral FTA (e.g., UK-EU) Dispute Settlement. Local establishment requirements and foreign ownership restrictions would by design discriminate against foreign cloud providers. US-headquartered companies, which currently serve more than 75% of the EU market, would be most affected by EU immunity requirements.[1] Depending on US preferences and the scope of the proposed EUCS, the EU could be subject to retaliatory tariffs of up to USD 12 billion worth of EU goods exports or equivalent restrictions for EU services exports to the US. Other governments could lodge complaints via the WTO as well (e.g., Singapore, Japan, Canada and others, where cloud development is advancing rapidly). EU suppliers are currently in no position to manage a broad-based transition to cloud, and thus such requirements would delay significant efficiency and security gains that current foreign suppliers could offer. A blanket exclusion of non-EU cloud vendors would also likely undermine Europe’s objective to achieve a 75% cloud adoption rate for EU enterprises. Sensitive European businesses and public sector organisations would have to delay migration and make do with legacy systems for a very long time. Contrary to large countries, these negative impacts would be much more pronounced for smaller EU Member States, which lack the presence of large domestic incumbents and generally rely much more on an open international trading regime for digital services. ENISA’s cloud certification scheme should be limited to technical and transparency requirements. Immunity requirements for non-personal data should be addressed in bilateral initiatives such as the EU-US Trade and Technology Council (TTC) or agreements requiring a company that sought to offer services of the highest level of sensitivity to be headquartered in a country granted adequacy with EU data protection rules, or a country that is an adherent to the OECD’s Trusted Government Access principles, or (concerning the US) a participant in the upcoming Trans-Atlantic Data Privacy Framework. Excluding foreign companies from operating in the EU would have far-reaching consequences. If that is the intent, it should require a sound legal analysis and the decision should be taken through a formal legislative procedure at the EU level.
Topic:
Economics, Markets, European Union, Cybersecurity, Digital Economy, Trade, and Resilience
Political Geography:
Europe

8. The Economic Dividend of Competitiveness

Author:
Fredrik Erixon, Oscar Guinea, Philipp Lamprecht, Elena Sisto, and Erik van der Marel
Publication Date:
03-2023
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
In a world of technological and economic rivalry, the EU must devote increased attention to its competitiveness. Higher levels of competitiveness will help the EU build a more prosperous economy which will in turn produce innovation and resources to address the great challenges of our time. ECIPE published a study presenting a competitiveness compass with concrete policy recommendations that will improve EU’s competitiveness. These policy recommendations, once implemented, will bring tangible benefits to the EU economy in the form of higher levels of trade and productivity. This report presents five scenarios in which the EU pursues competitiveness policies that lead to higher economic growth.
Topic:
Economics, Science and Technology, European Union, Economic Growth, and Competition
Political Geography:
Europe

9. Building a Mature UK Trade Policy

Author:
David Henig
Publication Date:
03-2023
Content Type:
Policy Brief
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
Global Britain has not delivered according to the hopes expressed by supporters of leaving the EU. Trade with the rest of the world has not grown to make up for leaving a bloc with seamless trade, early Free Trade Agreements with Australia and New Zealand are of minor economic significance, and it is hard to discern much of a strategy beyond completing a few more similar deals. Meanwhile the world of trade policy is transformed since 2016, negatively. The US has essentially declared its national interests to be more important than global rules, while the EU wants to act unilaterally as the global regulator. In both, the climate crisis is being used as an excuse to reintroduce protectionist measures threatening economic damage and global stability. Expectations of what a UK outside of the EU could achieve were exaggerated, but nonetheless the country could be doing a lot better in its trade policy. There is no good reason for such tensions as exist with a broad range of frustrated stakeholders, the absence of clear purpose on UK strengths such as services, or the defensiveness that seemingly takes pride in secrecy and resistance to proper scrutiny. Adjustment time was inevitable, but six years should have been enough.
Topic:
Economics, European Union, Free Trade, and Trade Policy
Political Geography:
United Kingdom and Europe

10. The Regressive Nature of the U.S. Tariff Code: Origins and Implications

Author:
Lydia Cox
Publication Date:
06-2023
Content Type:
Policy Brief
Institution:
The Cato Institute
Abstract:
Tariffs are often thought of as taxes that fall uniformly across goods or industries. In reality, however, the U.S. tariff schedule is extremely complex—the modern‐​day tariff code comprises 4,394 pages of tariffs on 19,347 varieties of goods. As a result, there is a lot of variation in tariff rates, even within narrowly defined categories of goods. We study this complexity through the lens of a little‐​known but consequential pattern in the modern U.S. tariff schedule: tariff rates are systematically higher on low‐​value versions of goods relative to their high‐​value counterparts. For example, the tariff on a $400 handbag made of reptile leather is 5.3 percent, while the tariff on an $8 plastic‐​sided handbag is 16 percent. Through a comprehensive analysis of U.S. tariffs over the past 100 years, we show that this regressive pattern is, and has been, a systematic feature of tariffs for decades. Our findings are emblematic of a more fundamental feature of U.S. tariff policy: tariffs set to meet policy objectives of the past have persisted through vast changes in the economic landscape and, despite their historical origins, are still affecting consumers today.
Topic:
Economics, Tariffs, and Trade Policy
Political Geography:
North America and United States of America