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  • Author: Chad P. Bown
  • Publication Date: 05-2020
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: While the public was transfixed by the Trump administration’s policies alleging that imports were a threat to America’s national security during 2017–20, there was a concomitant and more quiet US policy shift on the export side. Addressing the national security threat presented by exports posed different economic and institutional challenges from those associated with import policy, including the acknowledgment that export controls for legitimate national security reasons can be the first-best policy to confront the problem at its source. Yet, export controls could also be misused as a beggar-thy-neighbor policy to redistribute economic well-being across countries, even from one ally to another. This paper describes how US export control policy evolved over 2017–20, as well as the international institutions—first the Coordinating Committee for Multilateral Export Controls (COCOM), then the Wassenaar Arrangement—historically tasked with multilateralizing US export restrictions used to protect national security. With the potential for US export control policy to brush up more frequently against WTO rules designed to limit the use of export restrictions, the paper also highlights new challenges for the WTO’s system of resolving trade disputes. Overall, a US failure to strike the right balance for its export control policy would result in it being ineffective at addressing national security risks, costly for the economy, and problematic for trade and diplomatic relations.
  • Topic: Economics, Government, National Security, Exports, Trade
  • Political Geography: North America, United States of America
  • Author: Olivier Jeanne
  • Publication Date: 01-2020
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: In theory, tariffs are partially offset by a currency appreciation in the tariff-imposing country or by a depreciation in the country on which the tariff is imposed. Based on a calibrated model, this paper finds that US tariffs imposed in 2018 should not have had a large impact on the dollar but may have significantly depreciated the renminbi. This prediction is consistent with a high-frequency event analysis looking at the impact of tariff-related news on the dollar and the renminbi. Tariff-related news explains about one-third of the renminbi depreciation observed in 2018.
  • Topic: Economics, Tariffs, Exchange Rate Policy, Currency
  • Political Geography: North America, United States of America
  • Author: Joseph E. Gagnon, Olivier Jeanne
  • Publication Date: 01-2020
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: This paper shows that the scope for bond yields to fall below zero is strictly limited by market expectations about how far below zero central banks are willing to set their short-term policy rates. If a central bank communicates a credible commitment to keeping its policy rate above a given level under all circumstances, then bond yields must be higher than that level. This result holds true even in a model in which central banks are able to depress the term premium in bond yields below zero via large-scale purchases of long-term bonds, also known as quantitative easing (QE). QE becomes less effective as bond yields approach their lower bound.
  • Topic: Economics, Finance, Central Bank, Global Bond Market
  • Political Geography: Global Focus
  • Author: Chad P. Bown, Aksel Erbahar, Maurizio Zanardi
  • Publication Date: 02-2020
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: This paper examines how trade protection is affected by changes in the value-added content of production arising through global value chains (GVCs). Exploiting a new set of World Trade Organization (WTO) rules adopted in 1995 that impose an exogenously timed requirement for countries to reevaluate their previously imposed trade protection, the authors adopt an instrumental variables strategy and identify the causal effect of GVC integration on the likelihood that a trade barrier is removed. Using a newly constructed dataset of protection removal decisions involving 10 countries, 41 trading partners, and 18 industries over 1995–2013, they find that bilateral industry-specific domestic value-added growth in foreign production significantly raises the probability of removing a duty. The results are not limited to imports from China but are only found for the protection decisions of high-income countries. Back-of-the-envelope calculations indicate that rapid GVC growth in the 2000s freed almost a third of the trade flows subject to the most common temporary restrictions (i.e., antidumping) applied by high-income countries in 2006.
  • Topic: Economics, International Trade and Finance, Global Markets, Finance, Trade
  • Political Geography: Global Focus
  • Author: David Reifschneider, David Wilcox
  • Publication Date: 03-2020
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: If the Federal Reserve does not decisively change the way it conducts monetary policy, it will probably not be capable of fighting recessions in the future as effectively as it fought them in the past. This reality helped motivate the Fed to undertake the policy framework review in which it is currently engaged. Researchers have suggested many steps the Fed could take to improve its recession-fighting ability; however, no consensus has emerged as to which of these steps would be both practical and maximally effective. This paper aims to fill that gap. It recommends that the Fed commit as soon as possible to a new approach for fighting recessions, involving two key elements. First, the Fed should commit that whenever it runs out of room to cut the federal funds rate further, it will leave the rate at its minimum level until the labor market recovers and inflation returns to 2 percent. Second, the Fed should commit that under the same circumstances, it will begin to purchase longer-term assets in volume and will continue such purchases until the labor market recovers. If the forces driving the next recession are not unusually severe, this framework might allow the Fed to be as effective at fighting that recession as it was in the past. If the next recession is more severe, however, the Fed will probably run out of ammunition even if it takes the two steps recommended here. Therefore, both monetary and fiscal policymakers should consider yet other steps they could take to enhance their ability to fight future recessions.
  • Topic: Economics, Monetary Policy, Federal Reserve
  • Political Geography: North America, Global Focus, United States of America
  • Author: Chad P. Bown, Soumaya Keynes
  • Publication Date: 03-2020
  • Content Type: Working Paper
  • Institution: Peterson Institute for International Economics
  • Abstract: On December 10, 2019, the World Trade Organization’s (WTO) 25-year-old system of resolving disputes broke down. This paper explains why. It describes the dysfunctional system that preceded the WTO, when the United States dealt with politically troublesome imports by using voluntary export restraints and increasingly resorted to the “aggressively unilateral” Section 301 policy to resolve trade concerns. The WTO was a compromise between the rest of the world and the United States, whereby the latter accepted some constraints with the expectation that the new system of binding dispute settlement would serve its interests. But although the creation of the WTO resolved some concerns about American unilateralism in the short term, its system of handling disputes turned out to be politically unsustainable.
  • Topic: Economics, World Trade Organization, Trade, Donald Trump
  • Political Geography: North America, United States of America
  • Author: Angela Kane, Noah Mayhew
  • Publication Date: 01-2020
  • Content Type: Working Paper
  • Institution: Institute for Development and Peace
  • Abstract: Many consider the Reagan-Gorbachev prin- ciple that “nuclear war cannot be won and must never be fought” (Joint Soviet-United States Statement 1985) to be the clarion call for arms control. With this, US and Soviet leaders put words to the fundamental under- standing that arms control was sacrosanct in the context of other, unrelated issues in inter- national security. In 2020, we live in a different reality where arms control by some experts has been reduced to “nuclear identity politics” (Ford 2020) while others claim that it is “practical- ly exhausted” (Yermakov 2020). Disconcert- ing as these sentiments may be, they contain a kernel of truth. Arms control in 2020 is still oriented to realities of the past. But if the arms race spirals into full force, it is humans who will be the losers. Hence, it is unhelp- ful to dismiss arms control as an obsolete manifestation of Cold War nightmares. But it is time for an update to address new global challenges, in particular quickly evolving geo- political realities and emerging technologies. Furthermore, the silos in the debate on arms control need to be overcome.
  • Topic: Arms Control and Proliferation, Diplomacy, Nuclear Weapons, Military Strategy, Military Affairs
  • Political Geography: Global Focus
  • Author: Jana Herold
  • Publication Date: 01-2020
  • Content Type: Working Paper
  • Institution: Institute for Development and Peace
  • Abstract: The support of agricultural value chains has become an important approach in German and international development cooperation, not only to promote the economic development of a country but also to contribute to poverty reduction and food security by integrating smallholder farmers into value chains. In consequence, this approach can address a number of goals of the Agenda 2030 for sustainable development. While promoting value chains has great potential to advance sustainable development, it can also have negative effects, particularly for poor and vulnerable population groups. In order for these population groups to be able to benefit from value chain support, they need targeted financial and technical support and bridging assistance. Therefore, the approach should primarily aim at poverty reduction, but also at improving food security, empowering women and sustainable natural resource management. The main challenges of the value chain approach are insufficient access to agricultural inputs, markets and agricultural credits and the lack of entrepreneurial know-how for market-oriented production. Overall, the INEF research on agricultural value chains shows that their promotion should always start with primary production, as this is the basis for any further added value. However, the land use rights of the population eligible for support, especially women, should be clarified before any investment is made. Another critical point that any support for value chains should take into account is a country's physical infrastructure. It is necessary to connect both primary production and processing to markets. The integration of smallholder farmers into value chains is particularly viable via primary production. In order to include resource-poor farmers into value chains as well, these should be actively supported at the beginning of the project, among other things through training in market-oriented production. Furthermore, access to financial services and bridging assistance as well as to agricultural inputs is of key importance, especially at the beginning of the growing season, and particularly when market-oriented production is started for the first time. Access to credits can be facilitated by organising in cooperatives. Furthermore, this form of organisation makes it possible to bundle resources and strengthen negotiating power vis- à-vis buyers. In order to ensure that smallholder farmers can continue to supply themselves with food, especially at the start of operations, a sole focus on cash crops should be avoided and instead healthy staple foods should also be promoted. To support sustainable production, the support of value chains should always include natural resource management measures. This can increase productivity and, compared to previous practice, at the same time achieve a more ecologically sustainable cultivation of the land. In this context, secured land use rights, especially for women, provide additional incentives for farmers to invest in their fields. The studies also show that the processing of local agricultural products and commercially harvested products offers income-generating activities especially for women. In this context, locally adapted partial mechanisation is important in order to increase production efficiency without displacing women from further processing.
  • Topic: Security, Agriculture, Natural Resources, Food Security
  • Political Geography: Global Focus
  • Author: Laura Einhorn
  • Publication Date: 02-2020
  • Content Type: Working Paper
  • Institution: Max Planck Institute for the Study of Societies
  • Abstract: Studies from various disciplines show that including more meat-free dishes in our diets benefits our environment and our health while also promoting animal welfare. However, little is known about what encourages the adoption of more meat-free meal choices into our everyday diets. This paper focuses on the role of normative social influence on food choice as a potential answer to this question. In a real-world setting and based on the combination of a field and a survey experiment in seven German university dining halls, I analyze the impact of social norms on meat consumption in a single meal choice situation. I distinguish between descriptive and injunctive norms as well as between remote and direct norms. In a first step, descriptive and injunctive remote norm message interventions promoting a vegetarian diet were implemented. In a second step, the influence of direct social norms, i.e., the influence of vegetarian peers on non-vegetarians’ meal choice, was assessed. I find that neither type of remote eating norm influences food choice, while direct normative influence leads to con- vergence towards vegetarian meal choices in a university setting. I summarize the implica- tions of these findings, discuss their limitations, and point to directions for future research.
  • Topic: Food, Culture, Academia, Dietary Habits
  • Political Geography: Europe, Germany, Central Europe
  • Author: Tobias Arbogast
  • Publication Date: 04-2020
  • Content Type: Working Paper
  • Institution: Max Planck Institute for the Study of Societies
  • Abstract: This paper examines the ownership structure of eurozone public debt and the distribu- tional consequences thereof. Through both a comparative perspective and an explorative case study of Italy, this paper asks two research questions. Firstly, it asks who holds gov- ernment debt in Spain, France, Germany, and Italy. I focus in on Italy to provide, to the author’s knowledge, the first highly disaggregated view of the holding structure of public debt. Secondly, for Italy I study distributional effects by examining who benefits from the interest received on government debt. This is accomplished through an investigation of the various stakeholders associated with public debt. Results indicate that most of the public debt is held by private and public financial institutions but rarely directly by households. Both direct and indirect beneficiaries of the interest received on government bonds in Italy turn out to be largely wealthy households, reflecting the unequal ownership of wealth more generally. However, prominent public financial institutions are also significant beneficiaries, which likely ameliorates a possible regressive distributional effect of the public debt hold- ing structure. The paper discusses the results with an eye on inequality and contributes to further study of the political economy of public debt.
  • Topic: Debt, Inequality, Financial Institutions , Public Debt
  • Political Geography: France, Germany, Spain, Italy