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501. United States/European Union — WTO Sanctions

Publication Date:
02-2002
Content Type:
Policy Brief
Institution:
Oxford Analytica
Abstract:
US trade officials said last week that EU estimates of damages arising from US export subsidies were exaggerated. EU trade officials have asked the WTO to approve 4 billion dollars worth of trade sanctions against the United States, after the latter lost an appeal before the WTO on the tax treatment of foreign-source income — judged to be illegal export subsidies. Washington must amend its tax laws or face the prospect of retaliatory trade restrictions.
Topic:
Economics and International Trade and Finance
Political Geography:
United States, Europe, and Washington

502. Does a Switch of Budget Regimes Constrain Managerial Discretion? Evidence for Italian Public Enterprises' Investment

Author:
Elisabetta Bertero and Laura Rondi
Publication Date:
03-2002
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This study examines the effect of the hardening of the budget constraint on the investment behaviour of Italian state owned enterprises (SOEs). It carries out a natural experiment that exploits the 1987 shift of budget regimes due to the pressure of European Union economic policies on the Italian government.Drawing from the theory of capital market imperfections, we apply the empirical framework for the analysis of investment-cash flow sensitivity to a panel of state-owned manufacturing firms during the period 1977-93. We parallel state firms to Anglo-Saxon public corporations which, under separation of ownership and control, are afflicted by agency problems, managerial discretion, misallocation of free cash-flow and overinvestment. We argue that, under a soft budget constraint, state firms' managerial discretion and, in particular, collusion between managers and vote-seeking politicians, lead to wasteful investment.
Topic:
Economics and International Trade and Finance
Political Geography:
Europe and Italy

503. Hardening a Soft Budget Constraint Through 'Upward Devolution' to a Supranational Institution: The Case of Italian State-Owned Firms and the European Union

Author:
Elisabetta Bertero and Laura Rondi
Publication Date:
01-2002
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper contributes to the literature on the role of decentralization in hardening the budget constraint of public enterprises. Following Qian and Roland the study adopts a 'federalist' approach. However, it interprets federalism as the upward devolution of domestic economic policies to a supranational authority and examines its role in disciplining public enterprises operating in a soft budget regime. The methodology is a case study of the shift in budget regime in Italy in the late 1980s. The study shows that a determinant role in driving this shift was played by European economic policies. The discipline imposed by participation in the EMS, the Single Market Programme and, later, the requirements to enter the EMU pushed the Italian government toward a much tougher approach to its budget deficit.
Topic:
Economics, Government, and International Trade and Finance
Political Geography:
Europe

504. Building a Transatlantic Securities Market

Author:
Benn Steil
Publication Date:
12-2002
Content Type:
Working Paper
Institution:
Council on Foreign Relations
Abstract:
This report aims to jump-start the integration of the US and EU securities markets through a mutual recognition agreement on transatlantic exchange access. Under this agreement, securities exchanges on each side of the Atlantic would be permitted to provide direct electronic access to brokers and institutional investors on the other side, for the purpose of trading listed equities and derivatives based on equities. We argue that this initiative will reduce trading costs, increase investment returns, lower the cost of capital, and increase economic growth on both sides of the Atlantic. The success of such an initiative will, over time, encourage its expansion to cover all forms of debt securities, primary issues, and other national markets.
Topic:
International Trade and Finance
Political Geography:
United States and Europe

505. The Economic Impact of Enlargement on the European Economy: Problems and Perspectives

Author:
Paul Brenton
Publication Date:
10-2002
Content Type:
Working Paper
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
Much of the attention on the economic aspects of the forthcoming enlargement of the EU have concentrated upon the high-profile issues which are linked to the level of relative economic development in the acceding countries; the perceived threat of large-scale migration and the budgetary costs arising from implementation of EU agricultural and regional policies. This paper briefly discusses that these are not insurmountable problems and stresses that the main difficulties from the next enlargement may arise from the effective inclusion of the acceding countries into the Single Market, the microeconomic hub of the EU. We discuss that the process of regulatory harmonisation will become more difficult in an EU of 25 or more members, which entails greater emphasis on the principle of mutual recognition as the main tool for ensuring freedom of movement of goods and services. However, mutual recognition has its limits and is likely to be less effective the more diverse the countries involved.
Topic:
Economics and International Trade and Finance
Political Geography:
Europe

506. Who Needs Foreign Banks?

Author:
Daniel Gros
Publication Date:
09-2002
Content Type:
Working Paper
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
This paper shows that countries with weak banking system and fiscal institutions, might benefit from the presence of foreign banks, which can constitute a commitment and transparency device. Foreign banks can also reduce the probability of self-fulfilling speculative attacks. A strong presence of foreign banks can make a currency peg feasible in the first place by rendering it more resistant to speculative attacks. The European experience is instructive in this respect. In all of the candidate countries from Central and Eastern Europe (CEEC) the banking system is now dominated by foreign banks. This is now taken for granted, but it is unusual if one looks at the existing EU-15 members, where foreign banks play a marginal role in even the smallest economies.
Topic:
Economics and International Trade and Finance
Political Geography:
Europe

507. Interdependent Growth in the EU: The Role of Trade

Author:
María Garcia-Vega and José A. Herce
Publication Date:
08-2002
Content Type:
Working Paper
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
After properly modelling growth externalities and using spatial econometric techniques we investigate whether economic integration promotes interdependent growth among countries. We conclude that this has been indeed the case for advanced OECD countries and that, for those countries belonging to the EU, through successive enlargements, the effect has been even stronger. More precisely, if every (trade) partner of a given country experiences an extra growth of 1 percentage point, this economy will profit from an extra 0.5 point, and if this country belongs to the EU it will have an additional increase of its rate of growth of 0.2 points. Both figures can be interpreted as growth externalities with the latter suggesting that an integration process like the one followed by the EU has an (positive) effect on growth.
Topic:
Economics and International Trade and Finance
Political Geography:
Europe

508. Making EU Trade Agreements Work: The Role of Rules of Origin

Author:
Paul Brenton and Miriam Manchin
Publication Date:
03-2002
Content Type:
Working Paper
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
A key element of the EU's free trade and preferential trade agreements is the extent to which they deliver improved market access and so contribute to the EUs foreign policy objectives towards developing countries and neighbouring countries in Europe, including the countries of the Balkans. Previous preferential trade schemes have been ineffective in delivering improved access to the EU market. The main reason for this is probably the very restrictive rules of origin that the EU imposes, coupled with the costs of proving consistency with these rules. If the EU wants the 'Everything but Arms' agreement and free trade agreements with countries in the Balkans to generate substantial improvements in access to the EU market for products from these countries then it will have to reconsider the current rules of origin and implement less restrictive rules backed upon by a careful safeguards policy.
Topic:
Foreign Policy, Economics, Government, Human Rights, International Trade and Finance, Migration, and Political Economy
Political Geography:
Europe and Balkans

509. The Development of European Citizenship and its Relevance to the Integration of Refugees

Author:
Joanna Apap
Publication Date:
01-2002
Content Type:
Working Paper
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
Achieving an integrated Europe involves political and social unity as much as economic integration. Thus, the issue of European citizenship is central to the debate about European integration. Union citizenship needs to be distinguished from national citizen ship. Every citizen of the Union enjoys a first circle of nationality rights within a member state and a second circle of new rights enjoyed in any member state of the EU. The presence of immigrants in Europe also raises wider questions for government policy in the field of citizenship. There are various issues that arise in the European context with respect to the boundaries of citizenship. One of the main questions in this regard is the extent to which the division between European Union citizens and third country nationals will continue to prevail.
Topic:
Economics, Government, Human Rights, International Trade and Finance, Migration, and Political Economy
Political Geography:
Europe

510. Home Bias, Transactions Costs, And Prospects For The Euro: A More Detailed Analysis

Author:
Catherine L. Mann and Ellen E. Meade
Publication Date:
07-2002
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper brings together the literature on determination of home bias in equity holdings and the portfolio balance model of exchange rates to consider whether the dollar might be affected by a change in transactions costs that alters international portfolio allocations. Our empirical findings lend support to the view that transactions costs have a significant influence on US portfolio holdings, even after accounting for float market share. In addition, new survey evidence on the equity holdings of European firms indicates home bias for European investors, and points to a reduction in the magnitude of this home bias since 1997.
Topic:
Economics and International Trade and Finance
Political Geography:
United States and Europe