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11. China’s National ETS and the Power Market: How the ETS Can Achieve Significant Emission Reductions

Author:
Yan Qin, Alistair Ritchie, and Yi Chen
Publication Date:
10-2022
Content Type:
Working Paper
Institution:
Asia Society
Abstract:
China’s newly established national emissions trading system (ETS) is intended to serve as the primary tool in assisting China in meeting its "dual carbon" target of CO2 peaking before 2030 and carbon neutrality by 2060. It is the largest ETS globally, accounting for 40 percent of China's CO2 emissions and more than 10 percent of worldwide emissions, with the potential to double its current size once industrial sectors are added. In its initial phase, it covers the power sector, particularly more than 2,000 enterprises operating coal- and gas-fired power stations. However, some critical challenges need to be overcome before the ETS can fulfill its emissions reduction potential in the power sector by driving fuel switching away from coal and toward renewables and low-carbon fuels through the carbon price. China's National ETS and The Power Market: How the ETS Can Achieve Significant Emission Reductions examines these challenges in relation to both the ETS itself and its interactions with the power market. It also proposes a policy pathway to address these challenges and unlock their potential to drive significant and cost-effective CO2 emissions reductions in the power sector and raise large amounts of revenue to fund the transition to carbon neutrality across the expanding ETS sectors.
Topic:
Climate Change, Markets, Carbon Emissions, and Energy
Political Geography:
China and Asia

12. Current Capabilities and Future Potential of African Textile & Apparel Value Chains: Focus on West Africa

Author:
Lindsay Whitfield
Publication Date:
12-2022
Content Type:
Working Paper
Institution:
Centre for Business and Development Studies (CBDS), Copenhagen Business School
Abstract:
African countries export very little of what is traded within apparel global supply chains and across the African continent, except in the case of cotton, but import a large amount of what the rest of the world produces. Africa’s fabric and apparel production is biased towards cotton, especially in yarn and fabric production, with little participation in production and export of man-made fibre, yarn and fabric. Most apparel exports from the continent come from North Africa, followed far behind by East and Southern Africa. Apparel exports from the African continent go largely to Europe and then North America. Currently, only 8% of Africa’s textile and apparel imports are supplied by other African suppliers. Southern Africa and especially South Africa is the largest supplier of intra-African imports of apparel. Inputs and intermediate textile products account for a significant share of intra-African textile and apparel imports in Southern, East and North Africa. Notably, under the free trade area in the Southern African Development Community, trade in clothes and home textiles increased, but trade in fibre, yarn and fabric did not significantly change. Overall, intra-African sources still account for a small share of these countries’ overall supplies of imported inputs, which indicates a substantial untapped potential. West Africa produces about 60% of Africa’s cotton but accounts for the bulk of its exports outside the continent, accounting for about 5% of the world cotton production and about 15% of world exportation. However, West African countries have little modern production capabilities in spinning, weaving, knitting or dyeing. A significant portion of the population in West Africa buys wax print cloth and has their clothes tailor made. The majority of the greige fabric used by the wax printing companies in Cote d’Ivoire and Ghana, which supply the rest of the sub-region, is imported from Asia. Only Ghana has industrial or mass apparel production for export, and it is small, comprised largely of two firms that started exporting in the late 2010s with foreign investment. Ghana and Cote d’Ivoire have some small-scale local firms producing for the domestic market, but most of these firms do not have the capabilities to grow into large firms that could produce using industrial methods. The governments of Togo, Cote d’Ivoire and Ghana are adopting new strategies to develop apparel exports in their countries. However, only the Togolese government has started implementing its strategy, which centres on an eco-industrial park and vertically integrated knit factories established through a public-private partnership with Arise Integrated Industrial Platform. Given the disruptions to globalized apparel supply chains during the Covid-19 pandemic and the resulting increased cost of shipping, buyers in the US and Europe are looking for shorter supply chains that are more resilient in the face of global shocks. Localization and regionalization of apparel production closer to end-markets are attractive to global apparel brands and retailers. However, global apparel buyers are no longer concerned just with cost, quality and speed to market when making sourcing decisions. They now must balance those criteria with sustainability goals. CBDS Working Paper 2022/3 5 Given the global trends outlined in this report that will reshape textile and apparel global supply chains over the next five to ten years, the textile and apparel industry should be reconceived as a sunrise and not a sunset industry. New fibre and recycling technologies are in a phase of fast innovation to produce more sustainable and circular man-made fibres. The raw material for clothing production will become manufactured fibres that rely on advancements in chemical technologies and biofabrication. Virgin cotton will be of less importance, as it is replaced by natural fibres that are less resource intensive and by manmade cellulosic fibres that feel like cotton. In the transition stage, cotton will move to organic and regenerative as well as become blended with other natural and man-made cellulosic fibres. Future fibres will have a high technology content and require licensing technology, both man-made cellulosic fibres and the new wave of synthetics that seek to replace polymers. African countries have the opportunity to build sustainable textile and apparel industries from the start, which can give them a competitive advantage as apparel-supplying countries in South and Southeast Asia do not (yet) have ‘green’ industries. The cost of renewable energy technology is falling and renewable energy technologies to power industries are evolving. New fibre and recycling technologies also offer a window of opportunity to leapfrog into the next generation of technologies. Taking advantage of this window of opportunity requires that the African government look forward and not backward, that they think in terms of building new and not rebuilding the existing textile industries. African textile and apparel domestic and regional value chains should be based on mastering the next generation of fibre production and recycling technologies. Such a strategy involves taking risks to invest in building the knowledge and skills required for this new technology, but not taking risks will mean that African countries miss the opportunity to move to the technological frontier. Furthermore, African countries can go beyond becoming competitive in the new textile and apparel global supply chains but also use them to drive broader green industrialization processes. Such a strategy also involves building diversified regional textile bases as well as regional value chains, which can harness the efforts of more economies and larger market demand as well as create a stronger platform of capabilities with which to engage in global export markets. AfCFTA negotiations on the rules of origin for the textile and apparel sector are on-going, and the AfCFA Council of Ministers responsible for trade is still working on reaching a consensus. The evidence assembled in this report shows that the textile production capabilities in the major apparel producing and exporting countries in Sub-Saharan Africa are not significant enough to support trade under a double transformation rule. Therefore, major investments in spinning, knitting, weaving, dyeing, and finishing are required before countries could take advantage of the preferential market access for textile and apparel in the AfCFTA with a double transformation rule. The quantitative and qualitative evidence presented in this report on the impact of the double transformation rule under SADC indicates that it did not encourage new investments in textile production, and thus regional integration was limited by existing textile production capabilities. CBDS Working Paper 2022/3 6 Trade rules are not strong enough incentives to encourage investments in textile production. In general, trade policy is a rather blunt instrument for addressing a task that requires a range of more sophisticated industrial policy tools. Instead of relying solely on trade policy tools, governments should design and develop industrial policies that actively support the learning processes of local firms. Part of the industrial policy tool kit to support local firm learning is attracting the ‘right kind of foreign direct investment’ and assisting local firms in leveraging technology from these foreign firms. Governments also need to make public investments in creating the industry-specific knowledge and skills for textile and apparel, which includes building the foundation for moving into new fiber and recycling technologies through investment in basic chemistry education and supporting partnerships in research between local and foreign firms and researchers.
Topic:
Markets, Business, Trade, Supply Chains, Value Chains, and Textile Industry
Political Geography:
Africa and West Africa

13. Microchips and Semiconductors: The U.S. Seeks Autonomy

Author:
Andrzej Dąbrowski
Publication Date:
11-2022
Content Type:
Working Paper
Institution:
The Polish Institute of International Affairs
Abstract:
The United States has turned to support of the domestic microchip industry in response to the increased risk of Chinese aggression against Taiwan, one of the leading producers, as well as to address disruptions in supply chains caused by the COVID-19 pandemic. A law on this passed with bipartisan consent and is intended to help finance a more resilient American sector towards global changes in manufacturing these components. Thanks to the CHIPS Act, the U.S. can reduce its dependence on microchip imports and undermine China’s ability to dominate the market.
Topic:
Markets, Science and Technology, Autonomy, Industry, Supply Chains, Semiconductors, and Microchips
Political Geography:
China, Asia, North America, and United States of America

14. Brothers in arms: The value of coalitions in sanctions regimes

Author:
Sonali Chowdhry, Julian Hinz, Katrin Kamin, and Joschka Wanner
Publication Date:
10-2022
Content Type:
Working Paper
Institution:
Kiel Institute for the World Economy (IfW)
Abstract:
This paper examines the impact of coalitions on the economic costs of the 2012 Iran and 2014 Russia sanctions. By estimating and simulating a quantitative general equilibrium trade model under different coalition set-ups, we (i) dissect welfare losses for sanction-senders and target; (ii) compare prospective coalition partners and; (iii) provide bounds for the sanctions potential — the maximum welfare change attainable — when sanctions are scaled vertically, i.e. across sectors up to an embargo, or horizontally, i.e. across countries up to a global regime. To gauge the significance of simulation outcomes, we implement a Bayesian bootstrap procedure that generates confidence bands. We find that the implemented measures against Iran and Russia inflicted considerable economic harm, yielding 32 – 37% of the vertical sanctions potential. Our key finding is that coalitions lower the average welfare loss incurred from sanctions relative to unilateral implementation. They also increase the welfare loss imposed on Iran and Russia. Adding China to the coalition further amplifies the welfare loss by 79% for Iran and 22% for Russia. Finally, we quantify transfers that would equalize losses across coalition members. These hypothetical transfers can be seen as a sanctions-equivalent of NATO spending goals and provide a measure of the relative burden borne by coalition countries.
Topic:
Globalization, International Trade and Finance, Markets, Sanctions, Alliance, and Embargo
Political Geography:
Russia, China, Europe, Asia, North America, and United States of America

15. The Effects of a Private-Sector-Driven Smallholder Support Programme on Productivity, Market Participation and Food and Nutrition Security: Evidence of a Nucleus-Outgrower Scheme from Zambia

Author:
Tekalign Gutu Sakketa, Raoul Herrmann, Chewe Nkonde, Mwelwa Lukonde, and Michael Brüntrup
Publication Date:
01-2022
Content Type:
Working Paper
Institution:
German Institute of Development and Sustainability (IDOS)
Abstract:
Nucleus-outgrower schemes (NOSs) are supposed to be a particularly effective private-sector mechanism to support smallholder farmers and contribute towards mitigating the problematic aspects of pure large-scale agricultural investments. This discussion paper uses panel household survey data collected in two rounds in Zambia to analyse some agro-ecological and socio-economic impacts of the outgrower programme of one of the largest agricultural investments in Zambia: Amatheon Agri Zambia (AAZ) Limited. The descriptive results show that the type of participation in the programme varies across participants and components, with most participating in trainings. Econometric results suggest the following key findings. First, although the overall impact of the AAZ outgrower programme on the uptake of conservation agriculture practices is robust and promising, impacts on the adoption of other agricultural technologies is less obvious and the effect depends on the type of support provided. Second, the programme has had a significant impact on maize productivity promoted in the initial phase but not on the other crops – mainly oilseeds – promoted later. Third, the initially less productive farmers seem to benefit slightly more than already better performing ones. Fourth, although the impact on overall household security was insignificant, there is some suggestive evidence (although the effect is weak) that the programme has a positive effect on improving women’s uptake of micronutrients. Finally, our findings show that the three components of the programme (trainings, seed loans and output purchases) have different effects on the adoption of sustainable agricultural practices and productivity, and to some extent on food security. Overall, the results suggest that NOSs, with all their risks, can play a role in the adoption of sustainable agricultural practices, improving farm-level agricultural technologies, providing input credit, and thereby improving productivity and smallholder livelihoods. However, this is not automatically the case, as it crucially depends on the design and management of the project; the availability of good policies and institutions governing the rules of operation; the types of crops promoted; the duration of the project; and the political commitment of host countries, among others.
Topic:
Markets, Food Security, Participation, Farming, and Productivity
Political Geography:
Africa and Zambia

16. The international financial system after COVID-19

Author:
Maurice Obstfeld
Publication Date:
02-2022
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
In March 2020, international markets seized up with a violence unequaled since the global financial crisis nearly a dozen years before. As economies around the world locked down in the face of the potentially deadly but completely novel SARS-CoV-2 virus, stock markets fell, firms and governments scrambled for cash, liquidity strains emerged even in the market for US Treasurys, and capital flows to emerging-market and developing economies (EMDEs) reversed violently. This paper reviews the evolution of global financial markets since the global financial crisis, changes in academic thinking about these markets’ domestic impacts, the strains seen during the COVID-19 crisis, and perils that may lie ahead. A key theme is that stability will be enhanced if the global community embraces reforms that elevate market resilience, rather than depending on skillful policymakers wielding aggressive but ad hoc policy interventions to ride to the rescue again.
Topic:
Economics, Markets, COVID-19, and Financial Systems
Political Geography:
Global Focus

17. WTO 2025: Enhancing global trade intelligence

Author:
Alan Wm. Wolff
Publication Date:
04-2022
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
International trade flows based on information. Is the foreign market open? What are the conditions for entry? Are there customs duties to be paid and other regulations that need to be satisfied? Businesses thrive on getting as much certainty as they can find, and this requires reliable information. Is the competition subsidized? Are the competitors favored state-owned companies? During the pandemic, governments needed to know if food and medical supplies were going to be available from foreign sources and, most importantly, how available vaccines would be as most of the world’s countries could not produce any. Effective public policy cannot be made in the dark. The World Trade Organization, and the General Agreement on Tariffs and Trade before it, were founded with the idea of providing transparency. But more is needed to understand why trade is taking place, and even more important, when it is not, why not?
Topic:
Economics, Markets, Trade, and WTO
Political Geography:
Global Focus

18. After the DMA, the DSA and the New AI regulation: Mapping the Economic Consequences of and Responses to New Digital Regulations in Europe

Author:
Fredrik Erixon, Oscar Guinea, Erik van der Marel, and Elena Sisto
Publication Date:
04-2022
Content Type:
Working Paper
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
The European Union (EU) has pursued an ambitious agenda for regulating the digital economy, and it is now planning to establish a new package of regulations, including the Digital Markets Act (DMA), the Digital Services Act (DSA), and a new regulation of Artificial Intelligence (AI). These regulations build on an already established structure of digital and business regulations in Europe that is comparatively restrictive but that varies substantially between EU member states. In this study, we take stock of the new incoming regulations and review their effect on EU member states’ economies. More precisely, the paper considers how different countries in Europe will be affected by the regulations and how they should balance these effects with policies that help the economy to prosper. The European Commission’s economic analyses and impact assessments of the new regulations are thin. In fact, they are grossly inadequate for the purpose at hand: to better understand how the economy will change because of these regulations. The Commission identifies some benefits – for instance, positive competition outcomes from reduced network effects and more trust in AI-based goods and services. There are good reasons to think that these benefits are real. However, these regulations will also lead to new costs and have broader consequences for firms and resource allocation in the economy. Remarkably, the only costs identified in the impact assessments are direct compliance and administrative costs. Obviously, for far-reaching regulations such as the DMA, the DSA and the AI regulation, the main costs will not be the direct compliance burden, but the dynamic and downstream economic effects spurred by their implementation. This is because these regulations will prompt firms and markets to change their current and future behaviour: these changes are likely to define the most important costs. Furthermore, it is important to get a better idea of the distribution of these costs. It is highly unlikely that all sectors and countries will be affected equally. Some sectors will be more affected than others just as some countries will experience economic consequences that are bigger than in other countries. The question is: what factors will lead to the expected variation in the costs and consequences of the three new regulations? In this paper, we argue that two factors are important for grasping the distributive patterns of costs from digital regulations. First, the industry structure of a country is key. In the economy, countries have different endowment structures, and the modern European economy is defined by factor endowments such as data and digital competences. These factor endowments are exploited in the economy by firms and organisations that use them to create different comparative advantages. In turn, these advantages influence how a firm and a country market, sell and trade. Second, the existing structure of a country’s business and digital regulations will influence how an economy will respond to new and additional digital regulations. In fact, the restrictiveness of regulations that we know to impact on the digital economy vary substantially in the European Union – both between countries and between sectors. This variation will have consequences for the distribution of the costs of the three new regulations that are going to be implemented. This paper maps countries and country groups in the digital economy: their endowments, advantages, and flows. Especially, it evaluates the digital performance of countries in a number of key indicators and data points, and anchors the analysis in the academic literature. The paper points to some specific consequences of the DMA, the DSA and the AI regulation, and how different regulations will affect endowments structures and advantages. One key finding is that the distributive effects of the regulations will depend on size advantages and disadvantages. In short, small economies and small firms will likely carry a disproportionate part of the cost of new digital regulations. Furthermore, countries that have used their endowments to specialise in the digital economy will be more affected than others. On this score, there is a vast difference between EU countries. For instance, countries in Europe’s North – generally small, competitive, and open economies – will be most affected by these new regulatory burdens. Countries in Central and Eastern Europe will also be negatively affected, especially through risks of market exclusion effects for small firms. It is important for European policymakers to now consider how they can avoid that these new digital regulations continuously reinforce size advantages for big economies and big firms. There are some policy strategies that should be considered. First, regulations can be changed to better fit the overwhelming evidence that young, dynamic, and innovative firms drive a substantial part of productivity growth in the economy. Second, EU and national policymakers can pursue policies that make the transition into a more size-balanced economy easier, for instance by taxing and regulating small firms differently. Smaller economies can also be helped by having corporate taxes that are lower than in big economies. Third, EU and national policymakers can reform other digital and business regulations and make them less burdensome. Fourth, the EU can help to support the build-up of digital advantages in smaller economies.
Topic:
Markets, European Union, Regulation, and Digital Economy
Political Geography:
Europe

19. The COVID-19 Pandemic in Latin American and Caribbean countries: The Labor Supply Impact by Gender

Author:
Mariana Viollaz, Mauricio Salazar-Saenz, Luca Flabbi, Monserrat Bustelo, and Mariano Bosch
Publication Date:
03-2022
Content Type:
Working Paper
Institution:
Center for Distributive, Labor and Social Studies (CEDLAS)
Abstract:
We study the labor supply impact of the COVID-19 pandemic by gender in four Latin American and Caribbean (LAC) countries: Brazil, Chile, Dominican Republic, and Mexico. To identify the impact, we compare labor market stocks and labor market flows over four quarters for a set of balanced panel samples of comparable workers before and after the pandemic. We find that the pandemic has negatively affected the labor market status of both men and women, but that the effect is significantly stronger for women, magnifying the already large gender gaps that characterize LAC countries. The main channel through which this stronger impact is taking place is the increase in child care work affecting women with school-age children.
Topic:
Gender Issues, Markets, Labor Issues, Inequality, and COVID-19
Political Geography:
Latin America and Caribbean

20. What happened to the Turkish Lira?

Author:
Güven Sak
Publication Date:
02-2022
Content Type:
Working Paper
Institution:
Moshe Dayan Center for Middle Eastern and African Studies
Abstract:
In our latest issue of Turkeyscope, Dr. Guven Sak delves into the core reasons for Turkey's current currency and economic crisis along with an explanation for the political reforms needed to stabilize the Turkish markets.
Topic:
Markets, Politics, Reform, Currency, and Economic Crisis
Political Geography:
Turkey, Middle East, and Mediterranean