Political Geography: Europe / Topic: Economy

51. Strengthening the impact of EU sanctions against Russian aggression in Ukraine

Author:: Svitlana Taran
Publication Date:: 10-2022
Content Type:: Working Paper
Institution:: European Policy Centre (EPC)
Abstract:: As Russia’s largest trade and economic partner, the European Union (EU) has significant leverage to expand the current sanctions regime. Yet, EU countries continue to rely heavily on Russia for their energy, raw materials, and agricultural fertilisers. This dependency reduces the EU’s economic resilience and exposes it to supply chain disruptions. Much more should be done to turn the tide on this dependency. The EU has so far adopted eight sanction packages against Russia, which already impacted the country’s economy. However, these restrictions will have an even greater impact when all sanctions are in full effect, and Western supply chains reduce their reliance on Russian products. This Discussion Paper identifies five measures the EU can take to increase the impact of sanctions against Russia and end the war as soon as possible. Extending the scope of sanctions on Russian export revenues: A large part of Russian trade flow remains unsanctioned. Russia is receiving record revenues from energy exports due to rising prices. Even though Russia’s exports are likely to drop significantly after the implementation of the EU oil embargo, the impact of sanctions can be further increased. By expanding their scope to other sectors, such as the diamond industry, and placing embargoes on all iron and steel supplies, the EU can significantly impact Russia’s economy. Expanding and aligning export restrictions among the coalition countries: Many exports from the EU to Russia are not restricted. Sanctions should first target products that Moscow would find difficult to replace. EU and coalition partners (such as G7 members and other allies) should align their sanctions regimes to make it harder for Russia to redirect its trade to other markets and substitute its critical imports. Encouraging more company-level self-sanctions: Voluntary restrictions by companies can have a greater impact on Russian trade and investment flows than compulsory country-level sanctions. Self-sanctions by international companies should be encouraged in sectors unaffected by country-level sanctions, with public pressure serving as an effective catalyst for their trade and investment withdrawal from Russia. Preventing sanctions circumvention: Loopholes in the current sanction regime should be addressed. Sanctioning countries should take stronger enforcement actions, among others, against countries and foreign companies that facilitate sanctions evasion. The EU must work more closely with its allies to monitor and enforce the imposed sanctions. Prolonging renewal periods for economic sanctions: The current six-month period for renewing sanctions against Russia could lead to calls for lifting them, threatening EU unity. To avoid this and increase the sanctions’ impact, the EU should consider prolonging their renewal period until Russian troops leave the Ukrainian territory. Russia’s war of aggression has caused disastrous economic effects and devastating infrastructure damage to Ukraine. EU and Western sanctions against Russia should reflect the extent and consequences of these actions. Closing loopholes and widening the scope of sanctions must be a priority for the EU and its allies to strengthen their impact and curtail Russia’s capacity to continue its war. At the same time, existing possibilities for replacing Russian products with Ukrainian ones should be exploited. While maintaining EU unity over sanctions is a challenge, staying united will be crucial for sustaining the credibility of EU policies, accelerating the end of the war, and securing long-term peace in Europe.
Topic:: Sanctions, European Union, Economy, Exports, and Russia-Ukraine War
Political Geography:: Russia and Europe

52. Levelling up: what England thinks

Author:: Suzanne Hall, Will Jennings, Lawrence McKay, Sophie Stowers, Paula Surridge, and Alan Wager
Publication Date:: 10-2022
Content Type:: Special Report
Institution:: UK in a Changing Europe, King's College London
Abstract:: For all the discussion there has been about ‘levelling up’ and the problem of regional inequality in the UK, little energy has been expended in finding out how people feel about their areas, what could and should be done to improve them, and who they trust to actually do it. The following report aims to fill this gap. UK in a Changing Europe partnered with YouGov to carry out a survey of over 20,000 people from across England. This was the first survey of its kind on levelling up and regional inequality, and the first to assess the impact of changes to how England is governed, including the effect of the introduction of Metro Mayors. This survey was accompanied by a series of focus groups conducted by NatCen and King’s College London’s Policy Institute in Barking and Dagenham, Blackpool, Nottingham, Blyth and Barnsley – designed to capture the views of metropolitan boroughs, rural towns and coastal communities. The aim was to find out how people in England feel about their local communities, what policies they feel would be most effective when it comes to ‘levelling up’ the country, how they would like these policies to be delivered, and who they trust to deliver them.
Topic:: Public Opinion, Inequality, Economy, and Public Policy
Political Geography:: United Kingdom and Europe

53. Manufacturing after Brexit

Author:: David Bailey and Ivan Rajic
Publication Date:: 01-2022
Content Type:: Special Report
Institution:: UK in a Changing Europe, King's College London
Abstract:: In mid-2020, UK in a Changing Europe published its report on the eﬀects of Brexit on UK manufacturing, and the likely eﬀects after the end of the transition period. The present report is an updated view of where UK manufacturing stands after Brexit. The report ﬁnds: The Trade and Cooperation Agreement (TCA) helped avoid tariﬀ barriers. However, non-tariﬀ barriers have returned, and the end of the transition period has brought adverse impacts for UK manufacturing. The TCA does not fully replace the frictionless trade and market integration that existed before it. The main adverse eﬀects have been: administrative barriers to trade (e.g. customs formalities, proving rules-of-origin requirements) disruptions to labour ﬂows, both aﬀecting certain manufacturing sectors directly (e.g. food and drinks) and indirectly harming manufacturing by damaging service sectors (e.g. logistics) that support it. The adverse impacts are for now mainly showing through reduced exports and imports to and from the EU (around 15% less for both, as compared to a no-Brexit scenario), and through some production disruptions. The ongoing conﬂicts around Northern Ireland probably represent the biggest risk to UK-EU relations, with the potential to aﬀect the entire TCA in case they escalate. Potential beneﬁts from Brexit have yet to be felt: – There has been some redirection of exports towards non-EU countries, but this has not compensated for the reduction in trade with the EU. The UK has signed only two truly new trade agreements, with New Zealand and Australia, the former still only ‘in principle’. Both countries account for a small fraction of total UK trade, and the expected beneﬁts of the trade agreements with them are minor. Trade negotiations with the US are currently stalled. Whether there is more progress on the trade front in the future remains to be seen. If there is more regulatory divergence from the EU going forward, it will become possible to see whether it will bring beneﬁts or disruptions to UK manufacturers. Any beneﬁts that may potentially arise out of Brexit will not happen automatically. The UK needs an active, integrated, and well-funded industrial policy, within a stronger devolution framework, if UK manufacturing is to beneﬁt from future growth opportunities. This is especially the case in the context of net zero, industry 4.0 and levelling up. The impact of Brexit on manufacturing is likely to be most profound in regions in the north and midlands. That in turn will make levelling up more challenging.
Topic:: Treaties and Agreements, European Union, Economy, Brexit, Manufacturing, and Trade
Political Geography:: United Kingdom and Europe

54. Global Supply Chain Pressures, International Trade, and Inflation

Author:: Julian di Giovanni, Şebnem Kalemli-Özcan, Alvaro Silva, and Muhammad A. Yildirim
Publication Date:: 07-2022
Content Type:: Working Paper
Institution:: The John F. Kennedy School of Government at Harvard University
Abstract:: We study the impact of the Covid-19 pandemic on Euro Area inflation and how it compares to the experiences of other countries, such as the United States, over the two-year period 2020-21. Our model-based calibration exercises deliver four key results: 1) Compositional effects – the switch from services to goods consumption – are amplified through global input-output linkages, affecting both trade and inflation. 2) Inflation can be higher under sector-specific labor shortages relative to a scenario with no such supply shocks. 3) Foreign shocks and global supply chain bottlenecks played an outsized role relative to domestic aggregate demand shocks in explaining Euro Area inflation over 2020-21. 4) International trade did not respond to changes in GDP as strongly as it did during the 2008-09 crisis despite strong demand for goods. These lower trade elasticities in part reflect supply chain bottlenecks. These four results imply that policies aimed at stimulating aggregate demand would not have produced as high an inflation as the one observed in the data without the negative sectoral supply shocks.
Topic:: Economy, Inflation, COVID-19, and Supply Chains
Political Geography:: Europe and United States of America

55. The European Union renews its offensive against US technology firms

Author:: Gary Clyde Hufbauer and Megan Hogan
Publication Date:: 02-2022
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: The European Union's proposed Digital Markets Act (DMA) contemplates extensive regulation of "gatekeeper" digital platforms—firms that perform a "core platform service" in the European Union (defined as online intermediation, online search, social networking, video sharing, electronic communication, cloud services, or online advertising), have a significant impact on the EU internal market, serve as an important gateway between business users and end-users, and enjoy an entrenched and durable position. Although at least one European firm could qualify as a gatekeeper, Hufbauer and Hogan say, the DMA discriminates against American technology firms by singling them out for the label of "gatekeepers." The European Commission’s proposed DMA targets both US tech giants such as Google, Amazon, Facebook, Apple, and Microsoft and smaller (albeit huge) US tech firms such as Airbnb and PayPal. The authors say the EU goal is to confer competitive advantage on European digital firms, breaching the EU commitment to national treatment of foreign firms, violating their intellectual property rights, and imposing high expenses on the "gatekeepers." At the same time, France is planning to enact its own steep barriers against US and other foreign cloud services.
Topic:: Markets, Science and Technology, European Union, Economy, and Digital Policy
Political Geography:: Europe and United States of America

56. Fiscal support and monetary vigilance: Economic policy implications of the Russia-Ukraine war for the European Union

Author:: Olivier Blanchard and Jean Pisani-Ferry
Publication Date:: 04-2022
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: The economic shock from the war in Ukraine is forcing Europe to face difficult policy choices, according to Olivier Blanchard and Jean Pisani-Ferry. Governments must decide how best to soften the blow of higher energy and food prices, and how much to rely on debt finance. The European Central Bank must decide how to balance the fight against inflation with the need to sustain aggregate demand, in the face of decreases in real income. The authors analyze the impact of the war on the European economy, discuss the pros and cons of policy options, and call for coherence in balancing sanctions, fiscal measures, and monetary policy. They argue for the use of transfers rather than across-the-board subsidies and point to the room for debt finance. They show the potential role of tripartite wage agreement and also argue that monetary policy can remain on its current trajectory but be ready to adjust.
Topic:: War, European Union, Economy, and Fiscal Policy
Political Geography:: Russia, Europe, and Ukraine

57. Prosperity and Resilience: Diverse Production and Comparative Advantage in Modern Economies

Author:: David Henig and Anna Guildea
Publication Date:: 01-2022
Content Type:: Working Paper
Institution:: European Centre for International Political Economy (ECIPE)
Abstract:: A common version of trade theory suggests that countries will specialise in a limited number of products. Using the example of David Ricardo from 1817, England specialises in cloth and Portugal in producing wine – and then they trade with each other to mutual benefit. However, this is a crude version of comparative advantage that routinely leads to political concerns about trade. Today the prime concern is that Europe and other developed countries have become too dependent on China by allowing the logic of comparative advantage to work. In short, trade has made us vulnerable. The observed reality is different. Most advanced economies produce and export a broad range of goods and services. Their governments have similar aspirations to develop and support diverse manufacturing and services, including in the most traded global sectors such as pharmaceuticals, automotive, business services, and food and drink. Modern specialisation comes in countries producing various, but not all, products within global supply chains. Patterns of trade suggest such specialisation has allowed countries to both grow and become resilient to individual shocks. Knowledge and ownership of the whole supply chain is more important than producing everything.
Topic:: Globalization, Economy, Services, Resilience, WTO, and Production
Political Geography:: Europe and Global Focus

58. The Road to Low-Carbon Economies in the EU's Arab Neighbourhood

Author:: Sara Nowacka
Publication Date:: 03-2022
Content Type:: Special Report
Institution:: The Polish Institute of International Affairs
Abstract:: At the end of last year, Mediterranean Arab states (i.e., Egypt and Algeria) announced investments or tenders related to the production of renewable energy sources (RES). This is related to the pressure to move away from fossil fuels and the favourable conditions in these countries to produce solar energy. Although in the short term the EU cooperation with its Arab neighbours on RES might slow due to the war in Ukraine, in the longer perspective, given their capacities in this regard, it remains crucial in order for the EU to become independent on Russian energy.
Topic:: European Union, Economy, Fossil Fuels, and Carbon Emissions
Political Geography:: Europe, Algeria, and Mediterranean

59. The Impact of the Russian Aggression Against Ukraine on the EU's Economy

Author:: Melchior Szczepanik
Publication Date:: 03-2022
Content Type:: Special Report
Institution:: The Polish Institute of International Affairs
Abstract:: A spike in energy prices provoked by Russia’s invasion of Ukraine will inhibit the economic rebound in the EU. Member States will have to face high inflation for longer than previously expected. Forced to increase spending, they also could postpone plans to reduce their debts. The conflict with Russia is mobilising the Community to speed up the development of renewable energy and reduce dependencies on third countries, especially authoritarian ones, in strategic sectors.
Topic:: Energy Policy, War, European Union, Economy, and Inflation
Political Geography:: Russia, Europe, and Ukraine

60. The effect of COVID certificates on vaccine uptake, public health, and the economy

Author:: Philippe Aghion, Guntram Wolff, Philippe Martin, Lionel Guetta-Jeanrenaud, Bary Pradelski, Miquel Oliu-Barton, Nicolas Woloszko, Patrick Artus, and Arnaud Fontanet
Publication Date:: 01-2022
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: In the COVID-19 pandemic, governments have, among other measures, mandated the use of COVID certificates to prove vaccination, recovery or a recent negative test, and have required individuals to show certificates to access shops, restaurants, and education or workplaces. While arguments for and against COVID certificates have focused on reducing transmission and ethical concerns, the incentive effects of COVID certificates on vaccine uptake, health outcomes and the economy has not yet been investigated. To estimate these effects, we construct counterfactuals based on innovation diffusion theory for France, Germany and Italy. We estimate that the announcement of COVID certificates during summer 2021 led to increased vaccine uptake in France of 13.0 (95% CI 9.7–14.9) percentage points (p.p.) of the total population up to the end of the year, in Germany 6.2 (2.6–6.9) p.p., and in Italy 9.7 (5.4–12.3) p.p. Further, this averted an additional 3,979 (3,453–4,298) deaths in France, 1,133 (-312–1,358) in Germany, and 1,331 (502–1,794) in Italy; and prevented gross domestic product (GDP) losses of €6.0 (5.9–6.1) billion in France, €1.4 (1.3–1.5) billion in Germany, and €2.1 (2.0–2.2) billion in Italy. Notably, the application of COVID certificates substantially reduced the pressure on intensive care units (ICUs) and, in France, prevented occupancy levels being exceeded where prior lockdowns were instated. Varying government communication efforts and restrictions associated with COVID certificates may explain country differences, such as the smaller effect in Germany. Overall, our findings are more sizeable than predicted. This analysis may help inform decisions about when and how to employ COVID certificates to increase vaccine uptake and thus avoid stringent interventions, such as closures, curfews, and lockdowns, with major social and economic consequences.
Topic:: Government, Economy, Public Health, Vaccine, and COVID-19
Political Geography:: Europe

61. Better pensions for the European Union’s self-employed

Author:: Rebecca Christie, Monika Grzegorczyk, and Diane Mulcahy
Publication Date:: 03-2022
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: Self-employed workers are taking on a larger role in the European economy, particularly workers who operate as independent contractors rather than as small-business owners with their own workforce. Becoming self-employed offers flexibility and entrepreneurial potential, but can limit access to state-sponsored pension schemes. We assess the current state of pension policy across the European Union and take a more detailed look at five countries to see how independent workers are treated compared with their traditionally employed counterparts. We consider how policymakers might adjust or even overhaul their pension offerings to improve opportunities for the self-employed, while being mindful of the broader policy context in areas like innovation and overall tax burdens. In assessing policy options, it is useful to determine whether government, companies or individuals will be primarily responsible for paying for better pensions, and we structure our suggestions accordingly. Governments can make programmes more widely available, more consistent for all types of work and easier to understand and take part in. Companies can be encouraged to make pension contributions for all their workers, not just those they hire full-time. Individuals can be encouraged to set aside more for retirement with tax incentives, benefits flexibility and other policy measures. Access to pensions for low-income, more vulnerable self-employed workers should be considered separately from access for higher-paid workers. The current system does not facilitate this and indeed inhibits it in jurisdictions where a minimum income is required to join self-employment pension schemes.
Topic:: Labor Issues, European Union, Economy, and Self-Employment
Political Geography:: Europe

62. The Russian Economy Is Muddling Through the Sanctions War

Author:: Oleg Buklemishev
Publication Date:: 07-2022
Content Type:: Working Paper
Institution:: Istituto Affari Internazionali
Abstract:: The transatlantic campaign of sanctions against Russia after its aggression of Ukraine is unprecedented in scale and scope, involving not only dozens of democratic states but also many non-state actors. It imposes considerable barriers and additional cost to the functioning of the Russian economy, which is bound to undertake deep restructuring with far-reaching consequences for production and consumption processes. The current appreciation of the rouble and inflationary slowdown are not signs of improvement but rather the direct effects of the stabilisation measures undertaken and, in fact, bode ill for further economic development. Numerous problems have started to surface this summer and optimistic assessments on the basis of initial resilience of the Russian economy look premature. Russia currently lacks a strategic plan of economic restructuring under the new environment. The future course of events will depend on whether the private sector leads this restructuring with minimal losses or the government imposes its normative prospective, tilting the result farther from economic equilibrium.
Topic:: Sanctions, European Union, Economy, and Russia-Ukraine War
Political Geography:: Russia, Europe, and Ukraine

63. Measuring the intangible economy to address policy challenges

Author:: Marie Le Mouel
Publication Date:: 04-2022
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: European economies exhibit the so-called ‘productivity puzzle, whereby investments’ in digital technologies and intangible assets have not delivered the hoped-for productivity gains. Explanations for this puzzle lie in the unequal ability of companies to make use of these technologies, and resulting patterns of market concentration, productivity divergence and dampened business dynamism. Access to firm-level data is essential to properly understand these rich dynamics. The purpose of the first work package of the MICROPROD project was to improve the firm-level data infrastructure, expand the measurement of intangible assets and enable cross-country analyses of these productivity trends. The MICROPROD researchers developed the Micro Data Infrastructure (MDI), a centralised platform that harmonises access to the firm-level data gathered by national statistical institutes. The data infrastructure developed through this work package offers valuable insights into the evolution of productivity across the European Union and into the effects of digitalisation and globalisation. It can thus generate important evidence for designing policies to support the European Commission’s policy objectives, especially for achieving the digital and green transitions. In addition, the research enabled by this data infrastructure and carried out within the context of MICROPROD can provide valuable lessons about the response of European economies to the COVID-19 pandemic and its aftermath.
Topic:: Infrastructure, European Union, Digital Economy, Economy, and COVID-19
Political Geography:: Europe and Global Focus

64. Measuring macroeconomic uncertainty during the euro’s lifetime

Author:: Monika Grzegorczyk and Francesco Papadia
Publication Date:: 06-2022
Content Type:: Working Paper
Institution:: Bruegel
Abstract:: It is a cliché in official economic institutions’ publications and their leaders’ speeches to lament exceptional uncertainty. The complaint does, however, ring true currently. A solid empirical basis should be given to this view by properly measuring macroeconomic uncertainty. To measure macroeconomic uncertainty, we start from observable forecasts of macroeconomic variables, which are transformations of underlying economic conditions. By observing how forecasts change over time, we measure the flow of macroeconomic surprises. The more intense the flow of surprises, the greater uncertainty can be said to be. Greater differences among forecasts are also evidence of uncertainty. We draw out four indicators of macroeconomic uncertainty, measured over the lifetime of the euro: How the macroeconomic forecasts of a given institution for the same time period change over time; How the macroeconomic forecasts of a given institution deviate from realised outcomes; How the macroeconomic forecasts of different institutions deviate from one other; How dispersed the forecasts of different professionals are. We also measure whether the ‘stag-‘ or the ‘-flationary’ component is stronger in the overall stagflationary shock caused by the Russian invasion of Ukraine.
Topic:: Economy, Institutions, Macroeconomics, Uncertainty, and Euro
Political Geography:: Europe and Global Focus

65. China’s Global Vision Vacuum: An Opportunity and Challenge for Europe

Author:: Tim Rühlig
Publication Date:: 08-2022
Content Type:: Policy Brief
Institution:: German Council on Foreign Relations (DGAP)
Abstract:: China seems to strive to redefine the global order around sovereignty and a strong state. Yet is China engaging in a constitutive process shaped by the global economy; or is it an imperial power pursuing national sovereignty at any cost? In the West, there are very different answers to this question. This ambiguity is not by design but rather indicates that China lacks a coherent vision for the world. If the EU is to exploit this, it needs to understand why.
Topic:: Sovereignty, Economy, and International Order
Political Geography:: China, Europe, and Asia

66. Functional Specialisation in EU Value Chains: Methods for Identifying EU Countries’ Roles in International Production Networks

Author:: Aleksandra Kordalska, Magdalena Olczyk, Roman Stöllinger, and Zuzana Zavarská
Publication Date:: 08-2022
Content Type:: Special Report
Institution:: The Vienna Institute for International Economic Studies (WIIW)
Abstract:: Geographically dispersed production networks have allowed countries to specialise in different functions of the value chain. By making use of two methodologies for quantifying the magnitude of functional specialisation – one based on trade flows and one based on FDI flows – detailed profiles of the functional specialisations of EU member states are identified. The analyses are conducted at the country, industry and regional level. In line with the existing literature, they reveal that EU-CEE countries are predominantly specialised in the fabrication stage, that is, they serve as ‘factory economies’, while the Western EU countries are mainly performing knowledge-intensive pre-fabrication activities – a characteristic of ‘headquarter economies’. This dualism within the EU is confirmed by a cluster analysis. While functional specialisation patterns tend to be persistent, especially in the fabrication stage, there are also some signs of functional diversification in EU-CEE countries in more recent years. Still, these functional changes remain limited to a few industries. The dichotomy of factory and headquarter economies is also clearly discernible at the regional level. However, the fact that in most EU countries – mainly in the capital regions – there are some headquarter-type regions implies that a complete functional ‘lock-in’ in fabrication is less likely than suggested by the country-level patterns. Hence, while the results point towards major difficulties of functional diversification beyond the fabrication stage in the EU-CEE countries and regions, there are also several promising elements and trends discernible, in particular at the industry and the regional level.
Topic:: International Trade and Finance, European Union, Economy, Value Chains, Specialization, and Competition
Political Geography:: Europe

67. FDI Spillover Effects on Innovation Activities of Knowledge-using and Knowledge-creating Firms: Evidence from an Emerging Economy

Author:: Iraj Hashi, Mehtap Hisarciklilar, Slavo Radošević, Nebojša Stojčić, and Nina Vujanović
Publication Date:: 03-2022
Content Type:: Working Paper
Institution:: The Vienna Institute for International Economic Studies (WIIW)
Abstract:: The beneficial effects of innovation for firms’ performance and competitiveness are well documented, but it has been suggested in recent years that innovation regimes differ between advanced and emerging economies. While advanced economies rely on knowledge generation, their emerging counterparts follow mainly a knowledge-use regime through the application of existing knowledge and technology. Climbing up the technological ladder can be helped through spillovers from foreign investors to local firms. We investigate whether FDI spillovers influence different phases of the innovation process (from decision to innovate to productivity) among knowledge-using and knowledge-creating firms in an emerging European economy. The results show that the innovation process in emerging economies is closer to the imitation than the creation of novel products. Local firms benefit from foreign counterparts in the early phase of the innovation process. Stronger FDI effects are found among firms that undertake innovation through knowledge use rather than through knowledge generation.
Topic:: Emerging Markets, International Trade and Finance, Foreign Direct Investment, Economy, Investment, and Knowledge Systems
Political Geography:: Europe

68. How Will Coal Sanctions Impact on Russian Economy?

Author:: CESD Research Team
Publication Date:: 04-2022
Content Type:: Working Paper
Institution:: Center for Economic and Social Development (CESD)
Abstract:: The Western Alliance has approved a new package of sanctions against Russia. The most notable of the sanctions is the suspension of coal exports from Russia. What does this mean for Russia, and how can the European Union compensate for this ban? Yesterday, the European Commission posted a decision on sanctions on its website, which means that the ban will come into force. This means that from today, European companies will not be able to conclude contracts to buy coal from Russia. The contracts signed in the previous period must be completed by August.
Topic:: Sanctions, European Union, Economy, Exports, Coal, and Russia-Ukraine War
Political Geography:: Russia and Europe

69. Clear and president danger: Democracy and the constitution in Tunisia

Author:: Anthony Dworkin
Publication Date:: 07-2022
Content Type:: Policy Brief
Institution:: European Council on Foreign Relations (ECFR)
Abstract:: The new constitution that Tunisia will soon put to a referendum is a fundamental departure from the democratic model the country established after 2011. The process of drafting the constitution excluded any significant political participation or public debate. The new constitution would create an unaccountable presidency and leave other branches of the state without any power. Tunisia’s president has failed to address the country’s serious economic problems. An agreement with the International Monetary Fund will only provide a short-term solution to these problems. European policymakers should make clear that they do not see the constitution as genuinely democratic, while continuing to support Tunisia economically.
Topic:: Democracy, Constitution, Economy, Referendum, and IMF
Political Geography:: Europe, North Africa, and Tunisia

70. Gateway to growth: How the European Green Deal can strengthen Africa’s and Europe’s economies

Author:: Michaël Tanchum
Publication Date:: 01-2022
Content Type:: Policy Brief
Institution:: European Council on Foreign Relations (ECFR)
Abstract:: In much of Africa, growth is being driven by “green energy innovation ecosystems”, which combine telecoms, digital platforms, solar power, and the internet of things. European companies and states risk losing out on business opportunities and political influence if they fail to integrate their services and infrastructure into these emerging ecosystems. China and other economic and geopolitical rivals will become African states’ main partner if Europeans stand aside from this key growth trajectory. The EU can: assist on offering world-class data regulation and supporting the construction of data centres; support the construction of other infrastructure, such as for 5G; and help roll out off-grid solar power generation and electric vehicle manufacturing. Europeans should work in joint ventures with African firms as this model is proven to create value added that China’s investments often fail to produce. The EU should merge its nascent Global Gateway international connectivity programme with the European Green Deal. The objectives of both require similar levels of investment in African infrastructure and they can unlock the investment potential of European public-private partnerships.
Topic:: Foreign Policy, European Union, Economy, Innovation, and Green Deal
Political Geography:: Africa, Europe, and Sub-Saharan Africa

71. EU – Pacific Talks: Japan – V4 Relations – More Central but Still European

Author:: Jana Záhořová
Publication Date:: 01-2022
Content Type:: Special Report
Institution:: Europeum Institute for European Policy
Abstract:: In the last few years, there have been a number of articles written about the revitalization of relations between Japan and the EU following the signing of the Strategic and Economic Partnership. However, Japan’s rapprochement with the EU does not end in Brussels. On the contrary, Japan has drawn increasing attention to another European platform, the Visegrad Four. The V4+Japan regional cooperative framework started in 2004 by a series of meetings between the countries’ representatives, who discussed several domains of cooperation such as strengthening economic relations, political dialogue, promoting research and development in science and technology or providing development assistance to third countries. However, despite the noticeable expansion of relations, it remains far from becoming an institutionalized framework and is currently facing many challenges including Chinese rising global influence and strategic geo-economic shifts.
Topic:: International Relations, European Union, Partnerships, and Economy
Political Geography:: Japan and Europe

72. Promoting the Inclusion of Europe’s Migrants and Minorities in Arts and Culture

Author:: Lucía Salgado and Liam Patuzzi
Publication Date:: 03-2022
Content Type:: Special Report
Institution:: Migration Policy Institute (MPI)
Abstract:: Decades of sustained immigration have transformed many European cities into mosaics of different cultures. Yet this diversity is not always mirrored in the art celebrated in museums, the plays produced in major theaters, and the music heard in concert halls. In addition, well-intended efforts to celebrate ethnic and cultural diversity through art and culture run the risk of overemphasizing differences, exoticizing minority groups rather than contributing to the normalization of diversity within society. But this status quo may be changing. Widespread anti-racism protests have prompted long-overdue conversations about mis- and under-representation of minorities as well as discrimination in the cultural scene. At the same time, pandemic-related restrictions have placed further financial strains on the already fragile cultural sector, challenging organizations to reach new audiences in new ways. This MPI Europe report, which draws on interviews with cultural professionals from 11 European countries, explores approaches to strengthening the participation of migrant and minority communities in arts and culture, with potential benefits for immigrant integration outcomes, social cohesion, and the vibrancy and sustainability of cultural institutions. It examines migrants’ and minorities’ inclusion on three levels: as visitors of cultural venues and consumers of art, as featured artists and performers, and as leaders and staff within cultural institutions. The research was conducted within the framework of the Urban Agenda Partnership on the Inclusion of Migrants and Refugees, co-led by the City of Amsterdam and the European Commission and funded by the European Commission's Directorate-General for Migration and Home Affairs.
Topic:: Arts, Culture, Employment, Citizenship, Economy, Integration, Identity, Inclusion, Civic Engagement, and Immigration Policy
Political Geography:: Europe

73. China, Europe, and the Pandemic Recession: Beijing’s Investments and Transatlantic Security

Author:: John R. Deni, Chris Alden, Erik Brattberg, Roger Cliff, Mark Duckenfield, R. Evan Ellis, Nicholas Nelson, and Laura Speranza
Publication Date:: 05-2022
Content Type:: Special Report
Institution:: The Strategic Studies Institute of the U.S. Army War College
Abstract:: Given the depth and breadth of the pandemic-induced recession in Europe, private companies in need of capital and governments looking to shed state-owned enterprises may be tempted to sell shares, assets, or outright ownership to investors with liquidity to spare. Of greatest concern is the role that China might play in Europe, building Beijing’s soft power, weakening allied geopolitical solidarity, and potentially reprising the role it played in the 2010s, when its investments in Europe expanded dramatically. More specifically, there is concern over China’s investments in infrastructure and sensitive technologies relevant to American and allied military operations and capabilities. Whether Europe is prepared and able to parry Beijing’s economic statecraft is somewhat unclear, given varied attitudes toward China and the patchwork of investment screening mechanisms across the continent. Regardless, the outcomes will have significant implications for US security and for the Defense Department specifically. In support of US European Command (EUCOM) and the Department of Homeland Security (DHS), the U.S. Army War College’s Strategic Studies Institute (SSI) assembled an interdisciplinary team to examine these issues and offer actionable policy recommendations for military leaders and decisionmakers on both sides of the Atlantic.
Topic:: Security, Military Affairs, Economy, Investment, Transatlantic Relations, COVID-19, State-Owned Enterprises, and Recession
Political Geography:: China, Europe, Asia, and United States of America

74. CONTAINMENT 2.0: SANCTIONS FOR THE LONG HAUL

Author:: David A. Lake
Publication Date:: 03-2022
Content Type:: Commentary and Analysis
Institution:: Political Violence @ A Glance
Abstract:: The West is not imposing coercive sanctions on Russia to stop its current aggression. No one seriously expects that the sanctions will cause President Putin to withdraw from Ukraine. NATO made clear before the war that its members will not defend Ukraine with military force. The European members have also, as expected, carved out exceptions to the sanctions regime for oil and gas so as not to impose too much pain on their own economies. Putin anticipated the general scope of the sanctions likely to be imposed on Russia and decided it was worth invading Ukraine anyways. While he may have been surprised by the extent of the sanctions and unity of NATO so far, this is not enough to alter his calculus. Indeed, he is doubling down on the original plan. He also knows that he has other weapons and forms of coercion against the West up his sleeve. Rather, we are seeing the birth of a possible Containment 2.0, a forced decoupling of Russia from the Western international economy. This is a long-term, not a short-term, strategy. The point is to undermine the Russian economy, stifle its technological progress, deny Russians a standard of living comparable to that of the West, and break support for the regime over time. In doing so, the West undermines Russia’s ability to compete militarily, aiming to forestall further Ukraines, and weakens Putin’s hand at home and abroad.
Topic:: NATO, International Trade and Finance, Sanctions, Economy, and Containment
Political Geography:: Russia, Europe, Ukraine, Global Focus, and United States of America

75. The Significance of Convening the European Union – Israel Association Council

Author:: Maya Sion-Tzidkiyahu
Publication Date:: 08-2022
Content Type:: Research Paper
Institution:: Mitvim: The Israeli Institute for Regional Foreign Policies
Abstract:: On July 18, 2022, the Foreign Affairs Council of the European Union (EU) decided to move ahead with convening the EU-Israel Association Council (AC) after a decade-long hiatus. What does this mean? What opportunities does it offer, and what were the costs of not convening it so far? This paper explains what the AC is, the reasons for its suspension and for the decision to re-convene it. Assuming it will re-convene, the paper recommends future measures between Israel and the EU.
Topic:: Foreign Policy, International Cooperation, European Union, and Economy
Political Geography:: Europe, Middle East, Israel, and Palestine

76. Processing Trade and Global Supply Chains: Towards a Resilient “GVC 2.0” Approach

Author:: Lucian Cernat
Publication Date:: 05-2022
Content Type:: Policy Brief
Institution:: European Centre for International Political Economy (ECIPE)
Abstract:: In the current global context marked by economic fragility, growing uncertainty and geopolitical conflicts, ensuring the smooth functioning of global supply chains becomes more important than ever. Supply shortages, higher freight costs, higher commodity prices and strong demand increase will trigger inflationary pressures for all economic sectors dependent on global value chains (GVCs). As part of global efforts to enhance the resilience of GVCs, this paper makes the case for a broader discussion about the untapped potential of processing trade, a relatively unknown trade facilitation option available in many countries around the world. Processing trade has been credited with stimulating China’s participation in GVCs, in combination with foreign direct investment (FDI) attraction and industrial upgrading. However, processing trade is not just a Chinese phenomenon. In the EU, significant trade flows (over 200 billion euros in 2021 alone) benefitted from a double-digit trade cost reduction, thanks to the EU processing trade provisions. Different types of processing trade arrangements exist in over 70 countries worldwide (including in the EU), as a way to facilitate the integration of developing countries in global production chains. However, these unilateral schemes have different requirements and co-exist without any attempt to facilitate their inter-operability along complex global supply chains. This paper argues that there is a pressing need for a global reflection on how best to promote a better integration between these national processing trade schemes. One option is to promote a “GVC 2.0” approach that offers key recommendations and best practices for processing trade along GVCs. Such a coordinated “GVC 2.0” trade facilitation initiative would not only make GVCs more resilient for countries that depend on global sourcing for their critical economic activities, but it will also reduce the inflationary effect generated by the unnecessary trade costs associated with GVC activities.
Topic:: European Union, Economy, Trade, Resilience, and Supply Chains
Political Geography:: Europe

77. India Emerges as a Key Power and Important Partner for the EU in the Indo-Pacific

Author:: Patryk Kugiel
Publication Date:: 09-2022
Content Type:: Working Paper
Institution:: The Polish Institute of International Affairs
Abstract:: India’s commissioning of its second aircraft carrier, the INS Vikrant, in September this year reaffirms the country’s aim to play a leading role in the Indo-Pacific. The country’s importance in the region will depend mainly on the course of the India-China rivalry, an increase in its economic potential, and the support provided to it by foreign partners. The convergence of goals in the Indo-Pacific strengthens India’s partnership with the U.S. and opens up opportunities for intensifying cooperation with the EU, especially in terms of connectivity, climate change, and the development of capacity in maritime domain awareness.
Topic:: International Cooperation, European Union, Partnerships, Geopolitics, and Economy
Political Geography:: Europe, South Asia, India, and Indo-Pacific

78. The Future of Xi’s China. Scenarios and Implications for Europe

Author:: Alessia Amighini
Publication Date:: 09-2022
Content Type:: Special Report
Institution:: Italian Institute for International Political Studies (ISPI)
Abstract:: At the upcoming 20th Party Congress, which opens Sunday in China, Xi Jinping is expected to be confirmed as the country's Secretary General for an unprecedented third term. At a time of international instability caused by the Covid pandemic and the war in Ukraine, as well as rising competition between international superpowers, the Chinese leadership is called to increase the country's international standing, while ensuring economic growth at the domestic level. However, achieving these goals will not be without challenges. This Report analyses China’s hard road to international prestige and development. Which prospects for China's economic growth? Which obstacles to its rise at the global level? To which extent can the Party steer the country’s direction?
Topic:: Foreign Policy, Development, Economy, Xi Jinping, and Instability
Political Geography:: China, Europe, and Asia

79. Which mergers should the European Commission review under the Digital Markets Act?

Author:: Christophe Carugati
Publication Date:: 12-2022
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: Large digital platforms acquired 1149 firms in various economic sectors between 1987 and July 2022. The European Commission reviewed only 21 of these mergers as most did not meet the European Union merger control turnover threshold. This suggests under-enforcement, with some problematic mergers escaping merger review and thus posing competition risks. The EU Digital Markets Act, which entered into force in November 2022, imposes obligations on firms that are considered ‘gatekeepers’ in relation to some core platform services, such as online search engines. In particular, these firms must now inform the Commission of all their intended acquisitions. This, in combination with Commission guidance on referrals by EU national competition authorities of mergers for review, should ensure more merger reviews in the digital sector. Current European Commission guidance on referring cases for merger review is flexible but impractical as it relies on theories of harm rather than clear and objective criteria. Without clarification, there could be over-enforcement in which unproblematic mergers are reviewed, human resources are allocated inefficiently and legal uncertainty persists. The Commission should issue new guidance on which digital mergers are likely to be problematic, thus triggering referral for merger review. This is likely to be the case when the target’s user base overlaps with that of the acquirer, when the target is a leader in a future critical market and when the target is active in a core platform service.
Topic:: Economy, Innovation, European Commission, and Digital Markets Act (DMA)
Political Geography:: Europe

80. How to implement the self-preferencing ban in the European Union’s Digital Markets Act

Author:: Christophe Carugati
Publication Date:: 12-2022
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: Large online platforms are intermediaries between end-users and business users. They sometimes propose their own products and services alongside those of rivals. This can lead to platforms promoting their offers over those of competitors in so-called self-preferencing. The European Union Digital Markets Act (DMA) bans large online platforms under its scope from treating their own products and services more favourably that those of rivals when ranking, crawling and indexing. Platforms – or gatekeepers in the DMA definition – should apply transparent, fair and non-discriminatory conditions when ranking products and services. However, the identification, detection, compliance with and monitoring of self-preferencing is complex and resource-intensive. It requires a case-by-case approach and access to and analysis of platform data and algorithms. The DMA allows gatekeepers to promote their own products and services if rivals are subject to the same treatment. Nonetheless, the DMA neither defines equal treatment nor the main elements of self-preferencing, thus preventing platforms within the DMA’s scope from correctly applying the prohibition. To ease enforcement, the European Commission should issue guidance on what constitutes self-preferencing under the DMA, outlining two main principles. First, gatekeepers should use objective and unbiased parameters to determine ranking, indexing and crawling. Second, gatekeepers should demonstrate equal treatment. The guidance will make compliance easier. The Commission should then monitor compliance by appointing and ensuring sufficient rotation of external auditors to avoid capture by gatekeepers. The Commission should also work with competent national authorities that develop technological tools. When monitoring flags a risk of non-compliance, the Commission should then further specify the ban on self-preferencing on a case-by-case basis.
Topic:: European Union, Digital Economy, Economy, Innovation, and Digital Markets Act (DMA)
Political Geography:: Europe

81. Completing Europe’s banking union: economic requirements and legal conditions

Author:: Thorsten Beck, Jan Pieter Krahnen, Philippe Martin, Franz Mayer, Jean Pisani-Ferry, Tobias Tröger, Beatrice di Mauro, Nicolas Veron, and Jeromin Zettelmeyer
Publication Date:: 11-2022
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: The European Union’s banking union project started in mid-2012 in response to the euro-area crisis, with the goal of breaking the bank-sovereign vicious circle. The objective was also to restore private liability in banking and to move towards an integrated supranational market for banking services. For all the progress achieved in the past decade, particularly in banking supervision, these aims have not yet been accomplished. This Policy Contribution analyses the deficiencies of the current framework and identifies possible responses, in line with three levels of reform ambition. We label these ‘incremental’ (broadening the scope for private-sector burden-sharing in future cases of bank failures), ‘real’ (effectively breaking the bank-sovereign vicious circle), and ‘cosmic’ (a single, seamlessly integrated banking market). European policymakers should set their sights on the second level, which we view as achievable within the current decade, requiring new EU legislation but no change to the European treaties.
Topic:: Regulation, Economy, Crisis Management, European Central Bank, and Banking
Political Geography:: Europe

82. Lessons for Europe from China’s quest for semiconductor self-reliance

Author:: Alicia Garcia-Herrero and Pauline Weil
Publication Date:: 11-2022
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: Semiconductors are a critical input to production of information and communication technology and many other goods. The major economies want to be able to produce chips at home to avoid excessive dependence on supply chains in an increasingly unpredictable world, where trade is being compromised because of national security concerns. China was first in terms of timing and scale of funding to support its its semiconductor industry. Since 2015, China has spent $150 billion upgrading its semiconductor industry. Success, however, has been limited. China’s massive industrial policy effort has been most successful in increasing capacity for assembly of chips, though that is also the least value-added part of the semiconductor supply chain. Progress on chip design and fabrication in China remain underwhelming. The United States has also started implementing its $50 billion package to support the production of chips. The European Union, meanwhile, has not yet fully finalised its main semiconductor initiative, the European Chips Act. China’s experience offers a number of lessons. First, chip fabrication requires massive fixed asset investment and, therefore, large subsidies, but with no guarantee of success. Second, one reason for the underwhelming results of China’s semiconductor policy is US containment, through export controls and other measures. In this respect, the EU should find it easier than China to upgrade its chips industry but, given the costs, focusing on the highest-end part of the supply chain would be the best approach. Assembly and production of lower-end semiconductors already face overcapacity, given the financial resources already invested by China.
Topic:: International Relations, European Union, Economy, Trade Policy, and Semiconductors
Political Geography:: China and Europe

83. How have sanctions impacted Russia?

Author:: Maria Demertzis, Benjamin Hilgenstock, Ben McWilliams, Elina Ribakova, and Simone Tagliapietra
Publication Date:: 10-2022
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: Russia’s invasion of Ukraine has triggered a series of sanctions imposed by the European Union, the United States and others. Sanctions included restrictions on Russia’s financial industry, its central bank and its coal and oil exporters, in addition to general export controls. Meanwhile, foreign companies have withdrawn voluntarily from the Russian market as a result of a ‘self-sanctioning’ trend. We assess the impact these sanctions have had on Russia’s economy in the immediate aftermath of the invasion and more structurally. Russian fiscal revenues have not suffered from sanctions sufficiently to reduce the length of this war. Effective management by the Bank of Russia has prevented financial instability and has therefore also protected the real economy. However, this picture of economic containment is coming to an end. Russia’s fiscal revenues are now beginning to take a hit; given the breadth of sanctions, the economy will suffer in the medium to long term. The voluntary departure of a large number of western firms, eventual energy decoupling by the EU and Russia’s inability to find equal alternatives will damage the Russian economy severely. As the Russian economy closes in on itself, it will become harder to find reliable data to evaluate the extent of the hit. Still greater sanctions coordination across the globe is needed to isolate the Russian economy, limit the flow of income into Russian coffers and therefore help stop the war.
Topic:: Governance, Sanctions, Economy, and Russia-Ukraine War
Political Geography:: Russia, Europe, and Ukraine

84. Will Ukraine’s refugees go home?

Author:: Uri Dadush and Pauline Weil
Publication Date:: 09-2022
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: About 15 percent of the population has fled Ukraine since the start of the Russian aggression in February 2022. Nearly 4 million Ukrainians have already registered in European Union countries. Based in part on evidence that few refugees return voluntarily to poor countries once they settle in rich countries, even once security is re-established at home, it can be expected that large numbers of Ukrainian refugees are likely to remain in European host countries, and will likely be joined by others, including many men that remained to fight when the conflict is over. Ukraine already has a long history of emigration. Its shattered economy, the likelihood of a protracted conflict and significant uncertainty with regard to its final status reinforce the argument that most refugees will not return and many more will join them. EU nations must prepare for. There will be large short-term costs and long-term economic gains from Ukrainian immigration in Europe. The best way to help Ukraine, and to moderate the likely outflow of its people, will be to assist in the country’s reconstruction, and not to place artificial impediments to the immigration of individuals who have already suffered greatly.
Topic:: Migration, Governance, Reconstruction, Refugees, Economy, Trade, and Russia-Ukraine War
Political Geography:: Russia, Europe, and Ukraine

85. Deciding the future: the Australian Army and the infantry fighting vehicle

Author:: Albert Palazzo
Publication Date:: 10-2022
Content Type:: Special Report
Institution:: Australian Strategic Policy Institute (ASPI)
Abstract:: The aim of this report is to inform government decision-makers and the public on the ability of Project LAND 400 Phase 3—the infantry fighting vehicle (IFV) acquisition—to meet the needs of Australia. I examine a number of factors that provide context for the government’s upcoming decision, whenever that may take place. Those include how IFVs fit into the Australian strategic environment, the ease with which the ADF can deploy them, their vulnerability to threats, and the ongoing utility of armour in the light of lessons unfolding from the ongoing Russian–Ukrainian War. To set the information into a useful context, this report explains the nature of contemporary land warfare and speculates how the Australian Army is likely to fight in a future conflict. To further assist those making the IFV decision, this report offers a number of scenarios that outline potential operations that the government may direct the ADF to undertake. It also identifies current gaps in ADF capability that will need remediation if the IFV is to achieve its potential, as well as the other opportunities that might not be taken up because of the focus on this investment. The report’s analysis results in some key questions for decision-makers to consider as they decide on the infantry fighting vehicle acquisition: Does the government believe that its IFV investment will deliver an appropriate balance of protection, lethality and mobility (both tactical and operational)? Does the government agree with the requirement for an infantry vehicle with STANAG 4569 Level 6 force protection and equipped with an active protection system? Is the government confident that the number of the IFVs obtained will generate a deployable and sustainable force that represents a sufficient return on the investment? Does the government accept that the IFV options under consideration will enable the ADF to offset existing gaps in capability and allow it to conduct operations in a contested maritime environment, including sea and airlift, long-range fires and logistics? Is the government confident that the Army’s combined arms system is deployable in contested environments, particularly in a maritime scenario? Does the government believe that the IFV will provide utility in the range of contingencies that the government envisages the ADF will need to meet? Does the government agree that the IFV will contribute to the requirement that the ADF be able to shape, deter and respond to threats as mandated in the 2020 Defence Strategic Update (DSU)?
Topic:: Defense Policy, National Security, United Nations, Economy, Defense Industry, and Russia-Ukraine War
Political Geography:: Russia, Europe, Australia, and United States of America

86. How to ‘open’ Strategic Autonomy

Author:: Luuk Molthof and Luc Köbben
Publication Date:: 10-2022
Content Type:: Policy Brief
Institution:: Clingendael Netherlands Institute of International Relations
Abstract:: The EU’s open strategic autonomy agenda is quickly gathering pace, especially in the trade and industrial domain. A host of initiatives and autonomous instruments have been introduced to strengthen the EU’s resilience, reduce its strategic dependencies in key sectors, and protect its industries against economic coercion and unfair trade practices. The EU has generally been careful to ensure that its efforts do not undermine the openness of its economy. However, there is an undeniable tension between the ‘open’ and ‘autonomous’ components of the agenda. Guaranteeing compatibility will require a careful balancing act, contingent on a coherent strategy not only for strengthening the EU’s strategic autonomy but also for fostering and preserving its openness. This policy brief offers concrete suggestions for operationalising the ‘open’ component in the EU’s open strategic autonomy agenda.
Topic:: European Union, Economy, Trade, Industry, Resilience, and Strategic Autonomy
Political Geography:: Europe

87. World Economy Winter 2022: Strong headwinds for global economic activity

Author:: Klaus-Jurgen Gern, Stefan Kooths, Ulrich Stolzenburg, Jan Reents, and Nils Sonnenberg
Publication Date:: 12-2022
Content Type:: Working Paper
Institution:: Kiel Institute for the World Economy (IfW)
Abstract:: Global growth has decelerated over the course of the year under the impact of high energy prices and great uncertainty. Monetary policy, which is being tightened very quickly in view of high inflationary pressure across the board, is now also putting a drag on economic activity. Overall, production remained on an upward trend into the fall, with impetus coming from easing supply bottlenecks and the continuing normalization of activity in those sectors of the economy particularly affected by the Covid-19 pandemic. Towards the end of the year, however, economic momentum weakened noticeably further. The major advanced economies in particular are currently facing a period of weak economic activity despite considerable fiscal support measures. At the same time, the problems for the Chinese economy remain significant. While global output (measured on a purchasing power parity basis) at 3.2 percent is expected to grow by 0.3 percentage points more this year than expected in September, we continue to forecast an increase of only 2.2 percent next year. For 2024, our expectation has even been reduced slightly to 3.2 percent, mainly because we do expect the US economy to recover slowly. Inflation is likely to have peaked and is expected to slow significantly over the forecast horizon thanks to lower commodity prices and easing economic tensions. However, underlying inflation is not likely to return to target levels until the end of the forecast period.
Topic:: Monetary Policy, Economy, Business, COVID-19, and Emerging Economies
Political Geography:: China, Europe, Asia, North America, and United States of America

88. The US economic presence in Greece – George Tzogopoulos

Author:: George Tzogopoulos
Publication Date:: 12-2022
Content Type:: Policy Brief
Institution:: Hellenic Foundation for European and Foreign Policy (ELIAMEP)
Abstract:: The excellent status of Greek-American relations is reflected in the economic sphere. The stock of American Foreign Direct Investment (FDI) in Greece has increased in the recent years. The technology sector has captured the attention of American digital giants, which have displayed a tendency to choose to build some of their innovation hubs in Greece. Although this is not a new phenomenon, the last few years have seen several new investments, as well as an increasing number of tech-labs in which Greece’s digital ecosystem flourishes. Over and beyond Greece’s digital transformation, the country’s shift toward green energy has sparked the interest of American companies, keen to explore opportunities. In tandem, the US is a critical supplier of liquefied natural gas (LNG) to Greece, which is, in addition, slowly acquiring the infrastructure capacity to function as an artery through which American LNG can be transported to other markets in the Balkans. Greek ship-owners are playing a significant role in the new energy market. The investment of ONEX in Syros is crucial for Greek-American co-operation in the maritime sector and could possibly be replicated in the Elefsis shipyards. The real estate sector appears attractive for American companies. Focused principally on the acquisition and/or renovation of hotels, this is expected to boost the tendency of American tourists to return to Greece after the two-years hiatus imposed by the COVID-19 pandemic. The positive momentum could also encourage more American students to study in Greece. The volume of Greek-American trade has steadily increased since 2016, with Greece maintaining a diminishing surplus.
Topic:: Science and Technology, Bilateral Relations, Economy, Trade, Real Estate, and Digital Transition
Political Geography:: Europe, Greece, North America, and United States of America

89. Operationalizing Growth Models

Author:: Lucio Baccaro and Sinisa Hadziabdic
Publication Date:: 10-2022
Content Type:: Working Paper
Institution:: Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo)
Abstract:: We present a new methodology for operationalizing growth models based on importadjusted demand components. Applying the methodology to the latest release of OECD Input-Output Tables, we calculate the growth contributions of consumption, investment, government expenditures, and exports for sixty-six countries in the periods 1995 to 2007 and 2009 to 2018 and identify the respective growth models. We find that most countries are export-led or domestic demand-led and that other forms of growth are rare. Our results corroborate previous classifications in comparative political economy but also differ from them in significant respects. Importantly, our classification improves on previous ones by covering not just the advanced capitalist economies but also Central and Eastern European and South-East Asian and Latin American countries. In a further step, we illustrate how the new indicators can be used to analyze the “drivers” of different types of growth. This examination reveals that there is a clear trade-off between consumption- and export-led growth in advanced Western economies in the period 1995 to 2007 and a dependence of export-led growth in these countries on real exchange rate devaluation in the same period, while export complexity is not a significant predictor of export-led growth.
Topic:: Political Economy, Economy, Economic Growth, Exports, and Emerging Economies
Political Geography:: Europe, Latin America, and Southeast Asia

90. Fragile States Index 2021 – Annual Report

Author:: Natalie Fiertz, Nate Haken, Patricia Taft, Emily Sample, and Wendy Wilson
Publication Date:: 05-2021
Content Type:: Special Report
Institution:: The Fund for Peace
Abstract:: The Fragile States Index, produced by The Fund for Peace, is a critical tool in highlighting not only the normal pressures that all states experience, but also in identifying when those pressures are pushing a state towards the brink of failure. By highlighting pertinent issues in weak and failing states, The Fragile States Index—and the social science framework and software application upon which it is built—makes political risk assessment and early warning of conflict accessible to policy-makers and the public at large.
Topic:: Climate Change, Authoritarianism, Employment, Fragile States, Economy, Political stability, Conflict, Crisis Management, Peace, Resilience, COVID-19, Health Crisis, Early Warning, and Risk Assessment
Political Geography:: Africa, Europe, Middle East, Tajikistan, Germany, Armenia, Central America, Spain, Lebanon, Timor-Leste, North America, Ethiopia, Southeast Asia, El Salvador, Global Focus, and United States of America

91. Brexit and Beyond: economy

Author:: UK in a Changing Europe
Publication Date:: 03-2021
Content Type:: Special Report
Institution:: UK in a Changing Europe, King's College London
Abstract:: Brexit is done. The formal negotiations are over — even though the Trade and Cooperation Agreement paves the way to many further negotiations between the UK and the EU. Our understanding of what Brexit does mean in practice is just beginning. This mini report is for those who want to dig deep on Brexit and its consequences for the economy, from its impact upon inequality, employment, and public finances, to future prospects for British trade outside of the EU.
Topic:: European Union, Employment, Inequality, Economy, Brexit, Trade, and Public Finance
Political Geography:: United Kingdom and Europe

92. The impact of Brexit on UK services

Author:: Sarah Hall and Martin Heneghan
Publication Date:: 12-2021
Content Type:: Special Report
Institution:: UK in a Changing Europe, King's College London
Abstract:: The service sector stands as a clear exemplar of the trade-offs entailed by Brexit. The emphasis placed by the government on reclaiming regulatory autonomy during the negotiations over the Trade and Cooperation Agreement (TCA), and the particular importance of ending freedom of movement had particularly serious consequences for those who import or export services. In this report, Sarah Hall, Senior Fellow at UK in a Changing Europe and Martin Heneghan, Research Fellow at the University of Nottingham explore the consequences to date of Brexit, and particularly of the TCA, for service providers.
Topic:: Treaties and Agreements, European Union, Regulation, Economy, Brexit, Services, and Trade
Political Geography:: United Kingdom and Europe

93. Can EU carbon border adjustment measures propel WTO climate talks?

Author:: Gary Clyde Hufbauer, Armen Hovakimian, and Jeffrey J. Schott
Publication Date:: 11-2021
Content Type:: Policy Brief
Institution:: Peterson Institute for International Economics
Abstract:: Reforms proposed in the European Union’s “Fit for 55” climate policy package are likely to sharply increase the cost paid by European firms for their greenhouse gas (GHG) emissions. Recognizing that increased carbon prices would put European firms at a disadvantage in competing with imports from countries that produce without incurring these costs, the European Commission has proposed a Carbon Border Adjustment Mechanism (CBAM) requiring that the most carbon-intensive EU imports either incur comparable carbon charges as EU firms or pay the equivalent of a carbon-based tariff. The CBAM aims to deter carbon leakage, which could arise if firms shift carbon-intensive production out of Europe to facilities in countries that do not tax GHG emissions (or tax at a low rate) and then export the goods to Europe. European production and output would suffer and global climate efforts to reduce GHG emissions would be undercut. The loftier goal is to encourage other countries to follow the European example and strengthen their own national decarbonization policies, which in turn would exempt their goods from CBAM charges. The CBAM would cover five carbon-intensive industries: iron and steel, aluminum, fertilizer, electricity, and cement. Countries most affected by the CBAM include Russia, China, Turkey, the United Kingdom, Ukraine, South Korea, and India. Some are likely to contest the policy, claiming that the CBAM is a unilateral measure that violates World Trade Organization rules and bolsters protectionism while hampering rather than encouraging efforts in other countries to tackle climate change. A better and more feasible approach would be adoption of a CBAM moratorium while negotiations are conducted to promote carbon abatement policies that comply with the rules-based global trading system.
Topic:: Climate Change, European Union, Economy, Carbon Emissions, and Imports
Political Geography:: Europe

94. How the rest of the world responds to the US-China split

Author:: Hung Tran
Publication Date:: 01-2021
Content Type:: Policy Brief
Institution:: Atlantic Council
Abstract:: The election of Joe Biden as the forty-sixth US president is not expected to change the list of substantive issues dividing the United States and China, such as trade, investment, technology, geopolitical competition, national security, and human rights—except that the priority among them may change, with human rights concerns moving more to the forefront. However, the tone and modality of the unfolding of the US-China competition will change from Donald Trump’s unilateralism to Biden’s efforts to build alliances with “likeminded” countries in Europe, Asia, and elsewhere to deal with the challenges China has posed. In a way, Biden’s alliance-building approach may intensify pressure on the rest of the world to take sides. How countries respond to this challenge, unwelcome by most, depends on whether they see themselves as competitors to China, or as “price takers” in the international economic system.
Topic:: Global Markets, Regulation, Finance, Economy, Trade, and Digital Policy
Political Geography:: China, Europe, Asia, North America, United States of America, and Indo-Pacific

95. From SMEs to Unicorns: What Role for Trade, Standards and New Tech?

Author:: Lucian Cernat
Publication Date:: 09-2021
Content Type:: Policy Brief
Institution:: European Centre for International Political Economy (ECIPE)
Abstract:: The global economy has been shaped by important, disruptive technological changes in recent years. Many of these technologies have been instrumental in our global COVID-19 response and will become the new normal. Some of these technologies have been introduced by small firms, which grew spectacularly to become ‘unicorns’, with very high market value and global reach, setting new technological standards in their sectors. The future competitiveness of the EU economy depends on the interplay between firm size, technological progress and ability to use the opportunities offered by global markets. This paper looks at the role of trade policy in influencing this complex interplay and offers a few tentative conclusions and recommendations.
Topic:: Science and Technology, European Union, Economy, Trade, and COVID-19
Political Geography:: Europe and Global Focus

96. EU and Mercosur in the Twenty-First Century: Taking Stock of the Economic and Cultural Ties

Author:: Oscar Guinea and Vanika Sharma
Publication Date:: 12-2021
Content Type:: Policy Brief
Institution:: European Centre for International Political Economy (ECIPE)
Abstract:: This policy brief examines the latest developments in the EU-Mercosur economic relationship and outlines the existing non-economic relationship in order to contextualise the EU-Mercosur Association Agreement and its potential for strengthening common bonds between both regions. Trade between the EU and Mercosur is significant, with both regions holding an important place as large markets for each other’s exports. Currently, trade between the two is dominated by trade in machinery, agriculture, and chemicals. As relevant as these traditional sectors are, their trade is also increasingly supported by trade in services, which unlike trade in traditional agricultural products such as soya, beef and sugar that are either stable or declining, is rapidly increasing. In addition to trade, EU and Mercosur economic bonds are also supported by investments. EU member states hold a large stock of investment in the Mercosur countries while investment flows from Mercosur into the EU are also increasing. This increase has been particularly marked in high-tech sectors like R&D and computer software, emphasising again the changing economic relationship between the EU and Mercosur from traditional to advanced sectors. These trade and investment dynamics are complemented by changes in the EU-Mercosur supply chains. Over the past ten years, the effects one region has on the competitiveness of the other have increased and will continue to do so into the future. The EU is the largest contributor to Mercosur exports, meanwhile Mercosur countries provide the biggest value-added to EU agricultural products. A primary underlying trend found across all dimensions of the EU-Mercosur economic relationship has been the rise of China. In trade, it takes two to tango, and since 2015, it has been China, rather than the EU, that has risen to become Mercosur’s main trading partner. Over the past nine years, the amount of Chinese value-added embedded in Mercosur exports has more than tripled. Moreover, China has ramped up its investment into Mercosur countries, while also receiving increased investments from Mercosur. So, although the EU-Mercosur relationship is changing and bonds have deepened, the EU faces constant competition from China in its relationship with Mercosur. Despite these changes, the EU and Mercosur share a long history of close non-economic relationships. Both have been at the receiving end of large migration flows from each other. This has led to the development of kindred cultures, shared languages, and strong non-economic ties. These similarities have long supported the establishment of deep economic bonds through meaningful collaborations in science and technology, ease of doing business, and provisions for working professionals through various cooperation agreements. However, with the rapidly changing nature of their commercial relationship, these cultural links might not be enough to sustain the economic relationship between the two. These ties need to be complemented by the ratification of the EU-Mercosur Association Agreement to nurture their changing relationship.
Topic:: European Union, Economy, Trade, South American Union (UNASUR), and Mercosur
Political Geography:: Europe and South America

97. Ukraine’s Policy Towards Turkey

Author:: Maria Piechowska
Publication Date:: 06-2021
Content Type:: Special Report
Institution:: The Polish Institute of International Affairs
Abstract:: The current revival of Ukrainian-Turkish contacts stems from Ukraine’s efforts to win over Turkey as an economic and defence partner in the face of Russian aggression. Both countries share the common goal of limiting Russian domination in the Black Sea. Turkey supports Ukraine’s territorial integrity and stands up for the Crimean Tatars, persecuted by Russia. Close bilateral relations may make Turkey—after the EU and the U.S.—one of Ukraine’s most important partners. However, the intensity of the political dialogue will depend on the state of Russian-Turkish relations.
Topic:: Foreign Policy, Defense Policy, Bilateral Relations, European Union, and Economy
Political Geography:: Europe, Turkey, Ukraine, and Middle East

98. A new direction for the European Union’s half-hearted semiconductor strategy

Author:: Niclas Poitiers and Pauline Weil
Publication Date:: 07-2021
Content Type:: Policy Brief
Institution:: Bruegel
Abstract:: A basic component in electronic devices, semiconductors are essential to the production of many products, from smartphones to cars. Securing reliable supplies of semiconductors to safeguard the production lines of a range of industries has thus become an important policy goal, especially in the context of an increasingly confrontational international environment in which high-technology leadership is also associated with military power and geopolitical reach. The semiconductor sector is highly concentrated, capital- and R&D-intensive, and particularly exposed to bottlenecks and political risks. High-end chip fabrication is centred in Asia, dominated by the duopoly of Taiwan’s TSMC and South Korea’s Samsung. In other parts of the supply chain, companies in the United States and Europe hold relative monopolies that have been leveraged for trade sanctions. The United States has taken steps to block the supply of chips and components to emerging tech giants in China, and to contain China’s ambitions of building its own cutting-edge chip production capacities. Heavy United states and Chinese investment poses a challenge to the European Union, which in response has set the goal of increasing European production beyond domestic demand. To increase its presence in this strategic and thriving sector, the EU needs a more targeted strategy that builds on its existing strengths while accommodating its relatively low domestic needs. Instead of investing public funds in a subsidy war over fabrication capacity, the EU should focus on inputs and chip design. However, no economy can hope to fully achieve independence in the sector and ensuring sustainable supply through diplomatic means should therefore also be a priority. Lastly, Europe’s small role in global semiconductor production is symptomatic of shortcomings in the European environment for high-tech innovation. These shortcomings should be addressed.
Topic:: Science and Technology, European Union, Economy, and Semiconductors
Political Geography:: China, Europe, and United States of America

99. Turkey’s African adventure: Taking stock of a new chapter in EU-Turkey relations

Author:: Ioannis N. Grigoriadis and Georgios Christos Kostaras
Publication Date:: 09-2021
Content Type:: Working Paper
Institution:: Hellenic Foundation for European and Foreign Policy (ELIAMEP)
Abstract:: Since its official adoption in 2005, Turkey’s “Africa Opening” (Afrika Açılımı) has become one of the most important elements in its foreign policy and resulted in the diversification of Turkey’s economic and political relations with sub-Saharan African states. While African-Turkish relations were broadly perceived as advanced by 2010, Ankara´s humanitarian involvement in Somalia the following year has been a catalyst for Turkey´s growing influence in the Horn of Africa and the Sahel. Emphasizing both the absence of a colonial past and its religious affinities, Turkey has further promoted its relations and influence across the continent. This is most evident in the Sahel, where the strategies of Ankara and Paris are at loggerheads. EU and Turkish interests in Africa are not necessarily irreconcilable; Africa, a continent whose economic and strategic significance is set to sharply rise, deserves more attention from Greece and the European Union.
Topic:: Foreign Policy, Politics, Bilateral Relations, European Union, and Economy
Political Geography:: Africa, Europe, Turkey, Middle East, and Mediterranean

100. The European Green Deal: How to turn ambition into action

Author:: Annika Hedberg
Publication Date:: 11-2021
Content Type:: Working Paper
Institution:: European Policy Centre (EPC)
Abstract:: The pressure is on. The climate and ecological crises are accelerating and there is growing recognition that business as usual is not an option. The EU can and should play a major role in addressing the planetary crisis, in enabling and accelerating the transition to a more sustainable world. It can do this by acting as a rule-maker and enforcer; as an economic powerhouse; as a source of significant funding within the EU and beyond, as well as a mobiliser for private financing; as a convening power; as an innovator and developer of new solutions; as a standard-setter; as a major producer and consumer. The European Green Deal is crystal clear in its ambition. However, as this ambition and its goals are turned into policies and initiatives, the greatest challenge lies in the ‘how’. How to turn the ambition of the European Green Deal into real action and real results? This paper argues that to achieve the goals of the European Green Deal and leverage impact beyond EU borders as well, there are five fundamental strands of action for the EU and its member states: Leadership that communicates the urgency for action. Europe needs leaders - be it politicians, policymakers, media, heads of military or other opinion influencers - that communicate clearly the direction of travel and remind the public of the benefits of action as well as the costs of inaction for the economy, society and people. Aligning member state action with the agreed goals requires political will, ownership of the needed measures and recognising that urgent action is in every nation’s interest. This calls for using every tool in the kit, including EU policies, investments and collective action, to get on the right track. It requires addressing existing incoherencies in the policy and investment framework as well as better enforcement of existing rules. Bringing business along: The EU needs to help create the right framework conditions for European businesses – big and small - to succeed in the transition and to become a leader in those solutions that are increasingly demanded in- and outside of the EU. Bringing people along: Reaching the agreed goals requires communicating and showing the benefits that the measures will bring to people; managing the social impact on the most vulnerable in particular; and providing people with the right tools to engage in the transition. Global action: The EU should lead by example but also collaborate with other major players in addressing the climate and the wider sustainability crises. When the EU speaks and acts as one, it can be more powerful and impactful globally than the sum of its parts.
Topic:: Climate Change, European Union, Leadership, Economy, Sustainability, and Green Deal
Political Geography:: Europe

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COLUMBIA UNIVERSITY PRESS