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1. The State of EU-US Digital and Energy Cooperation

Author:
Federica Marconi, Wolfgang Münchau, and Irene Paviotti
Publication Date:
02-2024
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
In a time of rapid technological advancements and changing energy paradigms, the European Union and the United States are trying to coordinate their efforts to navigate the complexities of an ever-evolving landscape. Transatlantic dialogues and cooperative endeavours are key mechanisms for mitigating tensions and fostering a common assessment of the opportunities and risks arising from these advancements. Critical in this regard are the problems of governance emanating from technological development and its consequences in the digital sphere as well as the delicate balance between security, competitiveness and environmental targets in the energy dimension.
Topic:
Climate Change, International Cooperation, Political Economy, Governance, European Union, Transatlantic Relations, Digital Policy, and Energy
Political Geography:
Europe, North America, and United States of America

2. Fossil Fuel Industry Phase-Out and Just Transition: Designing Policies to Protect Workers’ Living Standards

Author:
Robert Pollin
Publication Date:
02-2023
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
This paper focuses on just transition policies targeted at supporting workers now employed in the fossil fuel industries and ancillary sectors within high-income economies. As a general normative principle, I argue that the overarching aim of such policies should be to protect workers against major losses in their living standards resulting through the fossil fuel industry phase-out. The impacted workers should be provided with three critical guarantees to accomplish this, in the area of jobs, compensation and pensions. Just transition policies should also support workers in the areas of job search, retraining and relocation, but these forms of support should be understood as supplementary. Within the framework of these broad principles, the paper first reviews experiences with transitional policies in Germany, the UK, the EU and, more briefly, Japan and Canada. A critical point that emerges is that these just transition policies do not provide the needed guarantees for assuring workers that they will not experience major living standard declines. The paper then describe an illustrative just transition program for workers that includes reemployment, income and pension guarantees, focusing on a case study for the U.S. state of West Virginia. The results show that the costs of the just transition program for West Virginia’s fossil fuel industry dependent workers will amount to an annual average of about $42,000 per worker, equal to about 0.2 percent of West Virginia’s GDP. I briefly summarize results from the seven other studies of U.S. states and for the overall U.S. economy. For the U.S. economy overall, the just transition program’s costs would total to about 0.015 percent of GDP. These findings demonstrate that providing a generous just transition program does not entail unaffordable levels of public spending. Robust just transition policies should therefore be understood as an entirely realistic prospect for all high-income economies.
Topic:
Political Economy, Labor Issues, European Union, GDP, Economy, and Fossil Fuels
Political Geography:
Japan, United Kingdom, Europe, Canada, and Germany

3. The Political Economy of the Cost of Living Crisis in the UK: What Is to Be Done?

Author:
Ozlem Onaran
Publication Date:
02-2023
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
This paper analyzes the political economy of the cost of living crisis in the context of the United Kingdom. The paper presents the long-term trends in the wage share, wealth inequality, labour’s bargaining power, and real wages in the UK. The first and second waves of inflation in 2021-22 are discussed presenting the trends in the profit margins. The policy responses by the conservative governments and the Bank of England are analyzed, and their limitations are assessed. The paper concludes with short-run and medium-run policy alternatives to the cost of living crisis
Topic:
Political Economy, Labor Issues, Inequality, Inflation, and Cost of Living
Political Geography:
United Kingdom and Europe

4. The EU–US Data Protection Framework: Balancing Economic, Security and Privacy Considerations

Author:
Federica Marconi
Publication Date:
09-2023
Content Type:
Commentary and Analysis
Institution:
Istituto Affari Internazionali
Abstract:
The rapid evolution of digital technology has ushered in a data-centric economy, where data accessibility drives marketplace efficiency and economic growth across various industries. However, this shift, while offering numerous benefits, introduces significant privacy and data security challenges, particularly in the context of transatlantic data transfers. Considering the vast economic ties between the EU and the US, the transatlantic data flow vividly illustrates the complexities involved in governing and transferring data. It grapples with the ongoing challenge of striking a satisfactory balance between economic advantages stemming from data utilisation and various concerns pertaining to national security, digital sovereignty and individual rights. In recent years, the European Commission approved two different frameworks on transatlantic data flow – Safe Harbour in 2000[1] and Privacy Shield in 2016[2] – asserting that the US provided a level of data protection for data transfers essentially equivalent to that guaranteed in the EU. However, despite initial optimism, both adequacy decisions faced a significant setback when the Court of Justice of the European Union invalidated them in what is commonly referred to as the “Schrems saga”,[3] named after the Austrian activist who first challenged both frameworks before the European Court. The core arguments centred on the absence of adequate safeguards for personal data within US domestic law and the extent of state surveillance over such data when it was transferred, as initially disclosed by Edward Snowden in 2013.[4] This legal development led to a period of significant uncertainty and further heightened the ongoing debate concerning the regulation of transatlantic data transfer. To address the consequences of this legal turmoil, both EU and the US committed to establishing “a renewed and sound framework for transatlantic data flows”,[5] seeking a long-term solution to address the complexities of data privacy and security, eventually leading to the recently adopted EU–US Data Privacy Framework (“DPF”).
Topic:
Security, Economics, Political Economy, European Union, Privacy, Transatlantic Relations, and Digital Policy
Political Geography:
Europe and United States of America

5. Inequalities and Local Infrastructure: The Challenges of Post-Covid Recovery Investments

Author:
Filippo Barbera
Publication Date:
02-2022
Content Type:
Commentary and Analysis
Institution:
Istituto Affari Internazionali
Abstract:
Rather than being mere “productive environments”, localities embedded in infrastructure are distinctive living places in which communities of people live and establish a greater part of their daily social relationships. As a result, infrastructure represents the backbone of citizenship rights and strongly affect territorial inequalities. Infrastructure is chiefly understood in physical terms as reticulated systems of highways, pipes, wires or cables. This physical reductionism is by no means sufficient to encompass the multiple facets of the concept or to make sense of the many ways infrastructure affects socio-political inequalities. Knowledge infrastructure, for instance, may indicate robust networks of people, equipment and institutions that generate, share and maintain specific knowledge about the human and natural worlds. Infrastructure furthermore refers to the interplay between information technologies, transportation and other intermodal transport devices. All of these kinds of infrastructure affect inequalities in different ways.
Topic:
Political Economy, Politics, Infrastructure, Governance, European Union, Sustainable Development Goals, and Institutions
Political Geography:
Europe

6. Explaining immigration restrictions using a sequential path dependency model

Author:
Emmanuel Comte
Publication Date:
06-2022
Content Type:
Working Paper
Institution:
Hellenic Foundation for European and Foreign Policy (ELIAMEP)
Abstract:
This paper, by Emmanuel Comte, Senior Research Fellow, Ariane Condellis European Programme, analyses immigration restrictions by discussing major recent debates of historical political economy and proposing a new explanatory model. The conclusions in recent research on the subject of immigration restrictions converge in highlighting the natives’ fear of economic costs as a potent factor in immigration restrictions, despite evidence proving that actual costs are small and circumscribed, while the aggregate impact of immigration is generally positive. This paper develops existing scholarship to explain the magnitude of current immigration restrictions in Europe and North America by proposing a sequential path dependency model based on both historical insights and the insights of institutionalist theories of path dependence. In this model, the fears of adverse economic effects held by specific segments of the national workforce interact with a power structure dominated by the state and with the agency of union leaders and policymakers initiating a series of policy cycles that lead to complete restrictions on low-skilled immigration.
Topic:
Political Economy, Immigration, and Border Control
Political Geography:
Europe and North America

7. The New Wave of Defensive Trade Policy Measures in the European Union: Design, Structure, and Trade Effects

Author:
Fredrik Erixon, Oscar Guinea, Philipp Lamprecht, Vanika Sharma, and Renata Zilli
Publication Date:
05-2022
Content Type:
Working Paper
Institution:
European Centre for International Political Economy (ECIPE)
Abstract:
This study undertakes a comprehensive review of proposed and adopted defensive trade policy instruments in the EU, with the purpose of better understanding their design, functioning, and implications. The study covers eight policy instruments at different stages of development. These are: Anti-Coercion Instrument (ACI), International Procurement Instrument (IPI), Carbon Border Adjustment Mechanism (CBAM), Foreign Subsidy Instrument (FSI), Corporate Sustainability Due Diligence (DD), Level Playing Field Provisions in the EU-UK Trade and Cooperation Agreement (LPF), Enforcement Regulation (ER), and the Deforestation Initiative (DI). It is understandable that the EU seeks both redressive and retaliatory measures in its trade policy. However, these measures would have the total effect of Europe producing more for itself and being less dependent on imports. This is a significant policy shift, because in their totality the defensive trade policies make the EU more inward-looking. This can lead to major negative consequences. An extensive distortion of trade and markets would reduce the gains from trade and prompt a reallocation of European resources. Notably, the EU is a larger supplier of goods and services than it is a buyer, and an inward-looking policy that leads to retaliation from EU’s trading partners can harm its exports and trade surplus. There are also potential strategic consequences that could follow, and their importance has increased considerable as a result of the Russian war against Ukraine. Under these measures, the EU could introduce new trade frictions with friends and allies, and with countries that the EU seeks closer cooperation with to provide for a safer geopolitical environment. For each of these defensive measures, the study takes an extensive look at the objectives of the instruments, their legality, proportionality, and subsidiarity, the working of the instruments and the division of labour between institutions, as well as their enforceability in conjunction with existing multilateral and bilateral rules affecting the EU. It also attempts to capture the impact and potential for retaliation for the EU and its partners as a result of the implementation of the instruments. The study highlights the areas where the instruments lack clarity, particularly in the implementation of the instrument, the division of labour between the EU and EU member states, and the compliance of the instruments with WTO rules and bilateral FTA provisions. The instruments share some general characteristics. Many of the instruments have been created as retaliatory measures against coercion and unfair trade practices by partner countries. Very often, the partner countries most affected by the instruments are also the same. The United States, China, Russia, the UK, and Turkey are likely to be on the receiving end of the instruments due to the significant volumes of trade and economic interdependence with the EU, but also because they either do not follow the same trade rules as the EU, or the EU wants to maintain with them the current level of competitiveness. Most instruments also use restrictions to the EU market as the main policy lever. The objective is not just about creating an equal playing field but also ensuring that the rest of the world follows EU rules. Particularly, the EU aims at regulating non-EU companies directly and unilaterally through EU policies, which increases the risk of retaliation against the EU. At the same time, there are also important areas of departure in the specifics of each instrument, as illustrated by the varying objectives, measures, compatibility with international obligation, affected sectors, and whether the measures apply automatically or at the discretion of the EU.
Topic:
Defense Policy, Political Economy, European Union, and Trade
Political Geography:
Europe

8. 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:
Political Economy, European Union, Trade, Resilience, and Supply Chains
Political Geography:
Europe, Asia, and Global Focus

9. 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

10. China's Belt and Road Initiative in Italy: An Analysis of Financial Cooperation

Author:
Nicola Bilotta
Publication Date:
05-2021
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
Financial cooperation is essential to boosting bilateral economic ties, providing firms with more effective instruments to operate in foreign markets. It should come as no surprise, then, that financial cooperation was a pillar of the 2019 Memorandum of Understanding (MoU) reached between Italy and China in support of the latter’s Belt and Road Initiative (BRI). However, a preliminary analysis of BRI-related commercial agreements between Italian financial institutions and their Chinese counterparts shows that they have not resulted in any ground-breaking development. These Memoranda have apparently just added a “BRI” badge to pre-existing trends of collaboration. The BRI-related MoUs in the field of financial cooperation do not, for the time being at least, justify concerns that China may gain an economic foothold in Italy large enough to win it much political influence. A more realistic risk is that these MoUs may undermine a common European approach to China, weakening the negotiating stance of the European Union’s. Paper prepared in the framework of the IAI project “When Italy embraces the BRI”.
Topic:
Foreign Policy, Political Economy, Governance, Finance, and Belt and Road Initiative (BRI)
Political Geography:
China, Europe, Asia, and Italy

11. CBDCs for Dummies: Everything You Need to Know about Central Bank Digital Currency (And Why You Shouldn’t Be Afraid of It)

Author:
Nicola Bilotta
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
“No cash accepted in this store”. What might seem to some like science fiction is on its way to becoming reality. The rise of non-cash payments is a global phenomenon, although moving at different speeds around the world. To keep up with the digitalisation of payments (and of the economy), many central banks are exploring the development of Central Bank Digital Currencies (CBDCs), a digital form of cash. Despite being confined to a technical discussion among experts, when (rather than if) launched, CBDCs concerns us all. Thus, raising awareness of what CBDCs are, and of their key economic and political dimensions, is crucial to ensure that citizens are not only passive spectators. This paper has the ambition to provide (non-expert) readers with straightforward and simple answers to some of the many questions they may have around CBDCs. It sets the ground to better understand what CBDCs are (and are not), their drivers and their possible design. It will explore the impact of CBDC systems on privacy, the geo-strategic drivers of CBDCs and the possible rivalry between public and private money. Paper prepared in the framework of a research effort on the risks and the opportunities related to Central Bank Digital Currencies (CBDCs) with the support of Intesa Sanpaolo and the Bank of Italy.
Topic:
Political Economy, Governance, European Union, Finance, Currency, and Digital Policy
Political Geography:
China, Europe, and United States of America

12. Covid-19 and the International Liberal Order: Goodbye “Global”, Hello “Regional”?

Author:
Irene Paviotti
Publication Date:
10-2021
Content Type:
Commentary and Analysis
Institution:
Istituto Affari Internazionali
Abstract:
The Covid-19 crisis is broadly recognised as a watershed moment in world history, prompting a radical rethink of social norms and accelerating a number of pre-existing geopolitical trends. When it comes to globalisation and multilateralism, two defining features of the current international order, the pandemic has accelerated a move towards regionalism on the one hand and clearly exposed the shortcomings of an unequal multilateral system on the other.
Topic:
Globalization, Health, Political Economy, Politics, European Union, Institutions, and COVID-19
Political Geography:
Europe

13. Governance, Social Policy, and Political Economy: Trends in Norway’s Partner Countries

Author:
Stein Sundstol Eriksen
Publication Date:
04-2021
Content Type:
Special Report
Institution:
Norwegian Institute of International Affairs
Abstract:
In 2017–2018, NUPI (the Norwegian Institute of International Affairs) headed a project where political economy analyses were undertaken in eleven of Norway’s partner countries. These analyses were published as eleven separate reports. The reports focused on power relations and political developments in the partner countries, but they also analyzed the nature of governance. After the publication of the World Bank’s Worldwide Governance Indicators for 2019, the MFA approached NUPI and requested that we summarize the findings of this report for Norway’s eleven partner countries and assess these findings in light of the political economy analyses. We were also asked to investigate whether there were any connections between the nature and quality of governance on the one hand, and the nature of social policies and the human rights situation on the other. This report presents the findings of this assessment of the governance scores in the light of the above-mentioned political economy analyses. The report is structured as follows: Firstly, after briefly describing the governance indictors used by the World Bank, we summarize the eleven countries’ scores on the various governance indicators. Secondly, we assess the evolution of governance in the eleven countries, by comparing the scores in the 2019 report with those from 2011. Thirdly, we summarize the findings of the political economy analyses of the eleven countries and discuss how they fit with the governance scores. Finally, we present the eleven countries’ expenditure on social policies, as reported in the ILOs World Social Protection Report, and the human rights situation for the partner countries, and then describe how these findings relate to the governance scores.
Topic:
Development, Economics, Political Economy, Governance, and Social Policy
Political Geography:
Africa, Europe, and Norway

14. Volume 71 Issue 2

Author:
Gökhan Karabulut
Publication Date:
01-2021
Content Type:
Journal Article
Journal:
Istanbul Journal of Economics
Institution:
Istanbul University Faculty of Economics
Abstract:
Istanbul Journal of Economics-İstanbul İktisat Dergisi is an open access, peer-reviewed, scholarly journal published two times a year in June and December. It has been an official publication of Istanbul University Faculty of Economics since 1939. The manuscripts submitted for publication in the journal must be scientific and original work in Turkish or English. Being one of the earliest peer-reviewed academic journals in Turkey in the area of economics, Istanbul Journal of Economics-İstanbul İktisat Dergisi aims to provide a forum for exploring issues in basicly economics and publish both disciplinary and multidisciplinary articles. Economics is the main scope of the journal. However, multidisciplinary and comparative approaches are encouraged as well and articles from various social science areas such as sociology of economics, history, social policy, international relations, financial studies are welcomed in this regard. The target group of the journal consists of academicians, researchers, professionals, students, related professional and academic bodies and institutions.
Topic:
Economics, Globalization, International Trade and Finance, Oil, Political Economy, Natural Resources, Exchange Rate Policy, and Industry
Political Geography:
Europe, Turkey, and Asia

15. Pork, infrastructure and growth: Evidence from the Italian railway expansion

Author:
Roberto Bonfatti, Giovanni Facchini, Alexander Tarasov, Gian Luca Tedeschi, and Cecilia Testa
Publication Date:
07-2021
Content Type:
Working Paper
Institution:
Nottingham Interdisciplinary Centre for Economic and Political Research (NICEP)
Abstract:
This paper studies the role played by politics in shaping the Italian railway network, and its impact on long-run growth patterns. Examining a large state-planned railway expansion that took place during the second half of the 19th century in a recently unified country, we first study how both national and local political processes shaped the planned railway construction. Exploiting close elections, we show that a state-funded railway line is more likely to be planned for construction where the local representative is aligned with the government. Furthermore, the actual path followed by the railways was shaped by local pork-barreling, with towns supporting winning candidates more likely to see a railway crossing their territory. Finally, we explore the long-run effects of the network expansion on economic development. Employing population and economic censuses for the entire 20th century, we show that politics at a critical juncture played a key role in explaining the long-run evolution of local economies.
Topic:
Development, Political Economy, Infrastructure, and Railways
Political Geography:
Europe and Italy

16. Will corporate debt choke the post-COVID-19 recovery?

Author:
Frederico Mollet
Publication Date:
01-2021
Content Type:
Policy Brief
Institution:
European Policy Centre (EPC)
Abstract:
Europe’s economic recovery is threatened by the corporate debt overhang created in the wake of the pandemic. Even as vaccines roll out, Europe faces the prospect of a prolonged retrenchment as indebted firms pull back investments and repair their balance sheets. Insolvency procedures have gradually improved over the past decade in Europe, but decisive and swift public action is needed to take advantage of these reforms. Given the scale of the crisis, Frederico Mollet argues in favour of a comprehensive European restructuring strategy. EU member states and the Commission must step in to provide the resources, guidance, and coordination necessary to push through this monumental restructuring. This strategy would furthermore benefit from common European guidelines and criteria for creditors and debtors. It will not only increase the likelihood of success but also protect the level playing field. Lack of a clear strategy and coordinated approach will result in a drawn-out restructuring process that pushes too many viable firms into liquidation and permanently hampers the economic recovery. Centring on private restructurings would also minimise the use of public funds at a time when governments have to deal with multiple competing fiscal pressures.
Topic:
Debt, Political Economy, and Economic Recovery
Political Geography:
Europe

17. The EU–UK relationship: It is what it is

Author:
Fabian Zuleeg and Jannike Wachowiak
Publication Date:
02-2021
Content Type:
Working Paper
Institution:
European Policy Centre (EPC)
Abstract:
The EU–UK Trade and Cooperation Agreement might have pulled both sides back from the brink of a no-deal cliff edge, but it remains a shaky foundation for the next stage of EU–UK relations. Both sides must invest in the relationship and rebuild trust to prevent any conflict from escalating into a tit-for-tat. Or else, they risk the collapse of the deal and the return to a no-deal-like state. In the first months of its new phase, the relationship is already off to a rocky start. The rows over the diplomatic status of the EU mission in London and the Commission’s (now reversed) decision to trigger Article 16 of the Northern Ireland Protocol expose the volatility of the relations and the importance of good communication and trust. The hope for a deal came with the expectation that it would provide the foundation upon which a closer relationship could be constructed over time. It now seems more likely that it will be the basis for a diverging – and at times conflicting – relationship, with little prospect for a significantly closer economic relationship anytime soon. There seems little political appetite on both sides to build on the economic settlement meaningfully, which would require a significant shift of red lines. Previous expectations that a deal would pave the way for outstanding issues, such as the EU granting equivalence for financial services, have also diminished. Given both the political climate and many red lines, the agreed thin economic settlement may be the most we can expect.
Topic:
International Relations, Political Economy, Regional Cooperation, Treaties and Agreements, European Union, and Trade
Political Geography:
United Kingdom and Europe

18. Updating the European industrial strategy for the post-pandemic world

Author:
Marta Pilati and Frederico Mollet
Publication Date:
03-2021
Content Type:
Policy Brief
Institution:
European Policy Centre (EPC)
Abstract:
On 27 April, the European Commission is expected to publish an update to their 2020 Industrial Strategy, a blueprint for an assertive European industrial policy that drives the digital and green transitions. While the current strategy’s broad principles continue to hold, it must now adapt to the post-pandemic world’s challenges. Furthermore, the original strategy only provided a high-level roadmap, with many areas requiring further development. Frederico Mollet and Marta Pilati break down European industry’s weaknesses and potential areas of success, the effects of COVID-19 this past year, key points of the 2020 Industrial Strategy and its relevance for Europe and beyond. They outline 16 recommendations which would strengthen the design and implementation of the programmes outlined in the current strategy, across four themes: finance, industrial ecosystems and alliances, technology transfer, and strategic autonomy.
Topic:
Development, Political Economy, European Union, Digital Economy, Green Technology, Industry, COVID-19, Strategic Autonomy, and European Commission
Political Geography:
Europe

19. The Industrial Strategy refresh: A new opportunity to reboot the EU’s industrial innovation performance

Author:
Alison Hunter
Publication Date:
04-2021
Content Type:
Policy Brief
Institution:
European Policy Centre (EPC)
Abstract:
The EU’s forthcoming Industrial Strategy update aims to put Europe’s industry at the core of the Union’s efforts to improve competitiveness. To achieve this, the Union must upgrade its policy and investment framework in a way that supports collaboration on industrial innovation across the EU. Although the EU has made some gains when it comes to boosting industrial innovation, recently, a disjointed framework has begun to emerge with two separate ‘tiers’ of support: one geared towards key industry initiatives, such as Industrial Alliances and Important Projects of Common European Interest (IPCEIs); the other towards place-based industrial innovation, driven primarily by EU regions, such as Cluster Collaborations and Smart Specialisation Partnerships. To maximise the impact of these collaborative efforts and to generate a connected, Europe-wide industrial ecosystem, we need an industrial innovation pipeline for the whole of the EU. Amid growing concerns about an uneven recovery from the pandemic, the EU cannot afford to perpetuate the current innovation divide or widen the distance between industrial winners and losers. The new Industrial Strategy update should, therefore: spearhead efforts to close the gap between the EU’s ‘Tier 1’ and ‘Tier 2’ industrial innovation support landscape; improve the analysis of the barriers that prevent many EU regional industrial innovation systems from flourishing; and promote an ‘Innovation Everywhere’ agenda, focusing on EU territories where industrial innovation continues to fall behind.
Topic:
Political Economy, European Union, Innovation, and Industry
Political Geography:
Europe

20. China’s grand industrial strategy and what it means for Europe

Author:
Frederico Mollet
Publication Date:
04-2021
Content Type:
Policy Brief
Institution:
European Policy Centre (EPC)
Abstract:
In its 14th Five-Year Plan, China has mapped out a grand economic and industrial strategy that upends many of the assumptions that underpin the EU's approach - how can the Union respond? With this new plan, the EU can expect tougher competition and greater protectionism in its economic relations with China. A further blurring of the public-private sector distinction in the country's economic model will make it harder to combat unfair Chinese competition. And while China is actively courting foreign investment, it is also signalling greater protectionism to products not made in China, which will lead to European investors' and exporters' interests diverging. To balance the scales, the EU should adapt its own strategy by: continuing to develop trade instruments to combat unfair competition at home and abroad; ensuring that these instruments and institutions can respond to unfair competition from private companies benefiting from state capital investment; ensuring that the extensive and often opaque government holdings in private firms are reflected in foreign direct investment and export controls; incorporating China's attempts to reconfigure supply chains into its own assessment of strategic dependencies, identifying areas that could become vulnerable; prioritising the improvement of access to the Chinese market for goods and services produced in Europe; developing alternative sources of growth, and boost demand and reduce barriers within the Single Market to offset greater Chinese protectionism; and ensuring that its industrial policy efforts will enable European industry to match China's developments. The present moment may mark a turning point in EU–China relations: in a little over three months, an agreement on an investment treaty was followed by sanctions and countersanctions. Geopolitical conflict ratchets up between China and the US. Beijing's new economic course will reshape its global relationships. China's protectionist turn and growing one-sided dependencies will threaten Europe's long-term strategic autonomy and undercut any attempts to construct a balanced approach to EU–China relations. If the EU's multi-track strategy is to work, a concerted effort is required to preserve economic parity and balance between the two powers.
Topic:
International Relations, Political Economy, European Union, Grand Strategy, Industry, and Supply Chains
Political Geography:
China, Europe, and Asia