Western European integration and Eastern European transformation

The process of EU integration has intensified in the 1980s and early 1990s. The desire of a number of central and eastern European countries to join the EU is often seen as a threat to the continuation of this process. How wide should the radius of EU enlargement be? Which forms of integration would be appropriate between the EU and different subsets of ex-CMEA countries?     

The role of intermediate demand and technology for international competitiveness of the KIBS sector: evidence from European Union countries

In this paper, it is tested whether intermediate consumption of knowledge-intensive business services (KIBS) in the economy and technology advancement in the KIBS sector (measured by R&D expenditures) affect the international competitiveness of a country's KIBS sector. First, the definition of KIBS trade, in light of the available data from the balance of payments statistics, is presented. Then, using a panel data set from the EU countries over the period 2000–2009, a panel cointegration approach to estimating the model is adopted. The empirical study shows that among the old EU countries only those with high income are competitive in KIBS exports. Estimation results demonstrate that their competitiveness in KIBS exports is positively determined by domestic and imported KIBS intensity in the economy, as well as by the KIBS sector's technology advancement. The new EU countries usually were not competitive in KIBS exports, and those which were successful in this field seem to have derived their success mainly from international outsourcing rather than from building their own capacities. Their competitiveness in KIBS exports was positively determined by the KIBS sector's endowment in human capital, or via domestic KIBS intensity in the economy together with lower labour costs.     

A minimum corporate tax rate would be harmful for both high and low tax countries

Conclusion  The corporate tax policy of the new EU member states does create pressures for some of the old member states to reduce their corporate taxes, in particular statutory corporate tax rates. But reacting to this pressure by enforcing mimimum tax rates in the EU would be counterproductive. It would slow down the economic catching up process in eastern Europe and question the competitiveness of the entire EU as a location for investment compared to other countries and regions in the world economy. There are potential benefits from more coordination in the field of corporate taxation, but this coordination should aim at removing tax obstacles to border-crossing investment and at reducing the compliance costs of the tax system. This requires targeted measures in the area of tax base coordination. Introducing minimum corporate tax rates, in contrast, would be harmful for both high and low tax countries in the EU.     

Die Kosten der Flüchtlingskrise in Deutschland – eine Investition in die Zukunft?

The high costs of the refugee crisis are often a subject of public discussion. However, one should distinguish between the fiscal and the overall economic effects of this current wave of immigration. A financial economic model shows that the “fiscal break-even” point can be reached by the year 2031. This is the first point at which the taxes and contributions of employed refugees exceed the costs to the public sector resulting from the refugees who are not in the labour market. The “economic break-even” point can be reached as early as 2025 if the gross value added contributions of the employed refugees by that time exceed the costs of caring for and integrating the refugees who are not in employment. This will require a “smart” integration of the refugees into the labour market, requiring high investment in the qualification of individuals and a flexible use of labour policy tools.     

Economic Partnership Agreements Between Sub‐Saharan Africa and the EU: A Development Perspective

This paper draws on Hinkle and Schiff (2003). It analyses the planned Economic Partnership Agreements (EPAs) between the EU and Sub‐Saharan Africa (SSA) from a development perspective. It does not take a position on whether SSA should enter into EPAs with the EU. Rather, it starts from the notion that the process of forming EPAs is unlikely to be reversed and examines the conditions that will maximise SSA's benefits from the EPAs. If this notion is correct, then the analysis presented in the paper applies. On the other hand, Pascal Lamy, the EU Trade Commissioner, made a proposal at the May 2004 G‐90 summit in Dakar that might lead to a change in the EPA process. He proposed that the G‐90, a group consisting of ACP and non‐ACP LDC countries, should not have to make concessions at the WTO Doha Round of multilateral trade negotiations, i.e., he proposed a ‘free round’ for the G‐90. This proposal opens the door to the possibility that the same might apply to the ACP countries in the EU‐ACP negotiations and that the EPA process might be reversed. The paper considers the key issues raised by the planned EPAs, their relationship to the WTO's Doha Round and the EU's Everything‐but‐Arms Initiative, the changes needed to make the EPAs internally consistent, the domestic reforms in SSA that would need to accompany trade liberalisation in both goods and services, and the potential effects of the EPAs on regional integration in SSA. The EPAs will pose a number of policy challenges for SSA countries, including: restructuring of indirect tax systems, reduction of MFN tariffs, liberalisation of service imports on an MFN basis and related regulatory reforms in the services sector, and liberalisation of trade in both goods and services within the regional trading blocs in SSA. The paper also finds that the EPAs provide an opportunity to accelerate regional and global trade integration in SSA. To realise the potential development benefits of the planned EPAs, two steps are essential. First, the EU must, as it has stated, truly treat the EPAs as instruments of development, subordinating its commercial interests in the agreements to the development needs of SSA. Second, the SSA countries need to implement a number of EPA‐related trade policy reforms. However, the latter is far from certain, given the lack of reform momentum in SSA.     

Chile's Trade and Regional Integration Policy: An Assessment

This paper examines the economics, politics and political economy of Chile's trade and regional integration (RI) policies, and reaches the following conclusions. First, Chile is likely to obtain static and dynamic benefits from a free trade agreement (FTA) with the US, though the benefits depend crucially on the extent to which its market access to the US improves and on the costs of implementing the intellectual property rights agreement and of enforcing the rules of origin. Second, potential benefits are more doubtful with respect to FTAs with MERCOSUR and the Andean Pact and Central American countries.Third, Chile should complement its ongoing negotiations with the EU by negotiating FTAs with key Asian countries.Fourth, Chile should bind all its tariffs at the WTO at the applied MFN uniform tariff rate. Fifth, the uniform MFN tariff should be reduced below six percent after 2003.     

A Gravity Model Forecast of the Potential Trade Effects of EU Enlargement: Lessons from 2004 and Path‐dependency in Integration

This paper uses a gravity model to forecast the potential impact on trade balances and trade patterns of the 2004 EU enlargement. The results suggest that gross trade creation for the accession economies is about 25 per cent of their 2003 trade. Although membership of the EU creates trade it also results in trade diversion; that is, a declining share of accession country exports and imports with non‐EU15 countries. Overall, the trade balances of the accession countries suffer larger trade deficits after accession due to import growth surpassing export growth. The extent of increase in the trade deficit due to accession is inversely related to the level of integration and income of the new members. Hence integration is path‐dependent and the EU should take this into account when preparing for further enlargements to the Balkans and Southeast Europe.     

Fiscal policy and the recession: The case of Greece

This paper presents an analysis of the implications of Greece’s intense and long-lasting fiscal and external imbalances for the potential efficacy of a discretionary fiscal policy response to the current recession. It argues that, given recent developments in interest rate spreads and the credit markets’ increased sensitivity to risk, the interest rates applicable to the entire amount of Greece’s external debt would tend to be higher with a fiscal expansion than without one. Moreover, it deduces from a simple model that the leakages associated with increased interest payments to foreign creditors could well cancel out any positive multiplier effects generated by a fiscal expansion, resulting in a failure to stimulate growth. The implications of this finding for policy is that Greece should continue to avoid the adoption of a fiscal stimulus package, not only out of respect to its fiscal obligations as an EU member but, ultimately, because such a package would be ineffective as an economic recovery tool. While the analysis focuses on the Greek economy, it may be of relevance to other EU economies suffering from serious macroeconomic imbalances.     

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

A key element of the EU's free trade and preferential trade agreements is the extent to which they deliver improved market access and so contribute to the EU's foreign policy objectives towards developing countries and neighbouring countries in Europe, including the countries of the Balkans. Previous preferential trade schemes have been ineffective in delivering improved access to the EU market since only a small proportion of the available preferences have actually been utilised. The main reason for this is probably the very restrictive rules of origin that the EU imposes, coupled with the costs of proving consistency with these rules. If the EU wants the ‘Everything but Arms’ agreement and free trade agreements with countries in the Balkans to generate substantial improvements in access to the EU market for products from these countries then it will have to reconsider the current rules of origin and implement less restrictive rules backed up by a careful safeguards policy..     

Enlarging the EU: How can the costs be minimised?

Enlargement of the EU will be associated with many costs for all participants— the prospective new members, the old memebers and the EU institutions. A strategy should be pursued that reduces the economic costs as far as possible. This implies a postponement of enlargement until the conditions are more favourable. The author would like to thank Prof. El-Shagi El-Shagi and Dr. Dorothea Witter-Rieder for helful comments on an earlier draft of this paper.     

欧盟关于人员自由流动的立法特点及其启示

欧洲联盟内部人员自由流动,同商品、服务和资本的自由流动一起,构成了欧洲经济一体化的基本内容.人员在成员国之间自由流动,直接冲击成员国现行的经济、社会等制度,因此往往遭遇障碍和歧视.欧盟从建立时起,就注重对人员自由流动的法律调整,并形成了自己鲜明的立法特点.我国正处于城市化的高潮时期,人员流动正迅速发展.我们应该借鉴欧盟的经验,加强人员流动方面的立法,以确保人员流动有序进行,促进改革开放的健康、和谐发展.     

Accession of the Czech Republic,Hungary and Poland to the European Union: Impacts on Agricultural Markets

We analyse the consequences on agricultural markets of enlargement of the European Union (EU) to include the Czech Republic, Hungary, and Poland. We produce a market outlook up to 2010 for two enlargement scenarios assuming different policy restrictions on grain and dairy production in the acceding countries. Accession of the three Central and Eastern European countries (CEECs) leads to a permanent but moderate decrease in EU prices for most commodities. In the three acceding CEECs, domestic prices increase drastically, final consumption of agricultural products decreases in most instances, while production increases. Higher domestic prices in the CEECs reduce exports of most commodities to non‐union countries. Consequently, excess supplies are placed in stocks or exported to the original 15 member countries. Supply management mechanisms in the dairy and grain sectors would reduce the build‐up of surpluses in the new member states, but limit their ability to take advantage of the expanded market. Accession of the three CEECs would increase the CAP budget over its proposed maximum if area payments are extended to incoming crop producers.     

EU Migration to and from the UK After Brexit

In the 2016 referendum over the UK’s membership of the EU, the question of how Brexit would impact migration to the UK was a major point of contention. Those leading the campaign to leave the EU promised lower levels of immigration and the introduction of an “Australian type points based system” to regulate future inflows of EU nationals to the country, while at the same time maintaining access to the EU single market. At the same time, the status of EU nationals already living in the UK was not a key topic in the debate. The leaders of the campaign to leave the EU suggested that EU nationals already residing in the UK would be granted some form of residence permit and would retain most of their current rights. Likewise, there was little concern about the legal status of UK nationals in other EU countries and the argument that the “EU would be obliged to grant permanent settlement rights to Britons living in Ireland and mainland Europe”.     

Assessing the Enlargement and Deepening of the European Union

This paper estimates a theoretically‐motivated gravity model to examine the effect of the European Union (EU) on trade and whether the order of entry has affected the trade performance of member countries. Additionally, we analyse the impact of the different phases of EU integration on trade. The results show that both original countries and successive enlargements boost intra‐bloc trade. Moreover, the results suggest that the deepening in the integration process has led to more trade creation among members. Finally, only the latter phase of the European integration process (the single currency) has increased trade with non‐members.     

Economic Effects of the Syrian War and the Spread of the Islamic State on the Levant

This paper uses a global computable general equilibrium framework with new detail on six Levant countries – the Arab Republic of Egypt, Iraq, Jordan, Lebanon, the Syrian Arab Republic and Turkey – to quantify the direct and indirect economic effects of the Syrian war and the advance of the Islamic State on the Levant. Syria and Iraq bear the brunt of the direct economic costs, while the other Levant countries lose in per capita but not in aggregate terms as the inflows of refugees increase the size of their populations. The war has undermined progress towards deeper regional trade integration, thus adding to varying degrees to the direct costs sustained by the Levant economies and, in the cases of Syria and Iraq, doubling their welfare losses. All Levant countries are foregoing opportunities to expand intra‐Levant trade and the associated gains in economic efficiency. The average welfare effects are not indicative of the distributional effects of war within countries.     

Europäischer Zinslastenausgleich — eine sinnvolle Alternative zu EZB-Anleihekäufen

The eurozone’s public debt crisis is not over yet - as displayed in the still substantial yield spreads between “northern” and “southern” euro government bonds. Whereas the ECB tried to tackle this problem by announcing (in Sept. 2012) its willingness to conduct unlimited “outright monetary transactions” to the benefit of the southern countries, the German “Institut für Weltwirtschaft (IfW)” offered a less risky option in its “Kiel policy brief” (Jan. 2013): it suggested narrowing this yield spread by establishing a “yield spread compensation fund”, which would balance out interest payments among euro countries. Though this may sound like the first concrete eurozone bailout mechanism, the idea really is a risk-free debt alleviation tool, matching windfall gains with windfall profits without too much of a bailout.     

The Dilemma of Enlargement for the European Union's Regional Policy

The integration of the former communist countries of central and eastern Europe into the European Union creates a dilemma for the EU's regional policy. The EU's expenditure on regional policy (its ‘active’ regional policy) has been guided by political reactions to deepening or enlarging the EU, not by a rational strategy for regional policy. In contrast, the strong EU instrument of state aid control, developed for competition policy (its ‘reactive’ regional policy) has been relatively successful in avoiding a national race of regional subsidies among the member states. We show that a shift from active regional policy to reactive, competition‐oriented, regional policies is the preferred way for the established member states to handle the challenge of enlargement. At the same time, however, this shift is politically difficult for the accession countries to accept, despite the fact that this shift might prove better for them economically. This regional policy dilemma is one of the major obstacles for the full integration of the accession countries into the EU.     

Trade facilitation and the extensive margin

The literature on trade facilitation has mostly focused on implications for trade volumes. However, recent theoretical contributions have emphasized that trade costs – such as transaction costs related to cross-border trade procedures – affect both the traded volumes of ‘old’ goods (the intensive margin) and the range of traded goods (the extensive margin). This article therefore tests whether trade facilitation affects the extensive margin by counting the number of 8-digit products that are exported from developing to EU countries, and using this as the dependent variable in an estimation. Moreover, it also tests whether the extensive margins in differentiated and homogeneous goods are affected in the same way by transaction costs. Estimation results suggest that if export transaction costs – proxied by the number of days needed to export a good – declined by 1%, the number of exported differentiated and homogeneous products would rise by 0.6% and 0.3%, respectively. Policy simulations further illustrate that if all countries were as efficient at the border as the most efficient country at the same level of development, the number of exported differentiated and homogeneous products would increase by 62% and 26%, respectively.     

Integration of Refugees: Lessons from Bosnians in Five EU Countries

In this study, we reviewed the integration experience of Bosnian refugees displaced during the Bosnian war in the early 1990s. We compare reception conditions among the five Western European countries that played host to the majority of refugees at the time and track their labour market experience as well as, to the extent possible, education outcomes of second generation Bosnians.     

Tax-based Own Resources as a Core Element of a Future-Oriented Design of the EU System of Own Resources

Sustainability-oriented tax-based own resources would do more than just help to close the existing sustainability gaps in EU taxation.Member States primarily consider their individual net positions, i.e. the difference between their payments into the EU budget and the transfers they receive out of it, when determining the benefits derived from the EU (budget). Much less attention is paid to indirect benefits from EU membership and expenditures, which generally exceed Member States’ contributions to the EU budget considerably.