Cost of regulation and impact of EU membership on policy enforcement

Recent public debate on the costs and benefits of EU membership has focused more on the costs and less on the benefits. This paper explores the benefits from improved regulatory or policy implementation and enforcement. If actual regulatory enforcement differs from the socially optimal level, membership of a regional bloc that strengthens accountability mechanisms can improve the quality of implemented regulation. However, if the regional bloc tends to over-regulate, the overall increase in the regulatory burden, together with strengthened accountability, will move a country farther away from its socially optimal state. Membership of the EU is beneficial for countries with weak enforcement institutions, but it may worsen the welfare of countries with strong regulatory institutions. Infringement statistics indicate that no member state of the EU has a perfect record in implementation and enforcement.     

The new frontier in state aid control

State aid is in principle prohibited in the European Union, with a few exceptions provided for in the Treaty. Recently, a judgement by the European Court of Justice has weakened that prohibition by narrowing the concept of state aid. Criticism of this judgement so far has been based solely on legal grounds. This paper carries out an economic assessment of the judgement and argues that it is based on faulty economic premises. The author proposes an alternative method for dealing with compensatory measures so as to close the loophole opened up by the judgement. The author is grateful to Jean-Paul Keppenne for comments on an earlier draft, to Kirtikumar Mehta for stimulating discussions on the issue of compensation and to Anne-Mieke den Teuling for research assistance. The author is solely responsible for the views expressed in this paper.     

Trade and competition policies in an increasingly integrated world economy

The traditional boundaries between trade policy and competition policy are becoming fuzzier and less valid because firms increasingly compete at the same time in many different markets and in different ways. The following article examines a number of policy areas in which trade policy has significant effects on competition, and competition policy has significant effects on trade. It concludes that new ways of multilateral cooperation are necessary if trade and competition policies are to complement rather than contradict each other. This article was written while the author was a senior lecturer at the European Institute of Public Administration, Maastricht, the Netherlands. He is now Minister Plenipotentiary at the Ministry of Foreign Affairs, Nicosia, Cyprus. The article is a revised draft of a paper that was presented at a seminar organised by the OECD on 6 July 1993. The author is grateful to participants of the seminar for their comments and suggestions. The views expressed in this paper are the responsibility of the author and should not be attributed to any institution.     

Brexit and Trade: Between Facts and Irrelevance

This paper examines four claims made by Brexit supporters regarding the United Kingdom’s post-exit arrangement on trade with the EU. It reviews the nature and importance of UK-EU trade links and the possible impact on the UK of leaving the EU customs union. It argues that all four of the claims are based on incongruous arguments which are either logically inconsistent or ignore the extent of the commitment required by trade agreements that tackle regulatory barriers, not just tariffs and border restrictions. We demonstrate that the attractiveness of the UK market will progressively decline as the UK enters into additional bilateral agreements. We conclude by analysing the implications for the UK of “taking back control” of its trade policy.     

The economics of enlarging the European Union: Policy reform versus transfers

While the European Union will hardly be in a position to receive new members without extensive policy and financial reform, the discussion so far has exaggerated the link between reform and enlargement. It has also tended to neglect the economic benefits to be expected from integrating the CEECs into the EU and has been dominated by concerns about intra-EU transfers. In an attempt to placate those member states which have complained that they pay too much, recent proposals could give rise to more inefficiencies and disparities within the Union. The author is grateful to Beuter, Frank Bollen, Veerle Deekmyn and Les Metealfe for their comments on a previous draft. The author alone is responsible for the views expressed in this paper.     

Customs unions and preferential trading: The (in)significance of reciprocity

Conclusion Received CU theory proposes the superiority of a UTR over a CU; it has, therefore, long been held that a CU is an irrational trade policy. WW have maintained that consideration of the possible gains from reciprocal tariff reduction can restore the rationality of CUs. Their argument has been increasingly accepted by recent writers on international economics. The purpose of this paper has been to show the limitations of the reciprocity argument. First, in WW’s context the alleged CU is identical to a free trade equilibrium since a CET is unnecessary and in any case would be completely ineffective. Second, neither a CU nor a UTR may be an optimal policy. A CU may still be non-optimal policy because a discriminatory tariff on the other small country’s exports may be the best policy. Third, if countries behave myopically by exploiting unilaterally available gains from changes in trade policy, a CU is unlikely to be formed. If, however, they behave strategically and recognise the importance of reciprocity they may decide not to cooperate. Again, non-cooperation prevents the formation of a CU.

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Zusammenfassung Zollunion und Handelspr?ferenzen: Die (mangelnde) Bedeutung der Reziprozit?t. - Die Theorie der Zollunion behauptet, da? für kleine L?nder einseitige und nichtdiskriminierende Zollsenkungen einer Zollunion vorzuziehen seien. Diese Behauptung ist vor kurzem mit der Bemerkung angegriffen worden, da? die Theorie die Vorteile aus gegenseitigen Zollsenkungen in einer durch Z?lle verzerrten Welt vernachl?ssige. Dieser Aufsatz soll die Schw?chen dieses neuen Arguments zeigen. Die dabei behauptete überlegenheit von Zollunionen wird aus einem Modell entwickelt, in dem die Partnerstaaten ausschlie?lich untereinander Handel treiben. Folglich gibt es dann aber auch keinen Bedarf für irgendeinen gemeinsamen Au?enzoll, und das Handelsgleichgewicht kann nicht von dem unterschieden werden, das bei Freihandel herrschen würde.

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Résumé Unions douanières et commerce préférentiel: La (in)signifiance de réciprocité.- La théorie de l’union douanière suggère que pour des petits pays des réductions tarifaires unilatérales et non-discriminatoires sont préférables aux unions douanières. Cette thèse était récemment attaquée avec l’argument que dans un monde déformé par des tarifs la théorie ignore les gains d’une réduction tarifaire réciproque. Le but de cet article est de démontrer les défauts de ce nouvel argument. La supériorité prétendue des unions douanières est démontrée dans le contexte où les pays membres font le commerce exclusivement parmi eux. C’est pourquoi on n’ a pas besoin d’un tarif commun extérieur et l’équilibre de commerce ne peut pas être distingué de l’équilibre de commerce libre.

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Resumen Uniones aduaneras y comercio preferencial: la (in)significancia de la reciprocidad. - La teoría de las uniones aduaneras postula que en el caso de países peque?os reducciones unilaterales de aranceles no discriminatorios son preferibles a uniones aduaneras. Esta proposición ha sido cuestionada recientemente alegándose que en un mundo distorsionado por aranceles la teoría ignora los beneficios de una reducción recíproca de aranceles. El objeto de este trabajo es mostrar los defectos de este nuevo argumento. La supuesta superioridad de las uniones aduaneras es compatible con un contexto en el cual los países miembros sólo comercian entre ellos. Por ello, no hay necesidad de un arancel externo común y el equilibrio comercial es indistinto del de libre comercio.

     

An economic analysis of EC guidelines on state aid for the rescue and restructuring of companies in difficulty

The present Community guidelines on state aid for rescuing and restructuring firms in difficulty, a type of aid that is widely regarded as particularly distortive to the single market, will expire on 9 October 2004. The Commission has already identified a number of issues which it regards as problematic. This article draws attention to a number of further issues which also require clarification.