Corporate Taxes in the European Union

The enlargement of the European Union in 2004 and 2007 by a number of countries with comparatively low corporate tax rates – seen by some as representing an unfair competitive advantage – has refuelled the debate on corporate taxation in Europe. The present Forum highlights a number of pertinent issues and discusses the challenges implied for European corporate tax policy. *The authors are indebted to Andreas Reutter for helpful comments. **The findings, interpretations and conclusions expressed in this paper are entirely those of the author. They should not be attributed to the European Commission. The author wishes to thank Anton Jevcav for valuable comments. ? European Communities, 2007.     

Territorial disparities in Europe

Traditionally, EU policies have been focused on economic and social cohesion. Recently, the territorial dimension of regional disparities as an aspect of EU policy has gained importance. The European Spatial Development Perspective (ESDP), adopted in 1999, is meant to support a balanced development of the EU territory. Moreover, the European Commission addressed issues of territorial cohesion in its latest cohesion report. The present paper deals with territorial disparities and their current development in the EU. It analyses which kinds of region develop dynamically and offer favourable labour market conditions. The differences between rural and urban areas are a fundamental feature of territorial disparities in the EU and are of essential significance for the ESDP. The analysis deals with the question whether disparities between poor and rich regions as well as different growth trends and labour market conditions are still marked by the dualism between city and countryside. The authors would like to thank Elena Tcharykova for her excellent research assistance.     

The Climate Policy of the European Union

There is now almost universal agreement that climate change, with potentially disastrous consequences, is happening and that it is contributed to by human activities. This Forum is dedicated to the discussion of various aspects of the European Union's climate policy, e.g. the EU's future role in the global effort to combat global warming, the efficiency of its climate strategy, the design of a new rule for sharing the corresponding burdens fairly among member states, and the interrelationships between the Union's climate policies, on the one hand, and its energy and transport policies, on the other. * and member of the German Advisory Council on Global Change (WBGU). The author wishes to thank Helen Bicknell (Mainz University of Applied Sciences), Oliver Deke (WBGU) and Jürgen Schmid (ISET, Department of Efficient Energy Conversion at the University of Kassel) for their helpful comments. ** This contribution is based on a Jean Monnet Lecture held at Aarhus University on 19 March 2007. The author would like to thank Harri Kalimo for valuable comments.     

China and Globalisation

Since the initiation of economic reforms in 1978 China has become one of the world’s fastest growing economies and has emerged as a global economic and trade power. What are the implications for the world economy, in particular for the distribution of income and wealth? How will China contribute to shaping not only the globalised world economy but also the institutions and policies of global governance?The authors wish to thank the participants of the international seminar in Shanghai on 18-20 March 2005 for their valuable contributions, which have been incorporated into this paper.     

Grappling with Globalisation: Challenges for Economic Governance

This paper examines the key domestic institutional challenges posed by globalisation in terms of the following questions: how does economic globalisation differ from other types of economic integration, what is its impact on the extant national institutions of economic governance, what institutional innovations are required to cope with the challenges, and how can institutional change be made politically feasible? It identifies three perspectives on how national governments may respond – retreat, hold fort, or rearticulate. It concludes that though governments need to devise policies to attract MNEs, indulging in races‐to the‐bottom is not the only route, perhaps not even a desirable route. Second, to attract FDI, governments must afford labor flexibility. How they actually implement it will vary within and across countries, depending on the capacities and the willingness of governments to undertake institutional reform. Labour flexibility can be made politically feasible by increasing the levels of social insurance to protect displaced labour and by instituting programmes that increase their skills and employability.     

Incentives for investments in next generation access and customer choice: a dichotomy?

According to Noam,1 “The central question for telecom — and for many other media — is how to generate the funds and invest in upgraded infrastructure, while being subject to competition”. Investment in next generation access network is needed to deliver broadband services with signifi cantly higher bandwidth than today. This will allow the development of more innovative and better services. Investments under competitive conditions require a positive business case, which might not be viable for long-lived assets like fi xed access networks. This might lead to the situation where we can only have competition or a next generation access network but not both. This paper looks at the aspects of investments in next generation access (NGA) networks and competition and specifi cally focuses on potential effects of the EU commission draft recommendation on NGA. The authors would like to thank Igor Brusic and Matthias Ehrler for valuable comments to the draft version of this paper. Further, the authors would like to thank Brigitte Preissl for a critical review of the paper.     

Emerging Markets and the Global Monetary System: The Challenge of Rising Inflation

While spillovers of the present financial turmoil in mature economies to emerging economies have so far largely been contained, the monetary policy implications of the financial turbulence present a challenge to the approach pursued by emerging markets in integrating into the global monetary system following the crises of the mid to late 1990s. Specifically, the period of a smooth coexistence between meeting inflation targets and maintaining a high degree of exchange rate stability is likely to come to an end. * At the time of writing this paper, the second author was an advisor at the Deutsche Bundesbank on secondment from the European Central Bank. The views expressed are solely those of the authors. They wish to thank Karlheinz Bischofberger, Ulrich Grosch and Sabine Herrmann for their valuable comments and suggestions, as well as Livia Chitu for excellent research assistance.     

Do We Really Need a European Agency for Market Regulation?

In November 2007, the European Commission suggested that an EC regulatory agency should be set up for the telecommunications markets. The following paper examines the key tasks and structure of the proposed agency and identifies the limits to the delegation of powers involved by reflecting on the relevant case law and the existing doctrine. It compares the concept with a recently published rapporteur report to the European Parliament and an alternative model of a joint body of national regulatory authorities. The authors wish to thank Martin Busch, Student of Law and Politics at the University of Bonn, for his valuable assistance.     

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.     

The impact of sovereign wealth funds on global financial markets

If sovereign wealth funds act similarly to private investors and thus allocate foreign assets according to market capitalisation rather than liquidity considerations, official portfolios reduce their “bias” towards the major reserve currencies — the US dollar and the euro. As a result, more capital flows “downhill“ from rich to less wealthy economies. In this scenario, the euro area and the United States would be subject to net capital outflows while Japan and the emerging markets would attract net capital inflows. The potential implications of a rebalancing of international capital flows for stock prices, interest rates and exchange rates remain uncertain, however. The authors wish to thank Marcel Fratzscher for excellents comments. The views expressed in this paper are those of the authors and do not necessarily reflect those of the European Central Bank.     

From Social Pacts to Productivity Boards

Market solutions can be a way for small deregulated states like the Baltics to grow, but they are not a viable path for the EMU area as a whole or for the larger countries like France, Germany or Italy. As most of the challenges have to be addressed at the national level only, an interaction of flexible institutions (as the social pacts were) in coordination with developing European institutions (like a European unemployment scheme) can offer a more stable environment for growth.     

Measuring corporate internationalisation

Measures of corporate internationalisation have gained crucial importance in the recent debate on globalisation, since many scholars link globalisation to a quantitative increase in the international activities of firms. Opinions on the extent of this increase differ widely, however, depending on what measurement concept is used. As there is no universally applicable measurement concept, researchers face the difficult task of bringing research questions, measurement concepts and data availability into line. For useful comments the author would like to thank Douglas van den Berghe (University of Rotterdam), Dieter Plehwe (WZE), Stefano Vescovi (WZB) and Michael Wortmann (FAST e.V., Berlin). An earlier draft of this paper was presented at the workshop “Dimensionen der Internationalisierung von Unternehmen” at the Max-Planck-Institut für Gesellschaftsforschung, Cologne 16th/17th December 1999.     

The determinants of exit in an open economy

In this paper the determinants of exit are investigated for the manufacturing sector of the United States economy, which has been subjected to growing international influences. The analysis uses United States cross-sectional data. The results of the exit equation suggest that low profitability, declining industry growth, and displacement of incumbents by entrants foster exit. International influences are also seen to have an impact on U.S. manufacturing exit. Specifically, imports into an industry have a small effect on exit and protection has little influence in stemming exit.I would like to thank John Mayo, Don Clark, Ron Shrieves, Robert Feinberg, Joseph Shaanan and an anonymous referee for their comments on earlier drafts of this paper. The views in this paper do not necessarily reflect those of the Commission. The usual caveat applies.     

Are There Such Things as International Property Rights?

This paper argues that the process of economic globalisation is to remain partial, because of its continued reliance upon the national institutions in charge of the definition and enforcement of private property rights. Emerging economies often face critical enforcement problems, but the experience of the European Single Market also suggests that, in this respect, institutional convergence remains extremely slow. Second, the globalisation process since 1990 has seen a sharp growth in private inter‐temporal contracts, exemplified by private financial transactions and by contracting on intellectual property rights; both are much more vulnerable to local institutional failures than trade in tangible goods and sovereign credits, which were the hallmark of previous phases of international liberalisation. Thus the ‘frontier’ of globalisation now makes markets more exposed to the underlying fragmentation of national property institution than before. This suggests that multilateral negotiation, as an instrument for the coordination of State institutions, will remain the backbone of international economic integration.     

Europe’s Path Towards the Socio-Ecological Transition

Beset by an unprecedented combination of challenges including globalisation, demographic shifts, high unemployment and climate change, Europe is in dire need of a new kind of growth and development strategy. The authors of this Forum make compelling arguments for a socioecological transition, in which traditional measures of progress like GDP growth are downplayed in favour of factors such as social inclusion, environmental welfare, high levels of employment and the well-being of European citizens. This Forum explores some of the issues that must be resolved in order to fully achieve the socio-ecological transition, including the necessary decoupling of non-renewable energy use from GDP growth, the reduction of income and wealth inequalities, and the encouragement of innovation that is not based on fossil fuel technology. The Forum presents an optimistic path forward for the continent, with practical policy solutions that do not ignore the many obstacles facing a successful transition.     

中国社会养老保障政策和社会经济政策的协调

影响一个国家社会养老保障需求和供给的因素非常多 ,而它们彼此之间的关系也相当复杂。一个国家社会养老保障制度的性质及其具体运行模式将取决于这个国家的政治和经济制度、经济发展水平和人口状态。另一方面 ,社会养老保障制度和政策的合理性及其运行的效率将会在宏观和微观层面上 ,给政治、社会、经济及人民生活质量带来深刻的影响。在中国社会养老保障制度面临诸多问题和挑战的背景下 ,更需要建立一个科学、高效的综合决策支持体系 ,以协调社会养老保障政策与其他社会经济发展政策之间的关系 ,增强全社会应对人口老龄化挑战的能力     

Trade and Labour Market Adjustments: What Role for the European Globalisation Adjustment Fund?

Trade agreements have become a growing source of concern due to the potential job losses that some sectors can incur as a result of increased competition. Although the economic literature shows that the overall results of trade liberalisation are positive, some sectors may be adversely affected, leading to job losses and adjustment costs. In 2006 the European Commission established the European Globalisation Adjustment Fund (EGF) to help workers who have lost their jobs due to globalisation. Despite the relevance of the EGF as a trade-adjustment mechanism, the existing evidence suggests that its use is still limited compared to its potential. This paper reviews some of the constraining factors identified in the latest mid-term evaluation by the European Commission and suggests several avenues for further improvement.     

The European Commission’s New Industrial Policy in an Integrating and Globalizing World

The European Commission has launched a new industrial policy for Europe in October 2005. While manufacturing industry remains a key building block of the European economy, it faces a number of challenges—as well as opportunities—in the form of rapid technological change; increasing trade and financial integration of the world economy; and the rise of new emerging market competitors. Whilst some sectors are performing strongly, the overall industrial structure of the EU economy makes it less than ideally positioned to face these challenges. The new industrial policy articulated by the Commission is to help the European economy adapt to the new circumstances. In contrast to old policies that sought to ‘pick winners’, the new approach starts from the screening of horizontal policies and framework conditions in terms of their implications for specific industrial sectors. Second, the Commission has integrated policy by bringing more closely together different policy dimensions of key relevance to various industries. Finally, the industrial policy attempts to achieve a greater consensus over policy, through the involvement at an early stage of key stakeholders and Member States in policy making.     

Europe Needs More Lisbon to Make the ICT Investments Effective

While the renewed Lisbon strategy has emphasised the potential role that ICT can play in meeting the challenges of boosting growth and competitiveness in the EU, there is no clear understanding of the way ICT could complement the structural reform programme which is at the core of that strategy. The evidence presented in this paper suggests that higher market rigidities in the EU have deterred ICT investment and ICT contribution to GDP growth. The data used for ICT investment and ICT contribution to GDP growth is taken from the Groningen Growth and Development Centre database available at http://www.euklems.net. The views expressed by the authors are not necessarily those of the European Commission. Any errors are theirs alone.     

Valuation of East-South trade data

Trade between the developing countries and Eastern Europe has been less subjected to analytical scrutiny than trade among other regions. This is partly because the share of this trade in world trade is relatively small, but also because economic information and data on this trade are scarce, incomplete and of uncertain reliability. The objective of this article is to place East-South trade in perspective, review the available databases bearing on this trade, and examine the main analytical problems involved in the use of such data. The views expressed in this article are those of the author and should not be attributed to the World Bank. The author would like to thank Bela Balassa, Refik Erzan, Paul Meo, Aziz Tay and Alexander Yeats for helpful comments.