EU policies

Ingo Borchert, Mattia Di Ubaldo, 11 January 2021

Uncertainty over the future course of trade policy really matters. Developing countries obtain non-reciprocal tariff reductions from many industrialised countries through Generalised Systems of Preferences, but the uncertainty surrounding the continuation of preferential treatment is likely to undermine the schemes’ effectiveness. This column studies the 2014 reform of the EU’s Generalised System of Preferences, which removed the uncertainty on preferences for a subset of beneficiary countries. It finds that the removal of uncertainty led to an increase in EU imports from affected countries by about 45% without any changes in other market access conditions. This average trade impact is driven by country-sector pairs that are most exposed to preferences uncertainty prior to the reform, for which trade increased by over 70%.

Cristina Caffarra, Fiona Scott Morton, 05 January 2021

The European Commission has finally issued the proposed Digital Markets Act, its bid to complement antitrust intervention in digital markets with ex-ante regulation in the form of a set of obligations that platforms identified as “gatekeepers” should abide by. This column argues that the current proposal makes good progress, but lacks the translation tools to map the rules from the settings that inspired them to other businesses that are deemed gatekeepers, that the rules may not do enough to recognise the direct consumer harm that flows from the exploitation of data and the extraction and appropriation of consumer value, and that merger control remains a significant lacuna in the Commission’s digital regime that will need to be addressed separately. In contrast, the UK CMA proposals condition the rules on business models and fold merger control into the digital regime. 

Mattia Di Ubaldo, Steven McGuire, Vikrant Shirodkar, 03 January 2021

The adoption of environmentally friendly production methods matters to both firms and policymakers, as both are concerned with reducing the emissions of greenhouse gases and pollutants. This column studies the effect on emissions of environmental protection provisions in EU free trade agreements, as well as that of private ISO-14001 environmental certifications. Environmental protection provisions in EU trade agreements are associated with lower levels of sulphur dioxide and nitrogen oxide emissions, while ISO-14001 certifications are associated with lower levels of greenhouse gas emissions. For carbon dioxide, ISO-14001 certifications matter only for members of trade agreements with environmental protection provisions, suggesting the existence of complementarities between private and public environmental regulation.

Andrés Rodríguez-Pose, Roberto Ganau, Kristina Maslauskaite, Monica Brezzi, 15 December 2020

Does institutional quality mitigate the negative returns of credit rationing on labour productivity? Using data on a large sample of manufacturing firms in 11 European countries, this column demonstrates that this is indeed the case, especially for micro, small, and medium-sized firms. The negative effects of credit constraints on productivity are mitigated in those areas of Europe with high-quality governance. ‘Good’ regional institutions not only drive firm-level productivity but also, and in a more indirect way, reduce the negative productivity returns of credit constraints.

Elena Flores, Lucia Granelli, 14 December 2020

In April 2020, G20 Finance Ministers and Central Bank Governors endorsed the ‘G20 Action Plan Supporting the Global Economy Through the COVID-19 Pandemic’, setting out the key principles guiding the global response to the crisis and commitments to specific actions for driving forward international economic cooperation. The G20 agenda in 2021 – under the Italian Presidency – will be closely linked to the Action Plan. This column develops a few principles to support the G20’s work in 2021.

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