Template-Type: ReDIF-Paper 1.0 Title: Will Chinese Auto Export Boom Transform into Local Production in Europe? Author-Name: Thierry Mayer Author-Name: Vincent Vicard Author-Name: Pauline Wibaux Keywords: Automotive industry;Electric vehicles;China;Protectionism;Foreign direct investment;Industrial policy Classification-JEL:F10;L62 Abstract: The automotive industry faces two disruptions: China’s emergence as a leading global auto exporter, and the transition from internal combustion engine (ICE) to electric vehicles (EVs). Detailed data on sales by origin/destination/model show that the automotive market is primarily local or continental, with limited sales originating from distant countries for both ICE and EV. Accordingly, foreign direct investment (FDI) is an important mode of supply for foreign markets. Insights from Japanese and Korean brands’ market penetration in the 2000s and 2010s suggest that successful models are primarily sold through local assembly; the most successful Chinese EV models in Europe are close or above the investment threshold. Examination of potential differences between EV and ICE indicates evolving comparative advantages: while EVs are not inherently more traded compared to other vehicles, China currently leads in cells and modules, but not yet in assembly. Down the value chain, the median distance between battery production and assembly is 215 km in 2022, suggesting localized sourcing in EV similar to combustion engines and larger than ICE transmissions. Creation-Date: 2024-06 File-URL: http://www.cepii.fr/PDF_PUB/pb/2024/pb2024-45.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2024-45 Template-Type: ReDIF-Paper 1.0 Title: Dominance on World Markets: the China Conundrum Author-Name: Sébastien Jean Author-Name: Ariell Reshef Author-Name: Gianluca Santoni Author-Name: Vincent Vicard Keywords: China;Export Concentration;Trade Dependencies;Economic Security Classification-JEL:F5;F14;F15 Abstract: We characterize China’s atypical dominance in world trade at the product level and analyze a number of factors that could explain it. Defining product-level dominant positions as a share of more than 50% of worldwide exports, we show that China held a dominant position in almost 600 products out of some 5,000 in 2019. This is at least six times greater than the equivalent number for the United States, Japan or any other country, and twice the number for the European Union considered as a whole. This large number of dominant positions held by China is atypical by historical standards, at least since the 1970s. While we do not identify definite causes of China’s numerous dominant positions, we can rule out some explanations. The number of dominant positions is not explained by Chinese global market share alone. Nor is it explained by China’s sector specialization; dominant positions are prevalent in several important sectors (electronics, textiles/wearing apparel, footwear and machinery). Looking at pricing behavior, a fine-grained analysis based on individual firms’ average market share suggests that Chinese firms use their market power to charge significant mark-ups, much more than French exporters. Such product-level dominant positions make it difficult for importers to substitute their supplier for another, at least in the short term. This may be consequential in an open world increasingly seen through the lens of dependencies. Creation-Date: 2023-12 File-URL: http://www.cepii.fr/PDF_PUB/pb/2023/pb2023-44.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2023-44 Template-Type: ReDIF-Paper 1.0 Title: Quelle nouvelle ère pour la Chine ? Les défis de la prospérité intérieure et de l’affirmation internationale Author-Name: Michel Aglietta Author-Name: Camille Macaire Keywords: China;dual circulation;energy transition;geopolitical fragmentation;BRICS Classification-JEL:E61;F02;F33;F51;O53 Abstract: Le 14e plan quinquennal de la Chine a inauguré la «double circulation», un changement structurel de l’accumulation intensive de capital (la Chine comme usine du monde) vers un développement dirigé par l’innovation. La part intérieure de la stratégie consiste à développer le marché domestique, en adressant la question du vieillissement démographique. Elle constitue une opportunité de développement, avec la constitution d’un immense marché de consommation. Mais elle exigera aussi une refonte en profondeur des filets de sécurité, qui peine à se matérialiser. La montée en gamme de l’appareil productif, élément central de la stratégie intérieure, se heurte à l’instrumentalisation par les États-Unis de l’industrie des semi-conducteurs dans leur stratégie d’endiguement de la Chine, avec des implications aussi bien civiles que militaires. Enfin, le chemin vers la neutralité carbone en 2060 sera très abrupt, et la feuille de route pour y parvenir est lacunaire et peine à convaincre pour l’instant. La Chine, qui est devenue leader dans l’industrie de la transition énergétique, pourrait toutefois transformer en partie ce défi en opportunité comme relais de croissance. La part internationale de la transformation du régime de croissance consiste à proposer une alternative au système organisé autour des institutions de Bretton Woods pour un nouvel ordre géopolitique, en faisant de la Chine le chef de file des pays émergents. Cet appel trouve un écho favorable auprès de pays qui pour certains manifestent leur volonté de s’émanciper de l’influence américaine, comme on l’a vu à l’occasion du dernier sommet annuel des BRICS. Mais il se heurte à une méfiance toujours forte vis-à-vis des desseins chinois, dans un contexte de résurgence d’un antagonisme sino-américain qui s’est fortement durci et qui paraît irréconciliable. La Chine a une feuille de route ambitieuse. Elle devra faire face à des défis majeurs, démographiques, climatiques et géopolitiques, qui pourraient ralentir la transformation de son modèle de croissance et limiter sa sphère d’influence sur la scène mondiale. Creation-Date: 2023-09 File-URL: http://www.cepii.fr/PDF_PUB/pb/2023/pb2023-43.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2023-43 Template-Type: ReDIF-Paper 1.0 Title: What Do We Know About Chinese Industrial Subsidies? Author-Name: François Chimits Keywords: China;Industrial Policy;Subsidies;Trade policy;WTO Classification-JEL:L52;O2;F13 Abstract: While Chinese industrial subsidies have been one of the key drivers of international trade tensions, the details of the phenomenon itself are often overlooked. Reviewing the existing datasets and methodologies used to assess Chinese public supports, this Policy Brief tries to bring more clarity on what is known, and what is not. The most frequently used datasets in the literature are dated and/or largely incomplete, and find limited industrial support compared to more specific analyses. To further complicate things, the new development model pursued by the current leadership seems to champion the idea of “guiding” economic entities to align with Party-State objectives, which, by diffusing public intervention throughout the economy, makes it more difficult to assess the scale of subsidies. The Chinese authorities highly structured and detailed communication and policy planning offers alternative metrics to assess the distribution and evolution of public support to the industry, enabling a complementary approach to triangulate the actual subsidies to industrial production in China. Creation-Date: 2023-07 File-URL: http://www.cepii.fr/PDF_PUB/pb/2023/pb2023-42.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2023-42 Template-Type: ReDIF-Paper 1.0 Title: EU Strategic Dependencies: A Long View Author-Name: Vincent Vicard Author-Name: Pauline Wibaux Keywords: Strategic autonomy;Dependent products;Trade dependencies;Economic security Classification-JEL:F5;F14 Abstract: We analyze how trade dependencies have evolved over time to better understand how they relate to vulnerabilities. We focus on the EU-27 and apply the bottom-up approach laid out by the European Commission (EC) using trade data from 1996 to 2019. The number of dependent products has shown no clear pattern since the mid-1990s, nor has their sectoral composition. The geography of dependencies has, however, evolved towards dependencies concentrated on Chinese suppliers, but this shift had already occurred in 2010. The products identified as dependent exhibit significant churning over time: one out of five dependent products in 2018 was not identified as such one year later in 2019 and close to half of dependent products in 2014 were not identified as such five years later.Creation-Date: 2023-06 File-URL: http://www.cepii.fr/PDF_PUB/pb/2023/pb2023-41.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2023-41 Template-Type: ReDIF-Paper 1.0 Title: L’Inflation Reduction Act – Comment l’Union européenne peut-elle répondre ? Author-Name: Antoine Bouët Classification-JEL:F13;F18;F52;F64 Abstract: L’Inflation Reduction Act met en place des incitations fiscales à la production et à l’utilisation d’énergies propres aux États-Unis en programmant des financements fédéraux sur dix ans. Ces avantages fiscaux sont donnés aux entreprises ou aux ménages des États-Unis en contrepartie d’une obligation de production locale et/ou de contenu local de biens utilisés dans leur production. Cette loi est contraire aux principes de l’Organisation mondiale du commerce : elle ne respecte notamment pas la clause de traitement national. Ces clauses de contenu local pourraient avoir une efficacité limitée pour attirer les entreprises des filières vertes : primo, la localisation d’une activité de production dépend de nombreux facteurs et l’Union européenne a des atouts en termes d’attractivité des investissements directs étrangers ; secundo, si d’un côté la loi donne des incitations fiscales attractives, d’un autre, les critères techniques associés pour respecter des obligations de contenu local sont restrictifs et le deviendront de plus en plus sur les dix prochaines années ; tertio, les montants de subvention en jeu ne sont pas si importants, environ 0,17 % du PIB américain par an pendant dix ans, ce qui est, en termes relatifs, inférieur aux aides européennes dans le secteur. En voulant faire d’une pierre trois coups – lutter contre le changement climatique, réindustrialiser le pays, améliorer la sécurité nationale – les États-Unis affaiblissent l’efficacité environnementale des dispositifs. La position de l’Union européenne est difficile, mais des pistes se dessinent : des financements sont déjà disponibles et il faut améliorer leur efficacité. Il faut aussi identifier les fragilités des chaînes de valeur européennes. La conclusion d’un certain nombre d’accords commerciaux pourrait aider dans ce domaine. Enfin, un dialogue permanent avec les États-Unis pourrait permettre un certain nombre d’aménagements. Creation-Date: 2023-02 File-URL: http://www.cepii.fr/PDF_PUB/pb/2023/pb2023-40.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2023-40 Template-Type: ReDIF-Paper 1.0 Title: Central Bank Monetary Policy Strategies amid Turmoil in the World Economy Author-Name: Michel Aglietta Author-Name: Sabrina Khanniche Keywords: Surging inflation;Financial vulnerabilities;Yield curve inversion Classification-JEL:E58;E62;F31 Abstract: This policy brief addresses the challenges that confronted the main central banks in the face of uncertainties arising from multiple disruptions: the waves of the Covid-19 pandemic since early 2020 to the energy crisis of 2022, to the disastrous events generated by climate change, the war in Ukraine and the real-estate crisis in China. Inflation has surged due to supply-side problems and fiscal policies fostered by socio-political rivalries both within and between countries. In this environment, the task of central banks to fight high and persistent inflation, while limiting the risk of severe or prolonged recession, is extremely difficult, and particularly so when their lack of cooperation can lead them to overbid one another in raising their policy rate. To understand better how central banks are responding to inflation surges and financial vulnerabilities, we start from reviews of monetary policy frameworks by the Fed and ECB to highlight why they have been induced to abandon their forward guidance in favor of day-to-day responses to the flow of new events. Since early 2022, the main challenge forcing central banks from easing to restrictive monetary policy has been the surge in inflation triggered by the rise in energy and food prices related to the war in Ukraine in a context of deep uncertainty. However, specific national issues remain key to central bank policies. Creation-Date: 2022-11 File-URL: http://www.cepii.fr/PDF_PUB/pb/2022/pb2022-39.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2022-39 Template-Type: ReDIF-Paper 1.0 Title: Multinational Enterprises and the French Trade Deficit Author-Name: Pierre Cotterlaz Author-Name: Sébastien Jean Author-Name: Vincent Vicard Keywords: Multinational enterprises;Trade balance;Competitiveness Classification-JEL:F15;F23 Abstract: We assess whether multinational enterprises played a specific role in the deterioration of the French trade balance over 2000-2018. French multinationals contribute positively to the trade balance of goods, contrary to foreign multinationals and domestic firms. Yet their declining surplus, down by nearly 2 percentage points of GDP between 2000 and 2018, explains the deterioration of the French trade balance over the past two decades. Econometric evidence shows that this does not reflect poor specialization by French multinationals in the early 2000s or their takeover by foreign investors, but rather a specific trend in the sectors they dominate, beyond the cost conditions common to all companies in France. Against a background of buildup in French FDIs, these results suggest that the internationalization strategies of French firms have been dominated by offshoring over this period, including to serve the domestic market or previous export markets. Creation-Date: 2022-09 File-URL: http://www.cepii.fr/PDF_PUB/pb/2022/pb2022-38.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2022-38 Template-Type: ReDIF-Paper 1.0 Title: Guerre en Ukraine : bouleversements et défis énergétiques en Europe Author-Name: Carl Grekou Author-Name: Emmanuel Hache Author-Name: Frédéric Lantz Author-Name: Olivier Massol Author-Name: Valérie Mignon Classification-JEL:E3;E66;F51;L71;Q34, Q35 Abstract: La guerre en Ukraine provoque de multiples bouleversements, parmi lesquels la scène énergétique occupe une place de premier plan. L’Europe, très fortement dépendante des hydrocarbures russes, est tout particulièrement touchée. Ce Policy Brief analyse les enjeux et défis, pour l’Europe, du conflit russo-ukrainien sur les marchés gazier et pétrolier. Il dresse un panorama complet de la production et des échanges de gaz et de pétrole prévalant avant la guerre, puis met en évidence la dépendance des économies européennes aux hydrocarbures russes dont les impacts économiques se sont manifestés dès le début des hostilités. Il décrit de façon approfondie les différents canaux via lesquels le choc à la hausse des prix des énergies pourrait déclencher une spirale inflationniste à même de faire craindre le retour de la stagflation qui a miné les économies européennes dans les années 1970 et 1980. La devise européenne n’est pas épargnée par ce conflit et sa dépréciation participe à la transmission de la hausse des prix de l’énergie à l’inflation de la zone euro. Plusieurs pistes sont enfin explorées qui pourraient permettre aux pays européens de s’émanciper de la dépendance russe : (i) introduction d’une réelle concurrence sur le marché gazier et prévention d’éventuelles ruptures d’approvisionnement en réglementant les obligations de stockage, (ii) diversification des sources d’approvisionnement en hydrocarbures et (iii) accélération de la transition énergétique en dépit des obstacles de court terme. Creation-Date: 2022-05 File-URL: http://www.cepii.fr/PDF_PUB/pb/2022/pb2022-37.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2022-37 Template-Type: ReDIF-Paper 1.0 Title: The 14th Five-year Plan in the New Era of China’s Reform Asian Integration, Belt and Road Initiative and Safeguarding Multilateralism Author-Name: Michel Aglietta Author-Name: Guo Bai Author-Name: Camille Macaire Keywords: Dual circulation;Belt and Road initiative;Go West;Central bank Digital Currency Classification-JEL:N55;N75;O53;P41 Abstract: China’s 14th Five-Year Plan aims to inaugurate a structural change from intensive accumulation to innovation-driven growth, with two basic objectives: developing the domestic consumer market for an enlarged middle class, on the one hand; on the other, promoting the Belt and Road Initiative (BRI). This is the “dual circulation” towards the 2035 long-run objective of achieving a socialist market economy, embedded into an “Eco civilization”. Concerning the domestic part of the strategy, China is pledging innovations combining political ecology and digital economy to handle climate change in pursuing an upgraded commitment to the Paris Agreement. For this ultimate goal, R&D spending is being strategically reinforced. The international part aims at restructuring globalization towards a new geopolitical order. It is structured in three hierarchically intertwined steps. The first is the economic integration of Asia within the Regional Comprehensive Economic Partnership (RCEP), the largest trade agreement worldwide. The second level is the diversified network of infrastructures linking Asia, Africa and Europe along and around the old Silk Roads. The third part is the transcontinental network linking the Atlantic and the Pacific oceans through the Artic Road and the Central and Latin America networks. To succeed, this monumental project needs multilateral cooperation to overcome the huge financial leverage it is generating. Trust will be of the essence in attracting private capital. A tentative advance in Sino-European cooperation has been occurring within an agreement to expand mutual investment opportunities. All in all, China is looking for a strategic repositioning into the global multilateral framework so that the Middle Empire returns to the center of the world. Creation-Date: 2021-05 File-URL: http://www.cepii.fr/PDF_PUB/pb/2021/pb2021-36.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2021-36 Template-Type: ReDIF-Paper 1.0 Title: Réindustrialisation et gouvernance des entreprises multinationales Author-Name: Vincent Vicard Keywords: Multinational Enterprises;Corporate Governance;Space Organization;Competitiveness;Global Value Chains Classification-JEL:F6;M14;M54;R12 Abstract: Au cours des deux dernières décennies, les entreprises multinationales françaises ont affiché de bonnes performances alors que, contrairement à ce qui se passait en Allemagne, le secteur manufacturier déclinait sur le territoire national. Ce Policy Brief souligne les différences d’organisation et de gouvernance des multinationales des deux côtés du Rhin et leur rôle potentiel dans les choix de localisation de leurs activités, qui peuvent contribuer à expliquer les trajectoires des secteurs manufacturiers nationaux au tournant des années 2000, en réponse à l’émergence des chaînes de valeur mondiales. Trois pistes d’explication sont proposées : la représentation des salariés dans les conseils d’administration, l’éloignement des centres de décision des établissements de production et le profil des dirigeants des grands groupes. Les éléments apportés ici montrent que la réflexion autour des politiques de réindustrialisation doit pleinement intégrer les sujets d’organisation et de gouvernance des entreprises et de leur ancrage au territoire national. Creation-Date: 2020-10 File-URL: http://www.cepii.fr/PDF_PUB/pb/2020/pb2020-35.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2020-35 Template-Type: ReDIF-Paper 1.0 Title: Has immigration contributed to the rise of right-wing extremist parties in Europe? Author-Name: Anthony Edo Author-Name: Yvonne Giesing Keywords: Voting;Immigration;Political Economy Classification-JEL:D72;F22;J15;P16 Abstract: Alongside a range of already well documented factors such as deindustrialization, technological progress and international trade, a series of recent empirical econometric studies show that immigration has contributed to the rise of extreme right-wing parties in Europe. Our study highlights, however, that there is no mechanical link between the rise of immigration and that of extreme right-wing parties. Exploiting French presidential elections from 1988 to 2017, we show that the positive impact of immigration on votes for extreme right-wing parties is driven by low-skilled immigration and immigration from non-European countries. Our results moreover show that high-skilled immigration from non-European countries has a negative impact on extreme right-wing parties. These findings suggest that the degree of economic and social integration of immigrants plays an important role in the formation of anti-immigrant sentiment. Fostering integration should therefore reduce negative attitudes toward immigrants and preserve national cohesion at a time when the economic consequences of the Covid-19 pandemic could reinforce mistrust and xenophobia. Creation-Date: 2020-07 File-URL: http://www.cepii.fr/PDF_PUB/pb/2020/pb2020-34.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2020-34 Template-Type: ReDIF-Paper 1.0 Title: After Covid-19, will seasonal migrant agricultural workers in Europe be replaced by robots? Author-Name: Cristina Mitaritonna Author-Name: Lionel Ragot Keywords: Migrant Seasonal Workers;Agriculture;Covid-19;Labour Shortage Classification-JEL:F22;J20;Q10 Abstract: The covid-19 crisis and the ensuing closure of borders has profoundly affected the mobility of migrant seasonal workers. As some European agricultural sectors highly depend on these workers, governments in EU countries have urgently adopted different strategies to avoid disruptions due to their absence. Alternatives seeking to cope without this experienced foreign seasonal labour force, pose two difficulties: their effectiveness is not guaranteed and/or they are accompanied by a significant increase in production costs and therefore in prices. As this large-scale temporary shock may lead to longer-term structural changes in the agricultural sectors concerned, we draw on the UK’s post-Brexit vote experience to discuss alternatives to foreign migrant seasonal workers. The covid-19 pandemic may well accelerate the adoption of robots for picking fruits and vegetables in the EU fields. Creation-Date: 2020-06 File-URL: http://www.cepii.fr/PDF_PUB/pb/2020/pb2020-33.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2020-33 Template-Type: ReDIF-Paper 1.0 Title: Les banques européennes à l’épreuve de la crise du Covid-19 Author-Name: Jézabel Couppey-Soubeyran Author-Name: Erica Perego Author-Name: Fabien Tripier Keywords:Banks;Banking regulation;Basel Agreements;Monetary policy;Macroprudential policy;Europe Classification-JEL:G21;G28;E58 Abstract: European banks are stronger today than they were on the eve of the 2007-2008 financial crisis, thanks to the reforms that have taken place since then. But will they be strong enough in the face of a health crisis closer to the Great Depression of the 1930s than the stress-test scenarios envisaged by the European Banking Authority for 2020? Access to central bank liquidity probably eliminates the risk of bank illiquidity, but it is not unthinkable that a bank insolvency crisis would have to be managed. The non-repayment of one in five loans would be enough to exhaust the current level of capital. The resolution mechanism would then have to be mobilised, which is unlikely to be sufficient in a context where, according to the European Systemic Risk Board, the risk of simultaneous defaults is increasing sharply. It would then be possible to mobilise the European Stability mechanism. Should this instrument prove insufficient, the risk of the re-emergence of a sovereign debt crisis would increase. Creation-Date: 2020-05 File-URL: http://www.cepii.fr/PDF_PUB/pb/2020/pb2020-32.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2020-32 Template-Type: ReDIF-Paper 1.0 Title: Covid-19: Has the Time Come for Mainstream Macroeconomics to Rehabilitate Money Printing? Author-Name: Axelle Arquié Author-Name: Jérôme Héricourt Author-Name: Fabien Tripier Keywords: Monetization;Covid-19;Seignorage;Government spending;Fiscal multipliers;Helicopter drop Classification-JEL:E32;E52;E62 Abstract: The scale of public expenditure to be incurred in the Covid-19 health crisis is raising heated debates about the appropriate funding. Long rejected by mainstream macroeconomics due to its possible inflationary consequences, monetization is currently undergoing a surprising rehabilitation. Defined as the financing of public expenditure by money issuance -without the government ever reimbursing the central bank-, monetization appears as an attractive solution in a context where the burden of public debt could become particularly problematic due both to the persistent threat of secular stagnation and the massive Covid-19 shock. This policy brief offers some theoretical insights into this debate opposing monetization and issuance of additional public debt. We first clarify what is happening to current debt and how its sustainability can be assessed, before examining how current mainstream macroeconomics can be used to rehabilitate the use of monetization of public spending. In conclusion, we draw attention to the particular democratic challenges implied by such a policy in the Euro area context, in terms of balance of powers between European institutions. Creation-Date: 2020-04 File-URL: http://www.cepii.fr/PDF_PUB/pb/2020/pb2020-31.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2020-31 Template-Type: ReDIF-Paper 1.0 Title: Impôts des multinationales après la crise sanitaire : pour un taux de taxe effectif minimum Author-Name: Sébastien Laffitte Author-Name: Julien Martin Author-Name: Mathieu Parenti Author-Name: Baptiste Souillard Author-Name: Farid Toubal Keywords: Multinational Firms;Corporate Taxation;Tax Avoidance;Minimum Taxation;Pandemics Classification-JEL:H32;H40;H50;F23 Abstract: There are lessons to be learned from the current Covid-19 pandemic. This exceptional situation requires rethinking the provision of sound infrastructures and a functioning health system. National healthcare and other public services, which are currently under increasing pressure, have been underfunded in many countries, an issue that corporate tax avoidance has likely exacerbated. Some multinationals that have been avoiding corporate taxes for years are about to be bailed out by national governments, thus arousing a public sentiment of unfairness. In this Policy Brief, we argue that setting a minimum effective tax rate on the global profit of multinational firms would tackle these concerns. Creation-Date: 2020-04 File-URL: http://www.cepii.fr/PDF_PUB/pb/2020/pb2020-30.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2020-30 Template-Type: ReDIF-Paper 1.0 Title: Phase One Deal : une trêve qui crée plus de problèmes qu’elle n’en résout Author-Name: Sébastien Jean Keywords: Classification-JEL: F13;F42 Abstract: L’accord commercial signé le 15 janvier n’est qu’une trêve, laissant en place des droits de douane additionnels sur les deux tiers environ des importations américaines en provenance de Chine. Les engagements d’achats de produits américains devraient contribuer à diminuer le déficit commercial vis-à-vis de la Chine, mais pas nécessairement à réindustrialiser les États-Unis, tandis qu’ils léseront les pays tiers. Les engagements sur les droits de propriété intellectuelle, les transferts de technologie ou les services financiers, renforceront plutôt l’investissement en Chine des entreprises américaines, si tant est qu’ils aient un impact significatif. Et les engagements chinois d’alignement partiel sur les pratiques américaines en termes de normes sanitaires, pour sensibles qu’ils soient, n’auront que des conséquences commerciales limitées en ampleur et cantonnées au secteur agricole. En l’absence de système de règlement des différends basé sur un socle institutionnel crédible, l’accord échoue à garantir une stabilité durable, d’autant que le problème central des subventions industrielles n’est pas abordé, et que la perspective d’un accord « de phase deux » paraît nébuleuse et incertaine. Cet accord constitue un nouveau pas franchi dans la déstabilisation du système commercial multilatéral, en tentant d’assujettir les relations commerciales au rapport de force politique bilatéral. Creation-Date: 2020-01 File-URL: http://www.cepii.fr/PDF_PUB/pb/2020/pb2020-29_FR.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2020-29 Template-Type: ReDIF-Paper 1.0 Title: Setting the Stage for RMB Internationalisation - Liberalizing the Capital Account and Strengthening the Domestic Bond Market Author-Name: Michel Aglietta Author-Name: Camille Macaire Keywords: China;Bond Markets;Local Governments;RMB Internationalization;International Monetary System Classification-JEL:F36;G15;G18;H70;H74 Abstract: Internationalizing the Renminbi pertains to the new era of China’s reform, starting at the 19th Congress of the Communist Party. It is not a technical reform, but a political one. The objective is threefold: to match China’s autonomy in economic policy, to further Asian integration, and to safeguard worldwide multilateralism against by the rise of protectionist forces. The challenge has been aggravated by the protectionist policies pursued by the US, degrading ipso facto the functions assumed by the dollar in the international payment system. China’s authorities have drawn lessons from the Asian crisis of 1997-98 and the systemic crisis of 2008-09. They are now searching for a second-best option in advocating a multilateral international payment system based on the SDR. The process of currency internationalization is linked to the modernization of domestic capital markets. Studying the progress in both dimensions makes the first two parts of the paper We ask the following questions. In the first part: which steps has China taken, and should take in the future, to complete the gradual process of currency internationalization currently under way? In the second part: how can China build the deep and resilient bond market required to attract international investors? A shorter third part examines why emerging market countries are incentivized to issue their government debt in their own currencies to attract foreign investors in the lingering context of ultra-low interest rates in the main convertible currencies. The status of a freely usable currency, already reached by the Renminbi in its prudent internationalization, together with a reform of the huge domestic bond market, should make China able to attract foreign saving. This is compatible with the Belt and Road Initiative, which is bound to mobilize massive capital exports in the form of long-term loans. Creation-Date: 2019-06 File-URL: http://www.cepii.fr/PDF_PUB/pb/2019/pb2019-28.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2019-28 Template-Type: ReDIF-Paper 1.0 Title: Sectoral Reallocations, Real Estate Shocks and Productivity Divergence in Europe: A Tale of Three Countries Author-Name: Thomas Grjebine Author-Name: Jérôme Héricourt Author-Name: Fabien Tripier Keywords: Total Factor Productivity;European Integration;Financial Frictions;Real Estate Classification-JEL:G3;O4;R3 Abstract: The creation of the European Monetary Union (EMU) in 1999 was expected to become a catalyst for real convergence in Europe. Far from being the case, real divergence increased from the early 1990s as evidenced by low productivity growth in the “periphery” of the Euro area relative to “core” countries. This report investigates the role of sectoral reallocation in this divergence, focusing on three archetypal countries: France, Germany, and Spain. Using the EU-KLEMS database of sectoral Total Factor Productivity (TFP), we first show that sector reallocations have been at the origin of productivity losses in the considered countries and contributed significantly to this divergence. Second, we investigate how the substantially diverging real estate prices between these countries could explain those sectoral reallocations. More specifically, when access to external finance is restricted due to financial frictions, real estate assets may be used as collateral by borrowers to relax these constraints and increase investments. Real estate shocks turn out to be a strong driver of productivity divergence, causing the lag of Spain behind Germany before the Great Recession and that of France afterwards. For comparison purpose, we also shed light on the role of sectoral reallocation in the UK productivity puzzle. Creation-Date: 2019-05 File-URL: http://www.cepii.fr/PDF_PUB/pb/2019/pb2019-27.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2019-27 Template-Type: ReDIF-Paper 1.0 Title: The dollar and the Transition to Sustainable Development: From Key Currency to Multilateralism Author-Name: Michel Aglietta Author-Name: Virginie Coudert Keywords: Key Currency;Multilateral System;SDRs (Special Drawing Rights) Classification-JEL:F33;F36 Abstract: Drastic changes in US politics relative to international agreements and to bilateral relationships with China raise a political question about the key currency status of the dollar and a theoretical question in international monetary economics: Can a key currency system be maintained if the issuing country deliberately engages in conflicting protectionist policy? This policy brief investigates how the positions of major currencies have been changing in the international monetary system for several years. The key currency relies on the acceptance of the issuing country as a benevolent hegemon that delivers an economic policy conducive to international financial stability. Until recently, it appeared that, despite the relative shrinking of the US weight in the world economy, the dollar had maintained its dominance both in international payments and in official reserves. However, uncertainty in US policy is disrupting risk perception in heavily dollar-indebted emerging and developing countries. Besides, denying the services of international transactions for non-US-resident firms with countries under US embargo is a serious encroachment on the key currency system. In the long run, the forces that can transform the international monetary system (IMS) stem from the transformation of the growth regime under environmental constraints. Since its genesis in the industrial revolution, the key currency has been the currency of the country dominating the primary energy resource, e.g. the commodity most traded worldwide. The pound sterling was linked with UK dominance in coal, the dollar with US dominance in oil. The irremediable shift to renewables, required to moderate climate change, will shift the growth regime to dispersed sources of renewable energy. The developing countries have inadequate financial resources to undertake the needy investments. Second, the positions of countries in terms of energy dependence will be reshuffled. A multilateral financial system, mixing public and private financial institutions, will require the cooperation of major countries to channel saving from all parts of the world to finance those investments. Here we argue that a multilateral monetary system would be more adapted to these challenges than the present one. It would fulfill the basic functions of international money in providing an ultimate reserve asset that will be the debt of no country, an SDR-based IMS. The last section of the paper explains the transition from dollar to SDR reserve. Creation-Date: 2019-05 File-URL: http://www.cepii.fr/PDF_PUB/pb/2019/pb2019-26.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2019-26 Template-Type: ReDIF-Paper 1.0 Title: The design of a sovereign debt restructuring mechanism for the euro area: Choices and trade-offs Author-Name: Christophe Destais Author-Name: Frederik Eidam Author-Name: Friedrich Heinemann Keywords: Eurozone Crisis;Sovereign Debt Restructuring Mechanism;Collective Action Clauses Classification-JEL:H63;F53;G15 Abstract: This paper critically assesses several dimensions of a sovereign debt restructuring mechanism (SDRM) for the euro area. The novelty of our analysis is that we abstain from recommending one ideal model for a restructuring mechanism. Instead, we apply a menu-type approach. For five key institutional SDRM dimensions, we discuss the underlying fundamental trade-offs and discuss the pros and cons of different design choices. Specifically, we investigate the following SDRM dimensions: (i) the institutional assignments of responsibilities, (ii) the condition or decision rule that triggers a debt restructuring, (iii) the design and size of debt restructuring, (iv) the role and details of collective action clauses (CACs), and (v) the safeguards for financial stability in support for a SDRM. We conclude that there is no such thing as the single optimal SDRM. Design decisions require judgements on the underlying trade-offs and related assumptions on relative costs. Also, the search for an appropriate euro area SDRM design can benefit from complementarities. Ambition in one dimension can offer more degrees of freedom in another dimension. Our analysis implies that there is no convincing reason to further taboo the search for a euro area SDRM, as there are ways to combine the opportunities of a credible SDRM with financial stability. Creation-Date: 2019-03 File-URL: http://www.cepii.fr/PDF_PUB/pb/2019/pb2019-25.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2019-25 Template-Type: ReDIF-Paper 1.0 Title: L’étonnante atonie des exportations françaises : retour sur la compétitivité et ses déterminants Author-Name: Charlotte Emlinger Author-Name: Sébastien Jean Author-Name: Vincent Vicard Keywords: Commerce et mondialisation, Compétitivité et croissance, Europe Classification-JEL:F14;F23 Abstract: La nette dégradation du solde de la balance courante de la France pendant la première décennie de l’euro résultait principalement de ses mauvaises performances à l’exportation. Si depuis 2012 les pertes de part de marché ont été stoppées, la croissance des exportations françaises reste en retrait par rapport à nos partenaires européens. Cette atonie persistante peut étonner, aux vues notamment de la baisse du coût du travail moyen en France par rapport à l’Allemagne depuis 2011. Ce rééquilibrage ne représente cependant qu’entre le quart et le tiers de l’augmentation observée entre 1999 et la crise. En outre, que ce soit par les exonérations de cotisations sociales en France ou la mise en place du salaire minimum en Allemagne, cette baisse relative a principalement concerné les bas salaires, qui influent peu sur les exportations. La modération de ce rattrapage est symptomatique de la difficulté de la zone euro à mettre en oeuvre des politiques coordonnées de rééquilibrage en son sein. L’absence d’amélioration probante des performances françaises à l’exportation reste difficile à expliquer par les déterminants traditionnels. La spécialisation française s’est éloignée de celle de l’Allemagne pour se rapprocher de celle de l’Italie, mais elle ne semble pas avoir joué de manière notablement défavorable. L’hypothèse d’un effet d’hystérèse, selon lequel la baisse de la production industrielle française serait à l’origine d’une incapacité durable à regagner des parts de marché à l’exportation, ne résiste pas à l’analyse. La dégradation de la compétitivité hors prix est avérée si l’on entend par là que l’évolution ne nous semble pas complétement expliquée par les prix ; mais elle est difficile à relier à des causes clairement identifiées, qu’il s’agisse de qualité ou d’investissement. Les statistiques d’investissement suggèrent que la France ne souffre pas d’un défaut de dépenses de R et D en comparaison de ses principaux voisins ; au contraire, le maintien de ces dépenses contraste avec l’affaissement relatif de la production manufacturière. Ce constat pose la question de la capacité d’entraînement des activités de R&D sur la production en France, d’autant que l’économie française est marquée par le poids de ses multinationales, dont les implantations à l’étranger ont crû plus rapidement que celles des autres grands pays de la zone euro. Les importants revenus d’investissement qui en découlent expliquent d’ailleurs en bonne partie que la France affiche un solde courant proche de l’équilibre. En ce sens, l’économie française souffre plus d’une perte de sites de production industrielle que d’un défaut de compétitivité. Creation-Date: 2019-02 File-URL: http://www.cepii.fr/PDF_PUB/pb/2019/pb2019-24_FR.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2019-24 Template-Type: ReDIF-Paper 1.0 Title: How Far Will Trump Protectionism Push Up Inflation? Author-Name: Sébastien Jean Author-Name: Gianluca Santoni Keywords: Tariff Duties;Inflation;United States;Protectionism Classification-JEL:F13 Abstract: The tariff duties already enforced or threatened by the Trump administration are likely to increase costs and prices in the US economy, but by how much? To address this question, we identify and quantify three channels: direct taxation, cost increase linked to taxes on intermediate inputs, and altered pricing strategy resulting from strategic complementarities across firms. Evidence from three recent episodes of additional tariff protection show that our framework provides sensible assessments of ensuing price increases, which usually materialize gradually and do not reach their maximum level for at least four months. We reckon that the additional duties enforced up to December 2018 should increase inflation in the US by 0.25% to 0.38%. Should all US imports from China be hit with a 25% tariff, the total inflationary impact would range between 0.66% and 0.99%. Levying 25% additional duties on imports of autos and auto parts would more or less double down this effect, by adding 0.67% to 1.03% to inflation if all providers are targeted, and 0.47% to 0.73% if Canada and Mexico are excluded. These estimates show that the additional duties considered by the Trump administration, if applied extensively, might push up consumer prices by more than one percentage point. This is far from negligible from the point of view of both consumers’ purchasing power and financial stability, thus potentially seriously limiting the administration’s room for maneuver. The contrast with China is stark; there, the inflationary impact of retaliatory measures is small, and more than counterbalanced by the wide-ranging tariff cuts enforced over the last year. Creation-Date: 2018-12 File-URL: http://www.cepii.fr/PDF_PUB/pb/2018/pb2018-23.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2018-23 Template-Type: ReDIF-Paper 1.0 Title: The Effects of Immigration in Developed Countries: Insights from Recent Economic Research Author-Name: Anthony Edo Author-Name: Lionel Ragot Author-Name: Hillel Rapoport Author-Name: Sulin Sardoschau Author-Name: Andreas Steinmayr Keywords: Immigration;Labour Market;Public finance;Redistribution; Voting Classification-JEL:D72;E62;F22;H62;J15 Abstract: The rise in international migration over the past decades and particularly the recent influx of refugees to the European Union has given more audience to the economic and political consequences of immigration. A major concern in the public debate is that immigrants could take jobs from natives, reduce their wages and negatively contribute to public finances. At the same time, the rise of right-wing populist movements has brought to light that the skepticism towards immigrants and refugees may not only be based only on economic but also on cultural considerations. This report is devoted to investigating these considerations by carefully relying on the existing evidence. We thus study the vast literature on the effects of immigration on the labor market and welfare system in host societies, as well as the more recent literature on the attitudinal and political consequences of immigration. The literature on the labor market impact of immigration indicates that immigration has a negligible average impact on the wages and employment of native workers. However, because adjustments take time, particularly when immigration is unexpected, the initial and longer run impacts of immigration can differ. The average impact of immigration on public finance is also negligible, sometimes slightly positive or slightly negative. We also document that immigration can have distributional consequences. In particular, the age and educational structure of immigrants plays an important role in determining their impact on the labor market and public finances. The fact that immigration is sometimes perceived as a factor depressing economic outcomes in host countries tends to affect native attitudes and electoral outcomes. In this regard, the literature first suggests that cultural concerns is the main driving force behind the skepticism towards immigration and that fiscal or labor market concerns only play a secondary role. Second, immigration tends to reduce the support for redistribution among native workers. Third, the effect of local level exposure to immigrants and refugees on native attitudes towards immigrants and extreme voting has been found to vary by context and can be positive or negative. Creation-Date: 2018-04 File-URL: http://www.cepii.fr/PDF_PUB/pb/2018/pb2018-22.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2018-22 Template-Type: ReDIF-Paper 1.0 Title: Some Unpleasant Euro Arithmetic Author-Name: Guillaume Gaulier Author-Name: Vincent Vicard Keywords: Current account imbalances;Euro area;Exchange rates misalignments Classification-JEL:E31;F32 Abstract: Current estimates of misalignments in real effective exchange rates show that euro area imbalances are still large: Germany exhibits a 20 percentage point undervaluation compared to the rest of the euro area (EA). Within a monetary union, rebalancing requires price adjustments through differentials in inflation rates. The rebalancing process therefore involves a 2 percentage point higher inflation in Germany than in the rest of the EA over a decade, or a 1 pp over two decades. It also requires above 2% inflation in surplus countries to meet the 2% ECB inflation target. At the current pace, rebalancing is a 20 year process and requires sustained very low inflation rates in the rest of the euro area. Creation-Date: 2018-01 File-URL: http://www.cepii.fr/PDF_PUB/pb/2018/pb2018-21.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2018-21 Template-Type: ReDIF-Paper 1.0 Title: Uncertainty Fluctuations: Measures, Effects and Macroeconomic Policy Challenges Author-Name: Laurent Ferrara Author-Name: Stéphane Lhuissier Author-Name: Fabien Tripier Keywords: Uncertainty;Risk;Business Cycles;Monetary Policy; Fiscal Policy;Structural VAR Classification-JEL:C32;D80;E32;E44 Abstract: “The outlook is subject to considerable uncertainty from multiple sources, and dealing with these uncertainties is an important feature of policymaking.” Janet L. Yellen, Chair of the Board of Governors of the Federal Reserve System, speech “Inflation, Uncertainty, and Monetary Policy” given the 26 September 2017. There has been a strong focus in recent policy debates, on the various types of uncertainty in the global economy from economic policy uncertainty to financial volatility. This Policy Brief presents the key challenges raised by this phenomena: How to measure uncertainty? Through which channels does uncertainty impact the economy? What are the implications of uncertainty for policy makers? We show evidence from the literature that uncertainty has adverse effects on the economic activity and draw three lessons for policy-makers facing increasing uncertainties. First, macroeconomic policies have a direct role to play in stabilizing policy-related uncertainty. Second, financial uncertainty should be modulated through financial regulation. Third, the effectiveness of economic stabilization policies depends on the state of uncertainty and should be adapted accordingly. Creation-Date: 2017-12 File-URL: http://www.cepii.fr/PDF_PUB/pb/2017/pb2017-20.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2017-20 Template-Type: ReDIF-Paper 1.0 Title: Are State-Contingent Sovereign Bonds the Solution to Avoid Government Debt Crisis? Author-Name: Christophe Destais Keywords: Sovereign Debt;State Contingent Bonds;GDP-linked Bonds Classification-JEL:F34;G01;G15;H63 Abstract: The idea that sovereign borrowers may issue new debt, the service of which is contingent or GDP growth (GDP linked bonds) has been increasingly discussed in recent years. Some central banks (England, Canada and, recently, Germany and France) have taken steps to raise the awareness of stakeholders and launch a global conversation on GDP-linked bonds. The IMF participated in this debate though with extreme caution. The G20 mentioned the issue in its last Hamburg communiqué but refrained from taking side. GDP-linked bonds offer many advantages. They would limit the issuers’ debt-service obligations in time of slow or negative growth, reduce the likelihood of debt crises and defaults, avoid sharp spending cuts in order to maintain access to capital markets, and even provide some latitude for additional spending at a time when it is most needed. GDP-linked bonds would also render investors more responsible when it comes to lending money to a sovereign. In addition, investors would know in advance the terms of their bond restructuring and gain an equity-like exposure to a country. The counter-cyclical feature of GDP-linked bonds and the fact that they would alleviate the economic cost of a debt restructuring would also make them beneficial for financial stability and the broader economy. These benefits would justify a global policy initiative to promote the idea and kickstart the market. However, many issues remain unresolved (pricing, design, institutional framework…). The learning curve for such a new financial product might, therefore, justify a cautious and experimental approach even though the quick development of a large GDP-linked bond market would have many advantages, including liquidity and arbitrage. Creation-Date: 2017-11 File-URL: http://www.cepii.fr/PDF_PUB/pb/2017/pb2017-19.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2017-19 Template-Type: ReDIF-Paper 1.0 Title: Why Trade, and What Would Be the Consequences of Protectionism? Author-Name: Sébastien Jean Author-Name: Ariell Reshef Keywords: International Trade;Protectionnism;Adjustment Costs;Safeguard measure Classification-JEL:F13;F16;P16 Abstract: Trade liberalization affects the economy via three main channels: (1) efficiency/productivity gains, (2) purchasing power gains for consumers, and (3) consequences on incentives and governance. These give rise to adjustment costs and distributional impacts, as well as potentially large environmental consequences. Much of the impact of possible increases in EU trade barriers can be seen as forfeiting gains from trade, and it would also entail adjustment costs. Possible (but often unlikely) gains for workers in protected industries will be offset by increases in the cost of imported inputs, hurting competitiveness. This is increasingly important due to the rise of global value chains. Protection can also trigger a trade war, with widespread consequences; Noland et al. (2016) estimate that nearly 4.8 million jobs might be lost by 2019 in the U.S. in case of a full-blown trade war. We calculate that for Europe more than 20% of the value of total manufacturing extra-EU imports is composed of products that are not produced locally; this implies that substitution with local production is unlikely in the short to medium run. We discuss two recent episodes of protectionist policies: the U.S. safeguard on tire imports from China (2009-2011), and the U.S. safeguard measure on steel products vis-à-vis all source countries (2002-2003). In both cases, the estimated employment benefit in the industry protected was insignificant, while negative impacts on downstream industries were disproportionately large, including outsourcing jobs overseas. Protected sectors witnessed higher stock share prices – benefitting owners, not workers – and even this was offset by declines in downstream industries. We assess plausible scenarios for the future, in relation with the context of the recent U.S. presidential election. While the new administration’s policy remains highly uncertain, we discuss three main directions it might take: bilateralism, aggressive use of trade defense, and breach of agreed principles. We argue that the best way for the E.U. to defend its interests requires monitoring closely the U.S. practices, defending the rules-based system, and displaying resolve in the willingness to impose reciprocity. Creation-Date: 2017-11 File-URL: http://www.cepii.fr/PDF_PUB/pb/2017/pb2017-18.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2017-18 Template-Type: ReDIF-Paper 1.0 Title: Trump and the Dollar in the Reflection of History Author-Name: Michel Aglietta Author-Name: Virginie Coudert Keywords: Trumponomics;Supply Side Economics;Bond Market Crash;Dollar Appreciation Classification-JEL:E62;E65;F31;H62 Abstract: Fears of disruption in international relationships, raised by Trump’s access to power, have been confirmed by his first half-year in office. Uncertainty has spread in international relationships. Surprisingly few in-depth studies in political economy have been made to define “Trumponomics” and to analyze the economic consequences of implementing his intentions for the US and the world. Since the question pertains to radical uncertainty, the usual quantitative methods and indicators go astray. Financial markets are not at ease with political uncertainty. In this environment, the financial community takes refuge in denying that business as usual might be derailed. However, it may be useful to raise a lively debate in political economy to figure out the rising forces of change that might trigger the unraveling of the financial globalization founded with Reaganomics in the 1980s that spread all over the world with the Washington Consensus. We will first question the consistency of Trump’s revealed intents. Do they amount to a coherent doctrine? What might be the economic consequences? What type of dilemma will he face? To deepen the analysis, we will resort to history. Can Trumponomics be compared to Reaganomics? Both have claimed to overhaul social relationships in emphasizing supply-side economics. Revisiting the consequences of Reaganomics gives clues for assessing the pitfalls that can undermine Trumponomics, since the initial economic and financial conditions are opposite to those that prevailed when Reagan took office. Finally, the third part of the paper will try to assess the consequences for the world and for Europe if Trump’s policy triggers a dual rise in US interest rates and in the dollar. Creation-Date: 2017-09 File-URL: http://www.cepii.fr/PDF_PUB/pb/2017/pb2017-17.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2017-17 Template-Type: ReDIF-Paper 1.0 Title: Trade and Macro-Economic Issues for International Co-Ordinational in Tense Times Author-Name: Anne-Laure Delatte Author-Name: Sébastien Jean Keywords: International co-ordination;International Trade;Tax Competition Classification-JEL:G7;G20 Abstract: This Policy Brief discusses what useful form international economic co-ordination might take, notwithstanding the tense climate witnessed in recent months. On international trade, we argue that aiming at wide-ranging negotiations or more-of- the-same trade liberalizations would be pointless under present circumstances. Instead, efforts should focus on preventing the doom loop of protectionism and retaliation, in a context where the resilience of existing institutions should not be overstated. Updating China’s status is another pressing question which should be tackled seriously, and will require political negotations. Addressing the political concerns about globalization should be another priority, and we argue that it warrants considering including in trade agreements commitments and disciplines regarding non-trade areas such as exchange rates, or social, environmental and fiscal rules. On the macroeconomic front, we point to the rising temptation to use fiscal competition to compensate for low competitiveness. The risk of such strategy is a race to the bottom which would seriously impede the capacity of governements to provide highly-needed public services and infrastructures. A working multi-lateral cooperation shall consolidate the progress achieved thanks to the OECD BEPS initiative and set up a discussion on fiscal issues. Last we call for more accomodative macroeconomic policies to support investment and boost the mild economic activity recovery observed in several countries. This Policy Brief was written as part of the research project on “Major Challenges for Global Macroeconomic Stability and the Role of the G7” in view of the Italian Presidency of the Group of Seven (G7) in 2017, conducted by the Istituto Affari Internazionali (IAI) together with a major policy think tank in each of the other G7 member countries. The project’s papers have been presented and discussed at an international conference held in Rome on 27-28 March 2017. Creation-Date: 2017-06 File-URL: http://www.cepii.fr/PDF_PUB/pb/2017/pb2017-16.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2017-16 Template-Type: ReDIF-Paper 1.0 Title: Trade and Labor Market: What Do We Know? Author-Name: Matthieu Crozet Author-Name: Gianluca Orefice Keywords: Trade Liberalization;Job Polarization;Wage Inequality Classification-JEL:F16;F66;J31 Abstract: There is a large consensus in the economic literature suggesting the positive impact of globalization on the aggregate well-being of a country. However, a clear-cut conclusion has not been reached on winners and losers from globalization. For this reason, international trade is often accused of increasing wage inequality in both developing and developed countries. A first stream of literature focused on workers characteristics to identify winners and losers from globalization. Workers with characteristics (e.g., education levels) intensively used in import-competing sectors are likely to suffer from international trade; while workers having characteristics intensively needed in exporting sectors will gain. This is a clear-cut explanation but it does not fit the data as the reality is much more complex. Labor market shocks caused by trade openness are diffuse, and it is difficult to group those who suffer/gain into well-identified categories. The firm and the type of task in which workers are employed definitely contribute to identify winners and losers from globalization. Recent CEPII research outputs, based on detailed French firm and worker-level data, confirm that identifying who lost and who gained with globalization is a very difficult task. Creation-Date: 2017-03 File-URL: http://www.cepii.fr/PDF_PUB/pb/2017/pb2017-15.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2017-15 Template-Type: ReDIF-Paper 1.0 Title: Who is Afraid of the Brain Drain? A Development Economist’s View Author-Name: Hillel Rapoport Keywords: Brain Drain;Migration;Globalization;Development Classification-JEL:F21;F22;F63;J61;O11; O15 Abstract: In “Debating Brain Drain”, Brock and Blake (2015) discuss the pros and cons of high-skill mobility prevention to curb the brain drain from developing countries from a legal and political perspective. I complement this discussion with the insights from recent economic research on brain drain, globalization and development. Two main results are emphasized: the fact that educational investments are higher when high-skill migration is not constrained, and the role of skilled diasporas in promoting the integration of migrants’ home countries into the global economy. Both results strengthen the rationale for letting skilled people go. Creation-Date: 2017-02 File-URL: http://www.cepii.fr/PDF_PUB/pb/2017/pb2017-14.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2017-14 Template-Type: ReDIF-Paper 1.0 Title: Intra-European Labor Migration in Crisis Times Author-Name: Xavier Chojnicki Author-Name: Anthony Edo Author-Name: Lionel Ragot Keywords: Intra-European Migration;Labor mobility;Regional adjustment;Regional shocks;European Union;Employment;Economic crisis Classification-JEL:F22;J61;J68 Abstract: The question of whether migration can serve as a channel for regional adjustment to asymmetric shocks is crucial in an economic and monetary union. It is of particular interest within the Eurozone where countries do not have flexible exchange rates as an adjustment mechanism. By moving from countries with high unemployment to countries with better employment prospects, intra-European migrants should help countries to adjust to asymmetric shocks and lead to a more efficient allocation of resources within the free migration regime. This policy brief exploits the 2008 economic crisis to investigate how labor market disparities between EU15 countries affected intra-European migration. Our main contributions are threefold. First, over the period 2000-2013, we find that intra-European migration indeed responds to regional differences in employment conditions: a rise in unemployment differences between two EU15 countries fosters migration to the country with the better employment conditions. Second, we find that the 2008 economic crisis led to a strong reallocation of individuals within the EU15 between the southern countries (Greece, Italy, Portugal and Spain) which were the most affected by the crisis and the least affected countries, such as Denmark and the UK. Third, our results indicate that responsiveness to regional employment disparities is far greater among non-EU15 immigrants, compared to European-born people. This finding suggests that the mobility of Europeans within the EU15 could be greater, a hypothesis that is consistent with the higher mobility observed in the United States. Improving cross-country portability of social rights within the EU could thus be a relevant reform to foster intra-EU mobility. Creation-Date: 2016-10 File-URL: http://www.cepii.fr/PDF_PUB/pb/2016/pb2016-13.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2016-13 Template-Type: ReDIF-Paper 1.0 Title: China’s 13th Five-Year Plan. In Pursuit of a “Moderately Prosperous Society” Author-Name: Michel Aglietta Author-Name: Guo Bai Keywords: Innovation-led growth;green development;State-owned enterprises (SOEs);debt cleaning Classification-JEL:O11;O53;P11 Abstract: Chinese reform is an endogenous process that feeds on its own contradictions, and creates its own way through stages, interspersed by crises that are part of the reform. The Directives paper issued by the central committee of the CCP at its third plenum in November 2013 is a theoretical compendium of a strategic view of the reform. The 13th Five-Year Plan (2016-2020), adopted in March 2016 by the People’s National Assembly of China, is the most articulated document to date and explains the objectives and their implementation over the next five years. In order to understand the Plan, this paper focuses on six paramount objectives from this long and detailed document: shift from capital accumulation-led growth to innovation-led growth; integrated urban-rural development; green development; inclusive development; finance and State-owned Enterprise-(SOE) reform; opening up to the world. The process of reform is acknowledged to be under way. The paper analyzes the objectives identified and their content and it highlights their interdependencies to underline the comprehensive “new normal” strategy. Quantitative targets: • Bottom line: 6.5% annual average growth GDP from 2016 to 2020 to double 2010 GDP per capita. • R&D expenditure: 2.5% GDP in 2020 from 2.1% in 2015. • Urbanization rate: 60% of population in 2020 from 56.1% in 2015. • Green development: by 2020 to reduce emissions per unit of GDP by 40, to 45% compared to 2005 levels. Increase the share of non-fossil fuel energy to 15% by 2020. • Social welfare: lift 55.75 million more people out of poverty by 2020. One-child limit increased to two children per couple. Extend coverage of urban welfare services to all residents. • Financial targets: merge 106 SOEs under central government ownership into 40 world-class groups in strategic industries. Achieve full Yuan convertibility by 2020. Creation-Date: 2016-09 File-URL: http://www.cepii.fr/PDF_PUB/pb/2016/pb2016-12.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2016-12 Template-Type: ReDIF-Paper 1.0 Title: Granting Market Economy Status to China in the EU: An Economic Impact Assessment Author-Name: Cecilia Bellora Author-Name: Sébastien Jean Keywords: Antidumping;Market Economy Status;Chilling effect ;China Classification-JEL:f13;f14 Abstract: This Policy Brief assesses the possible economic impacts for the European Union of granting market economy status (MES) to China in antidumping investigations. The issue is important: China ranks first among the countries targeted by European antidumping, and sanctions cover tariff lines worth 8.7% of EU imports from China, based on pre-investigation imports (0.5% for MES partners). We find that China’s exports face a larger number of antidumping investigations than those from MES partners, even accounting for China’s trade specificities. These investigations also have a higher chance of being won by the plaintiff. Furthermore, when a sanction is decided, its trade-restrictive impact is higher against China. In addition, we show that antidumping measures lead not only to an increase in the prices of targeted Chinese products but also in those of Chinese untargeted products similar to those directly targeted. This chilling effect materializes in 4 to 14% prices increases for untargeted exports belonging to the same sector as those targeted. It does not affect MES partners. Antidumping cases against non-MES partners other than China are not numerous enough to isolate the impact of the MES per se. We thus assess the impact of granting MES to China assuming that all China’s specificities in EU antidumping procedures would disappear as a result. Under this assumption, disregarding the chilling effect, changing China’s status would boost its exports to the EU by 3.9% to 5.3% in volume (€13bn to €18bn). Factoring in the removal of the present chilling effect, the impact might reach 7.4% to 21% in volume (€25bn to €72bn). Domestic output losses would be small in relative terms (up to 0.06% disregarding the chilling effect, up to 0.32% taking it into account), but significant in absolute terms (respectively, €3.9bn and €23bn); 90% of these impacts reflect the decline in the number of investigations, as opposed to the level of duty in case of sanction. Accordingly, dropping the so-called lesser duty rule would not alter significantly these impacts. Creation-Date: 2016-09 File-URL: http://www.cepii.fr/PDF_PUB/pb/2016/pb2016-11.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2016-11 Template-Type: ReDIF-Paper 1.0 Title: International Financial Flows in the New Normal: Key Patterns (and Why We Should Care) Author-Name: Matthieu Bussière Author-Name: Julia Schmidt Author-Name: Natacha Valla Keywords: international financial flows;capital controls;macroprudential policy;financial stability;global imbalances Classification-JEL:F32;F36;F38;F41 Abstract: This policy brief documents recent trends in international financial flows, based on a newly assembled dataset covering 40 advanced and emerging countries. Specifically, we compare the period since 2012 with the pre-crisis period and highlight four key stylized facts. First, the “Great Retrenchment” that took place during the crisis has proved very persistent, and world financial flows are now down to half their pre-crisis levels. Second, this fall can predominantly be related to advanced economies, especially those in Western Europe, while emerging markets, except Eastern European countries, have been less severely affected until recently. Third, the global patterns of net flows have also recorded significant changes. Overall, net flows have fallen substantially relative to the years preceding the sudden stop, which is to some extent an expression of the changes registered in the current account. Fourth, not all types of flows have shown the same degree of resilience, resulting in a profound change in the composition of international financial flows: while banking flows, which used to account for the largest share of the total before 2008, have collapsed, FDI flows have been barely affected and now represent roughly 45% of global flows. Portfolio flows stand between these two extremes, and within them equity flows have proved more robust than debt flows, which should help to strengthen resilience and deliver genuine cross-border risk-sharing. Having highlighted these stylized facts, this policy brief turns to possible explanations for and likely implications of these changes, regarding international financial stability issues. Creation-Date: 2016-03 File-URL: http://www.cepii.fr/PDF_PUB/pb/2016/pb2016-10.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2016-10 Template-Type: ReDIF-Paper 1.0 Title: Climate Finance at COP21 and After: Lessons Learnt Author-Name: Etienne Espagne Keywords: climate change;carbon prices;COP21 Classification-JEL:Q54;Q58 Abstract: Finance has emerged in the last few years in and outside the Conference of the Parties (COP) process as a key ingredient of climate policy design. It also appears to be a key sector for structural reform in order to align it with the new low-carbon horizon. This policy brief draws lessons from a discussion platform launched jointly by CEPII and France Stratégie, which welcomed more than thirty contributions on climate finance issues from various experts and citizens in the four months leading to COP21. Both these contributions and the final text adopted by the Parties indicate that the financial question will remain essential in the near future in order to consolidate and nurture the Paris Agreement. In this brief, three directions for future debates are analyzed. First, the equity question remains open, through the financing schemes to guarantee a minimum of $100 billion in annual transfers to developing countries in the name of the principle of “common but differentiated responsibilities”. The question of an increasing ambition to implement the “Intended Nationally Determined Contributions” through specific financial instruments is also discussed. Finally, the necessary long-term objective of a net decarbonization of the world economy invites us to look for more structural reforms in the financial sector. Creation-Date: 2016-02 File-URL: http://www.cepii.fr/PDF_PUB/pb/2016/pb2016-09.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2016-09 Template-Type: ReDIF-Paper 1.0 Title: Currency turmoil in an unbalanced world economy Author-Name: Michel Aglietta Author-Name: Virginie Coudert Keywords: dollar;exchange rate Classification-JEL:E52 Abstract: The world is once again under threat of currency turmoil ignited by a vigorous appreciation of the dollar against all other currencies. This is the harbinger of another long cycle which has been the pattern of exchange rates since the fall of the Bretton Woods system in 1971. Because dollar cycles are driven by momentum dynamics disconnected from fundamentals, they are likely to distort real effective exchange rates between major currencies. The dollar appreciation phase may also wreak havoc in the financial systems of emerging countries that are heavily indebted in dollars. In the present state of the world economy, the prospect of a new dollar cycle is particularly worrisome since most countries, far from deleveraging after the financial crisis, have massively increased their debt relative to GDP in the non-financial sectors. The rise in dollar debt is due to subpar income growth in the world economy which has precluded deleveraging of the already high level of debt reached in 2007 on the one hand, and to the status of the dollar as the de facto exclusive supplier of international liquidity on the other hand. Because US monetary policy is not bound by any international rules, it has supplied liquidity on its own terms, flooding the world with cheap money in order to revive domestic consumption in the US. The catalyst for renewed dollar appreciation has been the divergence in monetary policy between the US on the one side, Japan until early 2013, and the euro area until late 2014 on the other. Monetary policies in these latter countries, working counter to the US before a recent change in course, have created deflation risks that the new trend of dollar appreciation compounded with the slump in the price of oil is expected to correct, spreading the recovery worldwide. However, this is the benign scenario. History would suggest the possibility of a much more unpleasant outcome. Misalignment in exchange rates is a repeated feature of dollar cycles, as much as unsustainable imbalances in the balance of payments. Currently, the gap between US long term interest rates and similar rates in the euro area and Japan is large and expected to widen. Nevertheless, the market’s expectations of future short-term interest rates up to end-2017 are much lower than the Fed’s. If the market expectations are right, this means that the US recovery will be hurt by the dollar turning from being cheap to expensive. If the US recovery stalls, this will mean that secular stagnation will be with us for an indefinite time. Creation-Date: 2015-07 File-URL: http://www.cepii.fr/PDF_PUB/pb/2015/pb2015-08.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2015-08 Template-Type: ReDIF-Paper 1.0 Title: A holistic approach to ECB asset purchases, the Investment Plan and CMU Author-Name: Natacha Valla Author-Name: Jesper Berg Author-Name: Laurent Clerc Author-Name: Olivier Garnier Author-Name: Erik Nielsen Keywords: ECB;Capital Markets Union;cross-border capital flows;policy strategy;securitization;covered bonds;financial structure;Quantitative Easing Classification-JEL:E42;E44;E52;E58;E61 Abstract: To stimulate and finance investment in Europe the three “policy stars” of Europe need to be aligned: the Capital Markets Union initiative, the €315bn Investment Plan, and the ECB’s €1,100bn asset purchase scheme. They jointly face a unique set of issues. First, the resilience and the cyclical performance of the European bank based system needs to be improved. Second, the “right” markets need to be developed for banks to outsource risks without jeopardising financial stability. Third, cross-border risk-sharing urgently needs to be rebalanced, because it has become, in the wake of the Great Recession, overly reliant on debt instruments as opposed to equity. We argue that to achieve alignment between initiatives, an overall strategic vision could: - Set an explicit, holistic strategy, ensuring that the instruments in the Investment Plan receive appropriate regulatory treatment within the CMU, and are eligible to the ECB’s purchase programme and collateral. - Set a strategic objective for the euro area financial structure. It could be a “spare wheel” model where (i) banks would remain predominant (with capital markets as a countercyclical “spare wheel”), and (ii) banks would outsource risk through covered bonds (with untranched securitisation acting as the “spare wheel”). - Proactively promote equity instruments in all three policy initiatives for more sustainable cross border risk sharing. - Promote a new business model for “credit assessment” with a value chain featuring the credit information collected by commercial and central banks. - Re-orientate the ECB’s purchases away from sovereign debt instruments towards the instruments that will finance the Investment Plan, those of the so-called “agencies”, and private sector assets. - Formally involve NPBs in the Investment Plan, preferably in the equity of the EFSI Fund. - Improve the governance of public investment ex ante via independent, supra-national investment committees, and ex post via strict disciplinary measures. - Be pragmatic but tangible in the objectives set for the Capital Markets Union (focus on cross-border insolvencies and improve national business environments). Creation-Date: 2015-04 File-URL: http://www.cepii.fr/PDF_PUB/pb/2015/pb2015-07.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2015-07 Template-Type: ReDIF-Paper 1.0 Title: Financing energy and low-carbon investment: public guarantees and the ECB Author-Name: Michel Aglietta Author-Name: Étienne Espagne Keywords: Ecular Stagnation;Social Cost of Carbon;Certification;Low Carbon Transition Classification-JEL:Q43;Q48 Abstract: The eurozone has been said to have caught a disease called "secular stagnation". Productive investment in the private sector fell by about 20% overall between 2007 and 2014, while private saving has surged, creating a huge gap between gross domestic savings and investment. The trajectory of actual GDP has decoupled from successive estimates of potential GDP, and there is no sign of a spontaneous short-term adjustment. The engineering of a powerful investment drive seems the only way out of this self-fulfilling low-growth trap. The European Union has already set investment objectives in the Climate and Energy Package. These targets cover four areas: renewable energy supply capacity, electricity distribution networks, energy efficiency in building renovation and urban mobility. Several financing tools need to be combined to tailor risk-sharing devices for investments in each of these sectors. First and foremost, is the integration of a high carbon price. However, as any sudden sharp increase in the overall carbon price would have a major (and politically unsustainable) impact on the rest of the economy, a core issue is how to create a transitory distinction between the carbon price included/paid by the existing capital stock and the carbon price included/paid by new low carbon investments. This can be achieved through a two-tier approach. First, for the four key sectors, a high notional carbon price is used to set an asset value on the carbon saved by new investments ("carbon asset"): these assets are accepted as repayment by central banks, and publically guaranteed. The ECB, by buying financial instruments issued by the low-carbon investors, creates a direct transmission channel to these areas of the economy. Second, fiscal measures ensure the carbon price catches up with the notional value, thus generating revenues that allow for the purchase of the carbon debt held by the central banks, guaranteeing the final budget neutrality of the process. By focusing on investments in these four sectors, the European output gap could be closed in the short run and a credible path opened to a low carbon economy. Creation-Date: 2015-03 File-URL: http://www.cepii.fr/PDF_PUB/pb/2015/pb2015-06.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2015-06 Template-Type: ReDIF-Paper 1.0 Title: Central Bank Currency Swaps and the International Monetary System Author-Name: Christophe Destais Keywords: Central Banks;International Monetary System;Foreign Currency Liquidity Risk;Financial Instability;International Monetary Fund;US dollar;Renminbi Classification-JEL:F33;F42;F65;G01;G15 Abstract: Central bank currency swaps (CBCS) allow central banks to provide foreign currency liquidity to the commercial banks in their jurisdictions. Since the end of 2007, these swaps have emerged as a de facto key feature of the international monetary system (IMS), with the US Federal Reserve (FED) having extensive recourse to them during the financial crisis, and their exploitation by the People’s Bank of China (PBOC) to help internationalizing the renminbi. This trend was further confirmed in the second half of 2013 with (i) the signing of two swaps agreements between the PBOC and the Bank of England (BOE) and the European Central Bank (ECB), and (ii) the little remarked decision by six major western central banks including the US FED, announced on October 31st 2013, to make permanent previously temporary swap lines. Currency swaps combined with the unlimited and exclusive power of central banks to create money can match the volatility of international capital flows. They have proved very effective and extremely helpful during the recent financial crisis. However, so far, central bank swaps have not been associated with conditionality, and are more precarious than alternative institutional arrangements, such as the International Monetary Fund (IMF) or regional financial agreements (RFA). Large scale use of CBCS can render central banks subject to significant counterparty risk. The huge powers that are bestowed upon central banks as a result of CBCS have triggered questions about the possibility of institutionalizing, and therefore limiting, this new tool. This might be a step too far, since most countries link sovereignty and money creation, and would never agree to have their hands tied. However, in our view, an internationally agreed set of principles would enable a fairer and perhaps more efficient exploitation of this instrument. These principles should include a commitment to transparency. They should encourage long-lasting agreements in order to foster stability, as well as the inclusion of provisions that require commercial banks to soundly manage their foreign liquidity risk. They should also encourage international currency issuers not to unfairly exclude potential CBCS beneficiaries. Creation-Date: 2014-09 File-URL: http://www.cepii.fr/PDF_PUB/pb/2014/pb2014-05.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2014-05 Template-Type: ReDIF-Paper 1.0 Title: A New Architecture for Public Investment in Europe Author-Name: Natacha Valla Author-Name: Thomas Brand Author-Name: Sébastien Doisy Keywords: public investment;private investment;Europe;European Investment Bank Classification-JEL:E6;H54 Abstract: Some five years after the severe recession of 2009, private sector investment in Europe is still dangerously sluggish. And public sector investment has been cut, reinforcing the downward trend seen over the past thirty years. In this paper, we discuss the complementarity between private and public sector investment. Evidence suggests that in the medium term, public investment does not hinder, but fosters, the quantity and efficiency of private investment. Moreover, our fiscal multiplier for public investment (at 1.4, considerably above ‘breakeven’) is significantly stronger than those for other fiscal instruments. Taken together, these two findings suggest that the public sphere would be well advised to tilt spending towards investment in areas such as infrastructure and human capital, which represent an investment for future generations. A new European initiative might be needed to get investment back on track and thus protect future growth. To this end we propose establishing, by treaty, a Eurosystem of Investment Banks (ESIB), around a pan-European financial capacity that would coordinate the actions of the national public investment banks of Euro area member states and add to their funding capacity. The ESIB would channel the Euro area’s excess savings towards investment in the right places throughout the continent. To do so in an economically sustainable and financially profitable way, funding would be conditional on firm commitments to growth-enhancing structural reforms and economic policies. Our proposed Eurosystem of Investment Banks (ESIB) would be structured around a federal centre and national entities. The central node, the Fede Fund, would be created by restructuring the European Investment Bank into a truly federal entity. The Fede Fund would orchestrate the joint work of national investment and development banks with a clear European map in mind. The mandate of the ESIB, enshrined in the Treaty, would be to promote long-term growth, well-being and employment in Europe. The mandate would, by definition, reflect a political consensus emanating democratically from the people of the Euro area member states. The ownership and governance of the Fede Fund would be key in ring-fencing the investment process from national political agendas not linked to the promotion of long-term growth. We propose a structure with both public and private Fede shareholders, who would collectively elect the ESIB Board of Directors. The Fede Fund would also issue debt to finance investment at an economically relevant scale (10% of Euro area GDP, so around €1tn). Creation-Date: 2014-07 File-URL: http://www.cepii.fr/PDF_PUB/pb/2014/pb2014-04.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2014-04 Template-Type: ReDIF-Paper 1.0 Title: China’s Roadmap to Harmonious Society : Third Plenum Decisions on “major issues concerning comprehensively deepening reforms” Author-Name: Michel Aglietta Author-Name: Guo Bai Keywords: Rule of law;land reform;interest rate liberalization;strategic planning Classification-JEL:H77;P41;P47 Abstract: In November 2013, the central committee of the Communist Party of China (CPC), at its third plenum, issued a Directives Paper (with 16 items and 60 prescriptions), setting out a long-term strategic compendium of China’s reform agenda, based on the principle of separation between market and state under the unifying predominance of the Law. Its prescriptions refer to three basic objectives: inclusiveness, protection of rights, and improving economic efficiency. The Directives Paper formulates an ambitious plan of reforms over the next 20 years, aimed at overhauling the factor price system. There are two pillars to the Reform. First, labor market developments should provide workers with enhanced bargaining power. Government is expanding the basic social safety net, promoting low catch-up, enforcing labor contracts and introducing collective bargaining. Second, capital market reform has been speeded-up by the urgency of dealing with non-performing loans held in state-owned enterprises and credit platforms guaranteed by local governments. The Government intends to foster bond markets, encourage private banks to finance SMEs, build a strong prudential framework, deregulate interest rates, and move to Renminbi convertibility in the new Shanghai free trade area. We believe that the political feasibility of the Reform depends on the sequencing of its implementation. Benefits in the early stage would legitimate more contentious future policy decisions. But the deep social changes involved in the Reform also imply risks. Reforming rural land and natural resource prices will be difficult. Farmers’ land-use rights will be secured by law and made transferable in rural land markets. Fuel, water, electricity and carbon prices will rise progressively to their social marginal costs within an integrated urban rural model to accommodate 350 million migrants over the next 20 years. New smart cities and greater social inclusiveness will be spurred by relaxing the hukou system and the one child policy. Tough political decisions will be required related to fi scal sharing amongst local H77governments, and rebalancing the tax system towards more progressive direct taxes. Creation-Date: 2014-05 File-URL: http://www.cepii.fr/PDF_PUB/pb/2014/pb2014-03.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2014-03 Template-Type: ReDIF-Paper 1.0 Title: Can the Euro Area Avoid a “Lost Decade”? Author-Name: Benjamin Carton Author-Name: Jérôme Héricourt Author-Name: Fabien Tripier Keywords: Lost decade;Crisis;Growth;Investment; R&D;Unemployment;Debt Classification-JEL:E2;E3;E5;E6;J2 Abstract: A “lost decade” refers to an extended period of low or negative growth triggered by an economic crisis and that could have been avoided by the use of efficient crisis policies. The risk to the world’s developed economies of a lost decade was highlighted early on in the 2007-2008 crisis. Now, five years on from the severe recession of 2009, the risk appears much more of a concern for the Euro Area. We find that there is currently a moderate to high risk of production capacities in the Euro Area being permanently impaired. The risk relates mostly to the prolonged period of stalled investment and persistent unemployment, with its detrimental effect on human capital. In addition, paying off past debt will be painful to both the public and private sectors, in particular in the context of a low inflation environment. The policy response in the Euro Area has been hesitant. It emphasised structural reforms over cyclical policies. While structural reforms are a good lever for growth in the long term, they need to be accompanied by much stronger cyclical policies, especially given the recessionary environment. In short, there is a danger the decade could be lost because of an excess of confidence in the ability to fight a major economic crisis with structural reforms only. Creation-Date: 2014-04 File-URL: http://www.cepii.fr/PDF_PUB/pb/2014/pb2014-02.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2014-02 Template-Type: ReDIF-Paper 1.0 Title: Transatlantic Trade: Whither Partnership, Which Economic Consequences? Author-Name: Lionel Fontagné Author-Name: Julien Gourdon Author-Name: Sébastien Jean Keywords: Trade Policy;International Trade Organizations;Computable General Equilibrium Models Classification-JEL:F13;C68 Abstract: The Transatlantic Trade and Investment Partnership (TTIP) is much more than another preferential trade agreement project: it aims to link the world's two biggest economic entities. The initiative seems motivated by the stalemate in multilateral negotiations, the competition between trade agreements, and the willingness of the two partners to retain their leading positions in world trade, or at least to limit their loss of influence. Given the limited average level of the import tariffs - 2% in the US and 3% in the EU - these duties in most cases are not the most important stake (exceptions are a few sensitive products, mainly some dairy products, some clothing and footwear, and some steel items for the US, and meat products in the EU). Much more significant at the macroeconomic level are negotiations on non-tariff measures, regulation in services, public procurement, geographical indications, and investment, all of which are contentious. We first review the main issues at stake in each case and then use a computable general equilibrium model to assess the economic impacts of an agreement. Not all aspects of the negotiations can be incorporated in the model but it does account for the restrictive impact of non-tariff measures on trade in goods and of regulatory measures on trade in services. The corresponding levels of protection provided by the non-tariff measures are much higher on average than those provided by the tariffs, and they differ significantly across sectors, confirming their sensitivity in these negotiations. Our central scenario combines progressive but complete phasing-out of tariff protection accompanied by an across-the-board 25% cut in the trade restrictiveness of non-tariff measures, for both product and service sectors with the exception of public and audiovisual services. We find that trade between the two signing regions in goods and services would approximately increase 50% on average, including an upsurge of 150% for agricultural products. Eighty percent of the expected trade expansion would stem from lowered non-tariff measures. Both partners to the proposed agreement would reap non-negligible GDP gains, in the long run, corresponding to an annual increase in national income of $98bn for the EU and of $64bn for the US. Creation-Date: 2013-09 File-URL: http://www.cepii.fr/PDF_PUB/pb/2013/pb2013-01.pdf File-Format: application/pdf Handle: RePEc:cii:cepipb:2013-01