Starting my PhD on International Trade Governance

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This week I am officially starting my PhD in International Political Economy research at King’s College London. I am really happy that the application process has worked out so well and that I am also part of the 1st cohort of the London Interdisciplinary Social Science Doctoral Training Partnership (LISS DTP) with funding by the Economic and Social Research Council (ESRC)!

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My PhD project will examine the role of trade experts and expert knowledge in WTO proceedings with a particular focus on the question how the content and contestation of this ‘trade expertise’ has affected the development and interpretation of the concept of national regulatory autonomy in the international trade system. Despite its importance for policy-making, multilateral negotiations and regime maintenance, this question has remained under-explored in academic research. More information on my project coming soon! I will set up a dedicated page on this blog explaining my PhD topic and aim to publish regular updates on my research progress.Esrc_logo

 

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Starting my PhD on International Trade Governance

Inclusive and fair trade, not protectionism, will restore trust in global trade

In our most recent comment in International Politics and Society, Clara Weinhardt and I argue that institutional reform at the WTO level and fair distributional policies on the domestic level are crucial to reduce income inequality and restore trust in global trade. Read the full article below. A longer version of our argument will soon be published in the Spanish edition of Nueva Sociedad.

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Why Trump’s anti-globalism is wrong

Inclusive and fair trade, not protectionism, will close the gap between rich and poor

By Fabian BohnenbergerClara Weinhardt | 26.09.2017

When the World Trade Organisation (WTO) was created in 1995, many assumed the promises of open international markets would prove irresistible. Two decades later, the consensus behind the idea of free trade seems to be crumbling. Those on both the left and right are increasingly questioning the benefits of our current approach to economic globalisation.

The WTO’s declining importance in an ever more fragmented global trade system makes it particularly difficult to withstand the strengthening winds of economic nationalism. To restore trust in the global trading system, governments need to make global trade more inclusive and narrow the gap between rich and poor.

The global financial crisis, coupled with increasing inequality, has made people sceptical of globalisation. WTO members are disappointed that after 16 years of negotiations they have still not managed to conclude the Doha Round – which aims to reform the international trading system through the introduction of lower trade barriers and revised trade rules.

Bigger trading nations including the US, the EU, Canada, Japan and China are now turning their attention to bilateral and regional free trade agreements, such as the much-touted CETA agreement between the EU and Canada, and the China-led Regional Comprehensive Economic Partnership (RCEP) between 16 Asian-Pacific countries currently under negotiation.

Continue reading “Inclusive and fair trade, not protectionism, will restore trust in global trade”

Inclusive and fair trade, not protectionism, will restore trust in global trade

New Article on the Precarious Legitimacy of Transnational Trade Governance

Prof. Christian Joerges of the Hertie School of Governance and I recently finished our work on a book chapter that examines the impact of modern trade agreements on democratic policy-making and the ways in which their effects on national governance can be legitimised. The new paper (SSRN download link) is based on a previous version with a slightly different focus that was extensively rewritten by us over the last months. The final version will be published in the forthcoming Research Handbook on the Sociology of International Law edited by Moshe Hirsch and Andrew Lang in the coming months.

A Conflicts-Law Response To The Precarious Legitimacy Of Transnational Trade Governance

The abstract: 

This paper discusses the fundamental tensions between economic globalisation and democratic politics in the field of international trade. New bilateral and regional trade agreements increasingly incorporate other ‘trade-related’ policy areas and threaten to constrain state action and democratic politics. The move towards deeper and more comprehensive trade deals has greatly accentuated grievances and is of exemplary importance in the realms of transnational governance. We examine the decoupling of these agreements from national and democratic control and the resulting legitimacy impasses of transnational governance, based upon the theoretical frameworks of Karl Polanyi and Dani Rodrik. Arguing that politics is not a mistake that gets in the way of markets, we submit our own conceptualisation of transnational legitimacy. In doing so, we suggest a new type of conflicts law which does not seek to overcome socio-economic and political diversity by some substantive transnational regime, but responds to diversity with procedural safeguards, thus ensuring space for cooperative problem-solving and the search for fair compromises.

 

New Article on the Precarious Legitimacy of Transnational Trade Governance

Fair handeln

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In vielen afrikanischen Ländern herrscht Armut, ihre Einwohner sehnen sich nach einem besseren Leben – und flüchten. Schaffen neue Handelsabkommen Abhilfe?

Gastbeitrag für das Magazin enkelfähig zusammen mit Clara Weinhardt

Seit 15 Jahren verhandelt die Europäische Union mit Ländern in Afrika, der Karibik und dem Pazifik über Wirtschaftspartnerschaftsabkommen (EPAs). Viele afrikanische Handelspartner befürchten jedoch Nachteile aus der eigenen Marktöffnung. 2014 wurden zwar mehrere regionale EPAs in Afrika unterzeichnet; die Kontroversen reißen jedoch nicht ab. Aus Sorge um die eigene Industrialisierung weigern sich Staaten wie Nigeria und Tansania, die bereits verhandelten Abkommen zu ratifizieren.

Und tatsächlich können sie sich in einigen Bereichen negativ auf die wirtschaftliche Entwicklung auswirken. Dabei sind weniger die Handelsgrenzen der EU das Problem, denn die Abkommen sehen weitgehende Zollsenkungen vor. Risiken birgt stattdessen die Marktöffnung, zu der sich die afrikanischen Partner im Gegenzug verpflichten.

Schokolade statt Kakaobohnen

Der Abbau eigener Handelsgrenzen verspricht zwar günstigere Importe, ver­ringert aber das Exportpotenzial. Der flexible Einsatz protektionistischer Maßnahmen, wie etwa Steuern, wäre für afrikanische Länder deshalb wichtig, um eine Marktöffnung mit der gezielten Förderung einzelner Sektoren zu verbinden, deren Wertschöpfungspoten­zial hoch ist. Wertschöpfung bedeutet: anstelle von Rohstoffen wie Zucker oder Kakaobohnen weiterverarbeitete Produkte wie Schokolade zu exportieren, deren Marktwert um ein Vielfaches höher liegt.

EPAs erschweren es jedoch, Steuern auf den Export von Gütern wie Rohstoffen einzusetzen. Äthiopien zum Beispiel hat diese in der Vergangenheit erfolgreich als Anreiz für eine Weiterentwicklung der eigenen Lederindus­trie genutzt. (Dazu hier mehr von mir – FB.) Viele afrikanische Länder haben dennoch ein EPA abgeschlossen, insbesondere um dem drohenden Verlust von zollfreiem Marktzugang in die EU zu entgehen.

Die EU betont, dass die EPAs im Vergleich zu anderen Handelsabkommen weiter reichende Schutzklauseln und Ausnahmen enthalten. Das ist richtig, kann aber nicht in allen Fällen die Risiken auffangen. Zwar konnten die afrikanischen Staaten rund 20 Prozent des Handelsvolumens von der Marktöffnung ausnehmen; diese Ausnahmen betreffen vor allem landwirtschaftliche Produkte.

Doch in Zukunft könnte es für viele afrikanische Staaten sinnvoller sein, Produkte der weiterverarbeitenden Industrie zu schützen. Die Länder, die ein EPA unterschrieben haben, sollten bei der Umsetzung darauf drängen, dass die angekündigte Überprüfung der Abkommen tatsächlich verwirklicht wird. Auf diese Weise ließen sich bei negativen Auswirkungen zumindest Anpassungen anmahnen.

Afrikanische Regierungen sind gefordert

Es wäre jedoch zu einfach, die EPAs zum zentralen Entwicklungshindernis der afrikanischen Partner zu stilisieren. Die individuellen nationalen Rahmenbedingungen spielen eine zentrale Rolle für wirtschaftliches Wachstum und soziale Gerechtigkeit. Viele Regierungen haben ihren eigenen Spielraum in der Vergangenheit nicht genutzt. Mit anderen Worten: Die afrikanischen Länder müssen auch eigene soziale, politische und wirtschaftliche Reformen initiieren und umsetzen.

Die Grundidee der EPAs, handelspolitische Reformen anzuregen, ist zukunftsweisend, aber der Impuls für eine strategische Neuausrichtung einer nationalen Ökonomie kann nicht von außen kommen. Viele afrikanische Regionen sind gerade erst dabei, eine eigene handelspolitische Strategie zu entwickeln. Der Druck der EU, die Abkommen dennoch abzuschließen, könnte somit kontraproduktive Auswirkungen haben, weil einige Länder schlicht noch nicht dazu bereit sind.

Fair handeln

Read my new Article in the Strategic Trade Review

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I just received the good news that my research article on the state of export controls for cyber-surveillance technologies was published. Here’s a direct link to my article in the Strategic Trade Review, a peer-reviewed journal that specialises on topics such as trade in dual-use items and strategic goods, nonproliferation and sanctions. 

The article incorporates some findings of my Master’s thesis at the Hertie School of Governance, which discussed the same issue from a much broader perspective. I also recently received an ‘Aquila Ascendens’ award for my thesis work. My thesis advisors were Prof. Dr. Wolfgang Ischinger, Chairman of the Munich Security Conference and Professor at the Hertie School of Governance, and Dr. Ben Wagner, who is now a researcher at the Stiftung Wissenschaft und Politik (SWP) in Berlin. 

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Want to know what ‘cyber-surveillance technologies’ are before reading the article?

Good question. There is no universally accepted definition and this is part of the problem. The European Commission recently proposed to include all items “specially designed to enable the covert intrusion into information and telecommunication systems with a view to monitoring, extracting, collecting and analysing data and/or incapacitating or damaging the targeted system.” (see pp. 91-92 of my article). Admittedly, this definition is a little more complicated than one might hope and remains both too vague and too broad to act as a good basis for export controls. What is basically meant is a cluster of heterogeneous (and very often dual-use) technologies that in the end all contribute to surveillance, but work very differently and come into play at different stages of the surveillance process. Here is a brief overview of products that various actors in the debate identify as cyber-surveillance technologies:

CyberSurveillanceTechs

The abstract of my new article:

The global trade in cyber-surveillance technologies has largely evaded public scrutiny and remains poorly understood and regulated. European companies play a central role in the proliferation of a broad spectrum of advanced surveillance systems that have legitimate uses, but have also been repurposed for nefarious ends. Export controls have developed into an important instrument to restrict sales of cyber-surveillance equipment and software to repressive regimes; however, these technologies pose significant challenges to traditional frameworks for the control of dual-use exports. This article provides an overview of current developments on the European level and within the multilateral Wassenaar Arrangement and presents the current state of export controls on cyber-surveillance technology. Most importantly, it discusses the outcome of the EU export control policy review, focusing on the regulation proposed by the European Commission in September 2016, and provides an initial assessment of the key innovations and limitations of the draft text. In addition, the article presents an analysis of the current debate regarding the problematic definition of ‘intrusion software’ in the Wassenaar Arrangement and offers insights into some alternative proposals.

 

Read my new Article in the Strategic Trade Review

The Economic Impact of Sanctions against Russia on EU Member States

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While attending a workshop on international sanctions a few weeks ago, I was fortunate to meet the author of the fascinating and very recent article “The Redistributive Impact of Restrictive Measures on EU Members: Winners and Losers from Imposing Sanctions on Russia“. Much has been written on EU-Russia relations following the crisis over Ukraine and important obstacles to a rapprochement remain; however, there have been few other detailed assessments of the economic impact of the sanctions, countersanctions and geo-political uncertainty on EU member states. Because the magnitude of the overall economic effects was a surprise to me – trade contracted by over a third for almost all EU member states and by much more for some members since 2013 – I couldn’t resist to take a brief look at the changes in the EU-Russia trade relationship myself: my analysis below complements the cited work but is based on more fine-grained data, which offers a potentially more nuanced assessment of some aspects of the development in EU-Russia trade relations.

“The concerns expressed by several EU leaders regarding the cost of the restrictive measures imposed on Russia were justified.” (p. 15)

In response to the annexation of Crimea by the Russian Federation in March 2014 and Russia’s support of armed separatist forces in eastern Ukraine, a group of states, led by the European Union and the United States, has imposed separate but overlapping sanctions on Russian individuals and businesses. EU sanctions have repeatedly been broadened in scope and today include restrictions against proponents and beneficiaries of Russian actions in Ukraine, economic sanctions against state-owned banks, energy and defence companies, as well as limitations on economic exchanges with Crimea. On 13 March 2017, the European Council prolonged the restrictive measures for a further six months, until 15 September 2017.

Sanctions are an important part of the policy response to what the EU and the US consider illegal actions by the Russian government. Germany has particularly emphasised the importance of a political solution and has strenuously worked towards a negotiated settlement: in March 2015, EU leaders decided to align the existing economic sanctions to the complete implementation of the Minsk II agreement, a package of measures to de-escalate the military confrontation in the Donbas that Germany and France facilitated between Moscow and Kiev. The provision of economic aid and military capabilities to Ukraine has been another pillar of the Western response; Germany has mostly focused on financial contributions.

This brief assessment aims at quantifying the changes in the EU-Russia trade relationship – which reflect economic sanctions and countersanctions as well as other factors, such as investor uncertainty and considerable changes in the exchange rate. The article also provides evidence on which member states have been affected the most in their trade relations with Russia and whether there are countries or sectors with excessive export losses or gains. This becomes especially relevant with regard to present discussions over burden-sharing and demands for a compensatory mechanism on the European level, as well as the Russian countersanctions on agricultural products, which may place disproportionately higher costs on the Southern and Eastern European countries.

In Sections 1 and 2, the text provides some background on the rationale behind the introduction of economic sanctions against Russia. This will then be complemented in Section 3 by a quantitative analysis of EU-Russia trade flows since 2013.

Continue reading “The Economic Impact of Sanctions against Russia on EU Member States”

The Economic Impact of Sanctions against Russia on EU Member States

An Example of the Successful Use of Export Taxes and Its Value for North-South Trade Negotiations

A recurring problem in the discussion on North-South trade relations is identifying good examples that show how controversial – trade-distorting – policy instruments are successfully used to promote economic development. The search is not a purely academic exercise as the case studies can be used to legitimise and defend policy tools in trade negotiations aimed at outlawing or restricting their domestic application. Export duties, i.e., taxes imposed upon the export of raw materials, are one of these instruments and the Economic Partnership Agreements (EPAs) between the European Union and developing countries are one attempt at circumscribing their use.

Because export taxes can be used to ensure a price advantage to domestic industries and therefore skew international competition – a good example are Chinese duties on the export of rare earth minerals – or enrich a small authoritarian elite, their use is actively discouraged by many industrialised countries. However, export taxes can also incentivise producers/exporters to process raw materials domestically into higher-value goods or components (that can be exported without additional charges). If used correctly, export taxes can thus promote the economic development and industrialisation of developing countries. Existing WTO rules do not discipline Members’ application of export taxes and only few countries have agreed to binding constraints on the use of export taxes during their WTO accession.

The EPAs between the EU and regional groups made up of African, Carribean and Pacific countries would limit the ability of governments to use export taxes considerably. For example, Article 13.1 of the EPA between the EU and the Economic Community of West African States (ECOWAS) declares: “No new duties or taxes on exports or charges with equivalent effect shall be introduced, nor shall those currently applied in trade between the Parties be increased from the date of entry into force of this Agreement.” According to Article 13.3, African members can impose export charges only “in exceptional circumstances, on a temporary basis and after consulting the European Union Party […] and with equivalent effect” of existing export charges.

But can export taxes be effective in promoting economic development? And if so, are there good examples that should discourage us from restricting their use? A brief look at the development of the Ethiopian leather industry suggests some benefits from the use of export taxes:

In February 2008, Ethiopia introduced a 150 percent tax on the export of raw and semi-processed animal hides and skins. This was meant as an instrument to encourage industries engaged in the preparation of raw hides and skins for export to shift to more advanced processing stages. Consequently, exports in raw hides and skins dropped significantly in 2009 and remained low, but exports in processed goods (“tanned or crust hides and skins”) almost doubled until 2011. In 2012, the Ethiopian government added a further 150 percent tax on the export of crust leather, i.e., leather that has been tanned, dyed and dried, but not finished. Again, this resulted in a signficant drop in exports of the affected products and the transformation of the leather industry to perform more advanced tasks in country.

The figure below summarises this development. It is based on data collected by the International Trade Centre for product group 41 (raw & semi-raw leather) and product group 42 (manufactured leather products). In Figure 1, I aggregate the different product types into four categories: (i) “raw hides” describes the most basic products, i.e., raw hides and skins (HS 4-digit: 4101-4103); (ii) “tanned hides” constitutes tanned or crust hides and skins” (HS 4-digit: 4104-4106); (iii) “prepared leather” represents more advanced leather processing (HS 4-digit: 4107-4113); and (iv) “manufactured leather products” are all finished leather products in product group 42.

Figure 1 – Ethiopian leather exports to all trade partners

EthiopiaExportsToWorld

Source: own calculation based on ITC data

Overall, the most drastic changes in the distribution of exports seem to occur in close temporal connection with the introduction of export taxes, as indicated by the two dashed vertical lines. The quick second transformation of exports in tanned hides to prepared leather from 2011 to 2012 suggests that the creation of this tax was better communicated and affected industries anticipated the costs. In addition, the adoption of this final processing step might have been much less demanding than the initial transformation. In parallel, exports in manufactured (finished) leather products started to increase from 2011. The same effects are visible in the trade relationship with the EU, see Figure 2.

These findings suggest that export taxes were used effectively to transform the Ethiopian leather sector from an industry focused on the preparation of raw skins to more advanced processing stages, while increasing the overall value of exports and encouraging the production of finished products. Of course, it is likely that other factors such as the growth in external demand, foreign investment and other policy interventions affected the transformation. The magnitude of the effects and temporal connection nevertheless suggest a considerable (positive) effect of the exports taxes on the economic development of the Ethiopian leather industry.

Trade agreements that are too restrictive of this and similar policy instruments might thus undermine national development strategies in the long run. Thus, it will be crucial for all members to the EPAs, the EU and its partners, to actively use review clauses such as Article 13.4 of the ECOWAS-EPA, which allow for regular reality-checks and revisions to the agreements “taking full account of their impact on the development and diversification of the economy of the West Africa Party” or other developing partners.

Figure 2 – Ethiopian leather exports to the European Union

EthiopiaExportsToEU

Source: own calculation based on ITC data

A brief addition:

Below I complement my assessment of the impact of export taxes on Ethiopian leather exports by also including exports of shoes with a leather component. These products are included in product category 64 (footwear), so I select all shoes with some leather content based on the HS 6-digit level. (This equals all product lines in category 6403, as well as line 640420 and 640510.)

I find that exports of leather shoes broadly mirror the growth rate in exports of other more advanced leather products. Ethiopian exports in shoes with leather content consequently increased specifically between 2011 and 2013, i.e., the time period where the government introduced export taxes on processed leather. This correlation, which also can be observed for the exports of other finished leather products, suggests that export taxes may have encouraged the domestic production of more advanced leather products.

Figure 3 – Ethiopian leather exports to all trade partners (incl. leather shoes)

EthiopiaExportsToWorldwithShoes

Source: own calculation based on ITC data

Ethiopia also recovered from the slight decrease in the exports of leather shoes after 2013 in 2016, when exports more than doubled to about $39 million.

An Example of the Successful Use of Export Taxes and Its Value for North-South Trade Negotiations