Newsletter November 2018
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In this issue: Last chance to register for EconPol’s annual conference; EconPol opinions - Clemens Fuest on the rise of inter-system competition in China, the Greek bailout and the case against a digital tax, and Daniel Gros on the US China trade war and Europe; new policy briefs – how to boost productivity in the EU and European development policy; anti-tax avoidance measures – policy report; eight new working papers, including the future of the Common Agricultural Policy.
Global trade and protectionism – what next for the EU?

With heightened tensions over transatlantic trade relationships and a continuing rise of protectionism, the European Union is experiencing significant challenges in trade policy making. EconPol’s annual conference, on 19 and 20 November in Brussels, brings together experts in international trade from the European Commission, European Parliament, European Stability Mechanism, trade and industry associations and academia to address the policy challenges faced by the EU. Jean-Luc Demarty (Director-General for Trade, European Commission), will deliver the keynote speech, with panelists and plenary sessions discussing the challenges of EU trade policy making and the costs of protectionism. See the programme and register.

US China trade war and Europe: ‘If two quarrel, the third rejoices’

With Trump’s trade policies becoming apparent, China has emerged as enemy number one. Meanwhile, other trading partners – particularly smaller ones - are being pressured to introduce concessions with advantages for the US. A key question for the rest of the world is what economic fallout to expect from this trade war.  EconPol researcher Daniel Gros suggests that the US will attempt to put similar pressure on the EU, but it is unlikely that this pressure will succeed.  But with the US expected to pursue its policy of trying to isolate China with other smaller trading partners, the political and systemic costs of the Sino-US trade war could be considerable in the long run. Read more.

Also recently published by EconPol:

Tragedies Like Greece Must Not Be Repeated – Clemens Fuest
The Third Type of Inter-System Competition: Europe and the Rise of China – Clemens Fuest
CAP Beyond 2020: Seven More Years of Money for Nothing? – Friedrich Heinemann and Stefani Weiss
Digitalisation Should be Promoted, Not Taxed – Clemens Fuest

Why and How There Should be More Europe in Development Policy

Extreme poverty in certain global regions remains one of our greatest international challenges: between 2014 and 2016, 800 million people suffered from hunger. Despite this, most EU member states spend less than the required 0.7 percent of Gross National Income (GNI) on development aid and there are high associated administrative costs. In this EconPol Policy Brief, authors Christoph Harendt, Friedrich Heinemann and Stefanie Weiss argue that shifting more financing and management of development aid from member states to the EU would help resolve these problems and reduce costs. Read more.

Also recently published by EconPol:

How to Boost Productivity in the EU – Klaus Weyerstrass

Dissecting the EU’s Recent Anti-Tax Avoidance Measures

Profit-shifting activities by multinational enterprises (MNEs) is widespread. Academics and policymakers agree that such activity should be curbed by diminishing the opportunities that exist within the international tax system The EU has legislated to reduce the scope for such activity, with a central tool being the Anti-Tax Avoidance Package. In this EconPol policy report, the authors argue that while elements of the package are likely to raise the minimum standards of anti-tax avoidance measures in Europe, they still leave scope for tax-planning. At the same time, the measures may lead to double taxation. They will also make the tax code more complex and distort firms’ decisions, generating social costs as a result. The balance between benefits and costs is not satisfactory. The authors discuss the pros and cons of other instruments like withholding taxes and formulary apportionment. While these measures would be of some help, in the long term, a fundamental reform of the international tax system is necessary. Read more.

Also recently published by EconPol:

EconPol Europe: How to Encourage Citizens to Identify More with Europe – Sarah Ciaglia, Clemens Fuest and Friedrich Heinemann

CAP Beyond 2020: Seven More Years of Money for Nothing?

The European Commission’s proposals for the post-2020 Common Agricultural Policy (CAP) are under discussion, and these cautious reform ideas have set the parameters for upcoming negotiations. CAP will continue to have a two-pillar structure of direct payments and rural development, with a seven-year budget of €365 billion. As before, almost three-quarters of the budget – €265 billion – is reserved for direct payments to farmers. However, ‘European added value’ must be urgently applied to CAP, say Friedrich Heinemann and Stefani Weiss, who summarise their recommendations to justify direct payments in their latest opinion piece for EconPol. Read more.

Also recently published by EconPol:

Shadow Banking and the Four Pillars of Traditional Financial Intermediation – Emmanuel Farhi and Jean Tirole
Fragmentation and Strategic Market-Making – Laurence Daures Lescourret and Sophie Moinas
Macroeconomic Imbalances and the Euro Zone. Alternative Views – Roberto Tamborini
Funding Constraints and Market Illiquidity in the European Treasury Bond Market – Sophie Moinas, Minh Nguyen and Giorgio Valente
The Role of Pre-Opening Mechanisms in Fragmented Markets – Selma Boussetta, Laurance Lescourret and Sophie Moinas
Attitudes towards Euro Area Reforms: Evidence from a Randomized Survey Experiment – Mathias Dolls and Nils Wehrhofer
Globalization and Electoral Outcomes: Evidence from Italy – Mauro Caselli, Andrea Fracasso and Silvio Traverso
EconPol Europe is a cross-border voice for research in Europe, providing research-based contributions aimed at promoting growth, prosperity and social cohesion in Europe and, in particular, the European and Monetary Union. Our mission is to contribute our research findings to help solve the pressing economic and fiscal policy issues facing the European Union, and to anchor more deeply the idea of a united Europe within member states.
Our joint interdisciplinary research covers:

    •    sustainable growth and best practice,
    •    reform of EU policies and the EU budget,
    •    capital markets and the regulation of the financial sector and
    •    governance and macroeconomic policy in the European Monetary Union.

If you would like further information about EconPol Europe, please contact Juliet Shaw at

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Editor: Juliet Shaw.

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