Non-member Countries Research Articles

Are LNG Exports in the Public Interest?

The United States has seen an enormous increase in the natural gas supply in the last three years. Several proposals to export liquefied natural gas (LNG) have been submitted and are currently under review at the Department of Energy/Office of Fossil Energy (DOE/FE). The Natural Gas Act requires the DOE/FE to consider whether the LNG exports are in the public interest before licensing export terminals. Although exporting to Free Trade Agreement member countries is de facto in the public interest, LNG exports to nonmember countries remains a hotly disputed and politically relevant question.

Compliance with BSBC Regulations by the Banks in Sri Lanka

The Basel Committee’s Role Most of the global banking and insurance regulations have been initiated or inspired by the work of the Basel Committee on Banking Supervision and its so-called “Basel regulations”. The Basel Committee on Banking Supervision (BCBS) was established in 1974 in response to a period of major disruptions in the international currency and banking markets (1971 collapse of the Bretton Woods Accord, 1973 stock market crash, 1974 oil price shock). BCBS members are drawn from 27 countries which are represented by their central banks and financial regulators. The Committee aims to enhance understanding of key supervisory issues and improve the quality of banking supervision worldwide. It achieves this partly through its role as a forum for cooperation and information sharing for national supervisors, and partly by issuing guidelines and standards. The Committee does not have formal supranational authority and its standards do not have legal force. Rather, it is expected that national supervisors incorporate these standards into their regulations, with which regulated institutions then have to comply. Basel regulations are also adopted by non-member BCBS countries that see benefits both in the regulations themselves and also in being associated with conformity with Basel standards. The BCBS actively encourages contact and cooperation between its members and other banking supervisors. Whilst at different stages of implementation, many countries are now applying Basel guidelines. In today’s global business environment, international coordination has become increasingly important. Application of the same standards across countries allows for consistent comparisons by investors and creditors, thereby supporting market confidence. Whilst this can be particularly relevant for banks in emerging markets, the recent sub-prime and sovereign crises have highlighted the dependence of some of the largest industrialised economies on their banking systems and thus the importance of global coordination.The BCBS is best known for its international standards on capital adequacy which have evolved from Basel I, issued in 1988, through Basel II issued in 2004, to its latest enhancements issued in 2010, commonly called “Basel III”. Full compliance with Basel III is required by 1 January 2019.

Letter to OECD Beps (Base Erosion and Profit-Shifting) - Recommending Approach to Change Behavior of Multinationals Re Profit Shifting into Low-Tax Countries

The OECD through its BEPS initiative should strongly recommend to OECD member and non-member countries that they abandon the territorial and deferral systems that they currently use. To replace these systems, they would implement full-inclusion systems under which all foreign income, including profits in foreign subsidiaries, would be currently taxed by each MNE’s home country. A foreign tax credit mechanism would prevent double-taxation.This action would eliminate or significantly reduce the motivation of multinationals to shift profits into tax havens and other low-tax countries. As such, there would be significantly reduced MNE profit-shifting structures that erode the tax bases of all countries and require considerable time and resources of all tax authorities as well as of the multinationals that must create and maintain complicated supply-chain and other tax-motivated structures.Other benefits include an expanded tax base for all countries, simplification through elimination of home country transfer pricing issues and need for CFC rules, and a more level-playing field competitively both for competition between multinationals headquartered in different countries and for competition between pure domestic companies and multinationals headquartered in that country. And the expanded tax base could allow a reduction in the overall corporate tax rate, a factor that could make the change to this full-inclusion system more politically acceptable.The basic concept is simple. By being subject to current home-country taxation on its worldwide earnings, a multinational’s motivation for complicated structures that shift profits into tax havens from countries where operations, sales and services take place is significantly reduced or eliminated.

Foreign direct investment and customs union: Incentives for multilateral tariff cooperation over free trade

The present article examines the implications of a customs union (CU) on the pattern of tariffs, welfare and the prospects for free trade when the non-member firm has an incentive to engage in foreign direct investment (FDI). First, I show that upon the formation of a bilateral CU, the non-member firm has greater incentives to engage in FDI. However, when FDI becomes a feasible entry option for the non- member firm under a CU, member countries have incentives to strategically induce export over FDI by lowering their joint external tariff. When fixed set-up cost of FDI is sufficiently low, this tariff falls below Kemp–Wan tariff and CU leads to a Pareto improvement relative to no agreement. Moreover, using an infinite repetition of the one-shot tariff game under a CU, I show that the presence of FDI incentive of the non-member firm makes the member countries more willing to cooperate multilaterally over free trade while the opposite is true for the non-member country. Finally, I find that, unless fixed cost of having an additional plant is sufficiently low, multilateral cooperation over free trade is easier to sustain when FDI incentive is present.

EU Democracy Assistance in the Mediterranean: What Relationship with the Arab Uprisings?

This article analyzes the European Union (EU) policy for democracy assistance toward the Southern Mediterranean countries and tracks changes in the last decade, with a special emphasis on the most recent period. It shows that the EU policy, which goes under the acronym of EIDHR, has evolved, but predominantly in response to internal dynamics rather than to developments in Arab countries. The EU has increasingly provided assistance to local actors on the ground in non-member countries and has differentiated its action in authoritarian countries from countries in transition. When it comes to implementing its own policy, however, the EU is less able to promote democracy than human rights, and most of the funds go to support projects centered on relatively uncontroversial rights such as women's and children's.

Euro Puppets: The European Commission's Remaking of Civil Society

With public confidence in the European project waning, the idea of initiating a ‘civil dialogue’ with the public emerged in the mid-1990s as a way of bolstering the EU’s democratic legitimacy.Citizens have not been consulted directly, however. Instead they have been ventriloquised through ‘sock puppet’ charities, think tanks and other ‘civil society’ groups which have been hand-picked and financed by the European Commission (EC). These organisations typically lobby for closer European integration, bigger EU budgets and more EU regulation.The composition of ‘civil society’ at the EU level is largely dictated by which groups the Commission chooses to fund. There has been a bias towards centre-left organisations, with a particular emphasis on those promoting policies that are unpopular with the public, such as increasing foreign aid, restricting lifestyle freedoms and further centralising power within EU institutions.The EC’s favoured civil society organisations are also marked by a homogeneous worldview and similarity of jargon. The literature and websites of these groups suffocate the reader with vague rhetoric about ‘stakeholders’, ‘sustainability’, ‘social justice’, ‘capacity building’, ‘fundamental rights’, ‘diversity’, ‘equity’ and ‘active citizenship’.Many of the groups which receive the Commission’s patronage would struggle to exist without statutory funding. For example, Women in Europe for a Common Future received an EC grant of €1,219,213 in 2011, with a further €135,247 coming from national governments. This statutory funding made up 93 per cent of its total income while private donations contributed €2,441 (0.2 per cent) and member contributions just €825 (0.06 per cent).There is virtually no funding for organisations which seriously question the Commission’s direction of travel. By contrast, groups that favour closer union and greater centralisation are generously funded. The ‘Europe for Citizens’ programme which ‘gives citizens the chance to participate in making Europe more united, to develop a European identity, to foster a sense of ownership of the EU, and to enhance tolerance and mutual understanding’ has a €229 million budget for 2014-20.Substantial EU funds are also used to support organisations that share the Commission’s environmentalist agenda. The Green 10 represent the largest of Europe’s environmental lobby groups, but dozens, if not hundreds, of like-minded ecological organisations also receive EU funding. The Commission freely admits that funds are given to environmental groups ‘to support policy development’. Civil society groups in non-member countries are another funding priority for the Commission. In 2012/13, its Neighbourhood Civil Society Facility had a €22 million budget to be distributed to groups in Eastern Europe, North Africa and the Middle East, later increased to €45.3 million. Many Youth in Action grants have been given to projects in potential new member states such as ‘Unite Unite Europe!’ (Serbia), ‘Be Active, Be European!’ (Albania) and ‘Citizen of my country, citizen of my Europe!!’ (Kosovo).The EC’s policy of picking allies and supporting them with taxpayers’ money has made the system more elitist and less democratic.

The effects of cross-regional free trade agreements under a vertical industry structure

This paper examines the effects of a cross-regional free trade agreement (FTA) on tariffs, welfare, and the incentives for multilateral free trade in a three-country model with a vertical industry structure. We show that the FTA induces member countries to reduce their tariffs on nonmember countries. On the other hand, a nonmember country lowers its tariff on final-good imports, but raises its tariff on intermediate-good imports. Also, the FTA makes member and nonmember countries better off. After the FTA is enacted, member and nonmember countries have an incentive to support multilateral free trade, so an FTA acts as a building block for multilateral trade liberalization.

The Hague Convention: Who is Protecting the Child?

The Hague Convention of 25 October 1980 on the Civil Aspects of International Child Abduction is a multilateral treaty that seeks to protect children from the harmful effects of abduction and retention across international boundaries by providing a procedure to bring about their prompt return. The ‘Child Abduction Section’ provides information about the operation of the Convention and the work of the Hague Conference in monitoring its implementation and promoting international co-operation in the area of child abduction. There are currently 58 member countries and 22 non-member countries. Australia signed the Convention five years after its introduction. The Family Law (Child Abduction) Regulations 1986 enshrined in Australian law the principles espoused in the Convention which came into force in 1987. The Regulations are to: (a)secure the prompt return of children wrongfully removed to or retained in any contracting state, and(b)ensure that rights of custody and access under the law of one contracting state are effectively respected in the other contracting states. This paper shows that the failure of Family Courts to take account of the effects of their actions on the development and best interests of children whose return is secured can add to the psychological abuse of those who were removed from their home countries to avoid sexual abuse and violence. It suggests that the exceptions in the regulations that allow a child to remain in the new country with the primary caregiver are being ignored.

The impacts of PTA formation on small economies’ tax competition for FDI inflows

This paper examines why small economies are so eager to form or join preferential trade agreements (PTAs), as observed in the East Asia and the Central Europe, taking consideration of the strategic impacts of PTA formation on tax competition for foreign direct investment (FDI) inflows. Based on a simple model where three asymmetric countries compete for FDI inflows, we demonstrate that PTA formation provides a strategic advantage to a small member country of PTA in competing for FDI inflows not only with respect to a non-member country but with a large member country when the integrated market size is large enough. In addition, it is shown that it might be an out-of-equilibrium path strategy for a non-member small economy to exert efforts to induce FDI inflows, because the excessive subsidies to induce FDI inflows might outweigh the gains from the FDI inflows due to strategic disadvantage in tax competition after PTA formation. These findings explain why small economies are mainly driven by the expected economic benefits including FDI inflows from joining PTA.

European Competition vs. Global Competitiveness Transferring EU Rules on State Aid and Public Procurement Beyond Europe

As long as state aid outside the EU is unregulated, the European Commission faces a dilemma: either European firms will be disadvantaged in global competition by strict EU rules, or the Commission will come under pressure to relax the rules, thereby running the risk that fair competition within the EU will be undermined. As a consequence, the Commission attempts to promote EU rules on state aid and public procurement beyond EU borders — in non-member countries as well as at the WTO level. This article analyses the Commission’s channels of regulatory transfer and the factors accounting for its varying success. Bilateral cooperation provides many opportunities to spread European state aid rules, but decentralised enforcement at the national level remains ultimately deficient. Moreover, the transfer of European rules to the multilateral WTO depends heavily on the EU’s ability to reach prior consensus with its most powerful partner and rival, the US government.

MERCOSUR enlargement: predicting the effects on trade in primary agricultural commodities

This article estimates the effects of a hypothetical enlargement of the Mercado Comun del Sur (MERCOSUR), depicted by granting MERCOSUR associate member countries a full membership status, on trade in primary agricultural commodities. The empirical investigation is implemented through the multiplicative form of the gravity model. The estimated gravity parameters are used to carry out scenarios that predict the effects of MERCOSUR enlargement on trade in primary agricultural commodities. The predictions reveal that MERCOSUR enlargement would generate significant increases in exports from the full members to the associate members. The predictions also show relatively smaller increases in exports from the associate members to the full members (in value terms), but some important increases in trade among the associate members. Trade diversion effects of MERCOSUR enlargement, which influence trade between full members and from non-member countries to full and associate members, are found to be limited.

The Effects of Trading Blocs on U.S. Outward FDI Activity: The Role of Extended Market Size

I use panel data of sales by the foreign subsidiaries of the U.S. MNCs to examine whether trading blocs create more or less FDI and the impacts on FDI of the extended market size created by forming blocs. By employing a region-fixed effects model, I find that countries forming trading blocs attract more FDI, particularly from non-member countries, but that FDI does not always increase with the market size of the blocs. As the market size increases, FDI increases only for large blocs. However, these findings are sensitive to model specifications. A policy implication is that a country considering forming or joining a trading bloc with a view to attract FDI may want to form a trading bloc with a country or countries with a large market size.

Trade effects of regional integration: A panel cointegration analysis

The paper quantifies the most likely trade effects of the exceptional cases of the GATT/WTO system, namely, Regional Integration Agreements, on the selected member as well as non-member countries of the EU, NAFTA, MERCOSUR and AFTA. To this end, the gravity model was estimated through fixed effects model and panel cointegration analysis. It was found that the explanatory power of the latter has superseded the former one. For the case of EU, it was found that the intra-union trade-creation effect is approximately six times larger than extra-union effects. In NAFTA, exports to outside countries are significantly diverted. For MERCOSUR, on the other hand, results indicate that the integration has not contributed to intra-union trade. The members are still significantly dependent on extra-union imports, just like the members of AFTA.

Preferential Trade Agreements and Unilateral Liberalization: Evidence from CAFTA

AbstractThere is no consensus in the literature on whether preferential trade agreements help or hinder trade liberalization toward non-members. We examine the link between preferential trade liberalization and tariffs imposed against non-member countries for the case of CAFTA-DR. Using product data at the 6-digit HS level, we find that products with larger reductions in preferential tariffs experienced larger increases (or smaller decreases) in most-favored nation tariffs applied against non-members. However, we also uncover some interesting dynamics regarding the relationship between preferential liberalization and tariffs imposed against non-members. When we split the sample period into two sub-periods, we find an initial negative relationship between changes in preferential and most-favored nation tariffs during the first half of the sample period, followed by a positive relationship during the second half, although the evidence on the latter is not as strong. The results thus provide the first evidence of an initial stumbling block effect of preferential trade liberalization on unilateral liberalization, as well as (weaker) evidence of a subsequent building block effect.

Reciprocal Trade Agreements: Impacts on U.S. and Foreign Suppliers in Commodity and Manufactured Food Markets

Reciprocal trade agreements (RTAs), which grant special preferences to members, affect the pattern and volume of bilateral trade in global markets. This study uses the gravity framework and panel data depicting annual trade between 69 countries over 31 years to examine how 11 RTAs have shaped U.S. and other suppliers’ exports of commodity and manufactured foods. Empirical results show that joint RTA membership enabled exporters to increase their trade with member country importers in the two food markets. The few agreements that failed to have a positive effect on member trade in either commodity food or manufactured food involve developing countries that typically grant very limited cross-border trade preference to member countries. Interestingly, model results indicate that RTAs can be a vehicle to increase trade externally. Nine of the 11 RTAs also expanded exports externally to nonmember countries, albeit to a lesser degree than with member importers. In some cases, however, nonmember exporters of food bore the cost of the RTA-induced expansion of trade. Five RTAs lowered food imports from nonmember suppliers. The adverse effects on nonmember suppliers were more pronounced for the United States than for other competitors.

Portfolio choice of financial investors and European business cycle convergence: a panel analysis for EU countries

We investigate the linkage between business cycle convergence and financial portfolio choice for a panel of 18 EU countries. We construct an index of similarity of financial portfolios which we then put into context with the view that “the financial world” has an impact on business cycles and contributes to business cycle convergence via the consumption-wealth linkage. The model which guides our analysis is the International Asset Pricing Model (IAPM). Portfolios of the 18 EU countries investigated by us turn out to become more similar over time. According to our fixed effects GMM TSLS estimations, similar portfolios contribute to a convergence of business cycles—via a convergence of consumption cycles. This turns out to be especially true for country-pairs that include euro area non-member countries and, thus, have quite different income and wealth structures.

The G8 and G20 as Global Steering Committees for Energy: Opportunities and Constraints

Abstract This article looks at the opportunities and constraints for the G8 and G20 to act as steering committees in global energy governance. It starts from the premise that, intrinsically, informal consultation mechanisms among major powers have a large potential to act as coordinating bodies for global energy. After assessing the G8’s recent energy work, the article finds that the G8 has made notable strides on the energy front, particularly in areas of low controversy such as energy efficiency, but that its scope of action is limited by internal divisions, a lack of legitimacy, the absence of several key players and the lack of mechanisms for successful implementation of collective action. While some of these problems are addressed by the recent shift to the G20, the G20’s ability to act as a global energy governor remains limited. Nevertheless, by sketching the G20’s recent actions to phase out fossil fuel subsidies, we show that the G20 does have a large potential to make progress in addressing specific energy dossiers. The article concludes by making some concrete policy recommendations for G20 leaders to make full use of this forum’s potential. Policy Implications • Efforts to solve the various global energy problems are doomed to fail if they do not engage the most relevant and powerful players in this particular issue area. Only a handful of countries are responsible for the bulk of global energy consumption and CO2 emissions. • As long as large countries are reluctant to transfer substantial authority over energy issues to formal multilateral settings, informal and high-level forums such as the G8 and G20 fulfil a paramount function: they ensure continuous dialogue and deliberation with regard to this highly strategic and complex policy issue. • While the G20 continues to be plagued by internal divisions on energy and a lack of mechanisms for successful implementation of collective action, compared to the G8 it scores much better in terms of representativeness and the inclusion of all key energy players on an equal footing. • To make full use of the G20 as an energy forum the leaders should be farsighted, restrict the number of participants to a maximum of 20, treat energy issues iteratively, allow for independent monitoring of the commitments, and reach out to nonmember countries in a structured manner.

Chinese Responses to Good Energy Governance

Over the past twenty years, China has become a key manufacturer in the global industrial chain, a global financial heavyweight, and a growing important player in the international political arena. These developments are mirrored by rapidly increasing energy demand, which have turned China into a net oil importing country since 1993. In order to maintain its domestic development, the country started to secure supplies through progressive energy diplomacy and through turning its nationally owned energy companies into internationally operating ones. China's outbound foreign direct investment in oil and gas surpassed US$15 billion in 2010. Its largest oil firm, China National Petroleum Corporation (CNPC), is currently operating eighty upstream projects with over 80 million tons of oil operated in 29 countries, spearheading the country's drive of energy expansion as a flagship globally. China has been primarily concerned with the sustainable development of its domestic economy. Yet the country's role in energy issues on the global level has exposed it to growing international expectations. Even if bilateral and multilateral relations on energy issues are a challenge under the current governance structure, China has begun to play a more proactive role in regional energy governance platforms over the past years and will continue to do so globally. I discuss three governance areas of particular importance from a Chinese perspective: (1) global energy security, the challenge of establishing international regimes securing access to and flow of energy independent of particular political issues; (2) resource governance in host countries, the responsibility to develop and deploy tools and initiatives to help avoid the resource curse syndrome and foster development in resource-rich developing countries; and (3) climate change, the necessity to agree to effective mechanisms to reduce C02 emissions without compromising the right to development of individual countries. Cooperation with the IEA, IEF, and G20 to Deal with Global Energy Issues The International Energy Agency (IEA), the energy arm of the Organisation for Economic Co-operation and Development (OECD), began to strengthen its relations with non-member countries in the early 1990s. Among key non-member states are Russia, China, Brazil, and India. The IEA reached an agreement with China in 1996 when the country realized the importance of working with the intergovernmental organization on issues such as strategic reserves, price monitoring, and statistical reviews. In the wake of several dialogues and workshops, the parties encountered some difficulties in expanding their cooperation because of both the IEA's narrow focus on the interests of its members and Chinese limits to deeper cooperation. The IEA is an energy club of the OECD countries and an energy watchdog of its key members like the United States, the United Kingdom, France, and Japan. China, as a non-member country, had been reluctant to disclose data at similar levels as IEA members. Even if overall exchanges with the IEA have been satisfactory, China remains less likely to fully cooperate with the IEA on energy policy reviews or as a full IEA member. After a few years of stagnation (2002-2008), cooperation restarted in 2009 through initiatives such as pilot development of new energy, technology development, and energy management. It is valuable for China to learn about advanced country expertise and experiences from OECD countries through the IEA. Likewise, the IEA has come to a better understanding of China's energy policy and how it may contribute to enhancing governance. In order to strengthen global energy governance, advisers to Western countries requested to bring China and India into the global energy system. This can be relevant in the sense that the global energy market cannot be well governed without Chinese and Indian participation. This message is well received in Beijing and understood. …

Las políticas de gasto europeas y el desarrollo económico

In this paper, the economic development in the European Union is studied through the instruments that exist for its achievement, that is, the various community spending policies. These guarantee a harmonious and controlled evolution of the large categories of expenses, and therefore ensure the development of those policies linked to the Single European Act. Among these categories of expenses we can distinguish two related to economic development; these are structural actions and external actions, or in other words: expenditure policy whose purpose is the internal development of the community and expenditure policy whose main objective is that of contributing to the economic development of third countries or non-member countries. These two ways to achieve development correspond to two different conceptions of the objective of economic development: external and internal, whose institutional framework and channeling channels are different.

Cases of White Spot Disease (WSD) in European shrimp farms

White Spot Disease (WSD) caused by White Spot Syndrome Virus (WSSV) is listed as ‘non-exotic’ to the European Union in EC Directive 2006/88. Two other viral diseases (Taura Syndrome and Yellowhead Disease) are listed as exotic. Despite the listing of WSD as a non-exotic disease, definitive case reports have not been officially reported, or published in the peer-reviewed literature. Here we report on a series of outbreaks of WSD in three European Union (EU) Member States (Greece, Italy and Spain) and in one non-EU European country (Turkey) over the period 1995 to 2001. Samples were submitted by industry representatives over this period and were therefore not officially reported to the Competent Authorities of respective European Member States. At least one of the cases appeared to be associated with the feeding of imported shrimp carcasses from Asia to broodstock while other cases were associated with the importation of post-larvae between hatcheries and on-growing facilities from outside of Europe and further movements within Europe. These case reports demonstrate the ability for WSSV to cause disease and mortality in penaeid shrimp farmed at European ambient temperatures. Furthermore, they demonstrate potential for the introduction of WSSV to new geographic areas via the movement of live crustaceans and their products, both from outside of the EU, and between EU Member and non-member countries within the European region.