Globalization

Globalization

While not exactly new—globalization already existed under the British Empire, for instance—the current wave has been the widest-ranging and the most transformative. It has lifted billions from poverty around the world, but also left many millions behind. This has fueled a domestic backlash in many countries against globalization, and geopolitical shifts—China’s rise, Russia’s belligerence and US protectionism—have dealt further blows. Now the talk is of slowbalization, friendshoring and the like. But disentangling the extensive, fiendishly complex global supply chain networks is not easy, and maybe even not entirely possible. Globalization offers clear-eyed views and analyses from widely different perspectives to help policymakers detect both opportunities and pitfalls associated with the current state of the quickly shifting global value chains.  

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Cover of EconPol Policy Brief 41

Cutting through the Value Chain: The Long-Run Effects of Decoupling the East from the West

Felbermayr, Gabriel J. / Mahlkow, Hendrik / Sandkamp, Alexander

This Policy Brief analyses the long-run effects of an economic decoupling between the political West (i.e. the EU, the US and their allies) and the East (first and foremost Russia and China). A decoupling of Russia from the US and its allies would have much more severe long-term impacts for real income in Russia (minus 9.7 percent) than in the US and its allies (minus 0.2 percent). The reason for the uneven distribution of costs lies primarily in Russia’s low economic importance compared with the US and its allies.

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Cover of EconPol Policy Report 34

Investment Screening Mechanisms: The Trend to Control Inward Foreign Investment

Vera Z. Eichenauer (ETH Zurich), Michael Dorsch (Central European University), Feicheng Wang (University of Göttingen)

In an increasing number of sectors, concerns are rising that foreign firm participation may pose risks to public order. Many developed countries have adopted or extended their investment screening mechanisms to control inward foreign direct investment in strategically important sectors over the last years. This paper documents the development of investment screening in OECD and EU countries and provides the first discussion from an economic perspective. We review existing and propose new explanations for the adoption of investment screening. Our exploratory quantitative analysis suggests that countries with higher levels of technological development and with a stricter regulatory environment for foreign investment are more likely to introduce investment screening. Contrary to the popular wisdom, we do not find evidence that higher Chinese inward investments are associated with the implementation of investment screening.

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