POLICY BRIEFS

Global Solutions Journal G20/T20 Italy 2021 Edition

The Global Solutions Journal G20/T20 Italy 2021 Edition focuses on Italy’s G20 priorities, overcoming the challenges of the COVID-19 pandemic, Digital Governance and New Measurement. 

Authors from various sectors – politics, research, academia, business, and civil society – have contributed to this multifaceted edition. 

S20 Saudi Arabia Communique

S20 Saudi Arabia 2020: Read the Communique here.

On Xi-Trump meeting: Why the Trump-Xi Pact Won’t End Trade Tension

Paul Blustein of the Centre for International Governance Innovation (CIGI) recognizes that a crisis has been averted at the G20 summit in Osaka; however, it remains crucial to keep a sense of perspective about what was — and was not — accomplished in Osaka.

Why the Trump-Xi Pact at the G20 Summit in Osaka won’t end trade tension

Before the summit: A New Tax Regime for Big Tech

Kevin Carmichael, senior fellow at the Centre for International Governance Innovation (CIGI), shares his perspective on G20 efforts to establish a new tax regime for big tech companies. Such a regime could represent one of the biggest tax revolutions in recent memory.

The G20 efforts to establish new tax regime for big tech

Trade at the G-20 Osaka Summit: Jaw, jaw beats war, war

G20 leaders are due to discuss options to revive the moribund World Trade Organization (WTO) at this weekend’s Osaka Summit. Simon J. Evenett and Johannes Fritz discuss that since the last WTO Ministerial Conference in December 2017, trade officials have struggled to take forward several unrelated and incremental initiatives. There seems no apparent organizing logic, nor any systemic perspective. And even worse, the China-U.S. trade war has, according to the authors, absorbed bandwidth that could have been usefully deployed elsewhere.

The call for WTO reforms, by Simon J. Evenett and Johannes Fritz 

G20 Japan: Programme of Work to Develop a Consensus Solution to the Tax Challenges Arising from the Digitalisation of the Economy

The digital transformation spurs innovation, generates efficiencies, and improves services while boosting more inclusive and sustainable growth and enhancing well-being. At the same time, the breadth and speed of this change introduce challenges in many policy areas, including taxation.

Programme of Work to Develop a Consensus Solution to the Tax Challenges Arising from the Digitalisation of the Economy

G20 and the Sustainable Development Goals

This article discusses the issue of debt governance within the context of sustainable development and economic growth in the face of the G20 countries. The authors claim that current banking regulation innovations are not sufficient in terms of securing financial security and inclusiveness and assess the challenge to global financial security and sustainable growth posed by increasing governmental debt of the worldwide leading economies.

Debt Governance and Sustainable Development Goals, by Vladimir Zuev, Elena Ostrovskaya, Ekaterina Frolova

International Trade Agreements and the Future of U.S. Economy

In this column, Chad Bown claims that it is a risky game to question the significance of international trade agreements as put forward by the Trump Administration as well as leaders from the Democratic Party. He elaborates on how trade agreements do work in favor of protecting the U.S. economy, American workers and consumers and how they are essential in terms of avoiding the same policy mistakes that led to the crisis of the 1930s.

Column: The truth about trade agreements – and why we need them

Tax evasion and its link to social environment

Since the global financial crisis, many governments around the world have initiated policies against tax evasion and harmful tax avoidance. This article points out the deficiencies of poorly-designed tax schemes based on a dataset of employee reports within the Austrian commuter allowance scheme. The results show that there is a high level of misreporting, which, according to the authors, is systematically influenced by a  taxpayer’s social environment and carries the potential of spillover effects on other groups of society.

Tax evasion and the social environment, by Jörg Paetzold and Hannes Winner

Investment screening in times of COVID-19–and beyond

The economic upheaval resulting from the COVID-19 pandemic has led many governments to enhance their foreign investment screening mechanisms or introduce new ones – in the midst of an already steep drop of global FDI flows. Investment screening was already enjoying a heyday before the COVID-19 crisis – the pandemic is accelerating, rather than triggering this trend. The accumulation of the two waves of new measures may bring about transformational change to investment screening policy practice and to the way governments and societies view the benefits and risks associated with foreign investment.

Read more.

Rescuing the labour market in times of COVID-19: Don’t forget new hires!

The spread of COVID-19 and the ensuing drastic lockdowns are placing economies and labour markets worldwide in a state of emergency. Governments are struggling to safeguard jobs and firms. Short-time work and comprehensive liquidity support for businesses and the self-employed are some measures being used. This column illustrates the consequences of a substantial hiring stall on unemployment and proposes hiring subsidies – directly reduce firms’ costs and thereby stimulate hiring – as a cost-effective stimulus measure for European countries to reduce the risk of unemployment hysteresis effects.

Rescuing the labour market in times of COVID-19: Don’t forget new hires!

By Christian Merkl (University of Erlangen-Nuremberg) and Enzo Weber (University of Regensburg)

COVID, remobilisation and the ‘stringency possibility corridor’: Creating wealth while protecting health

The world is at war with COVID-19; containment policies are a key weapon. But this in not ‘total war’ where trade-offs can be waved off; governments must perform balancing acts. This column argues that instead of thinking of containment stringency as balancing dollars versus deaths, we should think of it as a balancing infections versus tolerability. Containment policies must stay in the ‘corridor’ where they are stringent enough to avoid overwhelming hospitals, but lax enough to avoid overwhelming citizens’ tolerance levels. Solving the dilemma will require an increase in production and a relaxation of constraints – in short, it will involve a partial remobilisation of the workforce. The mission-critical task facing us is to develop a strategy for remobilising workers without risking a medical overload.

COVID, remobilisation and the ‘stringency possibility corridor’: Creating wealth while protecting health

By Richard Baldwin (Graduate Institute Geneva)

The supply side matters: Guns versus butter, COVID-style

“Go big. Act fast. Keep the lights on” is good advice for governments trying to flatten the epidemiological and recession curves simultaneously. This column argues that the combination of containment policies that dampen production and stimulus policies that maintain spending will generate supply-side problems. Cost-push inflation may return, political pressures for price controls and rationing may be irresistible, and governments may find themselves engaged in thinking about production and logistics of the type not undertaken since the 1940s.

The supply side matters: Guns versus butter, COVID-style

By Richard Baldwin (Graduate Institute Geneva)

The labour market policy response to COVID-19 must save aggregate matching capital

The COVID-19 pandemic represents an unprecedented shock to labour markets. This column argues that the policy response should balance two objectives: (1) facilitating prompt reallocation of employment to essential activities during the emergency, and (2) maintaining workers’ attachment to their previous employers, preserving the aggregate stock of firm-specific human capital, and avoiding persistent mismatch, which would propagate the temporary shock into a prolonged stagnation. The authors make concrete labour market policy proposals and compare them with measures currently being implemented on both sides of the Atlantic.

The labour market policy response to COVID-19 must save aggregate matching capital

By Shigeru Fujita (Federal Reserve Bank of Philadelphia), Giuseppe Moscarini (Yale University), Fabien Postel-Vinay (University College London)

Supply chain contagion waves: Thinking ahead on manufacturing ‘contagion and reinfection’ from the COVID concussion

COVID-19 containment policies first shuttered factories in China. Since manufacturers around the world rely on Chinese inputs, Chinese industrial disruption hit other nations via ‘supply-chain contagion’. As China gears back up having mastered the first epidemic wave, the explosions of cases in the two other manufacturing giants, Germany and America, are likely to create reverse supply-chain contagion – the industrial equivalent of reinfection. International coordination may reduce the chances that multiple waves of supply-chain contagion hobble global manufacturing until a vaccine is developed.

Supply chain contagion waves: Thinking ahead on manufacturing ‘contagion and reinfection’ from the COVID concussion

By Richard Baldwin (Graduate Institute Geneva)

Africa after COVID-19 and the retreat of globalism

COVID-19 has brought the world economy to a standstill. It has thrown into stark relief the weaknesses in global institutions and international cooperation and revealed the dark underbelly of globalisation’s promise. Its timing is ‘auspicious’, with a self-centred hegemon, a rising rival great power, a supranational post-modern arrangement that has been buffeted over the last decade by economic and social crises, and a growing attraction by many strong men (they tend to be men) to chauvinistic nationalism. On the other side of the coin, ‘woke’ citizens are mobilising social movements against discrimination (race, gender, poverty and inequality) and against the feeble response of political elites to the realities of climate change. Could this be the perfect storm?

Africa after COVID-19 and the retreat of globalism

By Elizabeth Sidiropoulos (SAIIA)

Coronavirus and African Economies: Are Dominoes Starting to Fall?

Only” 3,778 cases of COVID-19 were recorded in sub-Saharan Africa as of 1 April, according to the WHO. Whether the global pandemic is reaching the continent later or there are reporting challenges, it seems safe to assume that that these numbers will unfortunately rise.

Just like elsewhere in the world, COVID-19 puts Africa in a trying situation. It has the potential to quickly become a human tragedy, given weaker health systems. It is also turning into a deep economic crisis, with countries battling the fallout from the global recession and using their limited fiscal space to meet health needs, support their productive systems and protect jobs, amid high poverty rates and lack of safety nets.

Coronavirus and African Economies: Are Dominoes Starting to Fall?

By Giulia Pellegrini (ISPI)

How Covid-19 Could be Like the Global Financial Crisis (or worse)

How can social scientists help political leaders to design policy responses and mitigation strategies for the COVID-19 economic crisis? To find out read Richard Baldwin´s edited e-book –free to download – in which a range of high-level economists proposes viable solutions. The book includes a piece by our coordinating lead author Nora Lustig, Samuel Z. Stone Professor of Latin American Economics and Director of the Commitment to Equity Institute (CEQ) at Tulane University. This e-book also includes pieces by Paul Krugman, Jason Furman (Obama’s former chief economist) and Olivier Blanchard among many others.

How Covid-19 Could be Like the Global Financial Crisis (or worse)

By Nora Lustig and Jorge Mariscal (IPSP)

The coronavirus pandemic and US consumption

The coronavirus pandemic has triggered unprecedented shocks to both supply and demand, raising important questions about the impact on US consumer spending. In the US, consumption comprised as much as 70% of GDP in 2019. Typically, consumption is less volatile than income. But as this column argues, it is now likely to fall even more than household income. One reason is that part of the negative shock originates in disruption to consumption itself. Another comes from the jump in income insecurity as reflected in an unprecedented rise in the unemployment rate. Other reasons include the fall in asset prices and a sharp contraction in credit availability. A plausible scenario from the analysis suggests that US real consumer spending in the second quarter of 2020 could fall by around 20%, if household labour income falls by 16%.

The coronavirus pandemic and US consumption

By John Muellbauer (VoxEU)

Coronavirus: economic threat, political response and implications

This paper analyses the impact of the coronavirus. It explains why we are facing radical uncertainty that makes it impossible to anticipate the impact of the pandemic, outlines economic policy options to address the crisis and identifies potential lessons to be learned.

Coronavirus: economic threat, political response and implications

By Federico Steinberg (Elcano Royal Institute)

What Can We Do to Manage the Economic Consequences of COVID-19?

A century after the 1918-1920 Spanish flu, we are facing a similar global outbreak. On the one hand, the battle against the disease continues, on the other hand, we are in a situation which requires us to measure the economic impacts and put forward precautionary steps for liberalizing the decision-making process.

Currently, in order to curb the spread and take time saving measures for those managing the process, “social distancing” has been suggested by the authorities as a precaution; consequently, slowing the rate of COVID-19 while a vaccine to control the outbreak can be found. In terms of health, this is the only measure that we have now. Correspondingly, this measure also causes negative economic consequences.

Due to the implementation of social distancing, some workplaces, especially those in the service sector, are closing. Employees have already or are now faced with the risk of losing their jobs. A spontaneous decline in demand is found in hotels, restaurants, public transportation, and civil aviation amongst numerous other portions of the service sector. Likewise, it is clear that there is a high risk of failing to meet mutual obligation in value chains. This is the first point.

What Can We Do to Manage the Economic Consequences of COVID-19?

By Fatih Özatay, Güven Sak (TEPAV)

How COVID-19 will change the nation’s long-term economic trends

Will the coronavirus change everything? While that sentiment feels true to the enormity of the crisis, it likely isn’t quite right, as scholars from the Brookings Metropolitan Policy Program have been exploring since the pandemic began. Instead, the COVID-19 crisis seems poised to accelerate or intensify many economic and metropolitan trends that were already underway, with huge implications of their own. Below, scholars weigh in on COVID-19’s long-term impact on businesses, workers, and the nation as a whole.

How COVID-19 will change the nation’s long-term economic trends

By Mark Muro, Tracy Hadden Loh, Martha Ross, Jenny Schuetz, Annelies Goger, Nicole Bateman, William H. Frey, Joseph Parilla, Sifan Liu, and Adie Tomer (Brookings)