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The Czech Republic exports only a small number of cars and car parts directly to the United States, but it’s likely to suffer significant economic damage if that country were to impose tariffs on auto imports. The reason: the Czech Republic supplies parts that are used to build cars exported by other European countries. Europe’s auto industry is one of many that are part of global value chains, in which different stages of manufacturing are dispersed among several countries. Because almost 70 percent of European exports are linked to value chains, tariffs imposed on products shipped by one country can affect many others. That is why, as we explain in a recent study, it’s important to view manufacturing through the prism of value chains when assessing the potential economic impact of tariffs or other economic shocks. Two yardsticks To do that, we need to distinguish between two yardsticks: gross value and value added. When a German resident buys a Volkswagen shipped from a...

The government in Oslo spending billions of oil export dollars to help the affluent buy an electric second car they wouldn’t otherwise want is European environmentalism at its phoniest and most hare-brained. It’s not that you can’t financially encourage societies to be more planet-conscious, but this charade of perverse incentives, inefficiencies, and negative side effects is not it. Norway’s electric car miracle is primarily one of numbers. Last year, EVs accounted for 49.8 percent of all cars purchased in the country, and so far this year three in five new cars bought in Norway are electric. For comparison, 2.1 percent of new cars registered in the US last year were EVs, while for the EU the figure is even lower – 0.9 percent. Thus, with a population of only 5 million, Norway has become the world’s third biggest electric car market. This has burnished the Scandinavian country's credentials as a land populated by uniquely-ethical people. But how has this incredible out...

Prime Minister Narendra Modi has made exports a high priority. Indeed, India would do well if it gave them the highest priority and pursued their success in mission mode. No nation has sustained growth rates of 9-10% for two or more decades without succeeding in global markets. China’s share in global merchandise exports rose from 2% in 1991 to 12.4% in 2012. These two decades saw China fully transform from a primarily agrarian to a modern industrial economy. Today, India’s share in global merchandise exports remains low at 1.7%. In 2000, when China’s GDP was no more than India’s today, it already accounted for 4% of global merchandise exports. Sustaining high growth and creating good jobs will require a strategy centred on building an exportfriendly ecosystem in the country. The starting point for this strategy is shedding three of our current obsessions: import substitution, micro and small enterprises, and a strong rupee. Import substitution has never produced sustained ...

A few days ago, when talking to an the assembled chief ministers of India’s states, Prime Minister Narendra Modi declared that he wanted India to be a “$5 trillion economy” by 2024, when he once again faces reelection. This would, he said, be “challenging, but achievable.” Modi could never be accused of lacking ambition, but the fact is that getting India’s GDP to $5 trillion in five years will be far more challenging than achievable. India is, currently, a $2.8 trillion economy; to reach the $5 trillion mark by 2024, the economy would require nominal growth in dollar terms of over 12% a year. To put this in context, in the last quarter for which data is available, India grew at slower than 6% in real terms — and, if you believe the Modi government’s former top economist, that data is flawed and India may well be growing a few percentage points less than that. India could and should aspire to double-digit growth. Without sustained growth at that level it has little hope of em...