OCTOBER 2024 Trade Intervention for Freer Trade Michael Pettis and Erica Hogan Trade Intervention for Freer Trade Michael Pettis and Erica Hogan © 2024 Carnegie Endowment for International Peace. All rights reserved. Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees. No part of this publication may be reproduced or transmitted in any form or by any me ...

Industry Overview - The report focuses on the evolution of social contribution exemptions in France over the past 30 years, particularly targeting low-wage workers to address labor market challenges for less qualified employees [11][12] - The policy of reducing employer social contributions has significantly impacted employment, especially during periods of high unemployment in the 1990s [12] - The cost of the exemption system is estimated at 75 billion euros in 2023, driven by employment growth, wage mass, and the level of the minimum wage (Smic) [6] Historical Policy Evolution - The policy of reducing employer social contributions began in the 1990s with the "Balladur" exemptions, targeting wages close to the Smic [57] - Between 1996 and 2005, the policy shifted to degressive systems, aligning with the transition to a 35-hour workweek [60] - From 2006 to 2012, the "Fillon" exemptions stabilized, with a degressive linear system and a threshold at 1.6 times the Smic [69] - Between 2013 and 2019, competitiveness measures expanded exemptions to higher wage levels [56] - Since 2020, the system has stabilized, with thresholds and rates remaining unchanged [56] Labor Market Impact - The employment rate in France has improved since the 1990s, but inactivity and unemployment remain high for specific groups and less dynamic employment areas [6] - The policy has benefited employers of workers near the Smic, but short-term Smic increases expose companies to heterogeneous cost shocks [6] - The concentration of wages around 1.2 to 1.3 times the Smic has increased over time, particularly during the transition to the 35-hour workweek [6] Economic Analysis - Empirical evaluations indicate substantial employment effects for low-skilled jobs, both in France and abroad [7] - Recent studies show that exemptions benefit companies by reducing costs and improving liquidity, leading to broader employment effects beyond low-wage workers [39] - The progressivity of the tax system can discourage labor supply and training efforts, potentially reducing productivity gains [39] Reform Scenarios - The central reform scenario proposes reducing exemptions by 4.05 points at the Smic level and eliminating certain thresholds, aiming to lower the slope of exemptions and encourage wage progression [14] - Alternative scenarios include maintaining current exemptions at the Smic level but smoothing them to a lower threshold, potentially saving 12.1 billion euros but resulting in job losses [46] - Another option is to recycle savings from reducing the slope of exemptions, extending them to higher wage levels, which could create 50,000 full-time equivalent jobs [47] Simplification and Clarity - The report recommends simplifying the system by limiting it to two exemption regimes: a general regime and an enhanced regime for workers particularly sensitive to labor costs [16] - It suggests unifying the base for social contributions and exemptions, using the same base as the CSG (General Social Contribution) for activity income [16] - The report also proposes making social contributions more transparent by distinguishing between contributory and non-contributory levies [16]

Investment Rating - The report does not explicitly provide an investment rating for the industry but indicates significant interest and investment from AI developers and major technology companies in AI agents. Core Insights - The report highlights the rapid advancements in large language models (LLMs) and their potential to create sophisticated AI agents that can perform complex tasks autonomously, which could transform various sectors of the economy and society [2][4][17]. Summary by Sections Executive Summary - The concept of AI agents has gained renewed interest due to advancements in LLMs, with many companies aiming to develop agents that can function as personal assistants and perform various tasks autonomously [2]. Introduction and Scope - The report discusses the historical context of AI agents and the recent progress in LLMs, emphasizing the potential for these systems to operate in more complex environments and pursue multifaceted goals [11]. What Is an AI Agent? - AI agents are characterized by their ability to pursue complex goals, operate in intricate environments, plan independently, and take direct actions, distinguishing them from simpler AI systems [3][12][13]. Technological Trajectories - The report notes a surge of interest in LLM-based agents, with companies developing software that allows these models to execute tasks autonomously, although current agents still face significant limitations [17][22]. Current State of AI Agents - As of mid-2024, many major AI companies are working on enhancing their chatbots into more capable agents, although existing products often struggle with basic tasks [22][72]. Opportunities, Risks, and Other Impacts - The development of AI agents presents numerous opportunities for increased productivity and efficiency, but also raises concerns about potential misuse, accidents, and the impact on labor markets [30][31][36]. Guardrails and Intervention Points - The report discusses the need for technical and legal guardrails to manage the risks associated with AI agents, including visibility, control, and trustworthiness [37][38]. Evaluating Agents and Their Impacts - There is a call for improved methodologies to evaluate AI agents' performance and impacts, as current assessment methods are inadequate [39]. Technical Guardrails - The report outlines various technical measures that can be implemented to ensure the safe operation of AI agents, including real-time monitoring and access control [44][48]. AI Agents and the Law - Existing legal frameworks can be applied to AI agents, but there are complex questions regarding liability and responsibility that need to be addressed as these systems become more prevalent [61][62]. Conclusion - The report concludes that while AI agents hold great promise, their development and deployment will require careful consideration of the associated risks and the establishment of appropriate governance frameworks [71][74].

Investment Rating - The report does not explicitly provide an investment rating for the Wi-Fi industry Core Insights - The Wi-Fi industry faces challenges due to an over-allocation of spectrum, which does not necessarily enhance user experience or performance [4][5][6] - The performance improvements across Wi-Fi generations have diminished, with Wi-Fi 4 showing the most significant advancements compared to its predecessors [28][29] - The need for additional unlicensed spectrum is questioned, as current performance levels exceed the requirements for typical applications [15][29] Summary by Sections Introduction - The evolution of wireless communication has seen cellular networks grow to nine billion subscribers, while Wi-Fi connects nearly 20 billion devices globally [2][3] Spectrum Allocation - The U.S. has allocated significantly more mid-band spectrum to unlicensed Wi-Fi compared to licensed networks, which contrasts with Japan's balanced approach [3][6] - The report advocates for a rationalization of spectrum allocations to support both licensed and unlicensed technologies effectively [6][7] Performance Analysis - Wi-Fi 4 achieved a 760% increase in download bandwidth and 588% in uploads, while subsequent generations have shown modest improvements [8][28] - Testing indicates that Wi-Fi 7 can achieve high throughput of 3 Gbps at close range, but performance drops significantly with distance [19][26] Regulatory Challenges - The report highlights the need for better spectrum management and the potential for additional spectrum to support licensed networks facing congestion [5][6] - It suggests that the U.S. should aim to auction an additional 1500 MHz of spectrum to correct imbalances in allocation [7][36] Simulation and Predictions - Various simulation studies have produced conflicting estimates of spectrum needs, indicating a lack of consensus on the future requirements for Wi-Fi [33][36] - The report critiques the reliance on simulations that do not accurately reflect real-world conditions, emphasizing the need for more realistic modeling [9][33]

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - App-based mobility services are integral to urban transport systems in Southeast Asia, enhancing the efficiency and quality of existing paratransit services [20][24] - The regulatory landscape for app-based mobility varies significantly across ASEAN member states, necessitating a balance between innovation and market regulation [21][22] - The report emphasizes the need for regulatory frameworks that support the integration of app-based services with public transport and address market failures [23][24] Summary by Sections Executive Summary - App-based mobility services have become essential in urban transport, improving existing services and addressing public dissatisfaction with traditional transport options [20] - The report identifies a diverse regulatory landscape across ASEAN countries, highlighting the need for tailored governance approaches [21] - Recommendations include creating a permissive regulatory environment, ensuring equal treatment for all transport providers, and establishing data-sharing frameworks [25][26] Introduction - The report aims to review regulatory frameworks for app-based mobility in Bangkok, Manila, and Phnom Penh, providing insights applicable to other urban centers [29][30] Overview of App-Based Mobility in Southeast Asia - The region has seen rapid urbanization and economic growth, leading to increased demand for app-based mobility services [32][34] - The rise of digital technologies has facilitated the growth of app-based services, with significant market players like Grab and Gojek emerging [37][39] Determinants of Growth for App-Based Mobility - Urban population growth, strained public transport, and rising incomes have driven the adoption of app-based mobility services [37][38] - The report notes that the majority of growth has occurred in the ride-hailing market, with significant user engagement and market valuations for leading companies [38][39] Benefits and Challenges of App-Based Mobility - App-based services offer numerous benefits, including improved consumer welfare, job creation, and enhanced urban accessibility [40] - Challenges include equity concerns, data protection issues, and road safety risks associated with increased motorcycle usage [41][44] Recommendations - The report suggests strengthening regulatory enforcement, setting minimum employment protections for drivers, and streamlining governance across agencies [24][27] - It emphasizes the importance of addressing market failures related to transport emissions, congestion, and safety through targeted regulations [27][28]

Investment Rating - The report does not provide a specific investment rating for the industry Core Insights - Improved household surveys significantly enhance the measurement of consumption, leading to higher reported living standards and a potential redefinition of national poverty lines, but often result in minimal changes to national poverty rates due to upward adjustments in these lines [2][10] - The international poverty line remains fixed, which can lead to dramatic decreases in international poverty rates when new surveys reveal increased consumption, necessitating caution in temporal comparisons of poverty rates [11][12] - The design of household surveys, including recall periods and the inclusion of various consumption categories, is critical for accurate poverty measurement and can lead to substantial increases in reported consumption [20] Summary by Sections Household Surveys and Poverty Measurement - Most countries utilize household surveys to assess poverty, focusing on consumption levels to determine poverty status [4] - The design of these surveys greatly influences the data collected, affecting the accuracy of poverty assessments [5] Impact of Improved Surveys - Enhanced survey methodologies have led to an average increase of 46% in real mean consumption across 12 countries, attributed to capturing previously overlooked consumption [6] - Following improvements in survey quality, national poverty lines in ten countries increased by an average of 50%, which often offsets the increase in measured consumption [7][10] International Poverty Line Dynamics - The international poverty line, fixed at US$2.15 per day, can show significant declines in poverty rates when new surveys report higher consumption levels, as seen in cases like Guinea-Bissau and China [11][12] - The report emphasizes the need for caution when comparing international poverty rates over time, as improvements in survey methodologies can exaggerate perceived declines in poverty [12][13] Recommendations for Future Surveys - Countries should implement high-quality household surveys to ensure comparability and accuracy in poverty estimates, which is essential for reliable cross-country comparisons [16][20] - Strategies to mitigate the impact of survey design changes on poverty comparisons include maintaining a smaller sample with the old questionnaire or using imputation models for consistent trend analysis [17][18]

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The technology landscape is rapidly evolving with significant advancements in AI, cloud computing, and digital transformation, presenting both opportunities and challenges for companies in various sectors Group 1: AI and Digital Transformation - Georgia Pacific is leveraging AI and Generative AI to enhance manufacturing processes, aiming to predict equipment failures 60 to 90 days in advance [2][3] - The company has partnered with KCG Technologies, AWS, C3 AI, and SAS to implement AI solutions, utilizing over 60,000 sensors across its equipment [3] - AI tools are designed to optimize machine settings and provide operational insights, enabling less experienced workers to perform at higher competency levels [4][5] Group 2: Fleet Management and Safety - Samsara introduced AI-based solutions to address driver fatigue, which is a significant cause of trucking accidents in the U.S., with nearly half of such accidents attributed to this issue [6][7] - The company’s dual-facing AI dashcam detects signs of drowsiness and alerts drivers and safety managers, filling a critical gap in fleet safety [6] Group 3: Automotive Industry Developments - Volkswagen is entering a joint venture with Rivian, investing an initial US$1 billion to enhance its software capabilities in the electric vehicle market [9][10] - This partnership aims to leverage VW's capital and supply chain influence alongside Rivian's software expertise to compete in the evolving automotive landscape [10][11] Group 4: Cloud Computing in Asia-Pacific - The Asia-Pacific region is becoming a hub for technology innovation, with major cloud providers like AWS and Microsoft investing heavily in local infrastructure [16][17] - AWS plans to invest US$12 billion in Singapore's cloud infrastructure over the next four years, while Microsoft is investing US$4.6 billion in Indonesia and Japan [16] Group 5: Carbon Capture Technology - Carbon Capture, Utilization, and Storage (CCUS) technology is seen as essential for achieving Net Zero Emissions by 2050, yet it currently captures only 0.1% of global emissions [20][22] - Significant financial investments are required for CCUS implementation, which has hindered its adoption despite its potential [21][22] Group 6: Drone Industry Opportunities - The potential U.S. ban on DJI drones could create opportunities for new drone hardware providers, as DJI currently dominates the consumer-grade drone market [25][26] - Regulatory changes are also paving the way for new drone applications, with countries developing infrastructure to support drone operations [26][27]

Investment Rating - The report indicates a positive outlook for the private credit market in Asia Pacific, highlighting its growing importance and potential for expansion [2][3][59]. Core Insights - Private credit is increasingly filling the financing gap created by higher funding costs and regulatory scrutiny on banks, particularly in the Asia Pacific region [2][3]. - The private credit market is expected to continue expanding, driven by institutional investors seeking returns and risk diversification [3][59]. - There is a notable trend towards sustainability-linked loans within the private credit sector, reflecting the growing importance of ESG considerations [4]. Summary by Region Australia - The private credit market is growing, filling the gap left by declining bank lending due to regulatory scrutiny [10]. - Sustainability-linked loans are expected to see steady growth [10]. Mainland China - The private credit market is becoming more active, with opportunities for offshore funds due to deregulation and increased foreign investment [12][13]. - Challenges include restrictions on borrowing by real estate companies and the need for court involvement for enforcement [13]. Hong Kong - The private credit market is expanding, with credit funds focusing on special situations [19]. - Non-banking entities can lend without a banking license under certain conditions [19]. India - The private credit market is gaining traction due to higher delinquencies faced by banks and liquidity issues in non-banking financial companies [30]. - Private companies can provide credit support for acquisitions, while public companies face stricter regulations [32]. Indonesia - The private credit market is growing, driven by increasing consumer demand and the expansion of financial services [33][34]. - Private credit is expected to play a significant role in financing economic development [34]. Japan - The private credit market remains limited due to strict regulations and the dominance of banks [38][39]. - Some alternative lenders are providing mezzanine financing in special situations [39]. Malaysia - The private credit market is constrained by heavy regulations, with most lending activities dominated by licensed banks [43][44]. - Offshore private credit transactions are more common during economic downturns [44]. New Zealand - The private credit market is gradually eroding the dominance of major banks, driven by international trends and increased awareness of private credit [48]. - Private credit is expected to continue growing as borrowers seek more flexible terms [48]. Philippines - The private credit market is developing, but lending activities are highly regulated [54]. - The Personal Property Security Act has improved the legal framework for secured transactions [54]. Singapore - The private credit market is experiencing significant growth, with credit funds increasing their portfolios [60]. - Funds can lend without a banking license under certain conditions, but must comply with local regulations [60][61]. South Korea - The private credit market is resilient, with government support addressing concerns about debt crises [64]. - There is a growing appetite for refinancing existing deals as interest rates are expected to ease [64]. Taiwan - The private credit market is limited due to strict regulations, but insurers are exploring lending opportunities [68]. - Foreign lenders face challenges in holding security over certain types of collateral [70]. Thailand - The private credit market is dominated by licensed banks, but foreign lenders can provide loans without a banking license under certain conditions [75][77]. - Companies can provide credit support for acquisitions, but must comply with legal requirements [77]. Vietnam - The private credit market is limited, with lending primarily conducted by licensed credit institutions [78]. - Offshore funds can provide loans without a banking license, but must navigate regulatory challenges [81].

Investment Rating - The report does not explicitly provide an investment rating for the industry. Core Insights - The Egyptian Goodwill Committee is focused on enhancing child-friendly justice and addressing international parental child abduction cases, with a commitment to improving governance and legal frameworks [7][18]. - The report emphasizes the need for Egypt to consider ratifying the Hague Convention on International Child Abduction to align with international standards and improve cooperation with OECD member states [22][34]. Summary by Sections Executive Summary - The Goodwill Committee has managed approximately 200 international parental child abduction cases since its establishment in 2000, with around 85 still active [18]. - The review identifies opportunities for reform in governance arrangements, multilateral ratification, and addressing systemic barriers [19]. Assessment and Recommendations - The report outlines three main streams for reform: enhancing governance arrangements, reviewing multilateral ratification, and implementing prevention mechanisms [25]. - Recommendations include including new child justice institutions in the Committee, clarifying roles and responsibilities, and revising the Committee's mandate to prioritize the best interests of the child [30]. Understanding Child Rights and Child Abduction Frameworks - Egypt has ratified key international instruments for child rights, including the Convention on the Rights of the Child [40]. - The report discusses the complexities of international parental child abduction and the need for effective governance frameworks to manage such cases [45][51]. Strengthening the Mandate and Institutional Arrangements - Recommendations include enhancing the Committee's capacity by including the National Council for Childhood and Motherhood and the Child Protection Bureau as permanent members [20]. - The report suggests streamlining access to the Committee's services and improving case management processes [21]. Enhancing Access and Participation - The report highlights the importance of developing a user-friendly communication strategy to raise awareness of the Committee's services [33]. - It also emphasizes the need for procedural improvements to facilitate access and participation in the justice process [4.4]. Considering a Transition to Multilateral Governance - The report recommends that the Government of Egypt assess the viability of ratifying the Hague Convention to strengthen its governance framework [34]. Removing Systemic Barriers and Considering Prevention Mechanisms - The report identifies systemic barriers such as child travel bans and suggests mechanisms to mitigate these issues, including requiring parents to register their contact details upon entry to Egypt [35].

Investment Rating - The report does not explicitly provide an investment rating for the industry. Core Insights - The report emphasizes that business as usual is unsustainable, with plastic production projected to rise from 435 million tonnes (Mt) in 2020 to 736 Mt in 2040, while mismanaged waste is expected to increase from 81 Mt in 2020 to 119 Mt in 2040 [29][30] - It highlights the need for stringent policies across the plastics lifecycle to prevent growth in primary plastics production and nearly eliminate plastic leakage to the environment by 2040 [30][31] - The report outlines that global ambition has modest macroeconomic costs, with a projected 0.5% global GDP loss in 2040 compared to the baseline scenario, but with significant environmental benefits [30][31] Summary by Sections Executive Summary - The report investigates the potential benefits and consequences of varying levels of international policy ambition to tackle plastic pollution, emphasizing that partial measures are insufficient to end plastic pollution [28][29] - It presents a scenario where stringent policies can limit total plastics use to 508 Mt in 2040 and enhance recycling rates to 42%, nearly eliminating mismanaged waste [30][31] Chapter 1: Context and Objectives - The chapter discusses the dual role of plastics in society, providing benefits while also contributing to severe environmental and health issues [36][37] - It notes the international commitment to develop a legally binding instrument on plastic pollution, highlighting the urgency for comprehensive policy approaches [37][38] Chapter 2: Business-as-Usual is Unsustainable - The report projects that plastic waste will grow to 617 Mt by 2040, with significant leakage to the environment increasing to 30 Mt [29][30] - It emphasizes that current policies are inadequate to alter trends in plastic flows and pollution significantly [30][31] Chapter 3: Modelling Policy Packages - The chapter details the modelling framework used to analyze various policy scenarios, focusing on the lifecycle of plastics and the economic activities driving their use [43][44] - It presents ten policy instruments grouped into four pillars aimed at curbing plastic production and enhancing recycling [16][46] Chapter 4: Implications of Policy Scenarios with Partial Ambition - The report indicates that partial ambition scenarios fail to eliminate plastic leakage and can only modestly slow down primary plastics use [30][31] - It highlights the importance of strong policy commitments to achieve significant reductions in mismanaged plastic waste [30][31] Chapter 5: Implications of Policy Scenarios with High Ambition - The report asserts that ambitious integrated policies can decouple economic activity from plastics use and significantly reduce mismanaged plastic waste [30][31] - It emphasizes that all policy pillars are essential in achieving the goal of eliminating plastic waste by 2040 [30][31] Chapter 6: Comparison of Costs Across Scenarios - The analysis shows that policy packages targeting all stages of the plastics lifecycle are more cost-effective at the macroeconomic level [30][31] - It notes that non-OECD countries face higher investment needs to enhance waste management systems [30][31] Chapter 7: Challenges and Priorities - The chapter discusses the need for significant technical, economic, and governance improvements to implement ambitious policies globally [30][31] - It highlights the importance of international cooperation and financing to support developing countries in their policy efforts [30][31]