International Economics: IB Economics

Busy - and profitable - day for the EU Commission and the European Court of Justice with the court upholding the earlier decision that Apple had received illegal aid from the Irish government and should instead be paying 13 billion euros in tax. The Irish government argued that the benefits of Apple locating there outweighed the cost of the taxes foregone. 

Could this be a watershed in the history of the tech sector within the EU?  

This fascinating article looks at how retaliatory US protectionist measures on Rwandan textile exports have had unintended effects with one Rwandan textile exporter delighted, in that the £0% US tariff has given his textile firm access to new markets. The US tariff was a response to Rwanda implementing a tariff of on the import of second-hand clothing, and has had a range of effects

 That said, other textile manufacturers have lost out, the market for second-hand clothing has been adversely affected and, in an attempt to support an infant industry the Rwandan government has introduced tax breaks and subsidies, whilst Chinese garment manufacturers appear to have gained.

Proof, if it were needed, that tariffs rarely enhance economic welfare and largely serve to introduce market imperfections. 

This is a really interesting article offering a new perspective on Greece - with the new Greek government looking to attract inward investment and the global super-rich by offering tax incentives for people who are prepared to move to Greece and invest in the Greek economy. 

After a decade of crisis, and the associated austerity measures, does this signal a change in the tenor of policy?

The Germans have gone first, announcing a raft of measures designed to tackle the energy crisis, focusing on getting money into the hands of the most vulnerable, caps on energy bills, tax breaks for energy-intensive industries and a windfall tax on  energy companies. It will be interesting to see how our response measures up. 

Here's a man signalling a lack of economic understanding, as President Trump announces his going to offer tax breaks for US firms who reshore from China. 

It might appeal to his core vote - but here's the thing, it will make the vast majority of them worse off. It will make the goods manufactured more expensive, create relatively few jobs, and I suspect that the tax breaks will not be manifest in lower prices, or more hires, but in higher dividend payments to shareholders. 

I like his optimism in claiming to have built "the greatest economy in the history of the world". As leader of the world's largest economy at a given point in time, it's not much of a claim. Not coming from someone with multiple bankruptcies on his CV.