Economists in Survey Favor Tariffs on Energy from Russia
German economists would like to see EU tariffs imposed on energy imports from Russia. Such tariffs are an effective measure for reducing payments to Russia while also minimizing the impact on Europe’s energy supply, say 70 percent of the participants in the latest ifo and FAZ Economists Panel survey. They consider tariffs to be better than embargos and more effective than quantitative restrictions. Tariffs would force Russia to lower the export price. Participants also say higher prices in Europe would simultaneously lead to a redistribution of scarce resources via the free market. “This could be an effective way to put pressure on Russia,” says Lisandra Flach, Director of the ifo Center for International Economics.
Meanwhile, 23 percent of participants are skeptical about an EU tariff, citing the danger of an additional increase in customer prices, which are already high. It is their view that Russia has the upper hand in negotiations, especially when it comes to gas, meaning that the tariffs would mostly be borne by the EU. Some participants reject tariffs as insufficient and instead demand a complete halt on payments to Russia.
At the same time, 57 percent agree that Germany’s international economic policy should limit trade relationships with autocratic states. They warn that trade with these states entails great geopolitical risks, adding that such states often prove to be unreliable trading partners. Germany, they say, has a responsibility to safeguard human rights – even beyond its borders. In contrast, 36 percent want there to be no restrictions on trade with autocratic states, since they could become even more insular and dangerous without it.
However, the respondents to the Economists Panel also fear that the Supply Chain Due Diligence Act, which comes into force on January 1, 2023, will make international business harder for German companies. They reason that companies will face increasing bureaucracy, rising transaction costs, and difficulties in obtaining the necessary information. Furthermore, there is a risk that companies will have to obtain their intermediate products from a smaller number of suppliers. Only 15 percent believe that the law will not make international business harder for the companies affected. In their view, companies’ reputational gains will outweigh additional costs; they also point out that it is not yet clear how strictly the law will be enforced.
Increasing the number of sources of supply is the most popular measure for strengthening the resilience of supply chains, meeting with 88 percent approval. Coming in second and third are efforts to increase procurement from other EU countries, at 64 percent, and inventory scale-ups, a measure supported by 49 percent; 35 percent advocate improvements in the monitoring of supply chains, while 27 percent want more procurement on the home market of Germany and 26 percent want companies to reintegrate outsourced processes.
Survey
Economists Support EU Tariffs on Russian Energy Imports
Russian threats to cut off the supply of fossil fuels and drastic lockdowns in many major cities in China have highlighted Germany’s dependency on non-European imports. But doubts as to the reliability of these two trading partners predate Russia’s invasion of Ukraine and China’s strict zero-Covid policy. Whether trade with autocratic states should be limited has been a topic of discussion for quite some time now, not least due to human rights violations along supply chains.
