Der Forschungsschwerpunkt Internationale Wirtschaft (FIW) (https://www.fiw.ac.at/) ist eine Kooperation zwischen der Wirtschaftsuniversität Wien (WU), der Universität Wien, der Johannes Kepler Universität Linz und der Universität Innsbruck, WIFO, wiiw und WSR. FIW wird von den Bundesministerien BMBFW und BMDW unterstützt.
Die Tabellen zur aktuellen Wirtschaftslage bieten einen schnellen Überblick über die wirtschaftliche Entwicklung in Österreich.
Abstract: Seit Anfang des Jahres 2017 vollzieht sich in der internationalen Handelspolitik ein Paradigmenwechsel. Während protektionistische Agenden an Fahrt gewinnen, unterzeichneten die EU und Japan ein Wirtschaftspartnerschaftsabkommen (EPA) am 17. Juli 2018. Es ist das ambitionierteste Abkommen der EU mit einem asiatischen Staat. Die Studie schätzt die Effekte des EU-Japan-EPA für Österreich mittels qualitativer Analysen und einem strukturellen Gravitationsmodell ab. Für Österreich wurde ein kleiner aber positiver Effekt von rund 0.01% des BIP errechnet. Es wird erwartet, dass vor allem der Fertigungsbereich in Mittel- und High-Tech-Sektoren von diesem Abkommen profitieren werden. Since the beginning of 2017, a paradigm change in international trade policy is observed. While the protectionist agendas are on the rise, the EU and Japan signed an Economic Partnership Agreement (EPA) on 17 July 2018. It is the most ambitious agreement of the EU with any Asian state. The study estimates the effect of the EU-Japan EPA for Austria based on qualitative analysis and a structural gravity model. The model predicts small but positive effects of around 0.01% of GDP for Austria. Highest gains are expected for manufactured goods, particularly in the medium- and high-tech sectors.
Abstract: Die Terms-of-Trade (ToT) bezeichnen das Tauschverhältnis von Warenimporten zu Warnexporten, also die Relation von Export- zu Importpreisen. Das Einwirken gegenläufiger Kräfte führte in Österreich dazu, dass sich die ToT im langfristigen Vergleich relativ stabil entwickelten. Die vorliegende Studie analysiert daher nicht nur den Zeit- und Branchenverlauf der ToT, sondern auch die Bestimmungsfaktoren und deren Rolle in der Entwicklung der heimischen ToT: Es werden monetäre (Rohölpreis, Wechselkurs) und nicht-monetäre Determinanten (Gütersortiment, Gütervielfalt/Qualität, Kapitalakkumulation) diskutiert.
Abstract: This study focuses on the implications of rising global value chains (GVCs) on international trade and analysis the impacts on small open economies. Small open economies rely heavily on international trade and are highly integrated in global production networks but have so far been hardly considered in the literature. On the example of Austria, an industrialized small open economy in central Europe, we addressed the role of small open economies in a globalized economy. Based on the WIOD database we apply network analysis and use GVC as well as competiveness indicators to measure the associated risks as well as benefits. Findings imply for Austria a sharp turn in the focus of trade policy away from the traditional gross trade perspective. Austria’s competitiveness has been strengthened considerably via the participation in GVCs since resource and endowment constraints have been overcoming easier and foreign inputs are used in the production processes efficiently enabling vast economies of scale. Results also reveal that the promotion of service oriented activities which are a main source of the domestic value added content in manufacturing exports is of key importance for Austria’s competitiveness on the global market. In particular we found a mutual integration of EU enlargement countries of 2004 and Austria: Austria’s intermediate exports are mainly characterized by high knowledge- and service-intensive manufacturing goods, while the EU enlargement countries of 2004 specialize in low-skilled employment and less knowledge intensive services.
Abstract: There is evidence that Europe’s manufacturing activity is increasingly concentrated in a Central European (CE) core which the IMF in a recent publication also refers to as the German-Central European supply chain. This CE manufacturing core is dominated by Germany and in addition comprises Austria and the four Visegrád countries (the Czech Republic, Slovakia, Hungary and Poland). The case of Austria is particularly interesting because it is neither the primary technology leader within the country group, nor is it an offshoring destination and therefore takes an intermediate position. This study provides further empirical evidence for the growing concentration of European industrial production in the CE manufacturing core and explores in detail the structure and development of the regional supply chains over the period 1995-2011. This includes an analysis of the impact of international production integration on the value added share of manufacturing in the economy. The econometric results point towards differentiated effects for the members of the CE manufacturing core and the remaining EU Member States. Focusing on value added generated by the manufacturing sector, the industries which build the backbone of this regional manufacturing cluster are identified. Finally, the report investigates which factors are conducive to the intensification of international production sharing. In line with the notion of a production-investment-services nexus, it is found that (inward) FDI in the manufacturing sector is associated with higher degrees of production integration. Again, the econometric evidence suggests that some of the factors explaining international production sharing, such as the level of export sophistication, have differentiated effects for the members of the CE manufacturing core as compared to the other EU countries.
Abstract: Die vorliegende Studie zum Potenzial der BRICS-Staaten für die österreichische Außenwirtschaft diskutiert in einem ersten Schritt aktuelle makroökonomische Entwicklungen und strukturelle Aspekte der fünf BRICS-Staaten sowie die damit verbundenen Herausforderungen für die Zukunft. In einem zweiten Schritt wird die Außenhandelsverflechtung Österreichs mit diesen Ländern dargestellt und deren ökonomische Bedeutung für Österreichs Wirtschaft ermittelt. Strukturelle (mittels Constant-Market-Shares Analyse) und innovationsökonomische Merkmale der Exportaktivitäten werden in diesem Kontext diskutiert. Außerdem werden einzelne Sektoren anhand ihrer RCA Werte (Revealed Comparative Advantage) identifiziert, bei denen Österreich spezifische Branchenvorteile gegenüber den BRICS-Staaten aufweist. Auf Basis langfristiger Wirtschaftsprojektionen und der strukturellen Anpassungsdynamik Österreichs werden Exportentwicklungspfade abgeschätzt. In einem dritten Schritt wird die Sicht bereits aktiver sowie potenziell aktiver Akteure auf den Märkten der BRICS-Staaten betrachtet. Dazu wurden rund 400 Unternehmen mittels standardisiertem Fragebogen zu motivationalen Faktoren für ein Engagement in diesen Ländern, zu den Herausforderungen und Risiken in diesen Märkten sowie den Erfolgsfaktoren befragt. Interviews mit ExpertInnen aus Politik und Wirtschaft dienten darüber hinaus der Vertiefung der Analyseergebnisse. Auf Basis einer Synthese der Erkenntnisse dieser Untersuchungen werden abschließend Handlungsempfehlungen für die österreichische Wirtschafts- und Außenwirtschaftspolitik abgeleitet.
Abstract: Die vorliegende Studie untersucht die internationale Expansion der Pharmaindustrie in Österreich und stellt diese in den Kontext der zunehmenden weltwirtschaftlichen Verflech-tungen. Die Pharmaindustrie in Österreich besteht einerseits aus den Filialen einiger inter-national tätiger Großkonzerne und andererseits aus kleinen und mittelgroßen österrei-chischen Unternehmen, die bestimmte Nischenmärkte bearbeiten und nicht oder nur sehr selektiv international expandieren. Bedeutendes volkswirtschaftliches Gewicht haben vor allem einige wenige integrierte Pharmaunternehmen, die größere Produktionsstätten sowie Forschung und Entwicklung betreiben. Der österreichische Pharmamarkt wird vor allem von Vertriebsgesellschaften ausländischer Konzerne bearbeitet.
Abstract: This study investigates Austria’s positions in international production sharing and global value chains exploiting the recently available Global Input-Output Database (WIOD). Researchers and policy-makers become increasingly aware of the fact that production processes are more and more organised internationally, which implies that indicators based e.g. on gross export values become less meaningful as part of this value is made of imported intermediates. As such, statistics and indicators based on a value added rather than gross trade basis and emphasis on the actual (domestic) value added creation due to exports are needed for policy-makers and researchers to draw a more accurate picture of the link between trade and value added creation and the implications thereof. Making use of indicators for measuring different aspects of complex production relations established in the literature such as the degree of vertical specialisation, value added trade and global value chain income, we find that Austria has intensified its participation in international production sharing since 1995 as evidenced, e.g., by the substantial increase in its vertical specialisation index. Tight supplier-customer relationships, above all in medium-high- and high-technology-intensive manufacturing industries, with Germany and increasingly with the neighbouring CEEC economies have contributed strongly to this development. However, international production sharing is also inextricably linked to ‘employment sharing’, meaning that in the presence of vertical specialisation not all jobs related to Austrian exports are also located in Austria. In fact, if based on the individual countries’ labour productivities, Austrian exports embody more foreign than domestic jobs due to significantly lower productivity levels in some of the partner countries. Nevertheless, the development of Austrian exports has been very dynamic over the past decade as manifested for example in a trade surplus since the early 2000s. A counterfactual exercise that compares the actual amount of domestic jobs embodied in Austrian exports with the hypothetical amount of jobs that would be needed to produce Austria’s imports domestically suggests that foreign trade has a positive employment impact in Austria amounting to some 90,000 jobs in 2009 – a result that is closely linked to Austria’s trade balance surplus. The strong export performance of Austria is also revealed by the rising share in total EU value added exports which exceeded 3% in 2011, though this is sometimes masked by the fact that the share in global value added exports declined slightly between 1995 and 2011 as a result of new important players in the arena of international trade, above all China. Finally, analysing the trade slump of the year 2009 we find that ‘re-shoring’ activities of Austrian firms as well as the so-called ‘composition effect’ contributed to the crisis-related decline of Austrian exports.
Abstract: Die vorliegende Analyse der österreichischen Warenverkehrsbilanz diskutiert sowohl die zeitliche Entwicklung der Handelsbilanz und ihre zugrundeliegenden Faktoren als auch die bilateralen Bilanzen mit den wichtigsten Handelspartnern und die Handelsbilanz in ausgewählten Warengruppen. Mit ökonometrischen Verfahren werden kurz- und langfristige Effekte identifiziert und die strukturelle Komponente der Handelsbilanz geschätzt. Zudem wird der Einfluss der Finanzmarkt- und Wirtschaftskrise auf die Warenverkehrsbilanz ermittelt. In einem internationalen Vergleich werden Parallelen und Unterschiede zur deutschen und zur Schweizer Handelsbilanz gezeigt.
Abstract: Most firm-level research on the characteristics and strategies of globalized firms focuses on manufacturing industries while firm-level evidence on trade in services is still rare and has just recently begun to emerge. This study uses an unique dataset of Austrian service exporting firms over a four-year period to add to this literature. We show that service export participation is very low and highly concentrated among a few firms and that service exporters are on average larger and more productive than non-exporters. We also find that firm productivity increases with the number of export markets served. The detailed analysis on the export premium suggests the self-selection of firms as well as learning effects from exporting for export starters. The dynamic analysis reveals that the rate of export exits is high for export starters in the first year of exporting, especially for firms of small size. Movements into and out of exporting are however less frequent than moving in and out of individual markets. Entry and exit of markets (extensive margin) is an important component of overall export flows, especially for less popular markets, overall, however the intensive margin of trade contributes most. Analysis based on a Heckman sample selection specification including firm characteristics as well as the standard gravity variables on geographical characteristics of destination markets confirm this finding. In particular, distance to the destination market, firm productivity as well as destination market characteristics (market size, policy environment) significantly influence the probability of exporting but even more so the volume of service trade flows. Results from the counterfactual analysis suggest that export market growth and policy reforms produce the relative strongest impact on the entry into new markets. Hence, this decomposition of overall export growth into contributions attributable to the extensive and intensive margin allow for new insights for economic policy.
Abstract: A strong innovation performance based on R&D, product development and the implementation of advanced production technologies is key for the long-term competitiveness of European economies. This study investigates the effects of production offshoring on R&D and innovation activities of the firm in the home country. The analysis is based on a dataset of more than 3000 manufacturing firms from seven European countries. We employ propensity score matching to compare R&D and innovation activities of firms which have offshored production activities in a previous period to a control group of non-offshoring firms. The analysis finds no negative effect of production offshoring on innovation and technological capabilities of firms in the home country. On contrary, offshoring firms spend significantly more on R&D or product design, and invest more in process innovation than non-offshoring firms. These results support a view on internationalisation of firms that regards offshoring as a strategy of international expansion, and not a passive reaction of firms to a loss of their competitiveness. Our results indicate that this expansion goes hand in hand with innovation and process modernization at home.
Abstract: This study examines the economic impact on Austria of three possible new EU free trade agreements: (1) an EU-US agreement; (2) an EU-Canada agreement; and (3) an EUArmenia/Georgia/Moldova agreement. This is done with a computational model of the global economy. The trade agreements are modeled as a mix of preferential tariff reductions and reductions in non-tariff measures that affect both goods and services. The primary impact follows from NTM reduction rather than tariff reductions. Of the three agreements, a potential agreement with the US is by far the most important. This follows from the size of the US economy. The US accounts for roughly one-quarter of extra-EU Austrian exports. Overall, the combined impact of the FTAs studied is positive. Most of the impact follows from investment response. Productivity gains from NTM reduction mean a combination of increased national income, higher wages, and employment, and increased capital stocks for the Austrian economy.
Abstract: This study investigates the determinants of bilateral Greenfield FDI projects and flows in knowledge intensive business services from OECD/BRIC countries to the EU countries for the period 2003-2010. Greenfield FDI projects are distinguished by type of activity: (i) business services, (ii) design, development and testing activities, (iii) headquarters activities and (iv) R&D services. Another aim of this study is to provide new empirical evidence on the patterns of Greenfield investments in knowledge intensive business services over time, source country and destination country. For Austria, the number of Greenfield investments in headquarter functions remains stable over time whereas Greenfield investments in R&D and related activities declined during the sample period. The same holds true for the number of jobs generated through greenfield investments. The results using panel count data models show that wage costs, tertiary education, corporate taxes, having a common border and sharing a common language all play a significant role in determining bilateral Greenfield FDI projects in knowledge intensive services. However, the impact of corporate taxation and labour costs differs widely across the functions and does not play a role in Greenfield investments in R&D and development, design and testing services.
Abstract: Foreign trade and foreign direct investments (FDI) are key elements for economic development and growth of both a country and its regions. This paper focuses on foreign trade and FDI in Austrian regions (Bundesländer). Unfortunately, data on regional trade in Austria is only available on a very limited basis. The aim of this study is to develop new methodologies for the estimation of exports and imports of Austrian regions and analyse the data generated by this methodology. The basic idea is to disaggregate national foreign trade data to the regional level by using national input-output, regional employment and other supplemental data. This allows estimating Austrian regional foreign trade for the years 1999 to 2009. The study shows a large variation in trade among regions. Lower Austria, Upper Austria, Styria and Vorarlberg are the regions with the highest export share. The importance of regional trade increases between 1999 and 2008; the crisis in 2009 had a strong negative impact. Furthermore, the competitiveness of regions differs considerably. Only three regions, Upper Austria, Styria and Vorarlberg, show trade surplus.
Abstract: This paper develops a structural empirical general equilibrium model of aggregate bilateral trade with path dependence of country-pair level exporter status. Such path dependence is motivated through informational costs about serving a foreign market for first-time entry of (firms in) an export market versus continued export services to that market. We embed the theoretical model into a structural dynamic stochastic econometric model of bilateral selection into import markets and apply it to a data-set of aggregate bilateral exports among 120 countries over the period 1995-2004. In particular, we disentangle the role of changes in trade costs, in labor endowments, and in total factor productivity for trade, bilateral market entry, numbers of firms active, and welfare. Dynamic gains from trade differ significantly from static ones, and path-dependence in market entry cushions effects of impulses in fundamental variables that are detrimental to bilateral trade.
Abstract: In this paper, we examine possible medium-term changes in EU trade policy, including the negotiation and implementation of Free Trade Agreements (FTAs) with regional entities like ASEAN and the NAFTA countries. We also examine the possible conclusion of the Doha Round of multilateral trade negotiations. Such changes in policy at the regional and global level imply changes in trade policy and industrial structure that affect Austria as part of the network of European industry. To accomplish this, we work with a computable general equilibrium model (CGE) of the Austrian economy and its major global trading partners. This model is benchmarked to 2020 macroeconomic projections. The modeling scenarios are based on a mix of tariff reductions for goods and non-tariff barriers (NTB) reductions for services. The services liberalization scenario is based on protection with an “actionability” assumption. The results include estimated changes in GDP, welfare, as well as in the value added contained in Austrian exports. The focus on value added provides important insight to the overall impact on the Austrian economy. In all policy cases examined, the striking messages is the importance of high technology services (ICT and other business services) to the total growth in Austrian exports, on a value added basis. This reflects both the high value added content of trade in this sector, and the apparent comparative advantage of Austria in this sector in the 2020 baseline.
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Abstract: This report contains three separate papers, each addressing selected issues concerning natural gas policy and security of gas supply in Europe. The over-arching themes are vulnerability (to supply disruptions, to supplier pricing power) and fragmentation; and measures designed to overcome them, namely interconnection and consolidation of bargaining power. The first paper contains a review of some of the economic effects of, and subsequent policy reactions to, the January 2009 cut of Russian gas supplies through the Ukraine Corridor, with a particular focus on Bulgaria and on EU policy. The second paper provides an analysis of the current state of gas relations between Ukraine and the Russian Federation, with a focus on the Ukrainian perspective and on recent political developments in that country. The third paper provides an analysis of the case for consolidating buyer power in line with the concept of an EU Gas Purchasing Agency.
Abstract: What goods to export and where to sell them? Our research was pursuing these two major goals. The first one is related to detecting countries where Austria has good perspectives for boosting its export. The basic idea was to use macroeconomic data set detecting the significant variables. We found that besides the GDP of importer and distance, there are more important variables like being landlocked, language, inflation, and so forth. We found recent GDP growth rate to be non-significant in more than just the very basic models. Taking all explanatory variables into account we could calculate the country-effects, telling us how Austrian exporters are under or over-represented within each country. It is argued that exporters could put additional efforts into quickly growing countries where Austria is still under-represented. The second goal was a more detailed view on the role of transport costs. Gravity model was shown to be correct and robust (even for a class of functions of distance). The detailed accounting for transport costs requires consideration of different transport modes and ratios of value to weight. Distance suppresses trade of cheap goods most, suggesting that Austria has no disadvantage in export of high-tech goods (like pharmaceutics and complex machines) over long distances. In particular, pharmaceutical sector has growing potential and trade with Russia is one of its perspectives.
Abstract: The amount of water embodied in Austrian imports of selected agricultural products is quantified. These imports are analysed by a dynamic model that is based on the water footprint concept. The model quantifies the water savings potential using a database including more than 200 countries and regions. Austria could save up to 28% of the water embodied in coffee by substituting the current coffee imports from water inefficient countries by efficiently produced coffee. The water savings potential from wheat imports amounts to 22% that from orange imports equals almost 20% of the current amount of embodied water. We calculate a global water value equal to € 0.013 per cubic meter of water. The international trade of coffee, wheat and oranges trades embodied water equal to € 51.6 billions per year with a share of 92.6% (€ 47.8 billions) traded at commodity exchanges.
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Abstract: Using the Labour Force Survey (LFS) we explore the difference international migration makes for the distribution of occupational levels for any given level of education in the two countries of interest: Austria and Germany. Migrant outcomes are also being compared with home country outcomes, i.e. Serbia and Turkey. We find that education is imperfectly portable across national borders. Austrian employers treat schooling from certain countries of origin differently from the way they treat schooling from natives. Educational levels completed in Western European countries are obviously more transferable across national borders than educational levels completed elsewhere. Workers in their home country all have similar occupational returns to education but migrants in Austria or Germany lag considerably behind. Middle and higher education in particular are not equally rewarded if from abroad. The low value of foreign-acquired education may reflect discrimination, differences in school quality across continents of origin, imperfect knowledge of the evaluation of foreign credentials on the side of the employer or the low compatibility of the foreign-acquired education with the requirements and the specific orientation of the host country labour market.
Abstract: Studies regarding the migrants’ impact upon performance variables and in particular upon productivity growth – which is the focus of this study - are few although there has been an increased interest in this area. This study addresses this issue in a cross-country and regional perspective with a focus on EU-27 countries at the industry level. In the first part of the study the focus is on employment patterns of migrants regarding their shares in employment, the composition in terms of places of origin, and an important aspect of the analysis is the study of their ‘skills’ (measured by educational attainment levels) and the utilisation of these skills relative to those of domestic workers. The second part of the study conducts a wide range of ‘descriptive econometric’ exercises analysing the relationship between migrants employment across industries and regions and output and productivity growth. We do obtain robust results with respect to the positive impact of the presence of high-skilled migrants especially in high-education-intensive industries and also more generally – but less robustly – on the relationship between productivity growth and the shares of migrants and of high-skilled migrants in overall employment. There is also an analysis of the impact of different policy settings with respect to labour market access of migrants and to anti-discrimination measures. The latter have a significant positive impact on migrants’ contribution to productivity growth. In the analysis of impacts of migrants on value added and labour productivity growth at the regional level we add migration variables to robust determinants of growth and find positive and significant relationships between migrants’ shares (and specifically of high-skilled migrants) and regional productivity growth. The limitations of the study with respect to data issues, causality and selection effects are discussed which give scope for further research.
Abstract: This project focuses on comparing the qualification structure of migrants residing in Austria as well as their over- and underqualification rates to other EU countries. The skill structure of foreign born residing in Austria has improved slightly in the last years. Austria is, however, characterised by a high share of medium skilled migrants and a low share of highly skilled migrants. In addition among the pool of migrants in the EU from a given country, Austria generally selects the less qualified. The location decisions of highly skilled migrants are mostly governed by income opportunities, labour market conditions, ethnic networks and a common official language. Over- and under-qualification rates among the foreign born in Austria largely accord with the European average, the largest part of the differences can be explained by differences in qualification and country structure between the foreign born in Austria and the EU. Native-foreign born differentials in employment rates are, however, significantly higher in Austria than in other EU countries.
Abstract: In this study we analyse the labour market performance of Romanian and Bulgarian return migrants and whether it really pays off to return home. We looked at the employment dynamics of returnees from the perspective of employment and occupational status switches to capture the effects of the work experience abroad on the upgrade in the home labour market. After predicting the wages and measuring the wage premium upon return, we apply an endogenous switching ordered probit model to estimate simultaneously the decision to migrate temporarily and the determinants of an upgrading of labour market performance upon return. The labor market performance of return migrants is analysed by using the 2005 World Bank Surveys in Bulgaria and Romania. The main conclusion is that the interdependence in the decision-making between return migration and labour market participation requires counting them simultaneously. While, the labour market participation upon return are strongly determined by the intentions of a permanent return and the expectation of return premiums for the skills and experience acquired abroad, the permanent intentions of return are determined by the experience abroad, the family ties and by intentions of other household members to migrate.
Abstract: This study quantifies possible impacts of medium-term structural changes in the global economy on the Austrian economy. Emphasis is placed on the effects of continued medium term growth in emerging markets, especially in Asia and Latin America, on the structure of the Austrian economy. The issues here include the identification of price effects (due to increased demand for raw materials) that can be expected, as well as how these may impact the commodity composition of both exports and imports. Underlying global trends also involve both investment patterns and total factor productivity trends at a more regional level, also impacting on the Austrian economy. Finally, these structural changes at the global level also lead to changes in household incomes and the cost of living in Austria, impacting on patterns of inequality in Austria at the household level.
Abstract: China is a rising global power with a growing role and impact on the world’s energy markets as well as on the Earth’s climate system. China pursues its development in an essentially non-confrontational manner, a vision encapsulated by the notion of peaceful rise which is viewed positively in the world’s major capitals. Nevertheless, China’s rapid growth represents a genuine global challenge and raises many questions. How is China dealing with its growing need for imported crude oil? What is the impact of China’s rise on the global oil market, notably in terms of oil price developments? Are Chinese actions on oil markets different from those of other major importers? What opportunities and risks arise as a result of china’s growing role on the global oil market from the viewpoint of other global players? In this report we seek to offer some answers to those questions with a review of China’s developing energy policy, of the actions and revealed preferences of its national oil companies, and of broader economic and geopolitical analyses of the impact of China’s growing oil consumption on other global players.
Abstract: This study quantifies the CO2 emissions embodied in Austrian exports and imports, using a two region-input output approach (Austria and the rest of the world). The approach considers differences in production technologies between Austria and the rest of the world, concerning the CO2 coefficients (per unit of output) and the input-output structure (both are taken from data for EU 27). The CO2 emissions embodied in Austrian imports are considerably higher than CO2 emissions embodied in exports, i.e., CO2 for Austrian demand is leaking to the rest of the world. From 1995 to 2005 this negative balance of CO2 in trade has diminished in absolute terms, from 11 million tons (1995) to 6.4 million tons (2005), as CO2 embodied in exports has grown more rapidly than CO2 embodied in imports, thereby creating a huge potential for future carbon leakage.