Competing for Capital: Europe and North America in a Global Era

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Georgetown University Press, Oct 19, 2000 - Political Science - 352 pages

As corporations search for new production sites, governments compete furiously using location subsidies and tax incentives to lure them. Yet underwriting big business can have its costs: reduction in economic efficiency, shifting of tax burdens, worsening of economic inequalities, or environmental degradation.

Competing for Capital is one of the first books to analyze competition for investment in order to suggest ways of controlling the effects of capital mobility. Comparing the European Union's strict regulation of state aid to business with the virtually unregulated investment competition in the United States and Canada, Kenneth P. Thomas documents Europe's relative success in controlling—and decreasing—subsidies to business, even while they rise in the United States.

Thomas provides an extensive history of the powers granted to the EU's governing European Commission for controlling subsidies and draws on data to show that those efforts are paying off. In reviewing trends in North America, he offers the first comprehensive estimate of U.S. subsidies to business at all levels to show that the United States is a much higher subsidizer than it portrays itself as being.

Thomas then suggests what we might learn from the European experience to control the effects of capital mobility—not only within or between states, but also globally, within NAFTA and the World Trade Organization as well. He concludes with policy recommendations to help promote international cooperation and cross-fertilization of ways to control competition for investment.

 

Contents

Bidding for Business An Unclosable Can of Worms?
1
The Market for Investment
21
European Union Control of State Aid
50
The Development of the State Aid Regime
86
The North American Nonregimes
148
How Much Bang for the Euro?
198
Lessons for Theory Lessons for Policy
249
Bibliography
280
Notes on Game Theory
308
Text of Articles 8789 EEC
313
A Portrait of State Aid
316
NGOs Campaigning on Corporate SubsidiesAccountability
318
Index
325
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About the author (2000)

Kenneth P. Thomas is an associate professor of political science and fellow at the Center for International Studies, University of Missouri-St. Louis. He is the author of Capital Beyond Borders: States and Firms in the Auto Industry,1960-94 (Macmillan, 1997).

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