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Article

Wastewater Tariffs in Spain  

Marián García-Valiñas and Fernando Arbués

Urban water cycle services culminate in wastewater services; that is, with the collection, transport, and treatment of wastewater. Wastewater management in Spain is not a straightforward issue. In fact, the European Commission has initiated infringement procedures against Spain for not fully complying with the Urban Waste Water Treatment Directive. Yet, appropriate collection and treatment would require a large monetary investment that is increasingly difficult to carve out of existing government revenues. In this context, wastewater pricing emerges as a significant tool for achieving cost recovery and environmental protection aims. In Spain, local governments are responsible for providing wastewater services in urban areas and for setting the prices for those services. Spanish regional governments are in charge of specific pollution taxes on wastewater, which are included in the individual users’ water bills. Moreover, in most Spanish cities, the urban water tariffs for wastewater services (like water supply tariffs) are different for different users, representing the most common distinction between residential and nonresidential users. Additionally, specific tariffs are frequently imposed for different customer groups within both categories. In this respect, it is common to include pollution charges for industrial users, increasing their water prices according to the environmental impact of their wastewater discharges. The result is a very complex map of water-pricing and taxing in Spain.

Article

Tariffs and the Macroeconomy  

Xiangtao Meng, Katheryn N. Russ, and Sanjay R. Singh

For hundreds of years, policymakers and academics have puzzled over how to add up the effects of trade and trade barriers on economic activity. The literature is vast. Trade theory generally focuses on the question of whether trade or trade barriers, like tariffs, make people and firms better off using models of the real economy operating at full employment and a net-zero trade balance. They yield powerful fundamental intuition but are not well equipped to address issues such as capital accumulation, the role of exchange rate depreciation, monetary policy, intertemporal optimization by consumers, or current account deficits, which permeate policy debates over tariffs. The literature on open-economy macroeconomics provides additional tools to address some of these issues, but neither literature has yet been able to answer definitively the question of what impact tariffs have on infant industries, current account deficits, unemployment, or inequality, which remain open empirical questions. Trade economists have only begun to understand how multiproduct retailers affect who ultimately pays tariffs and still are struggling to meaningfully model unemployment in a tractable way conducive to fast or uniform application to policy analysis, while macro approaches overlook sectoral complexity. The field’s understanding of the importance of endogenous capital investment is growing, but it has not internalized the importance of the same intertemporal trade-offs between savings and consumption for assessing the distributional impacts of trade on households. Dispersion across assessments of the impacts of the U.S.–China trade war illustrates the frontiers that economists face assessing the macroeconomic impacts of tariffs.

Article

European Trade Policy in the 19th Century  

Markus Lampe

Trade policy is one determining factor of 19th-century globalization, alongside transport and communication innovations and broader institutional changes that made worldwide commodity and factor flows possible. Four broad periods, or trade policy regimes, can be discerned at the European level. The first starts at the end of the French Revolutionary and Napoleonic wars that had led to many disruptions in trade relations. Governments tried to recover from the financial impact of the wars and to mitigate the adjustment shocks to domestic producers that came with the end of the wars. Very restrictive trade policies were thus adopted in most places and only slowly dismantled over the following decades as some of the welfare costs of, for example, agricultural protection became evident. The second period dated from the mid-1840s, which saw the liberalization of protective grain tariffs in many European countries, to the mid-1870s, when trade liberalization reached its maximum. This period witnessed unilateral trade liberalizations, but is most famous for the spread of a network of bilateral trade agreements across Europe in the wake of the Cobden–Chevalier treaty between France and the United Kingdom in 1860. From the 1870s, industrial and commercial crises and falling prices in agriculture due to global market integration led governments to search for solutions to these policy challenges. Many European countries thus increased protection for agriculture and manufactured goods in which domestic import-competing producers struggled. At the same time, demands for renegotiations threatened the treaty network, and lapsing agreements were only provisionally prolonged. From the late 1880s, the struggle between protection for import-competing producers and market access abroad for export-oriented producers led to internal and external conflicts over trade policy in many countries, including trade (or tariff) “wars.” A renewed network of less ambitious trade treaties than those of the 1860s restored a fragile equilibrium from the early 1890s, to be renewed and renegotiated roughly every 12 years as treaties approached their expiration date. When looking at the country and commodity level it can easily be appreciated that the more or less common shifts during these periods at the European level were more pronounced in some countries than in others. For example, the United Kingdom, the Netherlands, Switzerland, and Belgium shifted more decisively to free trade and remained there, while liberalization was much less pronounced and more decisively undone in Portugal, Spain, Russia, and the Habsburg monarchy. The experiences of the Scandinavian countries, Germany, and France lie somewhere in between. Turkey and the countries that gained independence from the Ottoman Empire in the 19th century started as (forced) free traders and from the 1880s increased their duties, in part to meet growing fiscal demands. At the commodity level, tariffs on raw materials remained generally low and did not follow the protectionist backlash that affected foodstuffs. One exception was (initially) “tropical” goods such as sugar, coffee, tea, and tobacco, where many countries levied high tariffs to extract fiscal revenue. For manufactured goods, liberalization and protectionist backlash were milder than in agriculture, although there are many exceptions to this rule.

Article

An Assessment of the Widespread Use of Increasing Block Tariffs in the Municipal Water Supply Sector  

Dale Whittington and Céline Nauges

The design of municipal water tariffs requires balancing multiple criteria such as financial self-sufficiency for the service provider, equity among customers, and economic efficiency for society. Globally, various forms of water tariffs are in use (e.g., tariffs based on fixed or volumetric charges, single and two-part tariffs, and increasing or decreasing block tariffs) but increasing block tariffs (IBTs) have become popular worldwide over the last few decades for two main reasons. Apart from the fact that IBTs incentivize households to save water by charging large volumes at a higher price, there is a widespread belief that IBTs are pro-poor. The latter would be the consequence of providing all households with a minimum amount of water at a low (subsidized) price while large water users pay higher prices. However cross-subsidization between wealthy and poor households will occur only if poor households’ consumption falls in the low (subsidized) block and if rich households consume in the higher block and pay a price that is above the average cost of supply. These two conditions are rarely met in reality and IBTs often fail to allocate subsidies to the poor effectively. There are a few examples of water utilities making adjustments to the tariff to take into account that poor households with large families are likely to be adversely affected by IBTs. However, the provision of a minimum amount of water for free (as in South Africa), the design of household-specific low-cost water allowances (as in California), or tariffs being adjusted based on household size do not usually improve the targeting of subsidies to the poorest households. The widespread use of IBTs is difficult to rationalize, in particular while knowing that the use of a (simple) uniform volumetric tariff where water provision is charged at its full cost could improve social welfare by removing price distortions and would be easier for households to understand than IBTs. This simple tariff could be combined with some consumer assistance programs to help the poorest households pay their bills.

Article

Water Tariffs in Spain  

Fernando Arbués and Marián García-Valiñas

In the current context of climate change, water scarcity has become the center of an intense debate in recent years. Spain is a country affected by strong regional differences in terms of weather; thus, the quality and availability of water resources vary widely depending on the area, and the country is plagued by droughts and problems with water quality. Nevertheless, urban water prices in Spain are among the lowest in the European Union. Moreover, it is a federal country where subcentral governments (regional and local) are autonomous entities with different responsibilities in the design of water policies. The extremely atomized local panorama and the strong power of the regional governments have led to a highly complex system with a wide range of water price levels and structures. Since the heterogeneity is so great, this article focuses on the tariffs related to the water supply service in the 15 largest Spanish cities. In general, urban water tariffs commonly distinguish between residential and non-residential users. Additionally, there are usually specific tariffs for different customer categories within both residential and non-residential users, which are not always justified in terms of the equity principle. It is important to note that in most cities the eligibility criteria for these special tariffs usually add more complexity to the tariff system and adversely affect horizontal equity. All these factors contribute to the great complexity of Spain’s water-pricing map. The heterogeneous tariff system found in most Spanish cities runs counter to equity principles and can send the wrong signal to users about water scarcity, thereby hindering compliance with the resource sustainability objective. Thus, most Spanish cities require a simplification of the tariff system.

Article

Economic Sanctions and International Security  

David M. Rowe

Economic sanctions are a versatile instrument of statecraft used by states to try to influence the behavior of foreign actors by threatening or restricting customary cross-border trade or financial flows to an intended target. Examples of economic sanctions are retaliatory tariffs imposed in trade disputes and the complete cessation of economic flows aimed at undermining a certain regime. The importance of economic sanctions to policy makers has spawned a substantial amount of scholarly work dominated by two questions: whether sanctions “work” and whether states should use them. The long-running scholarly debate about whether sanctions work is essentially a dispute over how to classify cases. However, comparing cases of success and failure is problematic, in part because the very notion of what constitutes the successful use of sanctions is not clear and policy makers rarely seek to influence a single target or pursue a single policy goal when using sanctions. One of the most promising developments in the literature has been the increasing use of game theory to analyze sanctions, but this approach does not adequately determine the appropriateness of sanctions as a policy instrument. Sanctions research should focus instead on the basic strategic dynamics of the sanctions episode in order to identify those factors that contribute most strongly to the effective use of sanctions and to enable policy makers to understand more about the consequences of using sanctions as an instrument of statecraft.

Article

Do Households Respond to the Marginal or Average Price of Piped Water Services?  

Joseph Cook and Daniel Brent

Water utilities commonly use complex, nonlinear tariff structures to balance multiple tariff objectives. When these tariffs change, how will customers respond? Do customers respond to the marginal volumetric prices embedded in each block, or do they respond to an average price? Because empirical demand estimation relies heavily on the answer to this question, it has been discussed in the water, electricity, and tax literatures for over 50 years. To optimize water consumption in an economically rational way, consumers must have knowledge of the tariff structure and their consumption. The former is challenging because of nonlinear tariffs and inadequate tariff information provided on bills; the latter is challenging because consumption is observed only once and with a lag (at the end of the period of consumption). A large number of empirical studies show that, when asked, consumers have poor knowledge about tariff structures, marginal prices, and (often) their water consumption. Several studies since 2010 have used methods with cleaner causal identification, namely regression discontinuity approaches that exploit natural experiments across changes in kinks in the tariff structure, changes in utility service area borders, changes in billing periods, or a combination. Three studies found clear evidence that consumers respond to average volumetric price. Two studies found evidence that consumers react to marginal prices, although in both studies the change in price may have been especially salient. One study did not explicitly rule out an average price response. Only one study examined responsiveness to average total price, which includes the fixed, nonvolumetric component of the bill. There are five messages for water professionals. First, inattention to complex tariff schedules and marginal prices should not be confused with inattention to all prices: customers do react to changes in prices, and prices should remain an important tool for managing scarcity and increasing economic efficiency. Second, there is substantial evidence that most customers do not understand complex tariffs and likely do not respond to changes in marginal price. Third, most studies have failed to clearly distinguish between average total price and average volumetric price, highlighting the importance of fixed charges in consumer perception. Fourth, evidence as of late 2020 pointed toward consumers’ responding to average volumetric price, but it may be that this simply better approximates average total price than marginal or expected marginal prices; no studies have explicitly tested this. Finally, although information treatments can likely increase customers’ understanding of complex tariffs (and hence marginal price), it is likely a better use of resources to simplify tariffs and pair increased volumetric charges with enhanced customer assistance programs to help poor customers, rather than relying on increasing block tariffs.

Article

Preferential Trade Agreements: Recent Theoretical and Empirical Developments  

James Lake and Pravin Krishna

In recent decades, there has been a dramatic proliferation of preferential trade agreements (PTAs) between countries that, while legal, contradict the non-discrimination principle of the world trade system. This raises various issues, both theoretical and empirical, regarding the evolution of trade policy within the world trade system and the welfare implications for PTA members and non-members. The survey starts with the Kemp-Wan-Ohyama and Panagariya-Krishna analyses in the literature that theoretically show PTAs can always be constructed so that they (weakly) increase the welfare of members and non-members. Considerable attention is then devoted to recent developments on the interaction between PTAs and multilateral trade liberalization, focusing on two key incentives: an “exclusion incentive” of PTA members and a “free riding incentive” of PTA non-members. While the baseline presumption one should have in mind is that these incentives lead PTAs to inhibit the ultimate degree of global trade liberalization, this presumption can be overturned when dynamic considerations are taken into account or when countries can negotiate the degree of multilateral liberalization rather than facing a binary choice over global free trade. Promising areas for pushing this theoretical literature forward include the growing use of quantitative trade models, incorporating rules of origin and global value chains, modeling the issues surrounding “mega-regional” agreements, and modelling the possibility of exit from PTAs. Empirical evidence in the literature is mixed regarding whether PTAs lead to trade diversion or trade creation, whether PTAs have significant adverse effects on non-member terms-of-trade, whether PTAs lead members to lower external tariffs on non-members, and the role of PTAs in facilitating deep integration among members.

Article

The Health Impact of Water and Sanitation Utilities Privatization and Regulation in Sub-Saharan Africa  

Lisa Bagnoli, Salvador Bertomeu-Sanchez, and Antonio Estache

As of 2017, the urban access rate to safe water sources in 2017 stood at 84% while rural access was still around 45%. The rates for sanitation were 44% and 22%, respectively. Since the 1980s many high-profile reforms supported by international organizations have been implemented in the region in an attempt to close the access gaps in the water and sanitation sector (WSS). Two recommendations with high international exposure were an increased role for large-scale private sector participation in the management and financing of national or regional utilities and the creation of separate sector regulatory agencies to increase the independence of regulation. Both reforms seemed to contribute to improved water access rates, at least for the urban population, but not enough to catch up with the demands of a fast-growing population; and both failed to deliver on sanitation. The progress these initiatives allowed was correlated with improvements in the average health outcomes for some indicators (i.e., under-five mortality associated to diarrhea) but once again, it was not enough and was not fairly distributed. Indeed, improvements seem to have mostly benefited upper- and middle-income groups. Unfortunately, an evaluation of the health effects of these two reforms have not yet been fully established empirically, which is why it seems prudent to talk about correlations rather than causal effects. Most of the statistically robust evidence on the impact of utilities and regulatory reforms on health is incomplete because details of several dimensions of these reforms and their context are not measured consistently across countries or within countries. In addition, the small amount of econometric evidence available is based on pre-2010 data for SSA. The imperfect data is however solid enough to suggest that without further governance changes in the region, the health risks are likely to increase. This is because due to the high population growth rate of the region, closing the access gaps is likely to get tougher considering current investment levels and technological choices. The necessary changes require improving the match between policy and technological choices, including service delivery technologies that are consistent with the ability to pay and the tariff and subsidy levels adopted to ensure cost recovery without excluding any category of users.

Article

Hybrid Modes of Urban Water Delivery in Low- and Middle-Income Countries  

Alison Post and Isha Ray

Most urban residents in high-income countries obtain piped and treated water for drinking and domestic use from centralized utility-run water systems. In low- and middle-income countries (LMICs), however, utilities work alongside myriad other service providers that deliver water to hundreds of millions of city-dwellers. Hybrid modes of water delivery in urban areas in low- and middle-income countries are systems in which a variety of state and nonstate actors contribute to the delivery of water to households, schools, healthcare facilities, businesses, and government offices. Historically, the field has evolved to include within-utility networks and outside-the-utility provision mechanisms. Utilities service the urban core through network connections, while nonstate, smaller-scale providers supplement utility services both inside and outside the piped network. The main reform waves since the 1990s—privatization and corporatization—have done little to alter the hybrid nature of provision. Numerous case studies of nonutility water providers suggest that they are imperfect substitutes for utilities. They reach millions of households with no access to piped water, but the water they deliver tends to be of uncertain quality and is typically far more expensive than utility water. Newer work on utility-provided water and utility reforms has highlighted the political challenges of private sector participation in urban water; debates have also focused on the importance of contractual details such as tariff structures and investor incentives. New research has produced numerous studies on LMICs on the ways in which utilities extend their service areas and service types through explicit and implicit relationships with front-line water workers and with supplemental nonstate water suppliers. From the nonutility perspective, debates animated by questions of price and quality, the desirability or possibility of regulation, and the compatibility (or lack thereof) between reliance on small-scale water providers and the human right to safe water, are key areas of research. While understanding the hybrid nature of water delivery is essential for responsible policy formulation and for understanding inequalities in the urban sphere, there is no substitute for the convenience and affordability of universal utility provision, and no question that research on the conditions under which particular types of reforms can improve utility provision is sorely needed.

Article

Water as a Merit Good  

Michael Hanemann and Dale Whittington

In economics, a merit good is a good which it is judged that an individual or group of individuals should have (at least up to a certain quantity) on the basis of some concept of need, rather than on the basis of ability or willingness to pay. Examples include public elementary education and free hospitals for the poor alongside access to safe, affordable, and reliable water and sanitation. Exactly how a merit good is provided can be subjected to an economic test, but not whether the merit good should be provided. While there are some overlaps in application, the concept of a merit good is distinct from other economic concepts: A merit good may or may not be a public good, and it may or may not involve an externality. However, water and sanitation infrastructure may indeed be viewed as a form of social overhead capital. A merit good is an economic concept; the human right is an ethical concept—and, sometimes, a legal concept. That said, the concept of a merit good and the judgment that a particular item is a merit good clearly have an ethical component. If one accepts the existence of a human right to water and sanitation, that could certainly motivate a government decision to make the provision of water and sanitation a merit good. Even if a commodity is deemed to be a merit good, that still leaves open questions: To which group of people should it be provided as a merit good? In what quantity should it be provided? At what price, if any? By whom should it be provided? And how should the cost be funded?

Article

The Development Path of Urban Water and Sanitation Tariffs and Subsidies: A Conceptual Framework  

Dale Whittington, Marcus Wishart, David Kaczan, Hua Wang, Xiawei Liao, and Si Gou

The provision of universal, high-quality piped water and sanitation services on a financially sustainable basis continues to elude many urban areas globally. Water services suffer from political, technical, and financial “disequilibria,” in which governments are challenged to improve services, households are unwilling or unable to pay to cover the increased costs associated with those services, and both production and consumption efficiency remains low due to insufficient capital investment, low operating budgets, and poorly designed tariffs. Cities typically move along a water development path from low- to high-quality service provision, with movement between phases facilitated by shifts in these disequilibria. In the first phase, water supply coverage increases but quality of service and efficiency of consumption and production stagnates, trapped by insufficient government transfers and low tariffs. In the second phase, economic growth facilitates increased revenues, allowing for investments in service quality and increasing access to improved sanitation. Production efficiency improves, but consumption efficiency remains low due to weak price signals and poorly targeted subsidies, and environmental quality often degrades. In the third phase—which remains aspirational for many cities—governments and citizens demand improved environmental quality as well as improved service quality. Investments are made to improve the resilience of supply, and subsidies are more carefully targeted toward the poor. China demonstrates many of these patterns, with variation across cities reflecting different levels of development. There are, however, some differences that are a consequence of the country’s centrally planned economy prior to 1978. Reforms underway in China highlight the challenges of achieving this “third phase” urban water policy. These include revisions to the existing increasing block tariffs to improve financial sustainability, increased use of information provision to improve consumption efficiency, and asset management and investment planning that weighs the benefits and costs of new capital investments in the context of climate change.

Article

Urban Water Regulation and Health: The Case of Chile  

Michael Hantke-Domas and Ronaldo Bruna

In 50 years, Chile achieved nearly full urban water and sanitation coverage—even higher than some developed countries. Furthermore, in just a decade, the country obtained full urban wastewater treatment, making it probably the only developing country that will successfully meet the Sustainable Development Goals (SDGs) in this matter. These achievements can be attributed to policies oriented towards the incremental or gradual improvement of the water and sanitation sector sustained for more than 50 years. This policy was mainly focused on (a) increasing public investment in expanding coverage levels, both for potable water and sewerage; (b) reducing enteric diseases and infant mortality; (c) improving child nutrition; (d) streamlining public utilities; (e) establishing a legal framework for economic regulation applied by an independent body applicable to all utilities; (f) building efficient institutions; (g) a full cost recovery tariff policy; (h) bringing private capital into the industry; (i) subsidizing those who need it most; and (j) de-politicizing the sector. The Chilean experience is not well documented or, at least, there are few references regarding its success story, which reinforces the motivation to understand its history.

Article

Neoliberalism and Free Trade in Latin America  

Robert Jordan

First utilized in Latin America in response to the mid-20th-century decline of populist economic policymaking in the region, modern neoclassical theory, or neoliberalism, can be generally defined as a market-oriented form of economy policymaking that seeks to decentralize state authority and redefine state administrative responsibilities through deregulation, privatization, and the creation of common markets. Based on principles of classical 19th-century economic liberalism, the economic and political framework of neoliberalism advocates for a dramatically limited role for the state, which should only act to maintain the integrity of contract law and private property as a means of supporting the market. In the absence of state intervention, neoliberalism in Latin America alternatively emphasized the role of multilateral organizations, such as the International Monetary Fund, the World Bank, Inter-American Development Bank, and the U.S. Agency for International Development in bringing financial stability and growth to the region through the manipulation of interest rates, the devaluation of exchange rates, and the establishment of free-market pricing of goods. Ultimately, the widespread implementation of neoliberal reforms through the 1980s and 1990s ushered in a new era of transnational economic policymaking that had long-term, mixed results for the environmental, political, and social landscape of Latin America.

Article

Andrew Jackson and US Foreign Relations  

J.M. Opal

The foreign relations of the Jacksonian age reflected Andrew Jackson’s own sense of the American “nation” as long victimized by non-white enemies and weak politicians. His goal as president from 1829 to 1837 was to restore white Americans’ “sovereignty,” to empower them against other nations both within and beyond US territory. Three priorities emerged from this conviction. First, Jackson was determined to deport the roughly 50,000 Creeks, Cherokees, Choctaws, Chickasaws, and Seminoles living in southern states and territories. He saw them as hostile nations who threatened American safety and checked American prosperity. Far from a domestic issue, Indian Removal was an imperial project that set the stage for later expansion over continental and oceanic frontiers. Second and somewhat paradoxically, Jackson sought better relations with Great Britain. These were necessary because the British Empire was both the main threat to US expansion and the biggest market for slave-grown exports from former Indian lands. Anglo-American détente changed investment patterns and economic development throughout the Western Hemisphere, encouraging American leaders to appease London even when patriotic passions argued otherwise. Third, Jackson wanted to open markets and secure property rights around the globe, by treaty if possible but by force when necessary. He called for a larger navy, pressed countries from France to Mexico for outstanding debts, and embraced retaliatory strikes on “savages” and “pirates” as far away as Sumatra. Indeed, the Jacksonian age brought a new American presence in the Pacific. By the mid-1840s the United States was the dominant power in the Hawaiian Islands and a growing force in China. The Mexican War that followed made the Union a two-ocean colossus—and pushed its regional tensions to the breaking point.

Article

Chinese Merchants in Japan and Korea  

Jin-A Kang

In the mid-19th century, Chinese merchants moved to the treaty ports of Japan and Korea to expand the domestic commercial network abroad. They made significant profits by importing and distributing British cotton clothes via Shanghai to Japan and Korea. While Chinese merchants in Japan remained purely economic immigrant groups, those in Korea took an active political role since their advance to Korea on business was part of an effort by the Qing dynasty to strengthen its influence in Korea. Before the Mukden Incident in 1931, Chinese merchants in Kobe, Japan, engaged in trade with China and Southeast Asia and continued to be a powerful commercial group in Asian trade. However, Chinese merchants in Korea suffered from business crisis earlier on. They were hit hard by the sharp decline in import trade from China, which was their primary business, due to Japan’s protective tariff policy introduced in 1924. Until 1930s, both Chinese merchants in Japan and Korea were forced to gradually revise their business strategies to sell Japanese products in Greater China and Korea. The outbreak of the Sino-Japanese War in 1937 turned out to be a decisive blow to the already struggling businesses of the Chinese merchants in Japan and Korea.

Article

The United Kingdom and the United States: The Special Relationship  

Ted R. Bromund

The Special Relationship is a term used to describe the close relations between the United States and the United Kingdom. It applies particularly to the governmental realms of foreign, defense, security, and intelligence policy, but it also captures a broader sense that both public and private relations between the United States and Britain are particularly deep and close. The Special Relationship is thus a term for a reality that came into being over time as the result of political leadership as well as ideas and events outside the formal arena of politics. After the political break of the American Revolution and in spite of sporadic cooperation in the 19th century, it was not until the Great Rapprochement of the 1890s that the idea that Britain and the United States had a special kind of relationship took hold. This decade, in turn, created the basis for the Special Relationship, a term first used by Winston Churchill in 1944. Churchill did the most to build the relationship, convinced as he was that close friendship between Britain and the United States was the cornerstone of world peace and prosperity. During and after the Second World War, many others on both sides of the Atlantic came to agree with Churchill. The post-1945 era witnessed a flowering of the relationship, which was cemented—not without many controversies and crises—by the emerging Cold War against the Soviet Union. After the end of the Cold War in 1989, the relationship remained close, though it was severely tested by further security crises, Britain’s declining defense spending, the evolving implications of Britain’s membership in the European Union, the relative decline of Europe, and an increasing U.S. interest in Asia. Yet on many public and private levels, relations between the United States and Britain continue to be particularly deep, and thus the Special Relationship endures.