EPRS Admin By / July 15, 2016

Overview of results from studies on TTIP’s economic impact on the EU and the USA

Overview of results from studies on TTIP’s economic impact on the EU and the USA

Overview of results from studies on TTIP's economic impact on the EU and the USA

Several studies have shown varying results for the potential economic effect of TTIP (see Table 2 below). More recently, following a request by Parliament, the Commission produced a second impact assessment which also focused on sustainable development issues (Ecorys II, 2016). Studies which find a GDP increase of either more than 1% or less than O% (those highlighted in purple and blue in the table) have in common the fact that they depart from the model used in the first impact assessment, the Centre for European Policy Research (CEPR) (2013) study. The Capaldo study, which yields negative results, takes a short-run perspective using a Keynesian model, therefore introducing output rigidities, fixed wages and unemployment and not allowing for reallocation of resources. All other studies take trade models as their basis. Those following the CEPR (2013) approach (highlighted in orange in the table) use traditional computable general equilibrium models, whereas those in purple use new quantitative trade theory models. The latter create scenarios with existing data from other FTAs or integration systems, instead of using scenarios built on expert-driven assumptions (that is, the expert makes assumptions as to how negotiations will reduce the level of tariffs or non-tariff measures). In using existing trade data, new quantitative trade theory models try to link the scenario to a situation that is observable in reality. All trade models take a long-run perspective thus allowing for reallocation of resources. With the exception of the Bertelsmann study, none of the studies based on trade models integrate any kind of labour-market friction and all assume no unemployment. The Bertelsmann (2013) and the Felbermayr et al. (2015) studies are by the same authors and use a similar model; however, there are some major difference that explain why the former ended up with over-estimated, positive values. As highlighted by Felbermayr himself, the first difference is the base year, which was 2007 in the Bertelsmann study, and thus accounted for a pre-crisis period, whereas the 2015 study took 2012 as a base year, accounting for the post-crisis economic reality. The second difference concerns the number of countries used as a basis for simulating data: the Bertelsmann study used 126 countries, whereas the 2015 study processed data for 173 geographical units. The most recent Ecorys II (2016) study adjusts and makes use of the CEPR (2013) model, considering it as more appropriate and as generating more credible results than those using the new quantitative trade theory approach.

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