TTIP: an economic perspective

Transcription

1 TTIP: an ecnmic perspective Sphie Sete ESO, Brussel, 20 juni 2016

2 Structure f talk Free trade in a histrical perspective Evaluatin f arguments in favr and against TTIP TTIP will bst ecnmic grwth and bring jbs The value f TTIP lies in its strategic benefits TTIP will have a negative impact n develping cuntries TTIP is made fr big crpratins Regulatry cperatin means race-t-the-bttm Cnclusin

3 Internatinal trade If an exchange is vluntary, it will nt take place unless bth parties believe they will benefit. Miltn Friedman Internatinal trade is in essence nt different frm natinal trade. Why trade? Increase in welfare diversity (resurces, climate, skills, knwledge, taste, ) specializatin scale effects cmplete free trade achieves highest glbal welfare. Hwever, when gds crss brders, different gvernments get invlved

4 Free trade in a histrical perspective Hard t speak f internatinal trade befre rise f cncept natin state, but free trade in ancient cultures (Egyptians imprt spices frm Arabian, Greeks trade with cuntries arund Mediterranean, Silk rad, Vasc da Gama, ) Cncept f trade restrictins stems frm the 16th century: 1516 all beer in Bavaria has t adhere t purity law mercantilism thery UK starts t practice free trade by the 1840s, and first free trade agreement is put in place in 1860 between UK and France (Cbden-Chevalier Treaty) Great Depressin and US Smt-Hawley Tariff Act triggers new wave f prtectinism and beggar-thy-neighbur plicies 1947: General Agreement n Tariffs and Trade (GATT) 1990s: rise f bilateral and plurilateral trade agreements Great Recessin: sharp decline in trade

5 Bm f trade agreements since 1990s RTAs in frce cumulative RTAs in frce inactive RTAs cumulative RTA ntificatins Surce: WTO

6 Surce: DG Trade, Eurpean Cmmissin

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9 TTIP: why s sensitive? Familiarity with the partner New type f trade agreement Tuches upn lng-standing issues (e.g. in fd, chemical and pharmaceutical sectr) Between tw strng ecnmies with cnsiderable plitical pwer, wh are strng cmpetitrs in many fields Sme prpsals are (t) far-reaching

10 Arguments in favr r against TTIP evaluated: TTIP will bst ecnmic grwth and bring jbs

11 Arguments in favr r against TTIP evaluated: TTIP will bst ecnmic grwth and bring jbs Benefits f free trade agreements in general: Free trade is gd! Remving tariffs means lwer prices fr imprted gds fr cnsumers, and cmpanies can sell their gds abrad cheaper. It als means mre cmpetitin n the dmestic market, adjustment csts, mre efficient cmpanies and ecnmies f scale. Frm a glbal perspective: multilateral trade liberalizatin is better than preferential trade liberalizatin (discriminatin), but preferential trade liberalizatin is better than n liberalizatin. Dynamic effects: strng link between trade and investments. Glbal value chains: cheaper imprts = cmpetitive edge! But, a bigger pie des nt mean everyne gets a bigger piece Macr-effects versus distributinal effects.

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13 Arguments in favr r against TTIP evaluated: TTIP will bst ecnmic grwth and bring jbs Predicting the ex ante effect f FTAs empirically is very difficult. Based n a general equilibrium mdel: very cmplex mdel, depends strngly n the (many) assumptins made abut ecnmic base variables. Mrever, based n different liberalizatin scenaris f TTIP, which are nt always very realistic. Ecrys (2009) and CEPR (2013): Predict a grwth bnus f 0.5% fr the EU GDP and 0.4% fr the US GDP by Emplyment is predicted t increase with 0.5%. A husehld f 4 wuld see an increase in their yearly incme f 500 eurs. Predictins f Felbermayr et al (2013) and OFSE (2014) are a lt less psitive, but still find a general psitive impact f TTIP.

14 Arguments in favr r against TTIP evaluated: TTIP will bst ecnmic grwth and bring jbs Evaluating ex pst effects makes mre sense frm an ecnmetric perspective what is the effect f the trade agreements the EU already has? Sete, S. and Van Hve, J. (2015). Dissecting the Trade Effects f Eurpe s Ecnmic Integratin Agreements, CES discussin paper, University f Leuven. Research questin: what is the impact f FTAs n the EU and the member states? Fcus n hetergeneity f effects Difference between imprts and exprts Difference between the intensive margin (intensity f trade) and the extensive margin (diversificatin f trade, r number f prducts traded) Cnclusin: impact f FTAs is nt unifrm, but general mdest pstive effect Depends n deepness f integratin f the trade agreements Depends n differences in ecnmic structures f the member states

15 Hetergeneus impact FTAs n EU trade

16 Hetergeneus impact FTAs n EU trade

17 Hetergeneus impact FTAs n EU trade: Member States

18 Arguments in favr r against TTIP evaluated: TTIP will bst ecnmic grwth and bring jbs Evaluating ex pst effects makes mre sense what is the effect f the trade agreements the EU already has? Hwever, TTIP is different than mst trade agreements Tariffs between bth trade partners are already very lw (2% n average, but with sme serius utliers), and bth cuntries are already fairly integrated. High nn-tariff trade barriers such as safety standards, gvernment prcurement and ther regulatins. This culd be a ptential surce f high ecnmic benefits. Big part f transatlantic trade is in services, which requires specific liberalisatin initiatives. TTIP is abut s much mre than liberalizing trade.

19 The value f TTIP lies in its strategic benefits

20 Arguments in favr r against TTIP evaluated: The value f TTIP lies in its strategic benefits Imprtant trade relatinship: Small relative changes will have big abslute effects. Dynamic effects: strng link between trade and ther dmains, such as FDI. Setting a glbal standard will enfrce psitin EU and US in wrld trade. Glbal cntext: imprtance f EU and US in wrld trade is declining sharply and liberalizing trade multilaterally thrugh the WTO has cme t a stp. TTIP wuld be a cmprmise between US and EU standard FTAs, and will be used as a template fr future FTAs. Hence US and EU can define glbal trade rules thrugh TTIP. Harmnised regulatins will set a glbal standard fr many prducts. Spillver effects might be mre imprtant than direct effects. TTIP might imprve market acces wrld wide by making prgress in multilateral trade runds feasible again.

21 Main trade partners EU28 fr 2015 Imprts Exprts Surce: Eurstat

22 Share in wrld trade in gds and services

23 TTIP will have a negative impact n develping cuntries

24 Arguments in favr r against TTIP evaluated: TTIP will have a negative impact n develping cuntries Preferential trade liberalizatin tends t make third parties wrse ff, because they are discriminated and cannt benefit f the better market access. Hwever, Difference between third cuntries and develping cuntries. Mst develping cuntries already get preferential access frm EU and US thrugh the Generalised Scheme f Preferences r Everything but Arms. Harmnisatin f rules will have a psitive impact n third cuntries, while mutual recgnitin f rules will have a negative impact. Mitigatin f ptential negative effects thrugh multilateral trade runds.

25 TTIP is made fr big crpratins

26 Arguments in favr r against TTIP evaluated: TTIP is made fr big crpratins Nn-tariff barriers between US and EU are very imprtant: Estimated t 10-20% custms duties equivalent, with csts raised up t 73% fr EU exprts and 57% fr US exprts in certain sectrs. This is mainly a prblem fr SMEs, wh d nt have the knwledge r resurces t deal with bureaucracy. This creates an uneven playing field and unfair cmpetitin. SMEs are prminent in prcessed fd, machinery and mtr vehicle part sectrs sectrs with very high tariff peaks r a lt f nn-tariff barriers. This in terms f number f firms (94-99%), value added (12-51%) and emplyment (17-63%). US negtiatirs get mre input frm field experts in very technical and cmplex matters than EU. Balance between better/mre infrmatin and lbbying. Investr-t-state-dispute-settlement (ISDS) clause.

27 Regulatry cperatin means race-t-the-bttm

28 Ecnmics f regulatry differences Hme Market Bias Regulatry Differences Adaptatin Csts fr Prducers Higher Price, Less Chice r Late Availability fr Cnsumers Unfair playing field fr Cmpanies Less Trade r Investment Price Differentiatin Inefficiencies maintained

29 Arguments in favr r against TTIP evaluated: Regulatry cperatin means race-t-the-bttm 2 reasns fr differences in regulatins: Real differences in standards Instrument f strategic trade plicy (e.g. duplicatin f bureaucratic effrts in car and chemical industry) Gal: eliminate unnecessary trade barriers and create a fair playing field fr cmpanies and cmpetitin. N time fr harmnisatin f existing rules in mst sectrs due t time cnstraint (mmentum and plitical pressures). At this mment: regulatry cperatin. Prejudice that EU regulatins are the safest in the wrld nt always crrect. EU culd insist n race-t-the-tp t prtect wrkers and envirnment. Anther ptin is harmnisatin thrugh new and better standards t ensure fair cmpetitin (e.g. electric mbility). This culd als help fend ff cmpetitin frm third cuntries with lw standards.

30 Arguments in favr r against TTIP evaluated: Regulatry cperatin means race-t-the-bttm But regulatry cperatin als pens the dr fr serius lbbying. Plitical cntrl and checks and balances Transparency Stakehlder grups and experts Main histrical example f regulatry cperatin: Eurpean Cmmn Market. Imprtant t weight (ptentially big) ecnmic benefits f regulatry cperatin against ptentially negative effects f deregulatin and differences in preferences. This is a lng and difficult prces! Fast trade and investment deal = bad trade and investment deal.

31 Cnclusin Trade part f TTIP has many ptential benefits. But predicting the exact impact in is difficult. TTIP is nt nly abut trade. Like any big ecnmic shck, TTIP will result in a painful restructuring prcess fr certain sectrs/cmpanies. Glbal psitive impact des nt mean psitive impact n all sectrs r Member States. This als presents pprtunities. Negative effects can be mitigated by EU r member states.