TRANSATLANTIC
TRADE & INVESTMENT PARTNERSHIP
19/04/2017
Jacob A. Jordaan
Utrecht School of Economics
j.a.jordaan@uu.nl

Set up today
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•Literature
•Free trade: public opinion
•EU and US: Trade and investment patterns
•TTIP
•Trade liberalisation
•Expected gains
•Criticisms
•Questions and discussion
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Jacob A. Jordaan               Utrecht School of Economics

Literature
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Jacob A. Jordaan               Utrecht School of Economics

The Geopolitics of TTIP
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•Hamilton, D.S. (2014) The Geopolitics of TTIP: Repositioning the transatlantic relationship for a
changing world. Centre for Transatlantic Relations. John Hopkins University
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•Novák, T. Chapter 6: TTIP’s implications for the Global Economic Integration of Central and
Eastern Europe
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•Robertson, C. Chapter 9: CETA and TTIP: Implications and Lessons learned
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Jacob A. Jordaan               Utrecht School of Economics

1. Public opinion on free trade
•EU and US are negotiating trade and investment agreement
•Is receiving a lot of attention
•Emotions are running high!
•What is going on?
•This time it’s different?
•Negotiations cover a lot of issues
•Not surprising?
•The easy stuff has already been done?
•Free trade good or bad?
•Opinions have become very diverse
•Try to focus on economic issues
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EU membership
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Transatlantic Trends 2014      German Marshall Fund of the United States

Opinions on the EU
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Transatlantic Trends 2014      German Marshall Fund of the United States

Transatlantic trade
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Transatlantic Trends 2013      German Marshall Fund of the United States

Effects of free trade
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% of respondents agreeing with statements;
Pew Research Centre; Spring 2014 Global Attitude Survey

Economic development and free trade
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Surprising results?

TTIP: the German perspective
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Attitudes to global trade and TTIP in Germany;
Bertelsman Stiftung.

Brexit: EU has gone too far?
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What do we see?
•Free trade popular topic again
•Overall, free trade is good
•But persistent minority against
•Less support for positive effects of free trade (globalisation)
•Level of development affects opinion
•More developed economies already experienced the majority of the positive effects?
•Growing importance of “non-trade-related” issues
•Brexit outlier or start of economic de-integration?
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Jacob A. Jordaan               Utrecht School of Economics
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2. EU and US
•Context of trade negotiations
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•US and EU problems with recovering from crisis / reinitiating growth
•On-going integration in Asia
•Stagnation trade liberalisation in WTO
•Stagnation gains from integration in EU
•Multinational enterprises are increasing pressure
•Potential of trade agreement between two largest markets in the world economy
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US and EU in world economy
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GDP/Capita US and EU
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Key role in international trade
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Key role in international investment
•Share in worldwide Share in worldwide
•    inward FDI      outward FDI
•EU 35%; US 20%   EU 40%; US 24%
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Jacob A. Jordaan               Utrecht School of Economics
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Multinational enterprises
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•US and EU have many multinationals
•Large shares in modern manufacturing industries
•Key role in services
•Dominance in international trade
•Key role in creating new technologies
•International diffusion of technologies
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•We cannot ignore this in discussions on trade liberalisation and agreements
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3. TTIP
•EU-Canada CETA
•Negotiations have been completed, EU parliament has voted in favour
•Now it’s with national governments
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•Now TTIP
•Transparency and disclosure of information is much larger compared to previous trade negotiations
•http://ec.europa.eu/trade/policy/in-focus/ttip/
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One of the key issues for TTIP
•Where will the gains from trade liberalisation come from?
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More general for developed countries
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Non tariff barriers (1)
•Limiting market access
•Import quotas, export restraints, discriminatory measures against foreign firms
•Costs associated with operating in different markets
•Approval conditions and procedures
•Environment and health standards; consumer protection
•Industry standards; packaging and information requirements
•How to assess need for NTBs?
•Some of the NTBs exist for good reasons
•Mixture of backgrounds (labour rights, environment)
•Mix of trade policy and other policies
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Jacob A. Jordaan               Utrecht School of Economics
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Non tariff barriers (2)
•Lowering NTBs important to increase gains from TTIP
•Completely removing NTBs is going to be very difficult
•Alternatives
•Harmonisation
•Mutual recognition
•Public concern: race to the bottom?
•“Unfair” competition when NTBs differ: countries will be forced to accept lower standards
•Is this really the case?
•No relation between trade openness and level of standards
•What about consumer choice?
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Predicted effects of TTIP
•Difficult art of forecasting
•Computable general equilibrium models
•Trade liberalisation = decrease in trade costs → increase in competition → competitive sectors
grow → increase trade and GDP
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•Ecorys (2009) Non tariff measures in EU-US trade and investment- An economic Analysis. Study for
European Commission
•Fontagne et al. (2013) Transatlantic Trade: Whither partnership, which economic consequences?
CEPII
•Francois, J. et al. (2013) Reducing Transatlantic Barriers to Trade and Investment: An Economic
Assessment. CEPR
•FelberMayr, G. et al. (2014) Transatlantic Trade and Investment Partnership: Who benefits from a
free trade deal? Bertelsman Stiftung
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Source: Raza et al. (2014)

Effects according to CEPR
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€ 500 per household in EU
€ 655 per household US

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Additional positive effects
•Consensus on moderate gains
•Additional effects
•Dynamic effects
•Scale economies
•Productivity increases
•Development of new technologies & industries
•Restructuring and flexibilization EU economies
•See problems with recovering from financial crisis
•Positive effects on other countries?
•Increase in world demand & easier access to combined US & EU market
•Positive effect on trade liberalisation under WTO?
•Pressure on China?
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Jacob A. Jordaan               Utrecht School of Economics
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Criticisms (1)
•Impact studies have received a lot of criticism
•Macroeconomic adjustment costs
•Changing capital flows
•Public sector
•Less income from tariffs → decrease government income
•Needs to be compensated by economic growth
•Unemployment
•More trade, increase GDP → increase employment
•But: sectoral reallocation of labour!
•This takes time, is costly, spatially concentrated, not everyone will be successful
•Adjustment costs may be substantial!
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Jacob A. Jordaan               Utrecht School of Economics
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Criticisms (2)
•How to deal with unequal gains?
•Some countries will benefit more than others
•Gains unequally distributed within countries
•Coherence in EU?
•Is (Eastern) Europe ready for large increase in competition?
•Effect on third-party countries
•Social costs of regulatory change
•Which NTBs can be removed, harmonised, mutually recognised?
•Change in regulation = cost for firms
•Danger of race to the bottom?
•Horizontal versus sector specific
•Medicines, cosmetics, food, raw materials, motors, etc.
•What are the gains when there are so many exceptions?
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Criticisms (3)
•Investor state dispute settlement system (ISDS)
•System to solve disputes between foreign investors and state
•Many countries have bilateral treaties
•Concern: government constrained in designing policies?
•What about WTO?
•Public services under threat?
•Role of government versus private sector + increasing participation by foreign firms
•TTIP is made for multinationals?
•Threat to democracy?
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What is the key challenge?
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Concluding remarks (1)
•Globalising world economy
•Ongoing liberalisation of trade and investment
•What is the alternative?
•Stagnation WTO → Countries are looking for alternatives
•(WTO has made a lot of progress!)
•TTIP: potential trade agreement between the two largest markets
•Negotiations surrounded by a lot of commotion
•Difficult to appreciate all the arguments
•Substantial minority does not like free trade, even in EU!
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Jacob A. Jordaan               Utrecht School of Economics
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Concluding remarks (2)
•Key issues from economic perspective
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•Moderate gains versus adjustment costs?
•Tariffs versus NTBs
•Lowering NTBs key for gains
•Harmonisation, mutual recognition, many areas affected
•Unequal gains? Winners and losers?
•Redistribution necessary? Feasible?
•Within and between countries?
•Effects on third-party countries?
•Effect on trade liberalisation under WTO?
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•I hope you enjoyed the presentation!
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•Any questions?
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