PERSPECTIVE TTIP – The Growth and Employment Engine that Couldn’t SABINE STEPHAN November 2014 At a glance The story is that the transatlantic free trade agreement will open up substantial growth and employment opportunities to the participating countries. To back up this claim advocates of the agreement cite the findings of»independent« studies. Comparison of the findings of the three most influential studies shows that even if a comprehensive free trade agreement is eventually signed the expected growth and employment effects would be minimal. Since July 2013 the EU and the United States have been negotiating a Transatlantic Trade and Investment Partnership(or TTIP, for short), with the aim of creating the biggest free trade zone in the world, with more than 820 million consumers. The two largest economic areas in the world are already closely interwoven economically: every day goods and services in the amount of 2 billion euros are exchanged. In order to step up trade even further the idea is, within the framework of TTIP, to dismantle trade barriers on both sides of the Atlantic. Because customs tariffs in transatlantic trade are already very low – import duties on industrial goods in both economic areas are below 4 per cent, on average – attention has been focused on the extensive dismantling of so-called non-tariff barriers(NTBs). 1 In plain terms, this means that transatlantic commerce in goods and services is to be radically deregulated and liberalised. Attempts have been made by means of large-scale simulation studies to evaluate the economic outcomes of a transatlantic free trade agreement. In what 1. This includes measures that restrict trade either directly or indirectly but which do not involve tariffs. NTBs include, for example, import quotas, technical standards, safety and industrial norms, labelling requirements, rules on emissions, statutory provisions on food and pharmaceutical products and many other things. follows we present the findings of the three most influential investigations – the study by the Centre for Economic Policy Research(CEPR) and the two studies by the ifo Institute – in terms of their expected growth and employment effects. All the findings refer to the very optimistic scenario of a comprehensive free trade agreement. That means that all calculations are based on the assumption that all customs duties will be struck down and NTBs largely abolished. CEPR Study on behalf of the European Commission The European Commission is an enthusiastic cheerleader for TTIP. Against the background of the continued sufferings of many EU countries from the dramatic consequences of the global economic crisis and their inability to kick-start their economies due to the shackles of austerity policy the European Commission is inevitably attracted by»a comprehensive agreement covering all sectors[which] would be overwhelmingly positive, opening up trade and bringing a welcome boost to economic growth and job creation on both sides of the Atlantic. … The TTIP would be the cheapest stimulus package imaginable.« 2 In arguing the case the European Commission relies on a study it commissioned from the CEPR, 3 whose findings concerning a comprehensive free trade agreement(what it calls the»comprehensive ambitious scenario«) we shall now look at. 2. See: http://ec.europa.eu/trade/policy/in-focus/ttip/questions-and­answers/index_en.htm; accessed on 23.10.2014. 3. See Joseph Francois, Miriam Manchin, Hanna Norberg, Olga Pindyuk, Patrick Tomberger: Reducing Transatlantic Barriers to Trade and Investment. An Economic Assessment, London 2013.