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momagri, movement for a world agricultural organization, is a think tank chaired by Christian Pèes.
It brings together, managers from the agricultural world and important people from external perspectives,
such as health, development, strategy and defense. Its objective is to promote regulation
of agricultural markets by creating new evaluation tools, such as economic models and indicators,
and by drawing up proposals for an agricultural and international food policy.
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ASSESS TTIP: Assessing the Claimed Benefits of the Transatlantic Trade and Investment Partnership (TTIP)



ÖFSE (Austrian For Development Research) for GUE/NGL Group1


We have been looking at the proliferation of bilateral free trade agreements for a few months now and this demonstrates not only the WTO’s difficulty in imposing itself as an international body, but also questions the real impact of these agreements on strategic sectors such as agriculture. The TTIP (or TAFTA), the trade partnership between the European Union and the United States, gives us great concern and is putting the future of European agriculture at risk. There is increasingly more mobilization condemning the potential hazards and there are successive critical assessments of the studies outlining the advantages and the future economic benefits of the TTIP.

There is growing anger with regards total deregulation if such an agreement were to emerge. Consequently two questions need answering: What are the real economic benefits to be expected from the TTIP? Is the TTIP really beneficial for global economic growth as we are led to believe?

In any event, this is what is being challenged in a recent report by the Austrian foundation ÖFSE (Austrian Research Foundation for International Development) requested by the Confederal Group of the European United Left/Nordic Green Left (GUE/NGL) to the European Parliament and we recommend reading the extract we have published here2.

The report is particularly interesting and takes a critical look at the various impact studies of the Trans-Atlantic Partnership under discussion between the EU and the United States. For, if according to the European Commission, the potential economic stimulus from the TTIP would be 120 billion Euros for the European economy, 90 billion Euros for the U.S. economy and 100 billion Euros for the rest of the world, the estimated gains are ultimately minimal and the risks very real.

Finally, this is a bogus agreement and momagri stressed this point several months ago 3...

momagri Editorial Board




SUMMARY OF MAIN RESULTS

What are the economic effects of TTIP? In the public debate, a few selected studies, mostly commissioned by the European Commission, have set the tone, suggesting that effects are positive on both sides of the Atlantic. The studies are from Ecorys (2009), CEPR (2013), CEPII (2013) and Bertelsmann/ifo (2013). In this review, we critically assess these findings and their underlying methodologies. In addition, we discuss some issues, which are frequently neglected by trade impact assessments, but are nevertheless important from our point of view. In a nutshell, we see limited economic gains, but considerable downside risks. The results of our assessment are as follows:
    1. The estimated gains from TTIP are very small : All four studies report small, but positive effects of TTIP on GDP, trade flows and real wages in the EU. GDP and real wage increases are estimated by most studies to range from 0.3 to 1.3 %. EU unemployment will either remain unchanged (by assumption), or will be reduced by up to 0.42 %-points, i.e. roughly 1.3 million, which however appears unrealistic. EU exports will increase by 5 – 10 %. All of these changes are long-term, i.e. will accrue only over a transition period of 10 to 20 years.

    2. The estimated gains depend on NTM reductions: with average tariff rates already at very low levels (less than 5 %), roughly 80 % of TTIP gains are derived from the elimination or alignment of Non-Tariff-Measures (NTMs), such as laws, regulations and standards. Assumptions on actionable NTM reductions in the studies are however overly optimistic. On the basis of more realistic assumptions, the economic gains from TTIP would become even smaller.

    3. The social costs of regulatory change might be substantial: NTM reductions entail both short term adjustment and long term social costs, which are completely neglected in the studies. Most importantly, the elimination of NTMs will result in a potential welfare loss to society, to the extent that this elimination threatens public policy goals (e.g. consumer safety, public health, environmental safety). The analysis of NTMs in the studies, particularly Ecorys, completely ignores these problems. Instead, it is assumed that around 50 % or 25% of all existing NTMs between the EU und the US can either be eliminated or aligned to some common standard. This includes sensitive sectors such as foods & beverages, chemicals, pharmaceuticals and cosmetics or automotives. In order to arrive at its optimistic welfare estimations, the studies assume strong reductions/alignments of NTMs in precisely those sectors, where the safeguarding of public policy goals is perhaps most crucial. Though subject to considerable uncertainty, the incurred social costs of TTIP regulatory change might be substantial, and require careful case-by-case analysis.

    4. Macroeconomic adjustment costs are not negligible and should be dealt with by EU policy-makers:
      - Costs of unemployment, including long term unemployment, might be substantial, especially during the 10 year transition period of TTIP. Based on projected job displacement in one of the studies of 0.4 – 1.1 million, our rough (and conservative) calculation suggests implied costs of €5 – €14 billion for unemployment benefits, excluding costs for re-training and skills-acquisition. In addition, foregone public income from taxes and social contributions from unemployment might accrue to €4 – €10 billion.
      - Revenue losses for the EU budget because of tariff elimination might be in the order of 2 % or €2.6 billion p.a. Cumulated over a transition period of 10 years, this might accrue to a loss of EU public revenues of at least €20 billion.

    5. Other potential adverse effects of TTIP are downplayed in the study. These include:
      - LDC exports to the EU will possibly suffer from TTIP, resulting in a reduction of real GDP for LDCs of up to 3 %. Though not entirely conclusive, the results warrant a detailed examination of TTIP effects on developing countries, given the EU’s official commitment to eradicate poverty in LDCs.
      - Intra-EU trade will decrease due to TTIP. Some studies expect a modest reduction, while one study estimates intra-EU exports to decline by 30%. This calls for further examination.

1 This abbreviation stands for Confederal Group of the European United Left/Nordic Green Left
2 Read the full version of the ÖFSE report on GUE/NGL website or by following this link http://guengl.eu/uploads/plenary-focus-pdf/ASSESS_TTIP.pdf
3 http://www.momagri.org/UK/articles/Accord-de-libre-echange-UE-USA-un-accord-en-trompe-l-oeil-_1294.html
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Paris, 22 March 2017