Study reveals EU-US trade agreement comes with high social costs and limited actual economic gains
TTIP myths shattered by new GUE/NGL-backed report
A GUE/NGL commissioned study published today by the Austrian Foundation for Development Research (OFSE) has called into question the alleged benefits of a Transatlantic Trade and Investment Partnership (TTIP). Rather, the authors have uncovered considerable downside risks associated with removing remaining trade tariffs and very few actual economic gains from TTIP in terms of GDP, jobs, and real wages.
GUE/NGL MEP Helmut Scholz, who is the Group’s coordinator on Parliament’s International Trade committee, launched the study this morning with three of the authors, Werner Raza, Bernhard Tröster and Rudi von Armin. The launch coincides with a special hearing on ‘Left responses to TTIP’ being held today in the European Parliament in Brussels.
Scholz said: “The OFSE study points out several methodological flaws and shortcomings in influential European Commission-endorsed TTIP impact assessments by Ecorys, CEPR, CEPII, and Bertelsmann/ifo. The OFSE authors critically assess predictions these reports make about supposed positive impacts of TTIP on GDP, jobs, trade flows, and real wages. None of the studies take into account the social costs of TTIP.”
Lead author Werner Raza said: “Not only do these estimates fall flat when we look at the methodology used, which is biased in our view, the predictions also don’t stand up when we see that 80% of these estimated economic benefits depend on the removal or harmonisation of regulations, administrative procedures, and standards – non-tariff measures (NTMs). Negotiating compromises on regulations and standards could see decades of gains in social and environmental protections rolled back, posing a serious threat to consumer health, public health, and environmental safety. If you eliminate regulations that serve public policy goals there is a social cost.”
The study also strongly criticises the proposal for an investor-to-state dispute settlement (ISDS) mechanism as part of TTIP as it could lead to governments abstaining from enacting regulation that ran counter to multinationals’ interests. Such a mechanism could also see governments having to pay compensation to multinationals with taxpayers’ money.
The OFSE authors describe how TTIP will reduce trade between EU countries by up to 30% as EU countries’ exports won’t be able to compete with increased levels of cheap imports from the US. Such a spike in US imports could also bring about trade deficits in the EU (where imports exceed exports), and this could pose severe problems for some member states.
The knock-on effects of TTIP on developing countries cannot be ignored either: as a result of a fall in EU demand for exports from Less Developed Countries (LDCs), TTIP would mean a real reduction in GDP for LDCs. For example, GDP in Latin American countries could decrease by 2.8%, a loss of at least € 20 billion over 10 years. Therefore, signing up to TTIP certainly won’t help the EU make much headway when it comes to its commitments to eradicate poverty in LDCs.
Further, eliminating tariffs under TTIP will mean losses to public budgets as revenue raised from customs duties will be lost – this would be a 2% loss to the EU budget, or € 2.6 billion a year.
The GUE/NGL funded study also found that unemployment would rise as a result of job displacement due to TTIP: over the 10-year TTIP implementation period, between € 5-14 billion of unemployment adjustment costs (lost revenue from tax and an increase in unemployment benefits) can be expected.
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