Thursday

12th Dec 2019

Opinion

Put aside ideology when it comes to TTIP

  • 'TTIP could provide a significant boost in getting us out of the current economic stagnation in Europe' (Photo: Tracy O)

As EU trade commissioner Cecilia Malmström put it, the only valid measure of success for the Transatlantic Trade and Investment Partnership (TTIP) will be whether it improves people's lives.

TTIP is not about the purity of our ideological world views, much as its opponents try to convince us otherwise. It is about unlocking the hidden potential of both the European and American economies and improving opportunities for everyone, starting with workers and small businesses.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 30-day free trial.

... or join as a group

Here is something not many are aware of: Big multinationals don't exactly need ambitious trade agreements. They are, after all, already able to move around existing trade barriers with ease and speed.

It is workers and small businesses that have most to gain.

I am prepared to make these statements because I have looked at what the likely impact of TTIP for Portugal is.

There are many ways to do this, which is why I can only recommend a good dose of methodological pluralism. It is important to talk to individual companies and listen to what they have to say about the trade barriers they face, and the competition they expect from their American rivals.

We should look at economic history and draw the appropriate analogies. But there is a problem with these more qualitative methods. Ambitious trade agreements have a number of indirect, higher order effects.

They are also global in nature. Trade patterns between, say, Vietnam and China are by no means irrelevant to what will happen in California or in Portugal after TTIP.

This is why we must ultimately also make use of well-designed computerised general equilibrium (CGE) models. They are the most powerful instrument we have, provided we use them well.

Over a period of months my office worked with Joseph Francois at the Center for Economic Policy Research (CEPR) to develop a model that was able to take advantage of all the work he and his team have done over more than a decade, modelling very subtle regulatory and other non-tariff barriers, while testing all major assumptions for their political realism and ability to model specific sociological realities.

I am very proud of this study. It seems to me that it comes very close to all we can achieve in terms of predictive power in a very complex economic environment.

The results?

Portugal stands to gain significantly from TTIP. Different scenarios give us slightly different results, but over the long run we will likely be able to add something like 0.75 percent to our GDP, while keeping to modest assumptions about how ambitious the final outcome of the negotiations will be.

Crucially, we are estimating that something like 40 thousand new jobs could be created in Portugal in the short term. TTIP could provide a significant boost in getting us out of the current economic stagnation in Europe.

Of course, some other studies reach rather different conclusions. A recent study by a Tufts team predicts the deal will mean job losses, lower growth, lower wages and a more unstable economy.

But let's look at the model they use. It hardly deserves to be taken seriously. For the Tufts team, the main limitations of a CGE model are that it does not take into account effects on employment deriving from greater competitiveness.

It assumes that expanding sectors are able to entirely absorb all labour supply from the shrinking sectors and that resources do not hold specific features which prevent them from being employed in different sectors.

In addition, the authors also claim that CGE models disregard the distribution of gains and losses, which ultimately might have implications on global demand. But neither of these criticisms actually holds for most CGE models.

Now, to bypass such imaginary limitations, the Tufts team uses an approach that is itself highly unsuitable for the assessment of the effects of trade liberalisation. The Global Policy Model (GPM) used by the authors does not allow for the inclusion of tariffs and non-tariff barriers, which is after all the main variable under analysis.

They comment rather coyly that the GPM does not include data on tariffs. Instead, they rely on estimations from previous studies of the growth of exports and these, incidentally, are not even clearly identified in the paper.

Furthermore, the GPM does not include disaggregated sectors or categories of products, further hindering its predictive power.

There is one conclusion from all this.

There is no actual need to judge TTIP through the narrow lens of ideological beliefs. It is quite possible to have a fairly good idea of what we all have to gain from it, and to reach it with simple, objective and widely available analytical instruments.

Let’s make sure that we use as many of those instruments as we possibly can. This is not about who can win an ideological battle, but how we can improve people’s lives. That is the test for TTIP.

Bruno Macaes is the Portuguese secretary of state for European affairs

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

Magazine

TTIP's teflon coat wears thin

The prospect of an EU-US trade agreement was one of relatively few sources of comfort for EU lawmakers about the bloc's struggling economy in 2013.

European shipping's dirty secret

As the EU launches its flagship Green Deal, the Greens call for shipping emissions to be included in carbon targets. Ships carrying goods to and from the UK emitted more CO2 than all the cars in Britain's 15-largest cities.

Does Malta's Labour Party now belong in S&D?

The Maltese Labour Party is a curious creature. No minister, MEP, MP, president, or former president has yet criticised Joseph Muscat publicly and outright over the killing of Daphne Caruana Galizia.

Europe needs a greener Common Agricultural Policy

Two Danish ministers - for environment, and for food and fisheries - call on the EU to reconsider the unintended consequences of zoning rules and income support in the Common Agricultural Policy.

News in Brief

  1. Czechs protest against PM Babis over EU subsidy 'fraud'
  2. EU disbursed €2.7bn for Turkey refugees
  3. UK ports set to host EU border checks for Northern Ireland
  4. EU puts tech giants in crosshairs
  5. Faroe Islands under pressure to chose Huawei
  6. Hungary asked to apologise after council leak
  7. MEPs: Finnish budget proposal 'impossible to implement'
  8. EP committee supports 'Future of EU Conference'

EU investment bank 'wide open to abuse by fraudsters'

Fundamental reforms are needed if the EIB is to become more accountable, democratic and transparent. Establishing a firm grasp on corruption to ensure that public money no longer feeds corrupt systems is a vital first step.

European beekeeping in crisis

Europe's bee population is dying. The number of pollinator species threatened by extinction is increasing each year, and human activity is the main cause.

Stakeholders' Highlights

  1. Nordic Council of Ministers40 years of experience have proven its point: Sustainable financing actually works
  2. Nordic Council of MinistersNordic and Baltic ministers paving the way for 5G in the region
  3. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms
  4. Nordic Council of MinistersNordic Climate Action Weeks in December
  5. UNESDAUNESDA welcomes Nicholas Hodac as new Director General
  6. Nordic Council of MinistersBrussels welcomes Nordic culture

Latest News

  1. Leaders to battle on climate target and money at summit
  2. Von der Leyen: 'Green Deal is our man-on-moon moment'
  3. North Atlantic mini states in geopolitical turbulence
  4. Survey marks EU optimism on eve of UK's Brexit election
  5. Six priorities for human rights
  6. European shipping's dirty secret
  7. Hungary quizzed over EU rules amid twitter row
  8. Spanish King meets party leaders to break deadlock

Stakeholders' Highlights

  1. UNESDAUNESDA appoints Nicholas Hodac as Director General
  2. UNESDASoft drinks industry co-signs Circular Plastics Alliance Declaration
  3. FEANIEngineers Europe Advisory Group: Building the engineers of the future
  4. Nordic Council of MinistersNew programme studies infectious diseases and antibiotic resistance
  5. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  6. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues

Join EUobserver

Support quality EU news

Join us