the eu-us transatlantic trade and investment partnership · 2015. 11. 20. · the eu-us...

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The EU-US Transatlantic Trade and Investment Partnership

Re-launching Europe’s Competitiveness

September 2014


2

Index

Introduction

Executive summary

The EU-US trade relationship: facts and figures

What is TTIP

TTIP in the context of global trade policy

The effect of TTIP on the EU economy Motor vehicles Chemicals Metal products Processed food Financial services Energy

Final considerations


3

Introduction

In June 2013, US President Barack Obama and EU Commission President José Barroso announced the launching of formal negotiation for the Transatlantic Trade and Investment Partnership (TTIP)

Since the announcement, the parties have held six negotiation rounds at the technical level and one political meeting in February 2014. The next meeting of political “stock taking” between the incoming EU Trade Commissioner and US Trade Representative Michael Froman is scheduled for October 2014

The European House – Ambrosetti carried out a comprehensive review ofthe potential impact of TTIP on EU and US economies and its positive effects in improving EU’s competitiveness


4

Index

Introduction

Executive summary


What is TTIP





5

Executive summary (1/3)

The EU and the US are the two leading economies, accounting for almost half of global GDP and 30% of global trade

The two regions are already deeply integrated: the EU and US are each other’s first commercial partner with over € 796 billion in bilateral trade (amounting to 30% of global trade)

Our review of the existing studies indicates that TTIP could increase EU GDP by over 0.5% (€ 73.2 bln) per year, and US GDP by over 0.6% (€ 85.5 bln) per year

Even though tariffs barriers are already low (average weighted tariffs are below 3%), regulatory differences are a significant obstacle to transatlantic trade


6


Furthermore, selected products are still subject to high tariff (e.g. textile, agriculture, tobacco, processed food, etc.)

TTIP aims to bring tariff barriers to zero for virtually all sectors and to harmonise trade regulation and rules. On average, regulatory (non-tariff) barriers add extra export costs by 41% for goods and by 31% for services

A more liberalised market would improve EU export. An ambitious TTIP agreement would increase European value added exported globally by € 190 bln per year

In Europe, the motor vehicles and the processed food sectors are set to be among the main beneficiaries, with a potential increase in export by 21.4% and 9.4% respectively


7


Energy prices in Europe are on average 150% higher than in the US. A liberalisation of US oil and gas export would lead to a decrease in the current EU-US price gap. Europe would save over € 22 bln per year for each 10% reduction in the EU-US price gap

TTIP has also a high strategic value: an ambitious agreement would become a reference point for all future trade negotiations, giving a global competitive advantage to EU and US firms

High political commitment from European and the US leaders is a precondition for success and more transparent negotiation, continuous civil society and business community engagement is necessary to prevent the anti-TTIP opposition from gaining ground


8

Index

Introduction

Executive summary


What is TTIP





9

The EU and the US are the two leading players in the global economy

World GDP, 2013

Source: The European House - Ambrosetti on CRS, IMF, EUROSTAT, 2014

EU-US are world leaders in international trade

(2013 data)

30% of global trade

20% of all Foreign Direct Investments

€ 0.79 trillion in trade(+53% since 2004)

EU and US account for almost half of the world’s GDP

70% of all M&As sales and purchases


10

The EU and the US are each other's first commercial partner

Top EU partners, 2013 Top US partners, 2013 FDI stock, 2013

1,536

1,655

119

US FDI stocks inthe EU

EU FDI stocks inthe US

EU FDI stocksurplus

(*) Import and export

Source: The European House - Ambrosetti on EUROSTAT, 2014

TRADE IN GOODS*

€ billion %

1 US 484 14.2

2 China 428 12.5

3 Russia 432 9.5

4 Switzerland 263 7.7

5 Norway 150 4.1

World 3,419 100

€ billion %

1 EU 510 16.9

2 Canada 482 16.0

3 China 432 14.3

4 Mexico 386 12.8

5 Japan 171 5.7

World 3,021 100

FDIs

€ billion


11

EU and US economies (and firms) are already highly integrated

A significant share of transatlantic trade is intra-firm:

US affiliates in the EU account for about 13% of EU GDP (worth €1.47 trillion) and EU affiliates in the US represent 11% of US GDP (worth € 1.18 trillion)

Trade between affiliates accounts for 50% of total EU-US trade in goods

EU-US intra-firm trade accounts for 32% of total US exports and for 62% of total US import

Source: The European House - Ambrosetti on EU Commission’s Impact Assessment Report, 2013


12

The EU has a trade surplus of 106.4 billion towards the US

EU trade balance in goods and services(€ bln, 2013)


185.3

148.9

10.5

272.3

163.1

15.8

87

14.25.3

Industrial products Services Agricultural products

EU Import EU Export Trade Balance


13

Trade barriers negatively impact on sectors with high trade potential

Export(€ bln, 2013)

% variation2009-2013

Import(€ bln, 2013)

% variation2009-2013

Barrierpeaks on individualproducts

Machinery and transport equipment

122.75 +59% 74.41 +20%

Chemicalsand related

62.11 +17% 43.47 +32%

Manufacturedgoods

48.48 +21% 37.77 +26%

Crude materials and mineral fuels

21.49 +43% 27.78 +114%

Beverages and tobacco

7.93 +47% 1.53 +53%

Food products and animals

5.87 +55% 5.91 +60%

Commodities and transactions

2.43 -3% 3.58 -40%

Others 2.03 -62% 1.55 -69%

Total 288.24 42% 195.99 26%

EU-US trade by sector, 2009-2013



14

Index

Introduction

Executive summary


What is TTIP





15

What is the TTIP?

TTIP is a comprehensive commercial partnership that addresses three key aspects:

1. Market access (tariffs and public procurement)

2. Regulation (non-tariffs barriers to trade: health and safety, environmental standards, financial regulation, etc.)

3. Trade rules (custom policy, provisions for state owned enterprises, geographic indications, oil and gas export restrictions, etc.)


16

On average, EU and US weighed tariff barriers are already relatively low

Source: The European House - Ambrosetti on WTO and Eurostat, 2014

Tariff barriers on selected products (2014)

1

TTIP is expected to abolish tariff

barriers on virtually all

industrial sectors


17

However, selected products are still subject to high tariff peaks

EU TARIFF PEAKS

(selected products)

Agriculture ⇒ up to 18-25%*

Trucks ⇒ up to 22%

Footwear ⇒ up to 17%

Audiovisual products ⇒ up to 145%

Clothing ⇒ up to 12%

US TARIFF PEAKS

(selected products)

Tobacco ⇒ up to 350%

Agriculture ⇒ up to 160%

Footwear ⇒ up to 56%

Textile ⇒ up to 40%

Clothing ⇒ up to 32%

*Average agricultural peak tariff

Source: The European House - Ambrosetti on EU Commission and WTO, 2014

1


18

Reducing non-tariff regulatory barriers

Source: The European House - Ambrosetti on European Commission, 2014

The EU and the US have the most sophisticated regulatory frameworks in the world but have developed separate sets of rules. TTIP aims to reduce the cost of doing business across the Atlantic through:

Regulatory recognition: avoiding unnecessary duplications by recognizing equivalent standards

Regulatory harmonization: creating a shared EU-US intra-sector and across-sector decision making process for harmonizing current and future regulation

Regulatory integration will occur only where the standards are compatible (e.g. TTIP will not allow GMO sale in Europe, nor will it lower safety and environmental standards)

”TTIP is about cutting costs, not cutting corners”

EU Commission

2


19

55

37

45

5250

53

3432

49

24

32

20

4745

56

514948464646

38363635

3130

24

Aero

space

Mach

ineries

Medic

al

equip

ment

Cosm

etics

Bio

tech

nolo

gie

s

Chem

icals

Food a

nd

bevera

ges

Off

ice I

TC

equip

em

ent

Clo

thin

g, te

xtile

and f

ooth

wear

Ste

el and m

eta

ls

Auto

motive

Ele

ctro

nic

Wood a

nd

paper

pro

duct

s

Pharm

ace

utica

ls

EU barriers

US barriers

Non-tariff barriers still produce high additional costs across all sectors (1/2)

Source: The European House - Ambrosetti on Ecorys, 2010

Estimates of non-tariff barriers costs for goods (% on total cost, 2010)

+41%average

cost

2


20

35

20

37

27

39

1921

26

18

36

424545

30

20

30

40

36

Pers

onal

Com

merc

ial

Real Est

ate

Com

munic

ations

Insu

rance

s

ICT

Fin

anci

al

Tra

nsp

ort

Tra

vel

EU barriers

US barriers

Non-tariff barriers still produce high additional costs across all sectors (2/2)

Source: The European House - Ambrosetti on Ecorys, 2010

Estimates of non-tariff barriers costs for services(% on total cost, 2010)

+31%average

cost

2


21

Better trade rules would particularly benefit SMEs and consumers

Trade rules include custom rules, provision for state-owned enterprises, energy, and public procurements

80% of SMEs report that custom rules are the most difficult obstacle to expand their export

More liberalised energy markets would result in lower energy prices in Europe

A more liberalised public procurement market in the US would reduce costs for American taxpayers (non-US suppliers have restricted or no access to about 60% of US public procurement sector)

3

Source: The European House - Ambrosetti on European Commission, 2014


22

TTIP has the potential to boost growth and production (1/3)

(*) Bertelsmann Stiftung (2013). For a similar approach see also: IFO (2013)

Bertelsmann Stiftung estimated that TTIP could produce an increase in EU GDP by up to 4.9% (€ 640 bln) and US GDP by up to 13.4% (€ 1,554 bln)*

This would be the hypothetical effect of creating a common single EU-US market (akin to the EU single market)

We believe, however, that this is an unrealistic estimate. Over 50% of regulatory differences between the EU and the US are “not actionable” because of different standards, societal preferences, and excessive adjustment costs

Our review of more conservative studies indicates that TTIP would have a GDP impact below 1% on the EU-US economies (see next chart)


23

The estimated impact of TTIP on the EU and US economies

Study*EU GDP

effect (%)EU Import

(% change)EU Export

(% change)US GDP

effect (%)US Import

(% change)US Export

(% change)

CEPR(2013)

+0.48 +5.91 +5.11 +0.39 +4.75 +8.02

ECORYS (2009)

+0.72 +2.07 +2.0 +0.28 +6.06 +3.93

ECIPE(2010)

+0.47 - - +1.33 - -

Averageexpectedimpact

+0.56 +3.99 +3.55 +0.67 +5.41 +5.98

(*) The chart considers the most ambitious scenario presented in each study

Source: The European House - Ambrosetti on various sources, 2014

€ +73.2 blnper year for a 10-year period

(based on current GDP)

€ +85.5 bln(per year for a 10-year period

(based on current GDP)


24

Index

Introduction

Executive summary


What is TTIP





25

Trade is a key driver of economic development, especially for Europe

International trade in goods and services (import and export) accounts on average for:

Source: The European House - Ambrosetti on World Bank and Eurostat, 2014

42.1

16.8

23.825.7

22.4

33.9

44.9

13.5

26.423.7

28.331.1

EU-28 United States China Indonesia RussianFederation

South Africa

Import Export

In

tern

ati

on

al

tra

de

in

go

od

sa

nd

se

rvic

es

(% o

f G

DP,

2013)


26

However, trade liberalisation is slowing down and trade negotiations have become more difficult over the last 15 years

TRADE «ROUNDS»

1947 1949 1950 1956 1960 1964 1967

1973-1979

1986-1993

2001-…

Geneva

Geneva II Annecy

Torqay Dillon

Kennedy

Tokyo

Uruguay

Doha

7 months

5months

8months

8months

11months

11months

6 years

7 years

13 yearsongoing

Source: The European House - Ambrosetti on WTO, 2014

GATT-WTO trade negotiating «rounds»


27

Liberalising trade is essential to rebalance the international economy and usher in the “second phase” of globalisation

-8000

-6000

-4000

-2000

0

2000

4000

6000

8000

10000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Developing economies Developed economies

Net balance of payments, current accounts (USD, bln)

Source: The European House - Ambrosetti on UNCTAD, 2014

First phase

Industrialised economies opened up markets to

foreign import, accumulating large balance of payment

deficits

Second phase

Developing countries progressively increase

domestic consuption and open up to imports from

developed countries

First phase Secondphase


28

The current deadlock in multilateral trade negotiations led the EU to seek bilateral trade agreements with key partners

South Korea(2010)

Mexico(2010)

Chile(2002)

South Africa(2004)

India(started in 2007)

Malasya(started in

2010)

GCC(started in 2001)

Canada(started in

2009)

Singapore(started in 2011)

USA(started in 2013)

Source: The European House - Ambrosetti on EU Commission, 2014

Ongoing negotiations

Signed agreements

ASEAN(started in 2012)

EU


29

By locking in TTIP, the EU and the US will push other countries to follow and revive multilateral trade negotiations

EU and US would lead by example in the liberalisation of global markets

TTIP would set the regulatory and trade standards for the second phase of globalization

TTIP would strengthen the competitiveness of EU and US economies (especially Small and Medium Enterprises)


30

Next steps: negotiations are expected take long, but there is a window of opportunity in 2015-2016 for securing an ambitious deal

January 2013

President Obama invited EU to start negotiation at his State of the Union speech

June 2013

Obama and Barroso opened TTIP negotiations

May 2014

EU Parliament election

September 2014

US Mid-Term election

September 2016

US Presidential election

2015-2016

The most likely «windowof opportunity» for a political deal on TTIP

February 2014

First «political stocktaking»

October 2014

Second «political stocktaking»

Source: The European House - Ambrosetti on European Commission, interviews with corporate, institutional and political shakeholders 2014


31

Index

Introduction

Executive summary


What is TTIP





32

TTIP has the potential to boost growth and production in various sectors

Note: estimates are permanent increase per year, 2027 benchmark

Source: The European House - Ambrosetti own elaboration CEPR, Bertelsmann Stiftung, Ecorys, 2014

Effect of TTIP on EU trade balance with the US(€ billions)

http://www.tarborotimes.com/wp-content/uploads/2013/08/us-flag-pictures-united-states-of-america-flag4.jpg

http://www.tarborotimes.com/wp-content/uploads/2013/08/us-flag-pictures-united-states-of-america-flag4.jpg


33

TTIP would produce an increase of € 190 bln in EU added value exported globally per year

3,716 125.2 219.9

Additional EU export(EU-US tariffs abolition

+ regulatory harmonisation)Current EU export

(2013)

Effects of TTIP on global EU export (€ billions, per year)

Extra added value exported


108.1 190.0

Additional EU export(EU-US tariffs abolition only)

Source: The European House - Ambrosetti on CEPR’s export estimates and OECD data on Total Value Added embodied in export, 2014


34

Manufacturing: EU exported added value increases by € 167.9 bln

2,130 115.2 201.4


+ regulatory harmonisation)

Additional EU export(EU-US tariffs abolition only)Current EU export

(2013)

Effects of TTIP on global EU export(€ billions, per year)



96,78 167.9



35

Motor vehicles: EU exported added value increases by € 78.7 bln

227.2 45.6 94.8


+ regulatory harmonisation)

Additional EU export(EU-US tariffs abolition only)Current EU export

(2013)




37.9 78.7



36

Chemicals: EU exported added value increases by € 27.2 bln

382.0 19.3 35.4



(2013)




14.9 27.2




37

Metal products: EU exported added value increases by € 13.9 bln

138.1 9.8 16.6



(2013)



8.2 13.9





38

Processed food: EU exported added value increases by € 14.6 bln

177.5 9.2 16.6



(2013)




8.1 14.6




39

Financial services: EU exported added value increases by € 7.1 bln

184.1 3.9 7.8



(2013)




3.5 7.1




40

0.197

0.118

0.079

0.042

0.100

0.063

0.030

0.013

Electricity(domestic)

Electricity(industrial)

Natural gas (domestic)

Natural gas (industrial)

EU US

EU EU

Δ EU=+96%

Europeans pay higher energy prices than Americans and they would benefit from an easing of export restriction in the US

Source: The European House - Ambrosetti on OECD, UK Goverment, US EIA, EU Commission, 2014

Europe’s energy prices are on

average 150% higher than in

the US

Δ EU=+87%

Δ EU=+163% Δ EU=

+233%

US EU US EUUS

US

Energy prices in the EU and the US (Euro per kW/h, 2013)


41

Energy trade across the Atlantic is subject to substantial restrictions

The US have discovered extensive natural reserves in shale gas (340 tlncubic feets) and oil sands (29 mln barrels)*

However, the US government imposes high restrictions on export licenseson natural gas and banned crude oil export. These restrictions contribute tokeeping EU energy prices significantly above the US’s

The European House – Ambrosetti consulted a pool of energy experts** andconcluded that a liberalisation of US oil and gas export licensing could leadto a reduction in the EU-US price gap

Obviously, this is not just a trade issue but also a geopolitical decision onbehalf of US authorities

(*) Proven reserves (**) Interviews with experts in international organisations, oil business, and financial operators

Source: The European House - Ambrosetti on OECD, UK Goverment, US EIA, EU Commission, 2014


42

Estimates on the impact of TTIP on EU energy prices

Natural Gas and Electricity expenditure in EU(in € bln, 2012)*

(*) Based on latest data available on energy consumption and prices by sector in EU and US

Source: The European House - Ambrosetti on OECD, UK Goverment, USA EIA, EU Commission, 2014

Current costs(€ bln per year)

EU-US pricedifference

Saving for each10% reduction of

price gaps*(€ per year)

Electricity(domestic) 44.16

+97% 2.17 bln

Electricity(industrial) 72.98

+87% 3.40 bln

Natural gas(domestic) 157.46

+163% 9.77 bln

Natural gas(industrial) 104.83

+233% 7.33 bln

Total 379.9 - 22.6 bln


43

Index

Introduction

Executive summary


What is TTIP





44

Final considerations (1/2)

An ambitious TTIP agreement would have a positive impact on both the EU and the US, fostering economic growth and competitiveness in Europe in particular:

EU GDP would increase by over 0.5% per year

EU global export would grow by € 219 bln per year, as a result of increased EU competitiveness (worth € 190 bln of extra addedd value exported)

Lower export costs would particularly benefit European SMEs, which have traditionally faced high obstacles in expanding internationally

A liberalisation of US energy export would lead to a decrease in the EU-US price gap. European domestic and industrial consumers would save over €22 bln per year for each 10% reduction in the EU-US price gap


45

Final considerations (2/2)

TTIP has also a high strategic value: an ambitious agreement would become a reference point for all future trade negotiations, giving a global competitive advantage to European and US companies. It is in Europe’s best interest to reach an agreement before the US close other bilateral agreements with ASEAN countries

In view of the complexity of the negotiation, high political commitment from European and the US leaders is a precondition for success (beginning with the next “stocktaking meeting” in October 2014)

TTIP is a highly sensitive political issue: more transparentnegotiation, continuous civil society and business community engagement is necessary to prevent the anti-TTIP opposition from gaining ground

the eu-us transatlantic trade and investment partnership · 2015. 11. 20. · the eu-us...

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