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Not everyone would benefit from the establishment of free trade zone between the United States and European Union (EU), a study showed on Monday. Traditional trading partners and developing countries would be the main losers.
The U.S. and the EU member states would significantly benefit from the proposed Transatlantic Trade and Investment Partnership (TTIP), a comprehensive free trade agreement that would cover a zone of 800 million inhabitants, the study of Munich-based Ifo Institute commissioned by Bertelsmann Foundation showed on Monday.
If it is possible to largely eliminate tariffs and non-tariff barriers, real gross domestic product per capita would significantly increase and jobs would be created. In the U.S., the long-term real gross domestic product (GDP) per capita would grow by 13.4 percent, while the 27 EU member states would see an average growth of five percent.
The Britain would become the biggest winner in the EU, with a real increase of GDP per capita of almost 10 percent and with 400,000 additional jobs. In the U.S., 1.1 million jobs would be created, according to the study.
Social welfare gains in the U.S. and the EU, however, would stand in contrast with losses in the rest of the world, the study showed. The two economies would import fewer goods and services from other places. Traditional trading partners, such as Canada, Australia and Mexico, would be particularly affected. Additional losers would include developing countries, especially in Africa and Central Asia.
The study showed that EU trade with neighboring states in North Africa or East Europe would decline by an average of five percent from the comprehensive agreement. The U.S. trade with the BRICS countries (Brazil, Russia, India, China and South Africa) would decline sharply by 30 percent.
Germany, the largest economy in Europe, would have a significantly intensified trade partnership with the U.S. If tariffs and non-tariff trade barriers were comprehensively abolished, German trade with the U.S. would grow by as much as 93 percent in both terms of exports and imports.
Its trade with traditional partners in Europe and China, however, would be affected negatively. In the scenario of a deep EU- U.S. trade liberalization, a decline of about 13 percent in both exports and imports between Germany and China is to be expected.
"A transatlantic free trade agreement would be an important tool for increased growth and employment in Europe," said Bertelsmann Foundation CEO Aart De Geus, "Especially the southern Europeans, who have been shaken by crisis, would benefit from this to an above-average degree."
"However, social welfare gains that arise for the EU and U.S. should also be an incentive to show a readiness to compromise toward the losers of the agreement in the future multilateral negotiations. In this way, the transatlantic free trade agreement could also give fresh impetus to the Doha Development Round, which has come to a stall," De Geus said.
