13 Oct 2014

The Impact of TTIP: The underlying economic model and comparisons

Jacques Pelkmans / Arjan Lejour / Lorna Schrefler / Federica Mustilli / Jacopo Timini

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What are the economic and other impacts of the Transatlantic Trade and Investment Partnership? At the request of the European Parliament, CEPS has provided an appraisal of the TTIP Impact Assessment carried out by the European Commission, with special elaboration of the underlying economic model. The methodology applied by the Centre for Economic Policy Research (CEPR) for this economic modelling is analysed in depth, together with the assumptions used to make TTIP amenable to an economic appraisal. The research paper also compares the IA on TTIP with selected previous empirical economic assessments of EU trade agreements and with a set of alternative studies on TTIP itself. In reading our findings, two central caveats should be kept in mind that affect any analysis of the CGE model included in the European Commission’s Impact Assessment. First, TTIP is a rather unusual bilateral trade agreement; and second, TTIP is so wide-ranging that an alternative approach, such as the so-called ‘partial’ (equilibrium) approach – already a second-best solution – would be totally inappropriate to the case under examination.

This paper is the first in a special series of CEPS reports on the Transatlantic Trade and Investment Partnership (TTIP). The study was commissioned by the Ex-Ante Impact Assessment Unit of the Directorate for Impact Assessment and European Added Value, within the Directorate General for Parliamentary Research Services (DG EPRS) of the General Secretariat of the European Parliament, at the request of the European Parliament’s Committee on International Trade (INTA). The main conclusions were presented to the MEPs on 1 April 2014 in the INTA Committee. The study is also published at www.europarl.europa.eu/RegData/etudes/etudes/join/2014/528798/IPOL-JOIN_ET%282014%29528798_EN.pdf.

Jacques Pelkmans is Senior Fellow at CEPS and Professor at the College of Europe; Arjan Lejour is Programme Leader in Public Finance at CPB Netherlands; Lorna Schrefler is Research Fellow at CEPS; and Federica Mustilli and Jacopo Timini are Researchers at CEPS.