Dr. Werner Raza:

There will be a corresponding loss for the US once it has reduced or eliminated remaining tariffs on manufactured goods and agricultural imports from the EU. Both the US and the EU will lose revenue in the form of tariffs. Reducing tariff rates is the very essence of a free trade agreement and that leads to a reduction in public income. The EU budget will, in all likelihood, experience a loss of €2.6 billion per year. Accumulated over a transition period of ten years, this would accrue to a loss of EU public revenues of at least €20 billion. Part of that loss will be compensated for by increasing exports and output as a consequence of the agreement, but that is a long-term process. In the short term, the net effect on the public budget will be negative.

There could be additional potential negative effects of TTIP. For example, exports from least developed countries, LDCs, to the EU will possibly suffer, with a potential reduction in their real GDP of up to 3%. This is a rather straightforward conclusion from trade theory. If two countries or regions enter into a trade agreement, there will be trade diversion away from third countries or regions, with the latter seeing their exports diminish as a consequence. One could say, therefore, that there will be a negative effect on the rest of the world arising from TTIP. Empirically, the magnitude of that effect is not entirely conclusive. Certainly, given the EU's official commitment to eradicating poverty in LDCs, the results obtained by the four studies warrant a detailed examination of the possible effects of TTIP on developing countries.

Finally, intra-EU trade will probably decrease because of TTIP. Some studies suggest a modest reduction, but one estimation is that intra-EU exports will decline by 30%. That seems a very high figure and perhaps not plausible. On the other hand, it certainly seems likely that trade between EU member states will decrease because it will be substituted by imports from the US, to some extent at least. However, the studies do not give very precise information on this very important issue, which calls for further examination.

In our view, TTIP will, in the long run, give positive but very small economic effects. It has been our aim to show that some of the potentially negative effects which flow from regulatory change and macroeconomic adjustment costs have not been considered to the degree they should by policy-makers. That is the basic message of our study.