Dr. Werner Raza:

I thank members for their comments and questions. I will address a few of them. Deputy Barry asked whether I would argue in favour of stopping the talks. Let me make it clear that I am not an activist. I am a researcher and, therefore, I am not talking about stopping the negotiations. I am pointing my finger at some things which have been not highlighted but which should receive more attention from policy makers. The first thing I wanted to highlight was that with every trade agreement, including TTIP, there are winners and losers. In the studies and public debate so far, we have been talking mostly about the winners and the losers will be those obviously negatively affected because, for example, they will lose their jobs or they will suffer a deterioration in consumer standards potentially. We should, therefore, talk clearly about who are the winners and losers.

In terms of the economic case for the trade agreement, I made it clear there will be on balance positive effects on the economy but I made the case that the economic benefit will not be as large as has been reported in many studies published by the European Commission and others. Adjustment costs, which every trade agreement involves, are not taken into account in the modelling exercises in those studies. There will be winners and losers. On average, we should expect positive effects in the long term. They will not follow so much from decreasing prices of imported goods. When one looks closely at price structures and how they evolve, one will find prices are mostly sticky. Price reductions to some extent take place, particularly in the case of advanced countries that produce and export middle and high technology products. Prices are sticky and they will be not be reduced. The advantage in trade agreements in the long run comes from the fact that trade to some extent induces technological advances and innovations. There is a strand of economic discussion called new trade theory, NTT, and the results of the new theory basically say that companies that export the majority of their goods and services are on average more technology driven than other companies that, in the majority, produce for the local market. Trade, therefore, induces technological change and that is the kind of trade that then triggers dynamic effects in terms of value added with high productivity production models. In that sense, trade is positive in the long term. In the short term, the price effects between two highly industrialised regions such as Europe and US are probably negligible. That is my assessment in term of the economic gains to be expected.

The second issue I wanted to address is the regulatory agenda. I tried to highlight that the agreement to a large degree is about regulation. It is not so much about tariff abolition because that has been achieved more or less over the past 50 or 60 years. We are talking about regulatory change.

It is very difficult to estimate the economic effects of that regulatory change because the methods for doing that - cost-benefit analyses, etc. - are not developed to such a degree as to facilitate or provide a secure foundation for making economic assessments of the overall effect of regulatory change. The projected cost savings to companies taken into account in those four studies rest on surveys. Surveys are to some extent prone to bias. However, estimating the social benefits of regulation is also very difficult. We have seen in recent years attempts to do that. The Office of Management and Budget in the US has done impact assessments of the costs and benefits to society in the United States of regulation, including environmental protection regulations and consumer regulations. It tried to estimate the value of those regulations to society. Such exercises are methodically problematic. For example, how does one quantify the value of a life saved because of stringent public health regulations? A lot of things are being assumed to come up as a certain value. Nevertheless, those assessments have shown that, during the past ten to 15 years, the benefits of public regulations outweigh the costs by a factor of up to six. It is important to bear that in mind when discussing those regulatory issues. Public regulation has a benefit to society. If it is proposed to change it, even if it is a change only in technical standards, the question we have to ask is whether that change will affect the social benefit to society of that regulation. If the answer is no, there is no case to be made against harmonisation, alignment or mutual recognition. However, if it is proposed to introduce mutual recognition of different standards, one standard being more stringent than the other, that might lead to regulatory competition, because companies would perhaps move their production capacity to the jurisdiction with the lowest standard. These are tricky issues which go beyond the domain of economic analysis, but they are core issues in those negotiations. The negotiations in the regulatory arena will be complex and involve difficult trade-offs between cost savings for companies and the benefit of regulation to society.