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Felbermayr, Gabriel
Year of Publication: 
Series/Report no.: 
Ifo Working Paper 215
The sheer size of the EU and US economies combined suggests substantial economicbenefits from eliminating tariffs, reducing the costs of regulatory divergence, anddeepening cooperation. Estimating these gains is difficult: uncertainty concerningmodelling choices, data, and scenarios looms large. However, the economic potential ofa well-done agreement is substantial. Critics are wrong by dismissing the gains asmicroscopic. By now, a large number of scholarly studies exist which demonstrate gainson the level of GDP per capita from 0.5 to 4.0% for the EU and a similar span for theUS. Almost all of the gains arise from lower non-tariff barriers and in the form of lowerprices of final and intermediary goods, higher product variety, and higher productivity.Virtually all EU member states benefit, while TTIP outsiders may lose. Estimates of jobgains are even more uncertain, long-run effects are likely to be small and positive. TTIPcould increase economic inequality, but the effects will be modest as the structure ofcomparative advantage between the two partner regions is rather similar. All existingstudies rely on static models; neglecting effects on R&D, technology adoption, orhuman capital formation, they represent lower bounds to the true benefits.
non-tariff barriers
Document Type: 
Working Paper

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