2 What are the benefits of TTIP?|
7. The proposals for TTIP have provoked a vigorous
debate and our evidence sessions demonstrated that is a very wide
range of views on its potential merits. All of our witnesses could
see some advantage to be had in an agreement; where they differed
was which aspects were beneficial, which were not, and the level
of the economic benefit which would be achieved.
8. The British Chambers of Commerce believed there
was "hope and optimism about the benefits for jobs and economic
growth as a result of the TTIP" but noted that there were
"a number of challenges" which would first need to be
addressed. The CBI also
saw benefits in a free trade agreement noting the US was the UK's
largest market outside the eurozone, but despite this, the UK's
export performance in that market had been "extremely poor
over these past 20 years".
TTIP could, the CBI believed have a positive impact on "investment,
in terms of growth, jobs and competitiveness", and was "something
worth pursuing in the current economic climate".
Frances O'Grady, from the TUC, also noted that a deal to reduce
tariffs "could genuinely lead to greater trade and greater
benefits to all" in sectors such as the automotive and chemicals
9. The campaigning organisation 38 Degrees has run
a number of campaigns in opposition to TTIP. However, in evidence
to us, David Babbs, its Executive Director, told us that 38 Degrees
Members were "certainly not hostile to the idea of any agreements
between the UK, the EU and the US" and that overall they
had "instincts in favour of international cooperation,
in terms of countries working together and having positive relations
with each other".
That said, he reported that 38 Degrees members were concerned
about who benefited:
The kinds of things that they are saying are
that, for example, "It may help businesses, but there must
be proper regulation so that normal people benefit from this business
and not find their services and rights eroded in favour of the
profit of business owners".
10. He concluded that the TTIP deal should not be
pursued "regardless", and said that agreement depended
on "the content of that deal".
According to Mr Babbs, a key red line for many 38 Degrees members
in this respect was the proposals for Investor State Dispute Settlement
clauses, which we consider in more detail later in this Report.
11. Polly Jones from the World Development Movement
also saw the potential for benefits in a trade deal but argued
that for those benefits to be achieved, an alternative trade mandate
was necessary which put "working people at the heart of trade
agreements, in terms of recouping the benefits".
This was also a theme highlighted by Frances O'Grady from the
TUC, who saw the litmus test of TTIP as whether it would deliver
a "levelling up or levelling down of labour standards".
12. Central to the argument in favour of TTIP is
that it will bring significant economic benefits to the EU, and
in particular to the United Kingdom. On 17 June 2013, at the G8
Summit in Lough Erne, the Prime Minister stated that TTIP could
"add as much as £100 billion to the EU economy, £80
billion to the US economy and as much as £85 billion to the
rest of the world".
These figures were restated in the Government's paper on TTIP,
published in July 2014, which highlighted the potential benefit
to the UK economy:
An ambitious agreement could strengthen this
relationship adding as much as £10 billion annually to the
UK economy in the long-term. For individuals, this means more
jobs and reduced prices for goods and services.
13. This assessment of the economic benefit has been
used repeatedly by the proponents of TTIP and was relied upon
by Lord Livingston and thirteen other Trade Ministers in a letter
to Ms Malmström, Commissioner-designate for Trade:
The Transatlantic Trade and Investment Partnership
(TTIP) will add over 100bn to EU GDP and has the potential
to transform not just our own economies, but also the global economy.
14. These estimates are based on a study by the Centre
for Economic Policy Research (CEPR) and its figures have become
an established part of the debate on TTIP. The CEPR stated that
the benefits could be 119 billion to the European Union.
That said, given the lack of detail available on the breadth and
depth of any trade agreement, the figures are highly speculative.
Polly Jones from the World Development Movement described the
figure as "the most optimistic scenario" and suggested
that it was unlikely to be achieved:
It makes assumptions, for example that barriers
on services and goods, nontariff barriers, would be liberalised
by a further 25%, but on government procurement you might see
a liberalisation of 50%. To generate those topline figures,
you have all of these assumptions, and it assumes also that you
would be opening up public procurement by 50%, so the figures
are bestcase scenario, very crude and also a delayed benefit.
15. Ms Jones concluded that even this "best
case scenario" would not deliver benefits to the United Kingdom
until 2027 and would then only benefit a UK family to the level
of "about the cost of a packet of fish fingers a week".
She also highlighted the fact that a number of studies suggested
that the removal of tariffs would lead to a loss to public funds
across the EU of "nearly $20 billion over 10 years",
and referenced a GMB calculation based on the full liberalisation
of TTIP which, she said could cost the UK Exchequer £3.5
billion a year. StopTTIP
UK, an "informal, voluntary organisation of people concerned
about TTIP", also argues that the economic assessment:
Fails to identify losses, such as loss of intra
-EU trade, the costs of unemployment from loss of tax take and
from the cost of unemployment benefit payments, as well as loss
of tariff income, and it flags possible reduced exports from Least
Developed Countries to the EU.
16. By contrast, Ms Roderburg from BritishAmerican
Business, a pro-TTIP business lobby, described modelling as an
"indication of a trend" and asserted that the projected
financial returns were "underestimating the potential benefits
of TTIP". Sean
McGuire, Brussels Director of the CBI, noted that while it was
the "best estimate one can have", it was not "definitive"
as there was insufficient detail to accurately predict the financial
benefits of TTIP.
17. Dr Adam Marshall from the British Chambers of
Commerce was also sceptical of the estimated benefits as he believed
an accurate calculation was "impossible" to calculate.
However, he was equally critical of those predicting that TTIP
would be bad for the United Kingdom:
Our position is that those who are cheerleading,
whether they be in businessparticularly multinationalsor
the Commission itself, who have those very large numbers, and
also those who are very much against this agreement, who warn
of hellfire and damnation to come, are probably all in the wrong.
It is impossible to put a financial benefit number on TTIP until
we know what its content is.
18. In November, we took evidence from Dr Gabriel
Siles-Brügge, a political analyst whose research has questioned
the accuracy of the methodology underpinning the 100 billion
figure. He argued that the economic modelling made overly optimistic
predictions, and that rather than acting as "a reliable guide
to future outcomes" the model served the "pro-liberalisation
agenda of the European Commission and other advocates of the TTIP".
In evidence to us, he said that it was "somewhat disingenuous"
to present that figure as a reliable estimate,
because the assumptions were "unrealistic",
and made a number of unreasonable assumptions about the way that
the economy worked. As examples, Dr Siles-Brügge highlighted
the following erroneous assumptions:
That there will be full employment;
That the economy, after a policy decision such
as TTIP, adjusts smoothly from point 1 to point 2 without any
social costs in between; and
That individuals are rational optimisers.
In addition, he described the estimates of reducing
non-tariff costs at 17% as over-optimistic, suggesting a lower
figure of 3%. Dr
Siles-Brügge challenged the promoters of TTIP in Government
to be "intellectually honest" in that it was not possible
to put an accurate figure on the economic benefits.
19. A study conducted by the Bertelsmann Institute
concluded that in the event of a far-reaching deal (so-called
deep liberalisation) Canada, Mexico and Australia could suffer
GDP losses ranging from 7-10%. By contrast the United Kingdom
would be the second biggest beneficiary of such a deal. [See graph
20. When we challenged the Minister on the accuracy
of the estimated benefits of TTIP, he appeared to agree that they
should not be taken as fact. In doing so he quoted JK Galbraith,
who said that the only purpose of economic forecasts was to make
astrology look respectable.
In that vein, he acknowledged that the letter he co-signed with
other Trade Ministers would have been better with the following
The normal phraseology I end to use is "An
ambitious agreement could add £10 Billion to the UK economy"
but I would say, of course, it could be higher and it could be
21. Sean McGuire said that the CBI believed that
"companies of all sizes and from all sectors" could
benefit, but told
us that it had not yet conducted "a sector by sector analysis"
of those gains. Allie
Renison from the IoD agreed that a sectoral analysis of the economic
benefits was "really important" but cautioned that many
trade associations "do not have the resources to carry out
huge sector-by-sector analyses".
Adam Marshall from the British Chambers of Commerce said that
the BCC would not consider commissioning research among business
communities until there was greater detail and certainty on what
was being proposed.
BritishAmerican business confirmed that there was "currently
no comprehensive study available that assesses the potential benefits
of TTIP for United Kingdom (UK) regions and sectors". However,
it noted that a number "anecdotal and sector based assessments"
had been conducted by trade associations and companies for the
All Party Parliamentary Group (APPG) on EU-US trade which were
available on the BAB's website.
This sector by sector review was something that the TUC also would
22. Whilst TTIP has the potential to deliver economic
benefits to the United Kingdom, it is impossible at this stage
to quantify those benefits in any meaningful way. Rather than
continue to use the £100 billion figure, the Government must
come up with a comprehensive assessment which includes the estimated
economic yield of a variety of levels of agreement.
23. We further recommend that this assessment
sets out the potential benefits and risks on a sector by sector
basis, so that each area of our economy can better understand
the impact of a trade deal.
3 British Chambers of Commerce (TTI01) Back
The World Development Movement has since been renamed as Global
Justice Now Back
Letter to Commissioner-designate for trade Back
StopTTIP UK (TTI08) Back
BritishAmerican Business (TTI13) and BAB: website Back