Transatlantic Trade and Investment Partnership - Business, Innovation and Skills Contents

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.[3] 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".[4] 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".[5] 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 industries.[6]

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".[7] 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".[8]

10. He concluded that the TTIP deal should not be pursued "regardless", and said that agreement depended on "the content of that deal".[9] 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[10] 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".[11] 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]

Economic benefits

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".[13] 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.[14]

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.[15]

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.[16]

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".[17] 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.[18] 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.[19]

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".[20] 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.[21]

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 business—particularly multinationals—or 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.[22]

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".[23] In evidence to us, he said that it was "somewhat disingenuous" to present that figure as a reliable estimate,[24] because the assumptions were "unrealistic",[25] 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.[26]

In addition, he described the estimates of reducing non-tariff costs at 17% as over-optimistic, suggesting a lower figure of 3%.[27] 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.[28]

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 below.]

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.[29] In that vein, he acknowledged that the letter he co-signed with other Trade Ministers would have been better with the following caveat:

    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 lower.[30]

21. Sean McGuire said that the CBI believed that "companies of all sizes and from all sectors" could benefit,[31] but told us that it had not yet conducted "a sector by sector analysis" of those gains.[32] 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".[33] 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.[34] 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.[35] This sector by sector review was something that the TUC also would welcome.[36]

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

4   Q22 Back

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7   Q86 Back

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9   Q149 Back

10   The World Development Movement has since been renamed as Global Justice Now Back

11   Q89 Back

12   Q23 Back

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15   Letter to Commissioner-designate for trade  Back

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17   Q68 Back

18   Q126 Back

19   StopTTIP UK (TTI08) Back

20   Q236 Back

21   Q11 Back

22   Q234 Back

23   TTIP_and_the_Role_of_Trade_Impact_Assessments_Managing_Fictional_Expectations Back

24   Q153 Back

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26   Q157 Back

27   Q159 Back

28   Q192 Back

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30   Q346 Back

31   Q14 Back

32   Q16 Back

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35   BritishAmerican Business (TTI13) and BAB: website  Back

36   Q13 Back

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© Parliamentary copyright 2015
Prepared 25 March 2015