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Glyn Moody

Glyn Moody's look at all levels of the enterprise open source stack. The blog will look at the organisations that are embracing open source, old and new alike (start-ups welcome), and the communities of users and developers that have formed around them (or not, as the case may be).

TTIP Update XXI

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In Update XX, I noted that despite the European Commission’s claims to the contrary, there was simply no evidence of any meaningful transparency in TTIP. However, that changed today, when the Commission announced its consultation on investor-state dispute settlement. That’s because as well as the questions and useful background explanations, the consultation document [.pdf] includes not only provisions found in typical bilateral investment treaties but – and this is particularly welcome – the relevant text developed in the Canada-EU trade agreement (CETA). That is what transparency looks like, and needs to be extended to all the other chapters.

However, I don’t intend to go through the consultation document here: I’ll save that for another update (we have three months to reply to the consultation, so there’s no huge rush.) Instead, I want to address an issue that comes up again and again, and which represents such a serious misunderstanding of the facts, that I really want to try to deal with it once and for all.

It concerns the famous 119 billion euros figure for the “extra” GDP growth that TTIP will produce, which I’ve mentioned several times before. Here’s its latest appearance, on a page from the important EPP political group in the European Parliament, which is entitled "Mythbusting the EU-US free trade agreement". The relevant section reads as follows:

What’s in it for the EU?

The impact assessment launched by the European Union before the start of negotiations in March 2013 suggested that the EU’s economy could benefit by 119 billion euros a year and the US economy could gain an extra 95 billion a year – with gains of 545 euros for each EU family. These gains would be the result of removing tariffs and doing away with unnecessary rules and bureaucratic hurdles that make it difficult to buy and sell across the Atlantic.

There’s that “119 billion euros” figure, but notice that the claim is Europe would gain this each year. The @EPPGroup account confirmed to me that the EPP had obtained that number from the main European Commission research on the economic impact on TTIP, “Reducing Transatlantic Barriers to Trade and Investment; An Economic Assessment” [.pdf]. And sure enough, on page vii of that document, in the Key Findings section, we read:

An ambitious and comprehensive transatlantic trade and investment agreement could bring significant economic gains as a whole for the EU (‚¬119 billion a year) and US (‚¬95 billion a year). This translates to an extra ‚¬545 in disposable income each year for a family of 4 in the EU, on average, and ‚¬655 per family in the US.

This is very curious, because that’s not what the actual report says at all.

The correct interpretation is found on page 3 of the report, where we find that 119 billion euros figure again, which is explained as the change in GDP. But it is not the change in GDP each year, which is what the Key Findings section claims; in rather small print on that page, underneath the table labelled “Summary of Macroeconomic Effect”, we read the words:

Note: estimates to be interpreted as changes relative to a projected 2027 global economy

The fact that the Key Findings is wrong is confirmed on page 33 of the report, which explains things at more length:

The results are reported with respect to an economic benchmark projected out to the year 2027 which implies that that they capture the impact of the agreement a full ten years after the implementation of the agreement, providing the longer-term impact of policy changes.

As that makes clear, the results give the difference between two situations: the EU’s economy in 2027 if TTIP had been in place for ten years, and the EU’s economy in 2027 without TTIP. The difference (the “impact”) is expressed as the extra GDP that would result – 119 billion euros in the most optimistic case.

So what the report is saying is that the extra growth that TTIP could bring in 2027 relative to the economy in 2027 without TTIP in 119 billion euros. Which means that the 119 billion euros is the cumulative benefit for those ten years of TTIP, compared to the ten years without TTIP. It is not the extra GDP that TTIP would bring each year. In fact, the European Commission’s reports suggests that, on average, TTIP could produce around 11.9 billion euros extra for the European economy each year, which after ten years, gives an overall boost to the EU GDP of 119 billion.

It can be a little hard juggling abstractions like extra growth in GDP over a decade; so let’s look at the other figure that the Key Findings mentions: “an extra ‚¬545 in disposable income each year for a family of 4 in the EU,” which works out as around 136 euros per person. Assuming there are 500 million people in the EU, if that figure were each year, as claimed, this would give a total increase in EU disposable income of 500 million times 136 euros, which equals 68 billion euros, each year, thanks to TTIP.

But as we’ve seen, the increase in total GDP each year is only around 12 billion euros on average, so it’s impossible that TTIP could produce an increase each year of 68 billion euros in disposable income alone. That 68 billion euros figure must refer to the cumulative increase in disposable income in 2027, after 10 years of TTIP, compared to what what people would have had in 2027 without TTIP, just as the figure of 119 billion euros refers to the cumulative gain for the economy.

Put another way, that 545 euros is the total increase in disposable income across 10 years, not the extra disposable income available each year, as the Key Findings erroneously claims. That equates to an average of 60 euros extra, per year, for a family of 4. In other words, even under the most optimistic assumptions, and using the European Commission’s own forecasts, the real-life effect of TTIP would be that each month, everyone in the European Union would be able to buy an extra cup of coffee.

As this shows, even under the most favourable assumptions – assumptions that are unlikely to be realised – TTIP’s benefit to European citizens would be negligible. The threats, on the other hand, are considerable, not least from investor-state dispute settlement, which is likely to cast a chill over legislative initiatives in the European Union, just as it did in Canada under NAFTA.

Full list of previous TTIP Updates.

Follow me @glynmoody on Twitter or identi.ca, and glynmoody on Google

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