Since 2000, more than 10 regional trade agreements have come into force annually. However, the Transatlantic Trade and Investment Partnership (TTIP) announced in February 2013, for which negotiations began July 8, 2013, is unique: it aims to link the world’s two biggest economic entities. The initiative is motivated by the stalemate in multilateral negotiations, the competition between trade agreements, and the willingness of the two partners to retain their leading positions in world trade, or at least to limit their loss of influence.

Given the low average level of the import tariffs – 2% in the US and 3% in the EU – the setting of influential norms, standards, and other rules is probably where the main benefits lie for the US and the EU in the long run. The authors show that negotiations will focus on non-tariff measures, regulation in services, public procurement, geographical indications, and investment.

After reviewing the main issues at stake, Lionel Fontagné, Julien Gourdon and Sébastien Jean use a computable general equilibrium model to assess the economic impacts of an agreement. The central scenario assumes the complete phasing-out of tariff protection accompanied by an across-the-board 25% cut in the trade restrictiveness of non-tariff measures, for both product and service sectors with the exception of public and audiovisual services.

The authors find that trade between the two signing regions in goods and services would approximately increase 50% on average, including an upsurge of 150% for agricultural products. 80% of the expected trade expansion would stem from lowered non-tariff measures. Both partners to the proposed agreement would reap non-negligible GDP gains in the long run, corresponding to an annual increase in national income of $98bn for the EU and of $64bn for the US.

Reference: 
L. Fontagné, J. Gourdon & S. Jean (2013) "Transatlantic Trade: Whither Partnership, Which Economic Consequences?", CEPII Policy Brief No1, September.