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How Deep is Your Love? A Quantitative Spatial Analysis of the Transatlantic Trade Partnership


  • Oliver Krebs
  • Michael Pflüger


This paper explores the effects of trade liberalization envisioned in a Transatlantic Trade and Investment Partnership (TTIP) between the United States and the European Union. We use a new quantitative spatial trade model with consumptive and productive uses of land and inputoutput linkages. Our calibration draws mainly on the World Input Output Database (WIOD). The eventual outcome of the negotiations is uncertain. Tariffs in EU-US-trade are already very low, however, so that an agreement will have a major impact only by eliminating non-tariff barriers. These are extremely hard to quantify. We address these uncertainties by considering a corridor of trade liberalization paths and by providing numerous robustness checks. We find that even with ambitious liberalization, real income gains within a TTIP are in the range of up to 0.46% for most countries. The effect on outside countries is often negative, and even smaller. Taking land into account scales down the welfare effects quite strongly. Interestingly, we find that all German counties derive unambiguous welfare gains even though the model allows for negative terms-of-trade effects, in principle. Our analysis also implies that in order to arrive at the same welfare gains as under a TTIP, a multilateral liberalization would have to be much more ambitious for the US than for the EU.

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  • Oliver Krebs & Michael Pflüger, 2016. "How Deep is Your Love? A Quantitative Spatial Analysis of the Transatlantic Trade Partnership," Working Papers 168, Bavarian Graduate Program in Economics (BGPE).
  • Handle: RePEc:bav:wpaper:168_krebspflueger

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    References listed on IDEAS

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    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Gabriel Felbermayr, 2016. "Economic Analysis of TTIP," ifo Working Paper Series 215, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    2. Aichele Rahel & Felbermayr Gabriel J. & Heiland Inga, 2016. "TTIP and Intra-European Trade: Boon or Bane?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 236(6), pages 639-664, December.
    3. repec:zbw:zewexp:172787 is not listed on IDEAS

    More about this item


    international trade and trade policy; factor mobility; intermediate inputs; sectoral interrelations; transatlantic trade; TTIP;

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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