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Reducing Transatlantic Barriers to Trade and Investment: An Economic Assessment

Listed author(s):
  • Joseph Francois


    (CEPR, Johannes Kepler University Linz, and wiiw (Vienna))

  • Miriam Manchin


    (University College London)

  • Hanna Norberg

    (Lund (School of Economics and Business) and Stichting IIDE)

  • Olga Pindyuk


    (wiiw (Vienna))

  • Patrick Tomberger


    (Johannes Kepler University Linz)

This study reviews the importance of the bilateral economic relationship between the EU and US. It integrates NTB estimates, based on gravity modeling and firm surveys, with computable general equilibrium (CGE)-based estimates for the economy-wide impact of reducing both tariff and non-tariff barriers (NTBs). Estimates are provided with regards to expected changes in GDP, sector output, aggregate and bilateral trade flows, wages, and labour displacement, among other issues. The study investigates different policy options for the deepening of the bilateral trade and investment relationship between the EU and US. These range from partial agreements that are limited in the scope of barriers they would address (tariffs only, or services only, or procurement only) to a full-fledged free trade agreement (FTA) with a comprehensive liberalisation agenda covering simultaneously tariffs, procurement, NTBs for goods, and NTBs for services. The study also quantifies potential benefits from NTB reduction affecting FDI. The overall message is that negotiating an agreement that would be of a comprehensive nature would bring significantly greater benefits to both economies. A core message that follows from the results is that focusing efforts on reducing NTBs is critical to the logic of transatlantic trade liberalization. Different approaches to the same regulatory challenges have the unintended consequence of increasing costs for firms, which have to comply with two regulatory environments, dragging down labour productivity. Negotiation on NTBs provides the opportunity to pursue a mix of cross-recognition and regulatory convergence to reduce these barriers. Compared to a focus on NTBS, just limiting the exercise to tariffs would lead to much more limited, though positive effects. CEPR report for the European Commission.

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Paper provided by Institue for International and Development Economics in its series IIDE Discussion Papers with number 20130401.

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Length: 124 pages
Date of creation: 01 Apr 2013
Handle: RePEc:lnz:wpaper:20130401
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  1. Narayanan, Badri G. & Hertel, Thomas W. & Horridge, J. Mark, 2010. "Disaggregated data and trade policy analysis: The value of linking partial and general equilibrium models," Economic Modelling, Elsevier, vol. 27(3), pages 755-766, May.
  2. Henk Kox & Arjan Lejour, 2005. "Regulatory heterogeneity as obstacle for international services trade," CPB Discussion Paper 49, CPB Netherlands Bureau for Economic Policy Analysis.
  3. McDougall, Robert, 2000. "A New Regional Household Demand System for GTAP," GTAP Working Papers 404, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  4. Peter B. Dixon & Dale Jorgenson (ed.), 2012. "Handbook of Computable General Equilibrium Modeling," Handbook of Computable General Equilibrium Modeling, Elsevier, edition 1, volume 1, number 1.
  5. Giuseppe Nicoletti & Steve Golub & Dana Hajkova & Daniel Mirza & Kwang-Yeol Yoo, 2003. "Policies and International Integration: Influences on Trade and Foreign Direct Investment," OECD Economics Department Working Papers 359, OECD Publishing.
  6. Narayanan, Badri & Thomas Hertel & Mark Horridge, 2010. "Linking Partial and General Equilibrium Models: A GTAP Application Using TASTE," GTAP Technical Papers 3192, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  7. Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685.
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