Potential Economic Effects of the Reduction in Agricultural and Nonagricultural Trade Barriers in the Transatlantic Trade and Investment Partnership

The objective of the paper is to provide a preliminary assessment of the potential economic effects in the U.S. and EU28 of a reduction in their bilateral trade barriers. Using a global CGE model the paper develops four trade barrier reduction scenarios and analyzed their impact on trade, production, factor prices, and welfare in the two economies for a 10-year period through 2024 compared to a baseline without reductions. The scenarios are: (i) 90% reduction in tariffs only; (ii) 90% and 20% reductions in tariffs and NTMs, respectively, for all sectors; (iii) 90% and 20% reductions in tariffs and NTMs in non-agriculture only; and (iv) 90% reduction in both tariffs and NTMs. Results indicate largest percentage increases in bilateral trade for agriculture/food sectors when liberalization includes these sectors, but that most of the gains are in non-agriculture due to its predominance in production and initial trade flows. Only the fourth scenario reverses the baseline downward trend through 2024 in U.S.-EU28 bilateral trade as a share of their global totals.