Economic impacts of TTIP in Ireland Department of Jobs, - PowerPoint PPT Presentation

Economic impacts of TTIP in Ireland Department of Jobs, Enterprise and Innovation Martin H. Thelle Dublin, 27 March 2015

Economic impacts of TTIP in Ireland Introduction Purpose of the Study Objectives ● Quantify the sectoral and overall macro-economic impacts of the TTIP on the Irish Economy ● Identify key sectors ● In-depth analyses of key sectors Approach ● Large scale model from the CEPR (2013) study ● Adapted to the Irish economy and sectors ● Stakeholder consultations 2

Current trade between Ireland and the US 3

Economic impacts of TTIP in Ireland Ireland’s trade in goods with U.S. Billion Euro 25 Value of Exports 20 15 10 5 Value of Imports 0 4

Export to US Pharmaceuticals dominate goods exports Value of goods exports to the US, 2013 € billions 0 5 10 15 Agri-food 0,1 Beverages and tobacco 0,3 70% Other primary sectors is pharmaceuticals, 12,8 Pharma and chemicals chemicals and related products 1,0 Machinery 3,7 Misc. articles Other man. goods 0,1 Commodities Note: Irelands export to the US. Source: Copenhagen Economics based on data from Irish CSO 5

Economic impacts of TTIP in Ireland Ireland’s exports to the US Composition (% of total goods + services) 41% Goods exports Pharma chemicals 10% Other machinery ~60% 3,4% Electric machinery 1,6% Processed food 1,0% Other man. goods Dairy 0,3% Other special goods 0,3% Wood and paper 0,2% Metals 0,2% Primary agriculture Agri-food 0,2% Beef 0,1% Energy 0,1% Vehicles 0,1% 30% Service exports Insurance Business and ICT services 4,6% ~40% Finance 2,8% Air transport 1,7% 1,0% Other services 0,9% Other transport 0,4% Personal service 0,3% Communication Sea transport 0,0% Construction 0,0% 6 Source: Copenhagen Economics based on GTAP9 data.

Economic impacts of TTIP in Ireland A strong Ireland-US trade relation Share of extra-EU export of goods destined for the US market 60% 49% 50% 40% 30% 20% 16% 10% 0% DEN BEL ITA HUN SLV MLT EST SPA GRE ROM SLO LAT IRE UK GER AUT EU28 FRA SWE NL POR FIN LUX CZE POL CYP LIT BUL Note: Based on value of exports for total goods exports. Share of exports to the US relative to total extra-EU export. Source: Copenhagen Economics based on data from Eurostat. 7

Current barriers to transatlantic trade 8

Economic impacts of TTIP in Ireland Tariffs are generally low – but peaks for certain products Tariffs applied by the US on imports from the EU Irish exporters 6.6% Agriculture average pay in excess of 1.7% USD 300m in Industry average tariffs to the US 2.2% Treasury per year. Total average Tariffs applied by the EU on imports from the US 12.8% Agriculture average 2.3% Industry average 3.3% Total average 9 Source: Tariff averages from Cepii (2013)

Economic impacts of TTIP in Ireland Non-tariff barriers and regulation Regulation is legitimate o ensuring consumer information o improving health o product safety o preserving the environment Regulation in itself does not hinder trade … but differences in regulation and procedures to comply these may increase the cost of selling in foreign markets o Familiarisation costs o Conformity assessment costs o Certification costs o Adaptation costs o Blocking products 10

Economic impacts of TTIP in Ireland Non-tariff barriers may affect firms in several ways NTBs implies both a) Upfront fixed costs of selling in a foreign market b) On-going variable costs of exporting to that market This in turn affect firms’ i) Probability to export (to a country or a product) ii) Value of export iii) Export prices Impact can measured as a tariff equivalent , but impact differs from that of a tariff – e.g. they do not yield any fiscal revenue, and NTBs can be a heavier burden on SMEs. 11

Economic impacts of TTIP in Ireland Cost impact estimates and ‘ actionability ’ Objective: Reduce costs for exporters, without compromising the existing levels of protection of safety, health, environment. Cost equivalent of NTBs in the US for imports from the EU 22% Manufacturing goods average Cost equivalent of NTBs in the EU for imports from the US 25% Manufacturing goods average Source: CEPR (2013) 12

Economic impacts of TTIP in Ireland Cost impact estimates and ‘ actionability ’ Objective: Reduce costs for exporters, without compromising the existing levels of protection of safety, health, environment. Cost equivalent of NTBs in the US for imports from the EU 22% -> 16% Manufacturing goods average Cost equivalent of NTBs in the EU for imports from the US 25% -> 19% Manufacturing goods average Source: CEPR (2013) ‘ Actionability ’ = expectation that around one ¼ of the costs 13 resulting from regulatory differences can be reduced by TTIP.

Economic impacts of TTIP in Ireland NTBs differ from sector to sector Cost equivalent of NTBs in the US for imports from the EU 73% Food and beverages, average Pharma and chemicals, average 19% 15% Electrical machinery, average Source: CEPR (2013) 14

Main results 15

Economic impacts of TTIP in Ireland Main results This is an EU- US agreement … not Ireland -US ● TTIP will boost EU GDP by € 120 bn and the US GDP by € 90 bn (CEPR, 2013) ● Realising an untapped potential ● Limited trade diversion ● Trade with third parties will go up TTIP will change how Irish firms: ● …trade with the US ● …trade with rest of EU ● …trade with the rest of the world Trade liberalisation – and in particular NTB reductions – has different impacts on SMEs and MNEs 16

Economic impacts of TTIP in Ireland Main results Main economic impact in Ireland: Large and positive More trade ● Overall Irish export up by 3.8% to 5.0% ● Overall Irish import up by 4.3% to 5.3% Higher economic growth and welfare ● Irish real GDP up by 1.1% to 1.5% (EU avg. 0.5%) ● Investment up by 1.5% to 1.9% Higher wages and more export-related jobs ● Real wages up by 1.5% to 1.9% ● Export increase is estimated to correspond to 5,000 to 10,000 additional export-related jobs in Ireland. 17

Economic impacts of TTIP in Ireland Macro-results with current and future base year (2030) Pct. change from baseline year 6,0% 5,4% 5,0% 5,0% 4,3% 3,8% 4,0% 3,0% 1,9% 1,9% 2,0% 1,5% 1,5% 1,5% 1,1% 1,0% 0,0% GDP Exports Imports Real wages Investment Current baseline Projected baseline Source: Copenhagen Economics based on CGE-simulations by prof. J. F. Francois 2014 18

Economic impacts of TTIP in Ireland Lower tariffs and lower NTBs for goods are main sources of economic impact in Ireland TTIP implies reduction of transatlantic trade barriers, Total GDP change which result from these +1.1% elements of the agreement: 1,2% Spillovers 0,07% 1,0% 0,12% Lower barriers for services 0,8% Lower NTBs for goods 0,48% 0,6% 0,4% Lower tariffs 0,45% 0,2% 0,0% GDP change Source: Copenhagen Economics based on CGE-simulations by prof. J. F. Francois 2014 19

Main sectors 20

Economic impacts of TTIP in Ireland Opportunities are expected mainly in… Manufacturing ● Pharmaceuticals and chemical industry ● Electrical machinery ● Other advanced machinery Services ● Insurance Agriculture and processed food ● Overall increase in exports ● Attention to certain subsectors such as dairy and beef 21

Economic impacts of TTIP in Ireland Impacts in Manufacturing (non-food) Pharma and electronics are driving the trade effects € billions Goods trade changes Predicted increase with TTIP 3,0 Total export and import numbers Electrical machinery 0,6 (incl. both the US, rest of EU and RoW) Change from baseline, € billions 1,8 Pharmaceuticals and chemicals using current base-year 0,4 0,5 Other machinery 0,5 Exports 0,3 Agri-food Imports 0,3 Other transport equipment Other Manufacturing 0,2 Energy and petrochemicals 0,1 Motor vehicles 0,1 Wood, paper, publishing 0,1 -0,1 Metals 0,2 Note: Change from baseline. Estimates are based on Ireland’s trade flows in 2013 according to the CSO . 22 Source: Copenhagen Economics based on CGE-simulations by prof. J. F. Francois 2014

Economic impacts of TTIP in Ireland Impacts in services Insurance and financial up. Contraction in business service/ICT ● Small increase in overall service exports ● Significant increase in service imports Service barrier estimates ● Service output largely unaffected Services EU US Irish service exports are predicted to increase in ● Maritime transport 8% 8% ● Insurance (incl. pension funding, ● Air transport 2% 2% except compulsory social security) ● Finance 11% 32% ● Financial services (financial ● Insurance 11% 19% intermediation) ● Business/ICT 15% 4% ● Communications 12% 2% …while decrease in Irish export of Source: CEPR (2013) and Ecorys (2009) ● Business, professional and ICT services ● Other services 23