30 June 2016

Commission “not in possession” of national impact studies for CETA, while US business lobby take study spin to a new height

Positive economic impacts for TTIP being stretched to the outer-limit our expert Rikard Allvin finds, and in other cases, do not exist at all.

Simon McKeagney, Editor

The European Commission’s DG Trade department has admitted in a letter that it is “not in possession” of any national impact studies on CETA, nor is it “aware that such studies had been conducted in the Member States” despite demanding that national impact studies to be carried out for the TTIP agreement.

Commissioner Malmström has previously urged Member States to conduct impact assessments on how TTIP will affect their countries, in an attempt to strengthen the case for the deal across Europe. However several studies commissioned by Member State governments exposed the opposite, highlighting that some sectors, like the beef sector in Ireland, could be devastated as a result of the TTIP deal. The lack of CETA analysis at Member State level highlights the inconsistent approach in assessing the impact of these agreements, despite huge public outcry and demands by many national parliaments to have a say in the the final deal.

The letter, released on Monday in response to a Freedom of Information request, says that the Commission did conduct a ‘detailed Sustainability Impact Assessment (SIA)’ which covers the macro-impacts of the CETA agreement, but was not aware of any detailed analysis for any Member State:

‘I regret to inform you that the Commission is not in possession of national studies analysing the impact of CETA on individual Member States, nor is it aware that such studies had been conducted in the Member States…’

CETA has now been finalised, and has begun it’s journey through the EU institutions, with a decision by the EU Council on signing due in the early Autumn. Juncker said this week that the CETA deal is of EU-only competence, which is likely to further infuriate those governments who want to see it ratified in their national parliaments. 

Stretched truths and non-existent documents

The use of economic studies for political ends has never been more apparent than in the TTIP/CETA debate over the last 3 years. As of late, the highlighted jobs and growth figures first released by the Commission and by pro-TTIP business lobbies have been widely criticised and since debunked. But in some cases, even non-existent studies have been used to promote TTIP. Recently a Bulgarian NGO discovered that the US embassy in Sofia had been arguing in favour of the benefits of TTIP for Bulgaria, referencing a study by BAS (Bulgarian Academy of Sciences).

However, the study doesn’t appear to exist. It was first referenced by the US ambassador in December 2014, at a pro-TTIP forum:

‘The forum was organized by the US Chamber of Commerce in Bulgaria and the Consultative Committee of the Italian Entrepreneurship in Bulgaria in cooperation with the US Embassy in Sofia and the Bulgarian Chamber of Commerce and Industry. “The expectations are for increase in Bulgarian exports to the US by 7,7%, according to a study by BAS”, the Ambassador stated. Those words by Mrs. Ries were widely reported throughout Bulgarian media.’

Only following repeated requests by Solidarity Bulgaria for access to the report, via a member of parliament did vice prime minister Kuneva finally respond earlier this month. She admitted that the study in question had in fact been drawn up by a “team of researchers, working in the US”, not by the Bulgarian Academy of Sciences. She went on to say, “I can assure you that no analysis of the effects from the Transatlantic Trade and Investment Partnership between the US and the EU (TTIP) has been made by BAS.”

And finally… AMCHAM’s “inappropriate” jobs and growth machine

A recent study commissioned by the US business lobby AMCHAM EU has been widely circulated amongst government representatives in Brussels, political parties and business associations, painting a rather (unsurprisingly) rosy picture of TTIP for European countries across the board. Our Swedish expert Rikard Allvin has taken an in-depth look at the study, and finds that there’s a lot more than meets the eye:

By Rikard Allvin, Policy Advisor, Swedish Greens

After a lot of anticipation, a new study on the economic effects of TTIP was released earlier this year by the American business association AMCHAM EU. It joins a vast number of existing reports and copy most of the conclusions; TTIP will create a modest GDP-growth of roughly 0,5 % - an estimation based on the same overly optimistic assumptions on non-tariff barrier removal as previous studies. 

The study employs the same method of modeling (CGE) as the most cited (Ecorys 2009/CEPR 2013) previous studies and actually presents the exact same result as the CEPR study; economic growth will increase for the EU with approximately 0,5 %, or 119 billion euro, in the baseline scenario of 2030. This will, when implemented, represent a permanent increase to the economy (this is the so called ”annual” effect). This needs to be further explained;

We are not talking about an annual increase of 0,5 % GPD each year. And, we are not talking about a one-time effect at 2030. Instead, the conclusions of this (and the CEPR) study, is that the EU economy, with TTIP, by 2030 will be 0,5 % bigger compared to a situation where TTIP is not implemented. Therefore, we are not talking about an annual growth of 0.5 %, but an economy that is annually 0,5 % bigger, which, due to the exponential factor, makes a huge difference. On the other hand, as some critics have portrayed it, it's not a one-time effect distributed over ten years as in 0,05 % either.

The conclusion of 0,5 % GDP increase comes as no surprise when studying which authors are behind the report; its basically a ”who's who” of participants of earlier (positive) economic impact studies on TTIP. It includes Joseph Francois, main author of the CEPR study, Koen Berden, one of the authors of the Ecorys study, Gabriel Felbermayr, author of the widely critisised Bertelsmann study, and, surprisingly, Jan Frydman, special advisor to Trade Commissioner Cecilia Malmström, who apparently isn´t prohibited to co-write publications from business associations.

Since it literally presents the same numbers as previous studies, the Amcham publication does nothing to strengthen the economic rationale of TTIP. Oddly enough, Amcham seems very aware of this. Therefore, throughout the study, they try to present the numbers in an exaggerated or misleading way. A few examples; presenting the conclusions on TTIP:s macroeconomic effects, the study claim ”permanent increases in export for all 28 EU member states, ranging from +5 percent to +116 percent” (p.7). Of course, this is not total exports, but exports to the U.S, which the study for some reason doesn't explicitly mention. Those are subject to trade diversion (you trade more with the U.S, less with someone else), which brings the numbers for total export increase far from these suggested numbers. Instead, the total average increase in EU exports is, according to the study (and identical to CEPR), 6 %, compared to an average 28 % increase of EU exports to the U.S. The only number that actually matters is of course 6 %, since who you are trading with isn't really interesting compared to the overall effects.

One rather peculiar graph is found on page 40 in the study. It describes the relative economic development with and/or without TTIP between the year of 2016 and 2030. The difference in the size of the respective economies (with or without) is still 0,5 %, yet the graph presented in the study portrays ”with TTIP” as nearly twice as big. The Y axis is EU GDP, but with the fine lining ”in million euros”. Have a look; 

This graph actually makes sense, if you are extremely ”zoomed in”. Below is a graph more consistent with what it would actually look like if the differnce in size (percent) would be consistent with a proper y axis;

(the difference is actually even smaller, but would be to complicated to visualise)

Additionally, the study makes a claim with regard to job creation; TTIP is expected to yield positive effects on GDP and probably on jobs.” (p.25). Probably? Yeah, and this is why;If effects on exports are positive, as we expect, then net job creation, too, should be expected overall.” (p.26). So no reasearch, no calculations, nothing. They have a hunch. A recent study commissioned by the European Parliament (and coincidently written by the same Gabriel Felbermayr who is a co-writer of this report), says that ”While long-run employment effects of TTIP are likely to be very small and potentially positive, short-run effects may be negative as workers have to move out of industries with comparative disadvantages[1].

One additional ”takeaway” of the study is that TTIP is expected to have especially positive effects for SMEs if it focuses on addressing practical barriers to trade”. The Amcham study primarily base this assumption on the Ecorys/EU Commission survey[2] asking SME:s about perceived barriers.

We already did a review[3] of that study finding the claims to be based on wishful thinking and the removal of non-tariff barriers directly linked to environmental and consumer protection. On the contrary, a number of SME:s has voiced concern that TTIP will only favour big corporations. A recent survey commissioned by the The Business Growth Foundation (BGF) saw only 14 % of U.K SME:s seeing any benefit of the TTIP to their business[4].

As the name suggest, the study focus to a large extent on single Member States. The study has put the overall GDP and exports effects down to effects of every EU member state. For Sweden, the estimated effects of TTIP corresponds to 0,5 % GDP growth and increase of exports to the U.S of 48 %. Interestingly, this differs greatly from a study conducted by the Swedish National Board of Trade, Kommerskollegium, who finds that TTIP, in the most ambitious scenario, will lead to 0,18 % GDP increase and export rise of roughly 30 %[5].

Overall, the Amcham study does nothing to strengthen the economic rationale behind TTIP. Its simply rebrands old numbers by using new, and in some cases misleading, figures. The main takeaway of the study is potentially found on page 26; ”Although TTIP is likely to have (net) positive effects on the economies of the US and the EU in terms of GDP, to present TTIP as a “growth and jobs machine” is not appropriate”.

And there´s the truth of it.




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