How ‘Bout A Fast $226 Billion?
I finally finished reading a study published December 16 for the European Parliament about the economic impact of non-tariff measures (NTMs, as they are known in the trade biz) between the European Union and the United States. The study can be fairly dense and methodology is always open to dispute, but the authors quantify the issue and make some striking findings. The main conclusion is that if all non-tariff measures possible could be removed from North Atlantic trade, the U.S. and the EU could expand their economies by €163 billion every year. That’s nearly $226 billion.
Can They Reduce NTMs?
The impact is uneven, of course, depending on the characteristics of the NTMs and the two very different economies. Europeans would see their GDP go up by €122 billion ($169 billion) annually, while America’s GDP would only rise by €41 billion (almost $57 billion). That’s because exports make up a smaller percentage of the U.S. economy than Europe’s. Seen as a percentage of export sales, the United States stands to benefit the most from reducing NTMs across the Atlantic. U.S. exports to Europe would spike by 6.1%, while EU sales in the United States would go up by only 2.1%. One could argue that this means that America’s NTMs are less onerous than Europe’s, but that would be jumping to conclusions.
The authors also looked at which business sectors stand to gain the most from liberalizing trade, NTMs in particular. We can expect Europe’s automotive, chemicals, pharmaceuticals, food product and electric goods companies to support liberalization. The same goes for the U.S. electric goods, pharmaceuticals and chemical industries, but we would find sales by our insurance and financial services firms soaring. Yes, folks, that means big banks and companies like AIG.
The authors comment that there isn’t much to be gained from a Trans-Atlantic free trade agreement unless NTMs are the centerpiece. Tariff cuts between Europe and America have gone so far that further cuts in duties, while appreciated, won’t make much difference to overall economies. Thus, trade policy officials on both sides of the Atlantic need to focus on NTMs, and that means reducing regulations on business. I kind of like that.
