A Transatlantic Zero Agreement - Estimating the Gains from Transatlantic Free Trade in Goods

REPORT Published

Major gains from transatlantic free trade in goods states ECIPE-report

The U.S. Chamber of Commerce and the Confederation of Swedish Enterprise today welcomed the release of a new report by the European Centre for International Political Economy (ECIPE) demonstrating the significant economic and trade benefits of eliminating tariffs on transatlantic trade. This simple action, according to ECIPE’s analysis, would increase U.S. and EU exports to each other by 17% by 2015, while the gains to both economies would exceed those from even an ambitious WTO agreement.

Urban Bäckström, Director General of the Confederation of Swedish Enterprise, said, “Sweden is a strong supporter of the WTO multilateral trading system, but liberalizing transatlantic trade is also very good for Swedish and European firms and their employees. In view of the stalled Doha Round negotiations this option must now be seriously considered”

The ECIPE report, conducted under the leadership of Director Fredrik Erixon with a grant from the U.S. Chamber and the Confederation of Swedish Enterprise, uses widely respected economic models and techniques to project the GDP, national income, and trade effects from eliminating U.S. and EU tariffs on goods imported from the other party. Although both have generally low tariffs (usually between 4.8% and 6.5% ) the huge volume of trade between them – over $600 billion per year, over one-third of which is within one company – means that the cost reductions and productivity gains from removing tariffs are significant. In particular, the ECIPE simulations show that U.S. and EU exports to one another by 2015 would be 17% higher than otherwise ($53 billion for the U.S., and $68 billion for the EU), while welfare gains for both would range between $58 and $85 billion. Depending on the scenario, U.S. GDP would be 0.99-1.33 percentage points higher than otherwise, while EU GDP would expand 0.32-0.47 percentage points.