DP12705 | The cost of non-TTIP: A Global Value Chain Approach.

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What is the cost of non-TTIP for the European Union and the United States? To address this question, this paper develops a network trade model with international sector-level input-output linkages. Our model is entirely general with closed-form solutions and can be used for any trade policy experiment. We use World Input Output Data (WIOD) to simulate the effects of TTIP in terms of value added and employment. We find that a deep TTIP raises European GDP by 1.3%, and US GDP by 0.7%. The largest share of these TTIP gains result from the reduction in Non-Tariff Barriers (NTBs) rather than from the removal of tariffs. The potential gains from TTIP are higher for the EU than for the US. These findings may offer an explanation for the current US stance on TTIP.