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Stopped TTIP? Its potential impact on the world and the role of neglected FDI



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Latorre Muñoz, María Concepción and Yonezawa, Hidemichi (2018) Stopped TTIP? Its potential impact on the world and the role of neglected FDI. Economic Modelling, 71 . pp. 99-120. ISSN 0264-9993

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Official URL: https://doi.org/10.1016/j.econmod.2017.12.006


The Transatlantic Trade and Investment Partnership (TTIP) has been one of the most heavily debated issues in international economics over the last few years. We analyze its potential impact on the world, including both insiders and outsiders of the agreement, using a Computable General Equilibrium (CGE) model with Foreign Direct Investment (FDI) under imperfect competition. In our simulation, TTIP consists of reductions of tariffs, nontariff barriers and barriers to FDI. Our results show that the FDI component, which has often been neglected in previous studies, would contribute to nearly half of the overall impact of TTIP for the US and nearly one third for the EU. Insiders would heavily benefit from TTIP, whereas, it would be slightly negative for outsiders (Middle East, Sub-Saharan Africa, Latin America, Southeast Asia and Other Advanced Countries), except for the big Asian economies (China, Japan and India), which would remain unaffected. The slightly negative effects would turn into positive with an “inclusive TTIP” (i.e., one avoiding third country discriminating rules and standards). An inclusive TTIP would benefit both insiders, who would gain more than with the standard TTIP, and outsiders, who would be better off than without the TTIP. Welfare, GDP, wages, as well as aggregate imports and exports of the world economy would clearly increase following either a modest or ambitious TTIP agreement. Our results suggest that policy makers should resume TTIP negotiations and try to strike an inclusive and ambitious deal.

Item Type:Article
Uncontrolled Keywords:Computable general equilibrium; Foreign direct investment; Monopolistic competition; Multinationals; Trade agreements
Subjects:Social sciences > Economics > Commerce
Social sciences > Economics > Econometrics
Social sciences > Economics > World economy
Social sciences > Economics > Finance
JEL:C68, F14, F15, F17, F21
ID Code:54956
Deposited On:08 Apr 2019 13:23
Last Modified:08 Apr 2019 14:30

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