A U.S.-EU Trade Deal Will Not Have a Measurable Impact on Growth

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Thursday, 13 June 2013 05:28

The NYT implied that politicians in the United States and Europe are pushing a trade deal because they want to boost growth in a prolonged period of stagnation. This is not plausible.

Even optimistic projections of the impact of a trade deal show that it would only increase GDP by around 1.0 percent. This increase would only be felt after the changes in the agreement are fully phased in which will almost certainly be more than a decade. The implication is that the impact on annual growth will almost certainly be less than 0.1 percentage point, and even this would be an optimistic scenario.

The more obvious explanation is that powerful corporate interests could benefit from a trade agreement that would over-ride national or local health, safety, and environmental regulations. The most obvious news in this piece is that political leaders are misrepresenting their motives, trying to claim that a trade deal is about economic growth, which could provide benefits to most of the population, as opposed to special interest rules that are intended to benefit a narrow group of corporations.