The document summarizes criticisms of the economic arguments in favor of the Transatlantic Trade and Investment Partnership (TTIP) agreement between the EU and US. It argues that the projected economic gains from TTIP are very small, potential distributional impacts and costs to disadvantaged groups are being ignored, and the agreement would further concentrate economic power and extend monopolies for certain industries like big pharmaceutical companies. The document concludes that the case for TTIP is not clear cut and more analysis is needed of its potential impacts, especially at the Scottish level.

1. The Dubious Economics of TTIP
Stephen Boyd, STUC
Global Justice Now fringe, SNP
campaign conference, 28 March 2015

2. LET’S START WITH A FAMOUS TALE
FROM ECONOMIC HISTORY…

3. A mathematician’s challenge
“Hey Paul, name
me one
proposition in all
of the social
sciences which is
both non-trivial
and true”
Stanislaw Ulam

4. Comparative advantage in
international trade!
“"That it is logically true
need not be argued before a
mathematician; that it is not
trivial is attested by the
thousands of important and
intelligent men who have
never been able to grasp the
doctrine for themselves or
to believe it after it was
explained to them.“
Paul Samuelson

5. But ‘the crown jewel of economics’ descends
into tired orthodoxy…
gains from trade follow from allowing an economy
to specialise
gains from trade are significant and mutual; trade is
not zero-sum
Expanding trade is beneficial in each and every
circumstance
Opponents of ‘free trade’ must be self-interested or
ignorant
So opponents of trade agreements are wrong and
should be disparaged and ridiculed

6. …leading to statements like this…
“It comes down to the general question of
whether you believe in free trade, particularly
between developed countries but also more
generally, enhances overall prosperity”
Lord Livingston, UK Minister of State for Trade
and Investment
European and External Affairs Committee, 2nd Report 2015 (session 4), The
Implications of the TTIP for Scotland (para 59)

7. The economics of TTIP is framed as a
very simple choice
Autarky Free trade

8. But case for freer trade (inc. new bilateral
agreements like TTIP) isn’t at all clear cut
Dani Rodrik’s tests:
• Are the gains too small relative to the potential losses
to low income or other disadvantaged groups that may
have little recourse to safety nets?
• Does the trade include actions that would violate
widely shared norms or the social contract if carried
out here – such as repressing labour rights or using
environmentally harmful practices?
If answers are yes, then legitimacy of trade will be in
question

9. …and the distributional impacts become more
acute the freer trade becomes
“The more open an economy is, the worse the
distribution-to-efficiency ratio gets. The political
and social-cost-benefit ratio of trade liberalisation
looks very different when tariffs are 5% instead of
50%. It is inherent in the economics of trade that
going the last few steps to free trade will be
particularly difficult because it generates lots of
dislocation but little overall gain”.
Dani Rodrik, The Globalization Paradox

10. The Economic Case for TTIP as presented
by EU Commission
• TTIP likely to increase the size of EU economy by 120bn
euros or 0.5% of GDP by 2027 – best case scenario
assuming all plausible removal of trad. barriers to trade
(tariffs and quotas)
• Wages in EU and US up ‘roughly 0.5%’
• Labour reallocation of less than 0.7%
• No forecasts on overall job numbers (full employment
models) although hints at +3m across EU
• Particularly positive outcomes in metal products,
processed foods, chemicals, other manufactured
goods, motor vehicles

11. UK and Scottish Governments
• UK Govt: “in the long run, UK national income
could rise between £4bn and £10bn annually”
or 0.2 and 0.6% of GDP
• Scot Govt modelling suggests GDP could
expand by 0.2 to 0.3% and imports by 1.8 to
3.6% (impact will of course be balanced by
increase in imports)

12. Convinced?
• Annual increment in GDP growth likely to be so small
as to be unidentifiable
• Main benefits to flow from regulatory harmonisation
but there will be no ‘lowering of domestic standards’ –
how can these positions be reconciled? Upwards
regulatory harmonisation? Seriously?
• No serious employment impact analysis undertaken by
EU, US, UK or Scot Govts
• No distributional analysis – by income or geography –
undertaken by any official authority; how can this be
reconciled with EU’s cohesion agenda? Trade has
distributional consequences!

13. ‘Research’ simply ignores adverse
impacts…such as?
• Extending patent protection – and extending scope for
frivolous patents – will raise prices and impede competition
• Big Pharma in particular will be seeking to make its patents
stronger, longer and more far reaching with negative
impact on cost and availability of prescription drugs
• cost of displaced workers and higher inequality (research
suggests TTIP will exacerbate falling wage share/rising
profit share)
• institutionalises regulatory arbitrage with related impact on
resilience and stability (i.e. no FTT?)
• Further undermines global market legitimacy; undermines
(already scant) public support for ‘good trade’; markets are
not intrinsically legitimate

14. In summary
• Gains, if they transpire at all, will be so small
as to be lost in statistical noise
• TTIP about further concentration of economic
power and extension of rents through e.g.
longer and stronger patents
• Distributional impacts could be significant and
are currently being ignored
• No serious analysis of impacts at Scottish level
yet undertaken