On the Effects of TTIP on Trade and Growth

We quantify the effects of the Transatlantic Trade and Investment Partnership (TTIP) between the USA and the EU on trade and capital accumulation in the world. We allow for and estimate heterogeneous trade cost elasticities across EU member countries, which have strong implications for our general equilibrium analysis. Our results suggest that TTIP will have significant static and dynamic impact on trade and capital accumulation in the world. The biggest winners are large EU countries, but small EU members benefit as well. The effects on non-EU countries are mostly negative, however, the dynamic effects on trade in non-EU countries are non-monotonic. In some cases, the dynamic TTIP effects are strong enough to cause a reversal from trade diversion to trade creation in non-EU countries.