10 Jul 2014

WTI study reveals impact on Switzerland of planned EU-US mega trade deal

The World Trade Institute (WTI) has analysed the possible impact a trade and investment agreement between the EU and the USA would have on the Swiss economy and on Switzerland’s trade relations.

The study was carried out on behalf of the Swiss State Secretariat for Economic Affairs (SECO), and the findings were presented at a joint news conference at the WTI on 10 July.

Anirudh Shingal and Charlotte Sieber-Gasser of the WTI compiled the report.

A mega-regional agreement accounting for 30 percent of world trade and 50 percent of global GDP would result in significant prosperity gains, primarily for the negotiating parties. For third parties like Switzerland, the trade deviation resulting from such an accord could have a negative effect on the economy, whereas synergies created by a harmonisation of production standards would have a positive effect, the study found.

Using a computable general equilibrium model the study considered three scenarios based on different levels of economic integration. All scenarios analysed the possibility of Swiss trade measures in the form of a parallel accord between the European Free Trade Association (EFTA), to which Switzerland belongs, and the US.

Clear economic effects

Depending on the design of the Transatlantic Trade and Investment Partnership (TTIP) - and on the trade measures taken by Switzerland in response – the effects range from a possible 0.5 percent reduction in GDP (where the deal focuses on reducing tariffs and without an EFTA-US free-trade agreement) to an estimated 2.9 percent increase in GDP (where the agreement is comprehensive and there is an EFTA-US deal).

The study suggests that the service sector will be less affected by TTIP than trade in goods. Given previous steps towards liberalisation in comparable EU and US free-trade agreements, it is not anticipated that there will be sweeping liberalisation of service trade between the EU and the US.

It remains unknown what effects increased investment protection would have should companies be permitted to appeal to international courts of arbitration.

Should the TTIP contain a clause on liberalising public procurement in the individual US states this would open up important new markets to EU providers and exclude Swiss companies, the study found.