Trade agreements can’t solve wage inequality and only affects the economy over the long run—prefer our short term impacts

This chapter reviews the economic modeling of TTIP. It stresses commonalities across different studies and explains differences. A robust conclusion from the existing numerous studies is that TTIP promises long-run gains for the EU as a whole with the average estimate lying around 2%. However, there is substantial uncertainty, as the precise magnitude of the effect depends strongly on how ambitious the assumed scenario is. Also, while virtually all EU member states are consistently predicted to gain, there is substantial heterogeneity. The existing studies agree that TTIP can harm outsiders, in particular if there is a considerable overlap in exported products. But also regarding third countries, TTIP is likely to have very heterogeneous effects. Only if transatlantic cooperation also leads to lower trade costs elsewhere will TTIP yield substantial benefits for outsiders. Labor market effects of TTIP are likely to be weak, both regarding long run employment effects and net wage inequality. However, the agreement is bound to trigger reallocation of workers from shrinking firms and sectors to expanding ones. This transition can be dealt with using existing labor market instruments. Taking adjustment costs into account, TTIP still looks like a very promising investment for the EU.