UK Economy
G-8: US has most to gain from trade deal with EU; Rest of world most to lose
By Finfacts Team
Jun 18, 2013 - 8:11 AM

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Some of the G-8 leaders meeting at Lough Erne, Monday, June 17, 2013. The Group of Eight comprises: the US, Japan, Germany, UK, France, Italy, Canada and Russia.

G-8: Barack Obama, the US president and European leaders on Monday launched talks on “the biggest bilateral trade deal in history,” at the G-8 summit in Lough Erne, Northern Ireland. The president announced that talks on a transatlantic trade and investment deal would begin in Washington next month. While EU leaders admit the negotiations will be “difficult,” they believe they can be finalised within two years. Meanwhile, a study shows that the  US has the most to gain from a comprehensive agreement and the rest of the world would lose the most.

President Obama urged politicians to “look beyond narrow concerns and focus on the big picture” of a trade deal covering countries representing half of the world’s economy. David Cameron, British prime minister, said an agreement would be worth £100bn for the EU, £80bn for the US and £85bn for the rest of the world.

However, the US would gain more than the EU from a trade deal, according to a study [pdf] released Monday by Bertelsmann, a German think-tank

Its report concludes that a transatlantic agreement would reduce trade flows within Europe and damage many developing countries.

German trade with the peripheral countries, including Ireland, would drop. However, trade with teh US increases but at a lower rate for Ireland because of the existing high level of trade.

Irish trade with the UK would fall.

The report says that from a purely economic standpoint, the US and the entire EU will profit from a dismantling of tariffs and non-tariff trade barriers between both regions. The real gross domestic product per capita would increase in the US and in all 27 EU member countries. "Also when one looks at labour markets, the positive effects on employment predominate: Two million additional jobs could be created in the Organization for Economic Co-operation and Development (OECD) zone over the long run. The public welfare gains of these economies admittedly do stand in contrast with real losses in income and employment in the rest of the world. On balance, however, the beneficial effects on public welfare prevail."

The study adds:

"The US shows the greatest growth in real per capita income. There, the long-term gross domestic product per capita grows by 13.4%. The EU as a whole also shows gains in social welfare. In the case of a comprehensive transatlantic free trade agreement, the real per capita income in all 27 member countries is on average almost five% higher than without this agreement. Great Britain shows the largest growth in income. There, the real per capita income grows by almost ten% over the long term. The main reason for this growth: Great Britain already has a high trade volume with the US and therefore profits particularly well from a dismantling of trade barriers with the US."

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