Felbermayr

Regional and Sectoral Implications of Trade agreements

Philadelphia April 18, 2016

Gabriel J. Felbermayr Ludwig‐Maximilians‐University Munich

Ifo Institut

2

END OF AN ERA ?

OECD shares in nominal world GDP and in world trade 0.85

Share of OECD in world GDP

0.8 0.75 0.7 0.65 0.6 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014

0.55

Source: World Development Indicators.

Ifo Institut

3

END OF AN ERA ?

OECD shares in nominal world GDP and in world trade 0.85

Share of OECD in world GDP

0.8 0.75 0.7 0.65

Share of OECD in world exports

0.6 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014

0.55

Source: World Development Indicators.

ifo Institute – G. Felbermayr

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GLOBAL TRADE SLOWDOWN Since 2008, global trade has barely outgrown global GDP 250 200 150

50

1980Q1 1981Q2 1982Q3 1983Q4 1985Q1 1986Q2 1987Q3 1988Q4 1990Q1 1991Q2 1992Q3 1993Q4 1995Q1 1996Q2 1997Q3 1998Q4 2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 2006Q2 2007Q3 2008Q4 2010Q1 2011Q2 2012Q3 2013Q4 2015Q1

100

Real Trade/GDP

Real Trade/industrial production

Nominal Trade/GDP Source: National accounts, World Input‐Output Database, and International Monetary Fund’s World Economic Outlook.

ifo Institut: Gabriel Felbermayr

55

Non‐tariff trade barriers substantial Bottom‐up estimates, tariff equivalents, % Foods and beverages Chemicals Electrical machinery Motor vehicles Other transport equipment Metals and metal products Wood and paper products Personal, cultural, other services Constructions Communications Business and ICT Insurance Banking Transportation

US

0 Source: Berden et al. (2011)

10

20

30

40

50

EU

60

70

80

ifo Institute – G. Felbermayr

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MORE, BIGGER, DEEPER RTAs In terms of numbers, the boom of the nineties is over …

300

+40

200

+20

100

1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014

0

Source: DESTA data base; Bertelsmann Foundation..

Ifo Institut: Gabriel Felbermayr

77

MEGAREGIONALS: SHARES (%) IN GLOBAL TOTALS (2014) TTIP (29)

45

25

TPP (12)

39 38

29

EU‐JPN (29)

15

32

20

30

RCEP (16) CETA (29)

18 18

PACER Plus (15)

3 2

TFTA (26)

2 2 2

5

47

24 26

35

GDP Exports FDI inward stock

Ifo Institut: Gabriel Felbermayr

88

TTIP: NOT EXACTLY POPULAR …

70

Eurobarometer vs. Google‐Trends

60

60

AUT

50

DEU

50

40

Sep 15 Mrz 15

40

30 FRA HUN

20

30

% against % dagegen

Eurobarometer EU Average

0

CZE NLD

20 BEL

SWE ITA DNK GBR FIN ESP IRL POL 20 40 60 80 Google Indikator

Google indicator

10 0 100

120

Against Dagegen

Quelle: Eurobarometer, Herbst 2015; Google Trends 07.03.2016, eigene Darstellung

In favor Dafür

Ifo Institut: Gabriel Felbermayr

SECTORAL EFFECTS OF TTIP long‐run change in sectoral value added (%), medians and 95%‐CIs

Source: Aichele et al., 2014.

99

Ifo Institut: Gabriel Felbermayr

10 10

SECTORAL ISSUES No‐Go‐Areas

• Agri‐food – but heterogeneities • Certain services industries • Public sector

Reindustrialization ?

• Regulatory cooperation mostly in manufacturing realistic • Servitization of manufacturing

Some modeling results

• Within‐sector effects dominate between‐sector effects • Regionalization of GVCs?

New political economy

• Protection for sale logic outdated • Consumers fear to lose out

Ifo Institut: Gabriel Felbermayr

REGIONAL EFFECTS OF TTIP long‐run effects on real per capita income (%)

Quelle: Updated ifo calculations; Aichele et al., 2014.

11 11

Ifo Institut: Gabriel Felbermayr

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REGIONAL ISSUES Broad patterns

• Megaregionals create winners and losers, but world GDP increase • Sum of RTAs: Africa, LAM lose out

Bloc‐agreements

• Preference erosion (E.g., within EU, NAFTA, TPP) • Within‐region disintegration

Some modeling results

• Rules of origin decisive • Multilateralization through GVCs? • Regulatory spillovers?