TTIP and Developing Countries: Threats, Potential and Policy Options

By virtue of its sheer scale, the free trade agreement between the EU and the USA, TTIP, will also affect emerging and developing economies. Although the latter stand to benefit if additional growth in the TTIP countries boosts demand for their products, they may also face a decline in their price competitiveness in the EU and the USA, as TTIP partners can offer their goods more cheaply in these countries thanks to the agreement. In a new study commissioned by the German Federal Ministry for Economic Cooperation and Development, the Ifo Institute, together with the Institut für Angewandte Wirtschaftsforschung (IAW) in Tübingen, look at how these opposing effects balance out. According to the study, no sweeping statements can be made: there will probably be winners and losers among third countries. However, several model simulations suggest that the potential losses will not be serious. Moreover, there are several ways in which the TTIP agreement can be designed in a development-friendly fashion. In addition to guaranteeing fair framework conditions, this specifically means minimising the agreement’s trade diversion effects and putting developing countries in a position to exploit the impact on demand of positive income effects in the EU and the USA as fully as possible.