Thursday, 16 October 2014


E.U. officials are keen to let us know that most of the benefits of the Transatlantic Trade and Investment Partnership - the vast and controversial trade deal currently in negotiation - will come from reducing "non-tariff trade barriers", known as NTBs. At present, many European and American factories produce different versions of their products for the two different markets, because each has its own set of manufacturing standards. Harmonising these standards will make them more efficient, the argument goes, allowing them to produce more with less.

It is not difficult to see how this works. It must take less time, effort and material to produce 100 identical widgets, that 50 each of two different sorts. If that's where the matter stopped there would be little objection.

Who pockets the saving would still be a question. Workers would be more productive, so should, theoretically, be paid more. But fewer of them would be required, which depresses wages in the labour market. In a recent post, I explain how unlikely it is that productive workers will be the gainers from the TTIP proposals.

With free trade agreements, however, making factories more efficient is not really the point. The point is to make the market more efficient, enabling it to seek out the cheapest, most profitable places for producing things. So Europe will import more of the things that are cheaper to produce in America, and vice versa.

With that in mind, it is instructive to look at the sorts of goods that the E.U. expects to be importing more of, and those of which it expects its exports to rise. Table 31 of itseconomic assessment gives those increased exports as follows: cars: €87 billion; chemicals: €30 billion; processed foods: €13 billion; metals and metal products: €13 billion. Between them these amount to 77% of the total projected increase. Motor vehicles alone account for 47%.

If these are the things that Europe can produce more efficiently than America, what about the other way? In what goods can the U.S. do better?

It turns out that top of the list is... cars, at €66 billion. Then come chemicals at €27 billion; metals and metal products at €19 billion; and a category called "other transport equipment" at €10 billion. These four also account for 77% of the total. Motor vehicles alone account for 41%.

So it turns out that Europe and America both have the edge over each other at producing cars and car parts, and that nearly half of the projected benefits of TTIP in the best case scenario arise from them selling more of these to each other. An extra €153 billion's worth, to be precise, based on figures projected for 2027, taking the value of motor vehicles criss-crossing the Atlantic every year to a colossal €231 billion in total.

To put that number in context, the E.U.'s Eurostat service reports exports to the U.S. of €37 billion in the comparable "road vehicles" category in 2013. Imports were €7 billion, giving a combined total of €44 billion. Inflation at 1.8% would take that figure to €56 billion by 2027; nonetheless, the scale of the ambition remains staggering. From €56 billion to €231 billion in 14 years.

Eurostat is nothing if not thorough. As well as reporting the value of trade in Euros, it also provides its total weight, in multiples of 100 kilogrammes. Those €37 billion of exports in 2013 weighed in at 2.5 million tonnes, or €15 per kilogramme. The €7 billion of imports weighed in at 700,000 tonnes, or €10 per kilogramme. This makes sense: American cars are bigger, but not necessarily more valuable for that reason.

Extrapolating from these figures, the €87 billion of additional car exports the E.U. is hoping for as a result of TTIP will weigh nearly 6 million tonnes; the €66 billion of additional car imports will weigh nearer 7 million tonnes. In total that's an extra 13 million tonnes of vehicles making the 5,000 kilometre journey in one direction or the other across the Atlantic, or 65 billion tonne/kilometres of sea transport.

As Glyn Moody pointed out in his TTIP Update XXXIX, "TTIP's net effect will be to cause vast quantities of fuel to have been burnt carrying out this [transatlantic] vehicle swap". But how much fuel? More importantly, how much CO2 will be released into the atmosphere as a result of all this combustion?

Once again, the numbers, approximately, are to hand. The European Environment Agency has data up to 2011 for CO2 emissions per tonne/kilometre for various means of transport. For maritime shipping the figure has hardly changed since 1995, at about 14 grammes. 65 billion tonne/kilometres at 14 grammes each gives a total of 910,000 tonnes of additional CO2. And that's not accounting for the road and rail transport to get the vehicles to the ports.

Now here's the interesting bit. The E.U.'s TTIP assessment says that increases in CO2 emissions in its best case will be a "negligible" 11,000 tonnes. If the two-way trade in cars is going to add another 900,000 tonnes to that figure, it follows that other provisions in the proposed arrangements must bring about reductions in CO2 emissions on a similar scale.

What these are is not revealed, but some possibilities suggest themselves. If European and American car standards are to be harmonised, perhaps fuel efficiency will increase? Perhaps the greater availability of smaller, more frugal European models will squeeze traditional American gas-guzzlers out of the market? Well - maybe: but are we really saying that the only way to communicate a self-evident piece of knowledge (that smaller cars use less fuel) is to ship millions of them over in order to prove it? And that the price of shipping those cars is that millions of (presumably less efficient) cars are shipped in the other direction?

Let's hope not. Let's hope that this transfer of knowledge can be achieved without the accompanying 13 million tonnes of metal. For that to happen, however, the case for TTIP must stop focusing on the volume of trade and seek to make it smarter in environmental terms. "No worse", is not a great outcome, but a net saving of a million tonnes of CO2 would be worth celebrating.

This article first appeared on Huffington Post


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