1. TTIP Impacts on European Energy Markets and Manufacturing Industries
Presentation for EP/ITRE Committee
21st January 2015
Koen Rademaekers
Stephan Slingerland
Triple E Consulting – January 2014

2. This Presentation EU – US Trade Relations and TTIP
Potential impacts on the energy sector
Potential impacts on the manufacturing sector
Conclusions and recommendations

3. EU – US Trade Relations

4. EU – US Trade A positive trade balance for the EU Direction of trade
(bln €)
Goods (2013)
Services (2012)
Investment (2012)
EU to US
282
163
1,655
US to EU
196
149
1,536
Trade balance EU
+ 92
+ 14
+ €119
Evt. nog toevoegen met specificatie naar sector, goederen en diensten?
Source: Eurostat
A positive trade balance for the EU

5. TTIP Negotiation Process
Ongoing since 2013
Seven rounds so far
23 topics
Negotiation areas
Market access
Services and investment
Regulatory issues
Sectoral annexes

6. Potential Impacts on the Energy Sector

7. EU – US Energy Commodities Trade
EU-27 - US trade by SITC (2013) per ton (Source: Eurostat)
Commodity
EU Imports
EU Exports
Coal
103,285,142 8
Briquettes, Lignite and Peat
1,231
24,314
Coke and Semi coke
199,066
6,874
Petroleum oil and oils obtained from bituminous minerals, other than crude (refined)
17,905,931
22,054,330
Petroleum oil and oils obtained from bituminous minerals, crude (cf. ban on US crude oil exports)
4,843
3,173,598
Waste oils
16,145 4
Residual petroleum products
5,954,695
466,022
Liquified propane and butane
1,484,660
1,819
Natural Gas, whether or not liquefied
497,697 33
Petroleum gases and other gaseous hydrocarbons
4,917
32,552
It is clear where the trade is: coal, (and to a lesser extent) petroleum oil, petroleum products and LNG
Only in the case of petroleum oil, the US imports more.
Standard International Trade Classification (SITC) is a classification of goods used to classify the exports and imports of a country to enable comparing different countries and years. The classification system is maintained by the US
It is clear where the trade is...

8. Tariff and Non-Tariff Barriers for Energy
Source: WTO Tariff data
Fuel type
Non-tariff measure
EU tariff (0%)
US tariff (%)
Oil
(US) Export ban - License Required
> 0.2%
Natural gas
Refined fuels (gasoline, diesel)
(EU) Fuel quality directive (FQD)
> 0.4
Coal
(EU/US) Climate policy
Solar cells (tech)
(EU/US) Local content requirement
Wind energy (tech)
2.7
1.25
Tariffs are low, but significant non-tariff barriers exist
Non-tariff-measures (NTMs): technical barriers to trade (different regulations (for ex climate policy), certification and standards), customs procedures or labelling requirements (for ex. Ecodesign).
Tariffs are low, but significant non-tariff barriers exist

9. Impact on Energy Trade Limited TTIP impacts on energy trade expected
Coal is already without tariffs
Export bans to be affected by TTIP?
Other barriers (climate policies, FQD) not directly affected
LNG trade to increase, but more interesting markets in Asia
Limited TTIP impacts on energy trade expected

10. Impact on Energy Security
... If export bans are removed...
... If LNG trade to Europe will become attractive...
... If a crisis mechanism is agreed on (separately)...
Then TTIP could have a positive impact
on energy security in the EU

11. Impact on Renewables
Through the removal of local content requirements (LCR) .... trade in renewable energy technologies is likely to increase
We expect possibilities for
harmonisation without lowering
env. standards (for ex Ecodesign)

12. Potential Impacts on the Manufacturing Sector

13. Tariff Measures
Trade weighted average tariff rates (%) (2007)
Source: CEPR. 2013
Tariff barriers are generally low, with some exceptions

14. Non-Tariff Measures
Ad valorem equivalents of NTM in the U.S. and EU (%) (2007)
Its ad valorem non tariff measures, meaning the fictive additional costs for example regulatory differences. The value is in percent. 
80% REF CEPR
Source: CEPR, 2013
Almost 80% of the benefits of the TTIP are expected to come from the removal of NTMs

15. Overall impacts Depend on scenario
All scenarios show (limited) positive impacts on GDP
TTIP might lead to positive spill-overs in increased trade with third countries and adoption of standards
Small changes in emissions only
The CEPR report has made two projections for the manufacturing industry:
1. An ambitious comprehensive trade liberalisation scenario with the removal of 25% of NTM costs and 100% of the tariffs.
2. A less ambitious scenario including 10% NTM removal and 98% tariff reduction.
GDP changes EU bln euros, US 50 – 95 billion euros in 2027
(current EU GDP, 2013: billion euro: TTIP provokes 0,5 to 0,85% change)
Emissions figure result of increases and decreases: increase in EU, US, China, decreases in India, ASEAN, Mercosur

16. Impacts on specific sectors
Changes in EU output by 2027 (%)
Source: CEPR 2013
EU Metals and Electrical machinery are likely to decrease outputs

17. TTIP benefits will not be equal for all Member States
Changes in Real Per Capita Income of Selected Countries (%)
Source: Felbermayr et al. 2014
Core EU countries do not profit more than perifery

18. Labour market impacts
Depend on specific provisions or on additional agreements
Competitiveness: Lower US labour and energy costs stand against skills, energy efficiency, innovation
Relatively low movement of workers across sectors due to TTIP
Overall labour market impacts expected to be low
These dissimilarities affect the US by providing them with cheaper labour costs, but it is not likely that the EU will need to lower its standards because of the TTIP. There are precedencents from other FTAs, such as the 1994 North American Free Trade Agreement (NAFTA) that justify this conclusion. The NAFTA deal did not in itself include any provisions on labour rights . Instead, another contract was signed - the North American Agreement on Labour Cooperation (NAALC), which included 11 working right principles, such as minimum wages, child labour, and occupational safety and health. However, this agreement was implemented at the national level , meaning that even if the US has lower protection in terms of working rights, there is no need to believe that the EU would need to adopt any legislation.

19. Impacts on Innovation
In particular companies with high R&D costs can profit from access to larger markets
Intellectual Property Rights and in particular Geographical Indicators could be at risk
Contribution of TTIP to longer-term re-industrialisation and greening of industry is unclear
There are likely to be some benefits for innovation, but relation of TTIP to EU long-term policy goals is unclear

20. Policy Recommendations

21. Main Conclusions Energy
Security of supply, trade and energy prices might be less affected than claimed
Renewables might benefit from TTIP via removal of Local Content Requirements
Manufacturing industry
A small positive impact for most EU manufacturing industries is expected, with large uncertainties
Innovation might be stimulated
Labour market effects likely to be limited

22. Recommendations Monitor
Monitor closely if benefits of TTIP outweigh drawbacks of watering down on EU legislation (e.g. REACH, FQD)
Follow-up on the implications of ISDS in relation to TTIP
Discuss
Further discuss the relationship between TTIP and longer-term EU objectives regarding greening of industry
Analyse
Re-estimate TTIP projections once draft texts have become public

23. Thank you for your attention
Triple E Consulting – January 2013

24. ISDS Mechanism
Investor-state dispute settlement (ISDS) mechanism in the TTIP is currently under debate – however very controversial
ISDS was introduced in the Treaty of Lisbon and currently used under the provisions of the Energy Charter Treaty (ECT) (with 80% of the EU cases)
If included in TTIP, environmental policies might be disputed by international energy companies where they have made investments
The Investor State Dispute Settlement (ISDS) is a controversial procedure that allows foreign investors to take foreign governments to a special arbitration court if they feel this government has acted to undermine their investments in the particular country.