The European Central Bank Celebrates the Growth Potential of a Trade Agreement That Would Boost Growth by Less than 0.02 Percentage Points

September 26, 2013

You know times are bad when people start making a big deal about finding pennies in the street. That seems to be the case these days at the European Central Bank.

According to the New York Times, Joerg Asmussen, an Executive Board member of the European Central Bank, touted the growth potential of a trade agreement between the European Union and the United States. A study by the Centre for Economic and Policy Research in the United Kingdom (no connection to CEPR) found that in a best case scenario a deal would increase GDP in the United States by 0.39 percentage points when the impact is fully felt in 2027 (Table 16). In their more likely middle scenario, the gains to the United States would be 0.21 percent. That would translate into an increase in the annual growth rate of 0.015 percentage points. 

While the gains for Europe might be slightly higher, it is worth noting that this projection does not take account of ways that a deal could slow growth, for example by increasing protections for intellectual property and putting in place investment rules that increase economic rents. It reveals a great deal about current economic prospects that a top policy official in the European Union would be touting such small potential benefits to growth.

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