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The World Trade SystemTrends and Challenges$
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Jagdish N. Bhagwati, Pravin Krishna, and Arvind Panagariya

Print publication date: 2017

Print ISBN-13: 9780262035231

Published to MIT Press Scholarship Online: September 2017

DOI: 10.7551/mitpress/9780262035231.001.0001

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PRINTED FROM MIT PRESS SCHOLARSHIP ONLINE (www.mitpress.universitypressscholarship.com). (c) Copyright The MIT Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in MITSO for personal use.date: 26 September 2021

Transatlantic Free Trade: The Viewpoint of Germany

Transatlantic Free Trade: The Viewpoint of Germany

(p.267) 9 Transatlantic Free Trade: The Viewpoint of Germany
The World Trade System

Gabriel Felbermayr

Rahel Aichele

The MIT Press

Negotiations towards a Transatlantic Trade and Investment Partnership (TTIP) agreement between the EU and the US have proven extremely controversial in Germany. This is puzzling, because the US has been Germany’s largest export market for years, at least when measured in value added terms. However, realized trade flows substantially fall short from the friction-free benchmark. The simulation of a quantitative trade theory model, which assumes that a TTIP would be as effective as the average existing deep trade agreement, could lead to an increase in real per capita income by about 2.5% in both the US and Germany. Gains in Germany would be largely driven by higher value added in the automotive industry, while the agricultural and the chemicals sector would lose. However, resistance against TTIP has not been shaped by classical political economy motives along sectoral lines, but by wide-spread fears of a regulatory race-to-the-bottom.

Keywords:   Preferential trade agreement, Transatlantic Trade and Investment Partnership Quantitative trade theory model, Trade diversion, Trade Creation, Ricardian trade model

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