Capaldo’s European Disintegration

CapaldoIn October 2014, Jeronim Capaldo from Tufts University published a working paper on the Transatlantic Trade and Investment Partnership (TTIP) which he subtitled European Disintegration, Unemployment and Instability. In the paper, Capaldo puts into perspective the results presented by the promoters of the trade agreement and says that “the main studies of TTIP are not a good basis for policy decision as they rely heavily on unsuitable economic models.” He proposes an alternative model, the United Nations Global Policy Model, in order to estimate more realistic effects in case TTIP is implemented.

The least we can say is that his findings, though they require a certain economics knowledge, are unambiguous. Capaldo discredits the results advanced by advocates of TTIP by rightfully stating that their estimated increase of European GDP by 0.5% (over a period of more than 10 years, up to 2027) is negligible and not worth losing on other aspects.

Indeed, Capaldo projects rather unpleasant consequences to the implementation of a trade agreement such as TTIP. Among the gloomy effects of TTIP are:
– a net export loss for all EU economies
– the loss of approximately 600,000 EU jobs
– a continuous decrease of labour income as a share of total income
– weakening consumption
– increased pressure on social security systems

Table TTIP long-term effect

Capaldo nuances and states that this “simulation does not question the impact of TTIP on total trade flows estimated by existing studies. Rather [it analyses] their implications in terms of net exports, GDP, government finance, and income distribution.” And that’s precisely what we should worry about. Because, as it is formulated in Capaldo’s report – and that pictures perfectly the way SmOD feels about TTIP – “seeking a higher trade volume is not a sustainable growth strategy for the EU. In the current context of austerity, high unemployment and low growth, requiring that economies become more competitive would further harm economic activity.”

Make yourself an idea by reading Capaldo’s writing paper.

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