Potential!Impacts!of!a!EU2US! Free!Trade!Agreement!on!the! Swiss!Economy!and!External! Economic!Relations!

Transcription

1 PotentialImpactsofaEU2US FreeTradeAgreementonthe SwissEconomyandExternal EconomicRelations July2014 WorldTradeInstitute,UniversityofBern Hallerstrasse6,CH93012Bern,Switzerland

2 Colophon PotentialImpactsofaEU3USFreeTrade AgreementontheSwissEconomyandExternal EconomicRelations Projectleaders: ThomasCottier,WTI(Bern) JosephFrancois,WTI(Bern)andCEPR(London) Primaryauthors: ThomasCottier,WTI(Bern) PeterEgger,UniversityofZurich,CESifo(Munich) JosephFrancois,WTI(Bern)andCEPR(London) MiriamManchin,UCL(London) AnirudhShingal,WTI(Bern) CharlotteSieber3Gasser,WTI(Bern) Client: SECO3StaatssekretariatfürWirtschaftSECO Date: July2014 Contact: WorldTradeInstitute UniversityofBern Hallerstrasse6 3012Bern,Switzerland Phone:+41(0) Fax:+41(0)

3 Summary Backgroundandmandate:Inthewakeoftherecentfinancialcrisis,in2013theEuropeanUnion and the United States launched a joint, ambitious effort to boost their respective economies throughacomprehensivetradeandinvestmentagreement.knownasthetransatlantictrade andinvestmentpartnershipagreement(t9tip),thenegotiationsprocessthathasfollowed,and thatindeedisstillongoing,issupposedtobringabouttariff9freetradeingoods,reductionof non9tariffbarriersforgoodsandservices,andliberalizationofpublicprocurementmarkets. While tariff reductions are relatively straightforward, the main ambition with T9TIP actually relates to greater coherence and convergence of regulatory standards. The goal of regulatory convergence(andbettercross9recognitionofstandards)isthemostinnovativeandambitious aspectofthisventure.thisgoalrequiresenhancedcooperationinrulemaking,andsoisnotas straightforwardastariffelimination.indeed,thereisgrowingrecognitionthatasuccessfult9 TIPagreementwouldcombineimmediateliberalizationinsomeareaswithinstitutionalmecha9 nismssetuptoallowprogressive,longrunliberalizationinothers.suchaninstitutionalmecha9 nismmighthavestrongimplicationsforabroadersetofcountriesthatarealsograpplingwith regulatorybarrierstotradeandinvestment. Theplannedagreementactuallyamountstoasetoftradeagreements.Whileformallybilateral, itentailsthe50statesintheusand28membersoftheeu.itneedstotakeintoaccountparticu9 laritiesofagreatnumberofdifferentpartnersandthusonsubstanceamountstoanewtypeof mini9lateralagreement.givenitseconomicandpoliticalweight,aswellasitsmini9lateralchar9 acter, the T9TIP is of substantial importance for the rest of the world, including Switzerland, whichisnotamemberoftheeuandoperatingherownexternaleconomicrelations. BecausetheT9TIPhaspotentiallystrongeffectsonthirdcountriessuchasSwitzerland,thepre9 sentreportintegratesthefindingsfromtwostudiesmandatedbytheswissstatesecretariatfor EconomicAffairsinSeptember2013andundertakenbytheWorldTradeInstitute,Universityof Bern. The report summarized here presents the findings of those studies. The mandate for thosestudiescalledforanalysisoftheimpactoft9tiponswitzerland,andtheimplicationsofa parallelagreementbetweeneftaandtheus.thefocusoftheintegratedreportisthereforeon the implications of T9TIP for Switzerland. Except for the option of an EFTA 9 US Free Trade Agreement,itdoesnotentailtheexaminationoffurtherpolicyoptions. Methodological Approach: By its nature, a potential T9TIP agreement would imply immediate liberalizationofsomemeasuresandprogressivechangestoregulatorymechanismstoaddress others.thismeanstheprospectsandshapeofalikelyt9tipagreement,atthispointintime,are difficulttoassess.itfurthermoremeanstheswissplaceinsuchaframeworkisalsodifficultto assess.forthisreason,thisstudytakesamulti9prongedandmulti9disciplinaryapproach.this methodsusedhereincludethefollowing: EconomicmodellingofT9TIPscenarioswithacomputationalmodeloftheworldecono9 my (known as a CGE model), backstopped with market focused (partial equilibrium) modelling. Statisticalanalysisofprocurementmarkets,FDI,andservicestrade 3

4 Comparativeanalysisofthelegaltextsofexistingagreementsthatmightserveastem9 platesforthet9tipincriticalareas Atthesametime,wealsoexaminealternativescenariosintermsoftheoutcomeofT9TIPasit relatestoswitzerland.thesescenariosaremadeexplicitinthescenarioanalysisunderthecge9 basedeconomicmodelling.theyarealsoimplicitinthecomparativelegalanalysis,wherewe needtokeepinmindthattheshapeofthelegaltextsdefiningtheagreement,andhowthese relatetoswitzerland,alsohingeonlikelyoutcomesasspelledoutinourscenarios. Thescenarioscoveredinthisreportcoverbothtariffsandnon9tariffbarriers(NTBs).Itshould bestressedthatincontrasttoreducingtariffs,theremovalofntbsisnotasstraightforward. TherearemanydifferentreasonsandsourcesforNTBs.Someareunintentionalbarrierswhile othersreflectdeliberatepublicpolicy.assuch,formanyntbs,removingthemisnotpossible because,forexample,theyrequireconstitutionalchanges,unrealisticlegislativechanges,orun9 realistictechnicalchanges.removingntbsmayalsobedifficultpolitically,forexamplebecause thereisalackofsufficienteconomicbenefittosupporttheeffort;becausethesetofregulations istoobroad;orbecauseconsumerpreferencesorlanguageprecludeachange.inrecognitionof these difficulties, we follow recent studies by focusing on the set of possible NTB reductions (knownas actionable NTBs)giventhatmanywillremaininplace.OfthoseNTBsthatcanfea9 siblybereduced,wefocusondifferentlevelsofambitionforntbreduction. Ourformalscenariosaresummarizedinthetablebelow.Thescenariosrangefromarelatively shallowtariffsonlyagreementbetweentheeuandusatoneextremetoadeepagreementcov9 eringtariffsandntbsandincludingaparallelefta9usagreementattheother.betweenthese weconsiderdifferentcoverageofthecoret9tipagreement,anddifferentoptionsforaparallel EFTA9USagreement.Thesescenariosdonotmeanthatwebelieveoneoftheseisparticularly likelyofpreferred.ratherwesimplyneedtousesuchamappingtoframethequestions,both empiricalandlegal,coveredinthereport. 1.Tariffs'only'agreement:Underthissetofscenarios,weassumefulleliminationofindustrial tariffs, and partial liberalization (50% reduction) of tariff barriers for agricultural products. HerewealsoexaminewhathappensifthereisanEFTA9USagreementinparallelwiththecore EU9USagreementontariffs. 2.Tariffs'and'modest'NTB'liberalization(shallowNTBagreement):Underthisscenario,weas9 sumethat20percentofactionablentbs(thosethatcanbereduced)actuallyare.thismeansa 20percentreductionintradecostsassociatedwithactionableNTBs.Wealsoassumethatthese NTBreductionsarediscriminatory.HenceUSliberalizationwouldonlybenefitEUfirms,and vice9versa.again,wealsoexaminewhathappensifthereisanefta9usagreementinparallel withthecoreeu9usagreementontariffsandntbs. 3.Tariffs'and'ambitious'NTB'liberalization(adeepNTBagreement):Underthisscenario,weas9 sumethat50percentofactionablentbs(thosethatcanbereduced)actuallyare.wealsoas9 sume that not all of these NTB reductions are discriminatory. This reflects what are called regulatoryspillovers. Basically,withadeepagreementonNTBs,weassumethatthirdcoun9 triesalsobenefittoalimitedextent,intermsofsomeimprovementinmarketaccess.thelogic isthat,withdeepregulatoryreform,atleastsomeofthechangesarelikelytoaffectallplayers, andnotjusttheeuandusfirms.forexample,wheretheusrecognizeseustandards,firmsin other countries might then find it easier to meet US standards themselves. In addition, in the 4

5 Swisscase,throughtheMRACH9EU,Switzerlandisalreadystreamlining/harmonizingitstech9 nical regulations with the EU s. Therefore Switzerland might be expected to actually benefit morefromsuchanyrealizedmfnspilloversthanotherthirdcountries.again,wealsoexamine whathappensifthereisanefta9usagreementinparallelwiththecoreeu9usagreementon tariffsandntbs. PossibleScenariosforT2TIPandSwitzerland 1.Tariffsonly 2.Tariffsand ModestNTBagreement (AshallowNTBagreement) 1.1 EU9US Agree9 ment EU9US agreement ontariffs EFTA9US agreement ontariffs EU9US modest agreement onntbs EFTA9US modest agreement NTBs EU9US deep agreement onntbs EFTA9US deep agreement NTBs 3 rd country Spillovers from NTB reductions 1.2 EU9US and EFTA9 US Agree9 ment 2.1 EU9US Agree9 ment 2.2 EU9US and EU9 EFTA Agree9 ment 2.3 EU9US and EU9 EFTA Agree9 ment (not tariffs) 3.Tariffsand AmbitiousNTBs (AdeepNTBagreement) 3.1 EU9US Agree 9ment 3.2 EU9US and EU9 EFTA Agree9 ment X X X X X X X X X X X X X X X X X X X X X X X X FindingsfromEconomicModelling: 3.3 EU9US and EU9 EFTA Agree9 ment (not tariffs) AdiscriminatoryandshallowEU9USagreementmaybedamagingtotheSwisseconomy. AdeepagreementfeaturingconvergenceinEU9USregulatorystandardsshouldbenefit theswisseconomy. ActiveSwissinvolvementwouldbenefittheSwisseconomy(throughflankingEFTA9US agreements). Differentsectorswillbeaffecteddifferently OurassessmentofthepossibleimpactofaT9TIPagreementonSwissproductionandexports involvesasetofcomputermodellingexperiments,basedonthescenariotableaboveandrang9 5

6 ingfromapassiveswissresponsetot9tip,upthroughnegotiatingaparallelagreementwiththe US. Macroeconomic'estimatesaresummarizedintheFigureS91below,whereinprogressionfrom Scenario1.1toScenario3.3,wemovefromSwitzerlandoutsideatariffonlyagreementtoapar9 allelefta9usagreementcoveringbothtariffsandntbs(includingprocurementmarkets).we shouldstressagain(ascoveredinthereport)thatthedeeperintegrationscenariosincluderegu9 latoryspillovers.thesethereforehelptooffsetthetradediversionimpactoft9tipinthedeep agreementscenario,atamacroeconomiclevel.ingeneralshallowandpreferentialagreements thatexcludeswissparticipationharmtheswisseconomy,withgdpchangesrangingfrom9.17 (Scenario1.1)to9.0.51percent(Scenario2.1).IfthereisaparallelsetofEFTA9USagreements, theeffectsthenrangefrombasicallynothingnoticeable(90.09percentinscenario1.2)to+0.46 percent(scenario2.2withaparallelefta9usagreementontariffsandntbs).whenwemoveto deeper agreements (Scenarios 3) spillovers mean that Switzerland benefits even as a passive agent.asdiscussedinthebodyofthemainreport,spillovereffectsarequiteimportantindriv9 ingtheoverallimpactonswitzerlandunderthescenariosassumingadeepagreement.herewe estimateagdpgainofroughly0.96percentfromthet9tipagreementitself,asswissfirmsben9 efitfromgreaterregulatorycoherencebetweentheeuandusmarkets.withadeepcoret9tip andaflankingsetofefta9usagreements,swissgainsareasmuchas2.87percentofgdp(sce9 nario3.2).underthisscenariowealsoseegrowthininvestmentinswitzerland(1.43percent) andgreatertrade(5.27growthinexports).inallcases,aparallelsetofagreementsinvolving EFTAmorethancompensateforinvestmentdiversion(fallinginvestment)whenSwitzerlandis anoutsideagent. Basedontheestimatesinthemainreportandsummarizedinthefiguresbelow,theformthat mutual recognition of standards might take under T9TIP is very important. With some NTB harmonization(andsoeffectivelyareductionforthirdcountries)betweentheeuandus,bene9 fitscanbeexpectedforthirdcountries(likeswitzerland).thisisonepossiblenegotiationpath. Alternativelyifthesolutionfornegotiatedrecognitionofdifferencesinregulatorysystemsisto establish some sort of deliberately discriminatory country of origin based mutual recognition mechanismforconformityassessmentsunderdivergentnationalregulations,thirdcountryex9 porters(includingswitzerland)wouldthenbeworseoff.wehaveillustratedtheimportanceof spilloversinfigures92,wherewehavebrokendownestimatedchangesinswissgdpintothe driversofthosechanges.whatwefindisthatregulatoryconvergencespilloversarecentralto theoverallestimatedimpactofttiponswitzerland.withoutthismfnelementaddedtowhat isotherwiseapreferentialexercise,theimpactonswitzerlandisquitedifferent.thisfinding illustrates the importance both of the core EU9US agreement (potentially quite negative), the benefitsofaflankingagreementsuchasanefta9usagreement(potentiallyquitepositive)and alsothefurtherbenefitsofregulatorystreamlining(substantialgainsfromspillovers)aslongas theeuandusdonotpursueadeliberatelydiscriminatorysolutiontothesechallenges. 6

7 FigureS21:PercentChangesinSwissTrade,Imports,CapitalStock,andGDP Percent'Changes'in'GDP,'Trade,'and'Investment' imports% capital%stock,%%% GDP% exports% 3.%tariffs,%ambiEous% NTBs% Yes%EFTAUS%FTA%NTBs%only% Yes%EFTAUS%FTA%tariffs%&%NTBs% No%EFTAUS%FTA% 2.%tariffs,%modest% NTBs% 1.%tariffs%only% Yes%EFTAUS%FTA%NTBs%only% Yes%EFTAUS%FTA%tariffs%&%NTBs% No%EFTAUS%FTA% Yes%EFTAUS%FTA% No%EFTAUS%FTA% Source:CGEmodelestimatesinthisstudy. 2.00% 1.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% FigureS22:DecompositionofchangesinGDP Decomposi)on+of+Change+in+Swiss+GDP,+percent & 3.00& 1.84& 2.00& 1.00& 0.00& 1.00& 0.17& 0.89& 0.08& 0.08& 0.09& 0.51& 0.88& 1.74& 2.00& 1.&tariffs&only& 2.&tariffs,modest&NTBs& 3.&tariffs,&ambi?ous&NTBs& spillovers& EFTAUS&NTB&agreement& EFTAUS&tariff&agreement& core&euus&agreement& Source:CGEmodelestimatesinthisstudy. 7

8 Itmustbestressedthatestimatedspilloversarehighlyspeculative,evenmoresothanstandard tradepolicymodelling.onereasonisthat,unlikeold9styleftas,thettipnegotiationsaredif9 ferent in that they offer scope for reducing unintended barriers in a way that might lead to standardsadoptionbythirdcountries.theextenttowhichthirdcountriesthenadoptastand9 ardadoptedbyboththeusandtheeu,accountingtogetherforamajorshareofworldproduc9 tionandtrade,isnotsomethinganticipatedwithold9styleftas.neitheristhepotentialforef9 fectivelysimplifyingconditionsforthirdcountryaccesstotheusandeumarkets.assuch,apart fromthesinglemarketprocessintheeuitself,wehavelittlebasisforgauginghowlargethese effectsmightpotentiallybe.itisclearfromtheanalysisinthereport,however,thattheissueis centraltothelikelyeconomicimpact. Sector'effectsvaryacrosssectors,anddependheavilyonthedepthandwidthoftheagreement, andwhetherthereisaparallelefta9usinitiative.thisisillustratedinfigures93below.be9 causeboththeusandtheeuarehighlyprotectiveofprocessedfoods(includingmeatanddairy, butotherfoodsaswell)theswissprocessedfoodsindustryisactuallyapotentialnetwinner fromt9tip.furthermore,turningtomanufacturing,acombinationofaparallelefta9usinitia9 tive together with spillover benefits from regulatory convergence could be quite beneficial to Swissindustry.However,liketheoverallimpactonSwissGDP,theimpactonmanufacturing againdependsstronglyonwhethertheeu9usagreementispurelybilateral,thedepthofsuchan agreement,andwhetherornotitprovesstrictlydiscriminatory.theseissuesareexaminedin moredetailinthereport.finally,inservicesfewerchangesinmarketaccesspoliciesareantici9 pated,andassuchtheeffectsaresmallerthanforgoods.thisisalsoexaminedinthereport. FigureS23:PercentChangesinSwissOutputbysectors Percent'Change'in'Swiss'Output' services& manufacturing& Food&and&agriculture& 3.&tariffs,&ambiCous& NTBs& 1.&tariffs&only& 2.&tariffs,&modest&NTBs& Yes&EFTAUS&FTA&NTBs&only& Yes&EFTAUS&FTA&tariffs&&&NTBs& No&EFTAUS&FTA& Yes&EFTAUS&FTA&NTBs&only& Yes&EFTAUS&FTA&tariffs&&&NTBs& No&EFTAUS&FTA& Yes&EFTAUS&FTA& No&EFTAUS&FTA& Source:CGEmodelestimatesinthisstudy. 1.50& 1.00& 0.50& 0.00& 0.50& 1.00& 1.50& 2.00& 2.50& 3.00& 3.50& 4.00& 8

9 FindingsfromLegalAnalysis: Pastagreementssuggestthatprogressinservicesislikelytobemodest. AdeepEU9USagreementmaymeanmajorchangesinthecompetitivenessofSwissfirms intheeumarket. TheemphasisonstandardsandmutualrecognitionforserviceproviderswillplaceSwiss competitorsundergreaterpressuremainlyintheuswhilerelationswiththeeumaybe accommodatedwiththeexistingmutualrecognitionagreement(mra). Assessing the potential implications of services trade liberalization and mutual recognition in servicesrelatedactivitiesunderafuturet9tipisdifficultatthisstage:asmainparametersare notyetavailable,itdoesnotgobeyondguessing.acomparisonofcommitmentsintheeukore9 anandtheuskoreanagreementwithusandeugatslevelsshowsthatlevelsofadditional commitmentsmadeinserviceshavegenerallybeenmodest.atthesametime,theactualpattern oftradeinservicesineurope,andtheimpactoffdirelatedregulatorybarriers,pointstoscope forpotentiallylargechangesinthecompetitivestructureofeuropeanservicemarketsvis9à9vis USfirms.ThesechangesarelikelytobeadverseforSwissservicesfirms,whowilllosecompeti9 tiveadvantagerelativetousfirmsineuropeanmarkets. The comparative findings on preferential market access in services induce a note of caution. Governments have been reluctant to grant extensive liberalization in preferential agreements goingmuchbeyondthelevelsofgats.itbegsthequestionwhetherthiswillbefundamentally differentineu9usrelations.therearefundamentalobjectionsonthepartoftheustoinclude financialservices,andreservationsweremadeonthepartoftheeutoincludeculturalservices. Atthesametime,thereisaconsiderablepotentialthatUScompanieswillachievecompetitive advantagesineumarketsduetothefactthatswitzerlandstilldoesnothaveaptainservices withtheeu.wethereforeconcludethatindependentlyoft9tip,switzerland scompetitiveposi9 tioninservicesvis9à9vistheusintheeuropeanmarkethingesonfreemovementandservices tradewiththeeu.at9tipagreementwillinanycaseprovideacompetitiveadvantagevis9à9vis SwitzerlandfortheEUintheUSmarket. Thestrongemphasisonnon9tariffbarriersinT9TIP,addressingbehindtheborderissues,indi9 catesthatbetterstandardsrecognitionandacceptanceoftestingandadmissionwillbeanim9 portantfeaturefacilitatingtransatlantictrade.thesameholdstrue,particularlyfortheusmar9 ket,forcross9recognitionofthediplomasandcertificatesofservicesuppliers.whileswitzerland canbuilduponbothitsmraanditsagreementonthefreemovementofpersonswiththeeu,a similarinstrumentintraderelationswiththeushasbeenmissing. Procurementmarkets: SwisssuppliersaremajorplayersinEUprocurement,andsoT9TIPmayerodetheirposi9 tioninthesemarkets,especiallyinservices. TheWTOmayofferanopportunitytorebalanceaccessconditionsforprocurement. OuranalysisonthelikelyimpactofpotentialgovernmentprocurementliberalizationintheTTIP onswisssuppliersandserviceprovidersincludesbothqualitativeandquantitativeassessments. Our qualitative analysis discusses the potential areas and issues of interest that are likely to form a part of the negotiations. These include inter alia liberalization of sub9federal procure9 9

10 ment including parity in contestable thresholds, and coverage of procurement undertaken by utilities. Ourquantitativeassessmentidentifiessectorsimportantfromamarketaccessperspectivefor EUandUSsuppliersandserviceprovidersineachother sprocurementmarkets.theseinclude other commercial services, transport services, chemicals9rubber9plastics, food9beverages9 tobacco,transportequipment,electronicequipment,machineryandequipment,motorvehicles andpartsandmetalproducts.ouranalysissuggeststhatswisssuppliersandserviceproviders arealsosignificantplayersinthesesectorsinbothmarkets.successfulcoverageofthesesectors inthettipwouldthereforeenhancemarketaccessoneithersidethatmayhaveadverseimpli9 cationsforswitzerland.however,anyadverseeffectsforswisssuppliersandserviceproviders aremorelikelyintheservicessectors,whicharenotonlymoredifferentiatedbutwherepublic demandasashareofoutputiscomparativelylargerinboththeeuandtheusthanisthecase forgoods. We also consider procurement liberalization in the recently negotiated Canada9EU CETA as a benchmark in our analysis and conclude that reciprocal liberalization of sub9federal procure9 mentinthettipmayleadtogreaterchallengesforswisssuppliersandserviceprovidersineu andusmarkets. Foreigninvestmentandintellectualproperty: SwissfirmsshouldbenefitfromIPRaspectsofT9TIP. SwissserviceMNEsmaylosecompetitivepositioninEuropeunderT9TIP,basedoncur9 renttradeandinvestmentpatterns. SwissMNEsmaybenefitsubstantiallyintheUSmarket,throughspilloversandthrough SwisssubsidiariesintheEU. Through the WTO, Switzerland is entitled to Most9Favoured Nation (MFN) treatment inde9 pendentlyofexistinglevelsofprotectioninthetripsagreement.anyimprovementachieved undert9tipinthefieldofiprswillbesubjecttoarticle4ofthetripsagreement.thismeans thatiflevelsofprotectionandenforcementincreaseineu9usrelations,switzerlandandother MembersoftheWTOareentitledtoobtaintreatmentnolessfavourable.Thisisanimportant sourceforspilloversthatwouldenhanceswissinterests.overall,switzerlandisthereforelikely tobenefitfromspillovereffectsofadvancementsofiprprotectioninthet9tip. OuranalysisofFDIdata(econometricmodelling)suggeststhattheincentiveforSwissMNEsto relocateoperationstotheeuropeanmarketneedstobetakenintoconsideration.withahead officeintheeu,swisscompaniescouldgetunrestrictedaccesstotheeuropeanmarket,thefull advantagesofmarketaccessofthet9tipintheusmarket,andstillhavemarketaccesstothe SwissmarketsecuredthroughtheclosetraderelationsbetweentheEUandSwitzerland.Espe9 ciallywhentheproceduralbenefitsininvestor9statearbitrationinthet9tipturnouttobesub9 stantial,suchincentivesmaybefurtherreinforced.asinthecaseofdirectservicestrade,we findscopeforerosiononthecompetitivepositionofswissfirmsoperatingintheeufollowing fromreductioninbarriersthatimpactontheforeignpresenceoffirmsineurope. 10

11 TableofContents I. Introduction 12 A. Background'of'the'Mandate' 13 B. Content'of'the'Mandate' 14 C. Approach' 14 II. TheT2TIPintheContextoftheWorldEconomicOrder 16 A. Institutional'Issues'and'Regulatory'Convergence'and'Cooperation' 18 III. ModellingtheEconomicImpactofT2TIPonSwitzerland 19 A. The'Structure'of'Swiss'Trade'and'Investment' 19 B. NTBs'and'NTB'Reduction:'Actionability'and'Rents' 25 C. General'Equilibrium'Assessment' TheCGEModel Scenarios MacroeconomicResults UnderstandingtheResults 41 D. Partial'Equilibrium'Analysis' 46 IV. QualitativeAssessmentofT2TIPandSwissServicesTrade 50 A. Problem'and'Approach' 50 B. History'of'Preferential'Services'Trade'Regulation'and'Liberalization' PreferredRegulatoryStructureintheUSandtheEU LevelofLiberalizationinPTAsvisTàTvistheGATSintheUSandtheEU 56 C. Commitments'under'US/EU' 'Korea'PTAs:'A'Case'Study' FinancialServices TransportationServices ProfessionalServices DistributionServices TourismServices ExpectedSectorialImplicationsofT9TIPbasedonCaseStudy 70 D. Gravity'Analysis'of'Services'Trade'and'FDI' EstimatingFramework Data ServicesMarketAccessintheEU FDIandMarketAccess 77 E. Summary'and'Conclusion' 85 V. ImpactofProcurementLiberalizationonSwitzerland 87 VI. AdditionalAspectsofInterest 106 A. The'TTTIP s'impact'on'fdi' 106 B. The'TTTIP s'impact'on'ip'protection' 107 C. In'Particular:'The'TTTIP'and'Trade'in'Licensing' 108 D. In'Particular:'Better'Recognition'of'Standards' 108 VII. SummaryandConclusion 110 VIII. References 112 Annexes 119 A. Technical'Annex'for'CGE'model' 119 B. Swiss'Trade'and'Value'Added' 126 C. Procurement'Appendix:'Estimating'market'access'in'the'absence'of'actual'data' 135 D. Appendix:'Mapping'Model'Sectors'to'GTAP'and'NACE' 137 E. Appendix:'Detailed'Procurement'Tables' 141 F. Detailed'Sector'Effects'

12 I. Introduction InJuly2013,theEuropeanUnionandtheUnitedStateslaunchedbilateralnegotiations towards an enhanced transatlantic partnership in trade and investment. Under the heading of Transatlantic Trade and Investment Partnership Agreement(T9TIP) a com9 prehensive and ambitious effort to boost the economies in Europe and North America followingthefinancialanddebtcriseswaslaunched,unprecedentedsofar.theproject issupposedtobringaboutfreetradeingoods,removingtariffandnon9tariffbarriers,to include liberalization in services, public procurement and to foster mutual investment protection.themainambitionrelatestogreatercoherenceandconvergenceofregula9 torystandards,andthusofenhancedcooperationinrule9making.thetopicofregulato9 ryconvergenceperhapsamountstothemostinnovativeaspectofthisventure. TheeffortcomplementsEUandUSeffortstofostermultilateralisminalong9termper9 spective.giventhenewgeopoliticalconstellationsandthedifficultiestoadvanceanam9 bitiousagendainthewto,anyfutureagreementbetweentheusandtheeu,entailing morethan30%ofworldtradeand50%ofworldgdp,islikelytoprovidethetemplate forfutureinternationalrulesontradeandinvestment. The effort is part of a larger context shifting the emphasis to preferential trade agree9 mentsworldwide.majoreconomiesareinvolvedinamoreorlesssimultaneousround oftalksonvariousbilateralandregionaltradeandinvestmentagreements.forexam9 ple,theeuisengagedinnegotiationswithcountriesasfarrangingascentralamerica, South East Asia, East Asia, and North America. The negotiations for deep agreements withcoreoecdeconomiesgofarbeyondtariffs,emphasizingnon9tariffbarriers(ntbs) to trade and investment. This also includes the Trans9Pacific Partnership Agreement (TPP)theEU9CanadaFTA,theEU9KoreaFTA,andtheUS9KoreaFTA. Inthiscontext,Switzerlandisfirmlyembeddedwithinthemultilateraltradingsystemof the WTO while pursuing at the same time an active policy of preferential trade agree9 mentsmainlywithemergingeconomies.atthistime,switzerlandisapartyto28free TradeAgreements.WhilethecountryhasextensivetreatyrelationswiththeEuropean Union,relationswiththeUnitedStatesessentiallyrelyuponWTOlaw. Thisconstellationprovidesthebackgroundforassessingthepotentialimpactofafuture comprehensivetradeandinvestmentagreementbetweentheunitedstatesandtheeu9 ropeanunionontheswisseconomyandswissexternaleconomicrelations. Little is known to date on the specifics of the trade agenda of the Transatlantic Trade andinvestmentpartnership(t9tip)betweentheunitedstatesandtheeuropeanunion. While negotiations have started, draft texts are largely confidential for the time being, andthepublicisonlyprovidedwithlimitedaccesstoinformation.today,thet9tipne9 gotiations are primarily aiming at diminishing so9called non9tariff barriers to trade (NTBs). Discussions are on9going, to what extent investment protection with private 12

13 statearbitrationwillbeincludedinthetreaty,iffinancialservicesaretobepartofthet9 TIPisfurthermorediscussedpublicly,andthereareinterestingsuggestionsfortheinsti9 tutionalframeworkforregulatorycooperationbroughtforwardbybothsides.overall, wedonotknowwhenthedrafttextsofanagreementwilltakefinalform.moreoverre9 centlyconcludedtradeagreements,whichcouldserveasabenchmark,arenotyetavail9 able, in particular the Canada EU Comprehensive Trade Agreement (CETA) and the Trans9Pacific Partnership Agreement(TPP) which is slightly ahead of time, but still re9 mains to be completed. Similarly, the future scope of a plurilateraltradeinservices agreement(tisa)hasnotyetmaterialized. Giventhestateoftheplay,thestudyattemptstoassesspotentialimplicationontheba9 sis of econometric models and comparative legal analysis. It goes without saying that precisepredicationsareimpossibleatthisstage.yet,thescenariostestedallowidentify9 ingbroadtrendsanddrawingpreliminaryconclusionsfortradepolicyofswitzerland. ThisstudyseekstoinformtheSwissgovernmentandeconomicactors,andtocontribute toacurrentlylivelydebateonthisagreementinthemaking. A. BackgroundoftheMandate T9TIP negotiations between the United States and the European Union seek to reduce existing trade barriers in goods and in services. While reduction of tariffs remains im9 portant,theemphasisisonnon9tariffbarriers,seekingtostreamlineregulatoryconver9 genceandcooperationbetweentheunitedstatesandtheeuropeanunion.thescopeof negotiationsisessentiallydefinedbythedisciplinesofwtolaw,whichincludetradein goods (including technical barriers to trade and food standards), services, intellectual property protection and government procurement. Additional plurilateral disciplines include investment protection. The project is legally bound to follow the patterns re9 quiredbygattart.xxivandgatsart.v:essentiallytheeliminationofsubstantiallyall barrierstotradeisrequiredwithintransitionalperiodsbasicallynotexceeding10years upontheentryintoforceoftheagreement.thet9tipisscheduledtoaddressallperti9 nentareasofinternationaltraderegulation,includinggovernmentprocurement.more9 over,theprojectseekstoreinforcedisciplinesonprotectingforeigndirectinvestment. Overall, the agreement is expected to generate considerable trade creating effects, in particularintermsofjobcreationintheunitedstatesandintheeuropeanunion.esti9 matesguessthataveragehouseholdincomeintheeuropeanunioncouldbeincreased bymorethan600 annually.(europeancommission,2013b). The planned agreement amounts to a new generation of trade agreements. While for9 mallybilateral,itentailsthe50statesintheusand28membersoftheeu.itneedsto takeintoaccountparticularitiesofagreatnumberofdifferentpartnersandthusonsub9 stanceamountstoanewtypeofmini9lateralagreement.thet9tipthusisofsubstantial 13

14 importance for the rest of the world, including Switzerland, which is not a member of the EU and operating her own external economic relations. Third countries, such as Switzerland, on the one hand will benefit from trade creation and spillover effects of enhanced cooperation between the two largest trading blocks. On the other hand, they willbesubjecttopotentialtradediversioneffects B. ContentoftheMandate ThepresentstudymandatedbytheSwissStateSecretariatforEconomicAffairsinSep9 tember2013combinestwostudiesundertakenbytheworldtradeinstitute,university ofbern,incooperationwiththecenterforeconomicpolicyresearch,london.theau9 thors were selected upon submitting proposals in a tender process and requested to assessthepotentialimpactofafuturefreetradeagreementbetweentheunitedstates andtheeuropeanunion. AfirststudyundertakenbyProfessorJosephFrancoisWTI,ProfessorPeterEgger,ETHZ, and Miriam Manchin, CEPR, assesses the potential impact of the T9TIP on Switzerland usingcgebasedmethods.thestudycoversbothtradeingoodsandinservices.itoffers anoverallaccountandestimation.thesecondstudyundertakenbyprofessorthomas Cottier,ProfessorPeterEgger,ProfessorJosephFrancois,DrAnirudhShingalandChar9 lotte Sieber9Gasser of WTI assesses particular areas of interest. The study focuses on a numberofservicesectors,regulatorybarriersaffectingfdiinservices,andgovernment procurement. Thisjointreportreflectssubsequentworkandmethodologicaladjustmentsfollowinga workshopwithsecoonfebruary theinputofsecohasbeenparticularlyval9 uableinthisregard.forexample,whilethesecondstudydrawsonacomparativeanaly9 sisofexistingagreementsonserviceswhileignoringthecanada EUagreement,which isnotyetavailable,strongemphasisisplacedhereuponacomparisonwiththeusand EU agreements with Korea instead. Moreover,thequalitativeandquantitativeassess9 ments of services are based upon three different scenarios of deep, weak and lacking levelsofintegration. Given the early stages of the negotiations, the mandate is limited to the analysis of po9 tentialimplicationsanddoesnotincludepolicyrecommendations. C. Approach Given the early and forming stages of the negotiations in 2013 until March 2014, the studies cannot rely upon existing conceptual papers, let alone draft texts of the agree9 14

15 ment.thisisaveryearlystage,andanyassessmentnecessarilyremainscontingentup9 onfactorsnotyetdeterminedintheprocessofnegotiations.informationonthenegoti9 ating process is scarce and sketchy and largely dependent upon published materials, eitherbytheeucommissionorustrorinsideustrade.atthispointintime,themain parametersofthet9tipbeyondbroadcoverageandparticularemphasisonregulatory cooperationarenotyetdefined.whetherornotkeysectors,suchasfinancialservices will or will not be included is unsettled at this point in time. Likewise, it is unclear to what extent disciplines on government procurement will be extended to US States or not. Giventhisbackground,theCGEmodelworksunderanumberofassumptionsdepicting different levels of liberalization and integration potentially envisaged. The method ap9 pliedisbaseduponsimilarestimatesundertakenfortheeubycepr.baseduponactual andaggregatedtradeflows,tradecreatingandtradedistortingeffectsonswitzerland arebeingassessed. OuranalysisofspecificservicessectorsofinteresttoSwitzerlandisbaseduponthree approaches.firstly,thestudycomparesexistingftasoftheeuandtheusinthesesec9 tors. The respective agreements with South Korea are of paramount importance, since thecommitmentsrelatebothtohighlydevelopedeconomies.thetextofthecanada9eu TradeAgreement(CETA),ofleadinginterest,hasnotbeenmadeavailableatthispoint intimeandcouldnotbeconsideredinthestudy.secondly,weanticipatedifferentlevels ofmarketaccessliberalizationinsectorsofinterestandextrapolatesuchlevelsonthe basisofexistingpatternsoftradeandinvestment.tradecreation,diversionandspillo9 vereffectsareassessedforthesedifferentlevels,whichmayormaynotbeadopteddur9 ing the negotiations. Third, we examine actual levels of trade in Europe with a gravity modeloftrade,supplementedtoincludeinformationonbarrierstofdiinservices.the resultsofthegravitymodelsupportandreinforcethemessagesderivedfromthemore qualitativeanalysisofexistingagreements. The work on government procurement essentially relies upon existing market access andextrapolatestheeffectsshouldtheusprocurementmarketbeopenedonaprefer9 ential basis excluding Switzerland in both the United States and the European Union. Finally,thestudyaddressesanumberofparticularissuesrelatingtoinvestmentprotec9 tionandintellectualpropertyandtradeinlicensing. Basedupontheassessmentthatinherentlyispreliminarygiventheearlystageofnego9 tiations,theassessmentformulatesanumberofrecommendationsbeyondtheoptions ofjoiningt9tip.theserecommendationsrelatetonegotiatinganftaonserviceswith theeuropeanunion,andprogressonstandards,bothingoodsandinservices,withthe UnitedStates.Importantly,theserecommendationsarenotcontingentupontheimple9 mentationoft9tipbutshouldbepursuedindependentlyoftheconclusionofthet9tip Agreement. 15

16 II. TheT2TIPintheContextoftheWorldEconomicOrder Until quite recently, international economic law could generally be distinguished into two fora: the preferential forum and the multilateral forum. Switzerland, like all other industrializedmembersofthewto,participatedinbothforabybeingamemberofthe WTOandsimultaneouslyconcludinganumberofpreferentialtradeagreements(PTAs). PTAs are inherently in conflict with the multilateral trading system, since the core of WTOlawessentiallyistoprovidenon9discriminatoryaccesstotheglobalmarket.APTA, however, is by its nature discriminatory, since third countries are excluded from the benefitsofthepreferentialtreatmentprovidedinthepta. Because of the delicate regulatory relationship between the preferential and the multi9 lateral regulatory forum, WTO9law attempts to establish requirements for the exemp9 tionfrommost9favourednationtreatment(mfn)obligationforptas,whichintheory oughttosecuretheoverallregulatorycoherenceofinternationaleconomiclawandmin9 imizethenegativeimpactofaptaonthirdcountries.themostprominentprovisions regulating the MFN exemption for PTAs are GATT Art. XXIV and GATS Art. V. Both re9 quireaptatobecoveringsubstantiallyallthetradeingoodsandservicesrespectively, inordertoqualifyforanmfnexemption.however,asaconsequenceoftherelatively vague language and non9existing enforcement9mechanism in the WTO both GATT Art. XXIVandGATSArt.Vareoflimitedrelevanceinpractice:Atclosersight,mostPTAsin forcetodaydonotmeetalloftherequirements. WhilethishasbeenamatterofgeneralconcernforWTOspecialistsforsometime,the on9goingnegotiationsontheso9called mega9regionals,suchasthetrans9pacificpart9 nership(tpp),andthetransatlantictradeandinvestmentpartnership(t9tip)further increaseconcernsovertheweakimplementationoftheregulationofptas.eventhough members of the TPP and the T9TIP have repeatedly stressed that they plan a PTA in compliance with GATT Art. XXIV and GATS Art. V, it will remain open until the final agreementisconcluded,towhatextenttherequirementsofwto9lawtranslateintothe scopeandstructureoftheseagreements. TheweakimplementationoftheregulatoryprovisionsofPTAsmeansthatitisimpossi9 bletoprovideforarelativelysafeassumptionastowhattheregulatoryscopeofthet9 TIPcouldlooklike.WhileintheorythegeneralideaandscopeasestablishedbyGATT Art.XXIVandGATSArt.Voughttoprovideforabasisofsuchaprediction,inpractice especially when considering also the political power of the two parties involved any9 thingispossibleandthet9tipcouldessentiallyevenignoretherequirementsofgatt Art. XXIV and GATS Art. V altogether since it is unlikely that this would have conse9 quences. 16

17 IftheUSandtheEUdecidenottoimplementGATTArt.XXIVandGATSArt.VintheT9 TIP,thiswouldfurtherweakenthede'factoargumentofWTO9lawasthebasisofinter9 nationaleconomiclaw,providingforgeneralrulesandminimalstandardsapplicableto allwto9members. Weak multilateral regulation would particularly harm small econo9 mies,suchasswitzerland:wto9lawprotectstheinterestsofsmalleconomiesandestab9 lishesalevelplayingfieldindependentfromeconomicandpoliticalpower.thus,argua9 bly, it is in the interest of Switzerland to stress the importance of GATT Art. XXIV and GATSArt.V,andtohighlightthefactthatbythelaw,theT9TIPisforcedtocomplywith theseprovisions. Onanotherside,mostoftheliberalizingimpactofPTAstodayisachievedthroughmu9 tualrecognitionandthereductionofnon9tariffbarrierstotrade.giventhatthelevelof tariffsworldwidehasbeencontinuinglyreducedtoalowlevelofjustabout4%inaver9 age today, the reduction of non9tariff barriers to trade in a PTA is economically more relevantthantheleveloftariff9reductions.infact,morethan80%ofthegainsfromt9 TIPareexpectedtocomefromthelowercostsofbureaucracyandregulations. 1 Global tradeingoodstodayisincreasinglyfurtherliberalizedthroughregulatoryconvergence. WhilethemajorityofWTO9membersagreeonthis,multilateralnegotiationshavesofar notresultedinanymajorregulatoryconvergencesincetheestablishmentofthewtoin 1995.Countrieshave,thus,attemptedtoincreaseregulatoryconvergencethroughPTAs, whichresultedinnumerousdifferentapproachesandregulatorysystems. ItisthedeclaredgoaloftheUSandtheEUtoreducenon9tariffbarrierstotradethrough regulatoryconvergence.shouldtheyagreeonmajorreductionsofnon9tariffbarriersto trade,theywillinfactestablishaprototypeforanysubsequentregulatoryinitiativein reducing non9tariff barriers to trade. Provided that these economic giants agree on a certainstandard,itislikelythattherestoftheworldwillfollowtheirleadsoonerorlat9 er,iftheywanttosecuremarketaccesstothemostattractivedomesticmarketstoday. WhileSwitzerlandwillmostlikelybeabletoimplementsuchpotentialT9TIPbasedreg9 ulation, other and in particular poorer countries, will be struggling in keeping up withtheworld sleadingeconomies. Thus,reducingnon9tariffbarrierstotradeintheT9TIP,whileconstitutingthedeclared goalofthenegotiations,isnotnecessarilyintheinterestofthirdcountries,suchasswit9 zerland. Regulatory convergence in the T9TIP will serve as a regulatory prototype for subsequenteconomicintegrationworldwide.thejuryisstillout,whetherandhowthird countries which implement such PTA regulation will have to be given equal treatment. Switzerland in any case will have the opportunity to implement the T9TIP regulation unilaterally and will have to ask for participation in negotiations over mutual recogni9 tion.itislikelythatasubstantialreductionofnon9tariffbarrierstotradeinthet9tip willeventuallyleadtoanumberofwtodisputes,whichhavetoclarifytherelationship between MFN and mutual recognition, as well as to further substantiate the scope of equaltreatment. 1T9TIP,ExcerptfromInsideUSTrade,December13,January14. 17

18 A. InstitutionalIssuesandRegulatoryConvergenceandCoopera2 tion TheemphasisoftheT9TIPwillbeonnon9tariffbarriersorwhattodayarecalledbehind theborderissues.themainchallengeconsistsinbringingaboutsimplificationoftrade and investment while protecting public interests, by means of mutual recognition or evenharmonizationofstandardsandrules. ItisthedeclaredgoaloftheUSandtheEUtoreducenon9tariffbarrierstotradethrough regulatoryconvergence(seealsolesterandbarbee2014).proposalsonthetableareof greatinterest.theydepictthelong9termarchitectureoftheagreementanditsphiloso9 phy as a framework and forum for lasting discussions. T9TIP very likely will not be a static agreement modelled after traditional PTAs. It will be framework within which a processofcommonrule9makingandstandardsettinginconcertationwithdomesticpre9 rogativesandpowerswilltakeplace.mutualdialogueandhearingsareatthecentreof it. Proposals do not suggest undermining domestic law9making, and certainly not the prerogatives of Congress and Parliament. Much of the experience within the EU may translate into transatlantic procedures. It is too early to assess the prospect of these plans. As in the context of the transatlantic dialogue, they may become the victim of vested interests in government and administration. Both the EU and the US are accus9 tomedtoworkwiththeirowntemplates.thisnolongerwillbepossibleandcommon templatesneedtobedeveloped. Totheextentthatregulatoryconvergencematerializes,theresultswillofferatemplate forsubsequentmultilateralization,bothinthewtoandbymeansofptas.theywillin fact establish the prototype for any subsequent regulatory initiative in reducing non9 tariff barriers to trade. They will inform much of the work of the WTO in coming dec9 ades. RegulatoryconvergencebetweentheEUandtheUSprovidesimportantspill9overef9 fectsforthirdcountries.switzerlandisabletobenefitfromcommonstandardsbothfor theeuandtheus.shewillbeabletoextendherpoliciesofeuro9compatibilitytopoli9 ciesoftransatlanticcompatibility.muchofthiscanbeachievedunilaterallybysubse9 quentlyadjustingtoexistingnormsofthemaintradingpartnersundertheexistingleg9 islationontechnicalbarrierstotrade,orinadjusting,orenactingnew,legislation.lim9 itedparticipationintheprocessofrule9makingdoesnotfundamentallydifferfromto9 day,butmaybefurtheraccentuated.bettereftaengagementintheprocessmaybean option,which,ofcourse,woulddependontheeuandtheusandtowhatextentthe agreementsubsequentlywillbeopentootherstojoin.itmayleadtoreviewingcurrent relationswiththeeufromthepointofviewofdemocraticparticipation. 18

19 III. ModellingtheEconomicImpactofT2TIPonSwitzerland Inthissection,weexaminethepossibleimpactofT9TIPonSwitzerland.Theimpactde9 pendsonpossiblechangesinpolicyasdiscussedbelow,aswellasthestructureofthe Swisseconomyitself.Westartwithadiscussionofpolicyandpossiblescopeforliberali9 zation,andmoveonfromtheretothemodel9basedassessmentofpossiblescenarios. A. TheStructureofSwissTradeandInvestment Ultimately, the impact of TTIP on the Swiss economy depends on a number of factors. ThesefactorsincludethedirectionoftradeandthestructureoftheSwisseconomyit9 self, as well as likely changes in policy under TTIP. We deal with changes in policy throughout the rest of this report. We start here with an overview of the underlying economicstructure.thisservestosetboththemorequalitativeregulatoryanalysisand themorequantitativecgeanalysisincontext. FigureIII91depictsthetwentymostimportantexportandimportpartnersofSwitzer9 landin2012.theusandtheeuareamongthemostimportanttradepartnersforswit9 zerlandascanbeseenfromthefigure.thusanyagreementaffectingthetraderelations betweenthetwoislikelytohaveanimportantimpactontheswisseconomy. Figure III-1: Switzerland s top 20 export destinations, million Swiss francs Source: WITS, World Bank, own calculations. TheEUisthesinglemostimportanttradepartnerinmanufacturingforSwitzerland,fol9 19

20 lowedbychina,andtheus(in2012).switzerlandenjoysprivilegedtariffandntbac9 cesstotheeumarketvis9à9vistheus.thisprivilegewillbeerodedwithattip. Like other high9income countries, Switzerland is services9intensive in terms of value added(meaningemploymentandcapital)butgoods9intensiveintermsoftrade.figure III92 below provides a summary for The figure provides three measures of the contribution of sectors to trade and GDP. The first is simply the share of value added (thebasisforthevalueofnationalincome)acrossprimaryproductionandfood,manu9 facturing, and services. On this basis, services contributed 78.2 percent to Swiss GDP, while manufacturing contributed 18.6 percent and primary production and food 3.2 percent. InadditiontoGDPallocationsacrosssectors,throughoutthissectionwewillalsorefer toeconomic'linkages.bythis,wemeantheextenttowhichoutputfromonesectorthen feeds into another sector. This flow of output of goods and services is the basis for the conceptof valuechains linkingtheactivities(valueadded)insectorsatvariousstages of processing, leading ultimately to the final output of goods and services. When one focusesonthedownstreamflowofoutputtofinaloutput forexamplesteelsoldtomo9 torvehiclesproductionandtoconstruction thisisreferredtoas forward linkages. Whenweinsteadexaminetheoriginalsectorsprovidingvalueaddedtofinaloutputina givensector forexamplesteel,electricity,engineeringservices,andmachineryallfeed9 ing into motor vehicle production this is referred to instead as backward linkages. Backward linkages help to identify the importance of workers and production in up9 stream firms contributing to final output. 2 Linkages are an important feature in the modelofproductionandtrade thecgemodel discussedlaterinthisreport. IntermsofFigureIII92,weprovidethecontributionofexportstoGDPbasedbothon forward linkages and on backward linkages. Starting with backward linkages, percentofswissgdp(jobsandcapitalservices)wasexportedthroughgoods.services exportsaccountedforanother8.01percent.inthecaseofmanufacturing,thesefigures includenotonlyvalueaddedwithinmanufacturing,butalsovalueaddedfromservices thatfeedintomanufacturingoutput.intotal,31.69percentofswissvalueaddedisex9 ported.mostofthisisexportedthroughthemanufacturingsector. WhilemanufacturingaccountsformostofSwissvalueaddedcontainedinexports,much ofthisactuallycomesthroughinputsfromtheservicesectortomanufacturingproduc9 tion.thisisclearwhenwelookatthelastsetofdatainfigureiii92onforwardlinkages. Here,weseethat15.03percentofSwissGDP,locatedintheservicesector,isembodied inexportsofgoodsandservices.thisfigurepointstotheimportantroletheservicesec9 torplaysinswitzerlandasanintermediateinputtogoodsproduction,includingforex9 ampleengineering,ict,andfinancialservices.giventhenatureoftheswisseconomy, 2Foratechnicaldiscussiononthedefinitionoftheseconceptsandtheircalculationfromnationalinput9 outputdata,seefrancois,manchin,andtomberger(2013)andchristenetal(2013).here,inthissection weworkwiththegtap9database,whichisbenchmarkedtotheglobaleconomyin