Industries Presentation for EP/ITRE Committee 21st January 2015 - - PowerPoint PPT Presentation

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

This Presentation

• EU – US Trade Relations

and TTIP

• Potential impacts on the

energy sector

• Potential impacts on the

manufacturing sector

• Conclusions and

recommendations

EU – US Trade Relations

EU – US Trade

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

Source: Eurostat

A positive trade balance for the EU

TTIP Negotiation Process

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

Potential Impacts on the Energy Sector

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...

Tariff and Non-Tariff Barriers for Energy

Fuel type Non-tariff measure EU tariff (0%) US tariff (%) Oil (US) Export ban - License Required 0 > 0.2% Natural gas (US) Export ban - License Required 0 0 Refined fuels (gasoline, diesel) (EU) Fuel quality directive (FQD) 0 > 0.4 Coal (EU/US) Climate policy 0 0 Solar cells (tech) (EU/US) Local content requirement 0 0 Wind energy (tech) (EU/US) Local content requirement 2.7 1.25

Tariffs are low, but significant non-tariff barriers exist

Source: WTO Tariff data

Impact on Energy Trade

• 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

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

• n energy security in the EU

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)

Potential Impacts on the Manufacturing Sector

Trade weighted average tariff rates (%) (2007)

Tariff Measures

2 4 6 8 10 12 14 16 Other manufactures Wood and paper products Metals and metal products Other machinery Other transport equipment Motor vehicles Electrical machinery Chemicals Processed foods Other primary sectors Agriculture, forestry and fisheries % EU US

Tariff barriers are generally low, with some exceptions

Source: CEPR. 2013

Non-Tariff Measures

10 20 30 40 50 60 70 80 Transportation Banking Insurance Business and ICT Communications Constructions Personal, cultural, other services Wood and paper products Metals and metal products Other transport equipment Motor vehicles Electrical machinery Chemicals Foods and beverages US EU

Ad valorem equivalents of NTM in the U.S. and EU (%) (2007)

Source: CEPR, 2013

Almost 80% of the benefits of the TTIP are expected to come from the removal of NTMs

 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

• nly

Overall impacts

Impacts on specific sectors

• 8
• 6
• 4
• 2

2 Other transport equipment Wood and paper products Chemicals Other machinery Processed foods Other manufactures Motor vehicles Electrical machinery Metals and metal production Ambitious Less ambitious

Source: CEPR 2013

Changes in EU output by 2027 (%)

EU Metals and Electrical machinery are likely to decrease

• utputs

TTIP benefits will not be equal for all Member States

Source: Felbermayr et

• al. 2014

Core EU countries do not profit more than perifery

Changes in Real Per Capita Income of Selected Countries (%)

• 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

Labour market impacts

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

Policy Recommendations

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

Main Conclusions

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

Recommendations

Thank you for your attention

Triple E Consulting – January 2013

• 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

ISDS Mechanism