January 7 (SeeNews) - The proposed free trade pact TTIP between the EU and the USA will have a slightly negative effect on Slovenia's economy, but may present risks to the pharmaceutical and the automotive industry, a study shows.
Economist Joze P. Damijan presented at a round table on Wednesday an analysis of the effects on Slovenia's economy of the Transatlantic Trade and Investment Partnership (TTIP) the EU is negotiating with the USA. The study prepared by the University of Ljubljana has been commissioned by the ministry of economy.
Model simulations that summarise various scenarios of potential negotiation outcomes on the TTIP agreement suggest that the effects of the trade liberalization with the USA on the Slovenian economy would be negligible. Slovenia can expect a GDP growth from a negative 0.02 % to a positive 0.27 %. "Any small reform in the country will have a 10 times greater impact on GDP," Damijan said at the presentation.
Despite the potential 35% growth in trade between Slovenia and the USA, the foreign trade of the country will decrease due to a decline in volumes with the EU.
Employment due to the withdrawal of tariffs and subsidies for industrial products and services could decline by about 220 jobs in the best case scenario to 1,400 to 1,500 jobs in the case of the most ambitious trade liberalization.
Most vulnerable to TTIP are the pharmaceutical, motor vehicles and food sectors as they are highly dependent on foreign trade. Even in the case of most ambitious liberalization scenario all three branches would experience negative effects.
The harmonization of US and EU patent laws could negatively affect Slovenian drug makers Lek and Krka, as they produce generic medicines. Patent protection for the original drug may not extend beyond the existing frameworks established by multilateral negotiations, which could block domestic manufacturers and lower exports and employment and keep prices higher for domestic consumers.
The motor vehicle industry is also expected to suffer as the elimination of the relatively high tariffs on imports of cars from the US could trigger negative effects of domestic car production. The 10-year horizon of simulation shows that the value added of the industry will fall by more than 2%.
Another potential risk arising from the adoption TTIP, refers to a mechanism to settle disputes between the state and investors, called the investor-state dispute settlement, or ISDS. In such a dispute the case would be transferred from a national court to foreign arbitration.
Damijan pointed out, however, that the TTIP, in his opinion makes sense, since it will create the largest free trade zone in the world. The task of the government is to open opportunities for ambitious companies.