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Parliamentary questions
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1 September 2014
Answer given by Mr De Gucht on behalf of the Commission
Question reference: E-005826/2014

Even in the most advanced economic models, estimates of the impact of trade agreements should obviously be cautiously interpreted in light of the general limitations of the analytical tools used to generate them. Simulations based on models provide useful general indications, but their outcomes can only be seen as estimates. Modelling results depend on the assumptions made on future provisions of the agreement. Moreover, models necessarily build on simplifications of complex interactions across (and between) economies. Labour markets issues are particularly difficult to model due to their many intricacies, and lack of good data to capture them all. Hence, the standard computable general equilibrium models that are most commonly used adopt a very simple structure for labour markets and assume that total employment in the economy does not change due to the entry into force of a trade agreement. There are models with a particular focus on the labour market. But those usually take the outside world beyond national borders as exogenous and would therefore be incapable to adequately take on board the impact of a trade agreement with whatever world region.

Effects on the labour markets are captured through employment changes in the different sectors as well as the overall impact on wages. This standard technique may not be optimal from a policy perspective, but it offers fewer technical uncertainties on how the other general macroeconomic effects come to be. Modelling exercises that adopt another approach to specifying labour markets with a view to quantify job creation effects have their limitations too. Therefore, the approach used so far in studies commissioned by the Commission did not feature such effects.

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