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Global
investment
In America
HOW TTIP and TPP HAVE THE POWER
TO INCREASE GLOBAL INVESTMENT IN THE UNITED
STATES AND CREATE NEW AMERICAN JOBS
About
the Report
This report, based on the analysis of the Quantitative Economics & Statistics
(QUEST) group within Ernst & Young LLP, estimates the economic contributions to
the U.S. economy regarding increased investment in the United States by inbound
employers due to the TTIP and TPP agreements. These estimates are scaled to
the 2012 U.S. economy and reflect the long-run contributions of fully phased-in
agreements.
The Organization for International Investment
Created more than two decades ago, the Organization for International Investment
(OFII) is a non-profit business association in Washington, D.C. representing the
U.S. operations of many of the world’s leading global companies, which insource
millions of American jobs. OFII works to ensure the United States remains the top
location for global investment. As such, OFII advocates for fair, non-discriminatory
treatment of foreign-based companies and promotes policies that will encourage
them to establish U.S. operations, increase American employment, and boost U.S.
economic growth.
Published April 2015
2
Organization for International Investment | ofii.org
Contents
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6
7
10
12
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15
19
Executive Summary
introduction
Economic contributions of TTIP and TPP in the United States
State-level economic contributions of TTIP and TPP
Limitations and caveats
Appendix A. Technical description of the data and modeling approach
Appendix B. Detailed industry and state estimated impact tables
Endnotes
see more, Including comprehensive state-by-state analysis, at
ofii.org/trade
Unleash global investment in America
3
executive summary
T
he United States has embarked on ambitious trade negotiations with partners
in Europe and the Pacific. The Transatlantic Trade and Investment Partnership
(TTIP) and the Trans-Pacific Partnership (TPP) are currently being negotiated and
include most major U.S. trade partners. Collectively, these countries account for
nearly two-thirds of world trade and represent nearly 90 percent of foreign direct
investment (FDI) flows into the United States. The United States is the world’s
largest recipient of FDI flows, yet America’s share of global FDI has decreased in
the past decade. The conclusion of the TTIP and TPP agreements will increase the
attractiveness of the United States as an investment destination.
This report estimates the economic contributions to the U.S. economy regarding
increased investment in the United States by inbound employers due to the TTIP
and TPP agreements. These estimates are scaled to the 2012 U.S. economy and
reflect the long-run contributions of fully phased-in agreements.
findings
>
The stock of FDI in the U.S.
economy would increase by
an estimated $173 billion –
a 6.25 percent increase over
current levels.
>
More than one-third of the
estimated FDI increase ($61
billion) would occur in the
manufacturing industry.
>
>
4
It is estimated that TTIP and
TPP would increase the employment contribution of
inbound companies by more
than 1.4 million U.S. workers.
Every state would experience positive jobs contributions – most states would
experience an estimated increase of more than 10,000
jobs.
Trade agreements influence FDI flows in several ways. First, comprehensive
agreements such as TTIP and TPP include provisions that directly improve access
and protections for investments by inbound companies, such as lifting local content
requirements and ensuring investments are protected by the rule of law. Second,
reducing tariff and non-tariff barriers and improving regulatory cooperation allow
companies to operate effective global value chains. Reduced trade barriers also
make the U.S. more attractive as an export platform for global companies that
want to reach both domestic and regional customers. Third, the economic growth
produced by trade agreements attracts additional investment to grow America’s
economy.
Investments by inbound companies play an important role in the U.S. economy.
Inbound companies directly employ 5.8 million people in the United States and pay
wages that are 33 percent higher than the national average. Inbound companies
directly employ more than 18 percent of workers in the manufacturing industry.
Direct employment is not the only economic contribution inbound companies
make. There are also indirect and induced employment contributions. When a
major inbound employer establishes operations in the United States, other global
companies in the supply chain may invest nearby. The overwhelming majority of
the supply chain goods and services needed, however, will be provided by local
U.S. companies. These U.S. suppliers employ many workers in order to produce
the goods and services inbound companies buy in the United States. As these
inbound and U.S. companies invest and grow, additional workers are employed
when these direct and indirect employees spend their earnings in the local economy. These direct, indirect and induced employment effects may all increase as
inbound employers increase their investment in the United States.
Organization for International Investment | ofii.org
Table ES-1. Summary of estimated long-run contributions of TTIP and TPP
Billions of US dollars; number of full- and part-time employees (thousands)
TTIP
TPP
Combined
FDI Stock
Direct Employment
Indirect & Induced
Employment
Total employment
$153
$20
$173
334
68
400
865
165
1,030
1,200
233
1,432
Note: Scaled to the 2012 US economy. Estimates are based on fully phased-in agreements. Figures may not appear to
sum due to rounding.
Source: EY analysis; 2012 IMPLAN model of the US economy; Centre for Economic Policy Research, “Reducing Transatlantic Barriers to Trade and Investment: An Economic Assessment,” (2013); Peter A. Petri, Michael G. Plummer and
Fan Zhai, “The Trans-Pacific Partnership and Asia-Pacific Integration: A Quantitative Assessment,” (2011).
As shown in Table ES-1, inbound companies would increase their direct employment of
U.S. workers by 400,000 in response to TTIP and TPP. An additional 1,030,000 workers
would be employed at suppliers to inbound companies and businesses that expand in
response to the increased spending of workers at both the inbound companies and their
suppliers.
As shown in Figure ES-1, the direct employment impacts are concentrated in the manufacturing industry, which would experience an increase of 147,500 jobs at inbound companies. The manufacturing industry alone accounts for 37 percent of total direct employment
impacts in the United States. The next three sectors with the largest direct impacts are the
professional and business services industry (44,500 jobs), the retail trade industry (42,000
jobs), and the leisure and hospitality industry (36,500 jobs). These three industries account for approximately 31 percent of the direct employment impacts.
Figure ES-1. Distribution of estimated long-run direct employment impacts, by industry
Number of full- and part-time employees (thousands); percentage of total direct employment
Manufacturing, 147.5 (37%)
Professional and Business Services, 44.5 (11%)
Retail Trade, 42.0 (10%)
Leisure and Hospitality, 36.5 (9%)
Information, 31.5 (8%)
Transportation and Warehousing, 31.5 (8%)
Wholesale Trade, 24.0 (6%)
Finance and insurance, 18.0 (4%)
Other Industries, 16.5 (4%)
Education and health services, 10.0 (2%)
Note: Scaled to the 2012 US economy. Figures may not sum due to rounding. A detailed industry breakdown of direct employment impacts
is included in Appendix B.
Source: EY analysis using the 2012 IMPLAN model of the US economy; Centre for Economic Policy Research, “Reducing Transatlantic
Barriers to Trade and Investment: An Economic Assessment,” (2013); Peter A. Petri, Michael G. Plummer and Fan Zhai, “The Trans-Pacific
Partnership and Asia-Pacific Integration: A Quantitative Assessment,” (2011).
Unleash global investment in America
5
Introduction
T
he Transatlantic Trade and Investment Partnership
(TTIP) and the Trans-Pacific Partnership (TPP) are
ambitious trade agreements currently being negotiated
by the United States. Collectively, the other countries
account for nearly two-thirds of world trade and represent nearly 90 percent of foreign direct investment
(FDI) inflows into the United States.1 Conclusion of the
comprehensive TTIP and TPP agreements will further
increase the attractiveness of the United States as an
investment destination, which will lead to higher wages
for U.S. workers and increased economic output.
While the United States is the world’s largest recipient
of FDI on a cumulative basis, its share of worldwide
FDI has decreased precipitously in the past decade. In
2000, the United States received 37 percent of worldwide FDI stock. By 2013, that percentage had fallen to
only 19 percent. Preliminary figures for 2014 show the
lowest level of FDI flow into the United States in more
than a decade. More FDI flowed into China in 2014
than any other economy, pushing the United States to
the third position, behind Hong Kong, according to United Nations’ Conference on Trade and Development.2
Inbound companies directly employ 5.8 million workers
in the United States and pay wages that are 33 percent
higher than the national average.3 Inbound companies
also directly employ more than 18 percent of workers
in the manufacturing industry. Investment by inbound
companies supplies capital, creates employment opportunities for U.S. workers, and supports other U.S.
companies through the purchase of intermediate inputs. Additional FDI flows can be expected to increase
the number of jobs at inbound companies in the United
States.
TTIP is a broad trade and investment agreement currently being negotiated between the United States and
the European Union.4 The United States and European Union are both relatively open economies with
well-established trade and investment relationships.
The European Union accounts for 64 percent of total
FDI flows into the United States.5 TTIP negotiations
are focused on increasing regulatory cooperation,
strengthening intellectual property protections, and improving supply chains. While tariff rates between the
United States and European Union are relatively low,
the scale of trade between the continents makes reducing tariff rates another important focus of the negotiations.
The European Union is already the largest source of
FDI flows for the U.S. economy. If enacted, TTIP could
deepen existing investment relationships and provide
numerous benefits to the U.S. economy. Additional investment from European countries would create jobs,
increase output and expand local industries.
TPP negotiations began in 2005 with original members
Brunei, Chile, New Zealand, and Singapore. Since
then, Australia, Canada, Malaysia, Mexico, the United States, Vietnam, and, most recently, Japan, have
joined the negotiations. The addition of Japan – the
world’s third largest economy – has increased the profile of the negotiations and potential economic benefits
of TPP for the United States.
If enacted, TPP could increase trade and investment
in the United States. In addition to lowering tariffs, the
agreement is likely to increase regulatory cooperation,
facilitate supply chain development, and strengthen
investment provisions. Lowering tariff and non-tariff
trade and investment costs could make the U.S. economy a more attractive location for FDI. Additional FDI
from TPP negotiating partners would result in additional jobs and increased economic output.
America’s share of FDI stock has fallen dramatically
Worldwide Inward Stock of Foreign Direct Investment, 2000 and 2013
2000
6
37%
19% 2013
Organization for International Investment | ofii.org
Economic contributions of TTIP and TPP in the United States
Table 1. Summary of estimated long-run contributions of TTIP and TPP
Billions of US dollars; number of full- and part-time employees (thousands)
TTIP
TPP
Combined
T
FDI Stock
Direct Employment
Indirect & Induced
Employment
Total employment
$153
$20
$173
334
68
400
865
165
1,030
1,200
233
1,432
Note: Scaled to the 2012 US economy. Estimates are based on fully phased-in agreements. Figures may not appear to
sum due to rounding.
Source: EY analysis; 2012 IMPLAN model of the US economy; Centre for Economic Policy Research, “Reducing Transatlantic Barriers to Trade and Investment: An Economic Assessment,” (2013); Peter A. Petri, Michael G. Plummer and
Fan Zhai, “The Trans-Pacific Partnership and Asia-Pacific Integration: A Quantitative Assessment,” (2011).
rade agreements influence FDI flows in several
ways. First, comprehensive agreements such as
TTIP and TPP include provisions that directly improve
access and protections for investments by inbound
companies, such as lifting local content requirements
and ensuring investments are protected by the rule of
law. Second, reducing tariff and non-tariff barriers and
improving regulatory cooperation allow companies to
operate effective global value chains. Reduced trade
barriers also make the U.S. more attractive as an export platform for global companies that want to reach
both domestic and regional customers. Third, the economic growth produced by trade agreements attracts
additional investment to grow America’s economy.
The total stock of FDI in the United States exceeds
$2.6 trillion, of which $2.3 trillion is attributable to member countries of TTIP and TPP.6 The two trade agreements are expected to increase U.S. inward FDI flows
from the member countries through greater regulatory cooperation, lower tariffs, increased market access
and higher growth. As shown in Table 1, an estimated long-run increase of $173 billion in U.S. inward FDI
stock would occur after the two trade agreements are
fully implemented.
The total employment contributions of increased investment from inbound companies are the sum of
three distinct types of contributions:
Direct impacts of inbound companies
The direct employment impacts reflect the change in
total number of full- and part-time employees that are
directly employed by inbound companies. The trade
agreements are expected to reduce trade and investment barriers faced by inbound companies in the United States and increase the amount of FDI that flows
into the U.S. economy. The new investment from inbound companies flowing into the U.S. economy can
Unleash global investment in America
be expected to create more jobs in these companies.
Indirect contributions related to US suppliers
The indirect employment contributions of the trade
agreements are the U.S. supplier-related economic activities that result from purchases of goods and services
by inbound companies included in the direct employment impacts. Purchases by inbound companies from
U.S. businesses providing goods and services support
employment in these businesses. In turn, these suppliers purchase operating inputs, which support additional rounds of indirect employment contributions.
Induced contributions related to consumer spending
The induced employment contributions of the trade
agreements are generated by local spending by direct
and indirect employees. These employees use a portion of their incomes to purchase goods and services
from U.S. businesses. These transactions support employment at businesses such as retailers, restaurants,
and service companies.
Inbound companies from member countries of TTIP
and TPP employ more than five million full- and parttime workers in the United States.7 Inbound companies are estimated to increase their direct employment
of U.S. workers by 400,000 in response to TTIP and
TPP. An additional 1,030,000 workers would be employed by U.S. suppliers to inbound companies (indirect impact) and businesses that expand in response to
the increased spending of workers at both the inbound
companies and their suppliers (induced impact).8
In total, combining the direct, indirect and induced employment contributions are estimated to increase the
long-run employment contribution of inbound companies by 1,432,000. These estimates are scaled to the
2012 U.S. economy and reflect the long-run contributions of fully phased-in agreements.
7
Estimated industry impact
As shown in Figures 1 and 2, the manufacturing industry would benefit the most in its FDI stock ($61 billion) and
direct employment impacts (an increase of 147,500 jobs at inbound companies).
Figure 1. Distribution of estimated long-run impacts on FDI stock, by industry
Billions of US dollars; percentage of total change in FDI stock
Manufacturing, $61 (35%)
Finance and insurance, $29 (17%)
Information, $17 (10%)
Professional and Business Services, $15 (9%)
Wholesale Trade, $14 (8%)
Leisure and Hospitality, $12 (7%)
Transportation and Warehousing, $10 (6%)
Other industries, $7 (4%)
Education and health services, $3 (2%)
Retail Trade, $3 (2%)
Note: Scaled to the 2012 US economy. Figures may not appear to sum due to rounding. A detailed breakdown of FDI impacts is included
in Appendix B.
Source: EY analysis using the 2012 IMPLAN model of the US economy; Centre for Economic Policy Research, “Reducing Transatlantic
Barriers to Trade and Investment: An Economic Assessment,” (2013); Peter A. Petri, Michael G. Plummer and Fan Zhai, “The Trans-Pacific Partnership and Asia-Pacific Integration: A Quantitative Assessment,” (2011).
As shown in Figure 2, the manufacturing industry alone accounts for 37 percent of the total direct employment
impacts in the United States. The next three industries receiving the greatest direct impacts are the professional
and business services industry (44,500 jobs), the retail trade industry (42,000 jobs), and the leisure and hospitality industry (36,500 jobs). These three industries account for approximately 31 percent of total direct employment
impacts.
Figure 2. Distribution of estimated long-run direct employment impacts, by industry
Number of full- and part-time employees (thousands); percentage of total direct employment
Manufacturing, 147.5 (37%)
Professional and Business Services, 44.5 (11%)
Retail Trade, 42.0 (10%)
Leisure and Hospitality, 36.5 (9%)
Information, 31.5 (8%)
Transportation and Warehousing, 31.5 (8%)
Wholesale Trade, 24.0 (6%)
Finance and insurance, 18.0 (4%)
Other Industries, 16.5 (4%)
Education and health services, 10.0 (2%)
Note: Scaled to the 2012 US economy. Figures may not sum due to rounding. A detailed industry breakdown of the direct employment impacts
is included in Appendix B.
Source: EY analysis using the 2012 IMPLAN model of the US economy; Centre for Economic Policy Research, “Reducing Transatlantic
Barriers to Trade and Investment: An Economic Assessment,” (2013); Peter A. Petri, Michael G. Plummer and Fan Zhai, “The Trans-Pacific
Partnership and Asia-Pacific Integration: A Quantitative Assessment,” (2011).
8
Organization for International Investment | ofii.org
Figure 3 illustrates the distribution of the estimated indirect (U.S. suppliers) and induced (related to consumer
spending) employment contributions by industry. The estimated indirect employment contributions depend on:
(1) the mix of industries that act as suppliers to a particular industry, and, (2) the relative size of each supplier
industry in the United States. Since the induced contributions are generated by local spending by direct and indirect U.S. employees, it is concentrated in industries such as education and health services, retail trade, leisure
and hospitality, and professional and business services.
Figure 3. Distribution of estimated long-run indirect and induced employment contributions, by industry
Number of full- and part-time employees (thousands)
Professional and Business Services
Education and health services
leisure and hospitality
manufacturing
retail trade
finance and insurance
other services (except public admin.)
Wholesale Trade
Real estate and rental and leasing
Transportation and warehousing
agriculture, forestry, and fishing
public administration
information
Indirect (supplier - related)
mining, quarrying, and oil and gas extraction
Induced (consumption - related)
construction
utilities
0
50
100
150
200
250
Note: Scaled to the 2012 US economy. Estimates are based on fully phased-in agreements. A detailed industry breakdown of the indirect and
induced employment contributions is included in Appendix B.
Source: EY analysis using the 2012 IMPLAN model of the US economy; Centre for Economic Policy Research, “Reducing Transatlantic Barriers
to Trade and Investment: An Economic Assessment,” (2013); Peter A. Petri, Michael G. Plummer and Fan Zhai, “The Trans-Pacific Partnership
and Asia-Pacific Integration: A Quantitative Assessment,” (2011).
Unleash global investment in America
9
State-level economic contributions of TTIP and TPP
T
TIP and TPP would affect inbound companies in each state. There would be
additional investment from TTIP and TPP member countries into the United
States and it is expected that more local workers would be hired by inbound companies. Table 2 provides a summary of the contributions of TTIP and TPP on FDI
stocks and inbound companies’ employment across all 50 states and the District
of Columbia.
States with larger economies can generally be expected to enjoy larger benefits
from the trade agreements. Both trade agreements are expected to increase the
stock of FDI at the state level and FDI stock is generally estimated to increase more
in states that receive larger employment contributions from inbound companies. As
shown in the first column of Table 2, the top three states with the largest increase
in inbound companies’ employment would also experience the largest increases in
FDI stock. FDI stock would increase by $18.8 billion in California, $15.2 billion in
New York, and $14.0 billion in Texas. In states ranked fourth to tenth, FDI stock
would increase by $5.6 to $8.4 billion. Most of the other states would experience
an increase in FDI stock greater than $1 billion.
The resulting increase in inward FDI stock would lead to increases in jobs in each
state. The total employment contributions of TTIP and TPP are measured as the
sum of direct, indirect, and induced employment contributions. As shown in the
third column of Table 2, the total employment contributions in each state range from
several thousand to more than a hundred thousand new jobs.
California is estimated to receive the largest increase in inbound companies’ direct
employment of more than 42,250 jobs, followed by Texas (33,030 jobs), and New
York (28,290 jobs). The states ranked fifth to tenth would receive direct employment impacts ranging from nearly 19,000 jobs in Illinois to almost 14,000 jobs in
Massachusetts.
California also ranks first in terms of the absolute number of jobs with total employment contributions of 162,320, followed by Texas (117,950 jobs) and New York
(106,490 jobs). The top three states account for approximately 27 percent of the
employment related to TTIP and TPP. Of the remaining 47 states, 30 would receive
total employment contributions greater than 10,000 new jobs. Even in the three
states with the smallest employment contributions (Montana, South Dakota, and
Wyoming), there would be an increase of more than 2,500 jobs related to TTIP or
TPP.
see more, Including comprehensive state-by-state analysis, at
ofii.org/trade
10
Organization for International Investment | ofii.org
Table 2. Estimated long-run contributions of TTIP and TPP, by state
Billions of US dollars; percentage of total change in FDI stock
State Impacts on FDI stock Direct impacts Total contributions % change in FDI Jobs
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Total
$2.6
$0.4
$2.3
$1.1
$18.8
$2.7
$3.1
$0.9
$0.7
$7.6
$5.7
$0.9
$0.4
$8.5
$4.3
$1.9
$1.8
$2.7
$1.5
$0.9
$2.6
$6.1
$5.5
$3.4
$0.9
$2.6
$0.2
$0.8
$1.3
$1.0
$7.6
$0.7
$15.2
$5.0
$0.5
$6.3
$1.4
$1.4
$7.7
$1.0
$3.1
$0.3
$3.5
$14.0
$1.0
$0.3
$3.7
$3.0
$0.7
$2.7
$0.2
$172.5
5,810
1,040
5,850
2,880
42,250
5,990
6,870
1,840
1,810
17,510
13,490
2,310
1,010
18,830
10,690
3,540
4,030
6,380
4,140
2,370
7,870
13,620
13,040
7,400
2,210
6,310
490
1,820
2,800
2,690
15,270
1,520
28,290
14,370
1,050
15,760
3,390
3,190
19,500
1,850
7,970
650
8,510
33,030
2,500
870
11,210
7,150
2,040
5,880
640
401,530
17,730
3,680
24,250
9,930
162,320
23,320
22,910
5,390
7,230
76,250
43,830
8,300
4,750
64,400
30,180
12,960
12,800
18,200
17,470
7,970
30,290
46,670
40,420
26,840
8,750
23,610
3,080
7,550
12,120
8,260
49,570
6,260
106,490
45,910
3,920
52,200
13,560
14,130
66,250
6,340
21,490
2,980
27,610
117,950
10,770
3,310
41,100
27,120
6,840
23,700
2,600
1,431,560
6.72%
7.22%
7.04%
6.94%
7.01%
7.17%
6.86%
6.95%
7.74%
7.12%
6.87%
7.19%
7.26%
6.91%
7.00%
6.91%
6.90%
6.69%
7.10%
7.30%
7.42%
7.05%
6.95%
7.56%
6.48%
7.05%
6.80%
6.74%
7.00%
6.97%
6.78%
7.53%
6.97%
7.07%
6.86%
7.04%
7.04%
6.89%
7.08%
6.77%
6.87%
6.77%
6.77%
6.93%
7.02%
7.31%
7.26%
7.31%
6.96%
6.87%
7.11%
7.02%
Note: Scaled to the 2012 US economy. Estimates are based on fully phased-in agreements.
Source: EY analysis using the 2012 IMPLAN model of the US economy; Centre for Economic Policy Research, “Reducing Transatlantic Barriers to Trade and Investment: An Economic Assessment,” (2013); Peter A. Petri, Michael G. Plummer and Fan Zhai, “The Trans-Pacific Partnership and Asia-Pacific Integration: A Quantitative Assessment,” (2011).
Limitations and caveats
T
he estimates of the employment contributions of TTIP and TPP are based on
standard methodologies and publicly available information. However, the reader should be aware of certain limitations with respect to the analysis:
>
The direct employment impacts of TTIP are based on the assumption that the
agreement would reduce the non-tariff barriers between the United States and
the European Union by 25 percent. The actual impacts of TTIP could differ
depending on the extent of barrier reduction actually achieved, as well as other
provisions included in a final agreement.
>
The overall contributions of TTIP and TPP on FDI from the Centre for Economic
Policy Research (CEPR) and Peterson Institute for International Economics
(PIIE) studies, respectively, were applied to individual U.S. industries. Depending on the existing level of trade and investment barriers in the United States
and the proposed contents of the trade agreements to reduce these barriers,
the extent to which FDI is affected across industries could vary.
>
Estimates are based on static production relationships that do not incorporate
potential changes in the composition of intermediate inputs, the use of labor
and capital, or other production characteristics.
summary
C
onclusion of the comprehensive TTIP and TPP agreements will further increase the attractiveness of the United States as an investment destination
by improving the investment climate and reducing market access barriers. Thus,
these agreements will lead to more jobs and higher income for U.S. workers and
increased economic output.
Once they are fully implemented, TTIP and TPP are estimated to result in a longrun increase of $173 billion in U.S. inbound investment. Inbound companies are
estimated to increase their direct employment of U.S. workers by 400,000 in response to TTIP and TPP. An additional 1,030,000 workers would be employed by
suppliers to inbound companies and businesses that expand in response to the
increased spending of workers at both the inbound companies and their suppliers.
These employment benefits would be felt by every state, ranging from more than
2,500 jobs to more than 160,000 jobs due to increased investment generated by
TTIP and TPP. In total, the direct, indirect and induced employment contributions
are estimated to increase the long-run employment contribution of inbound companies by 1,431,500. These estimates are scaled to the 2012 U.S. economy and
reflect the long-run contributions of fully phased-in agreements.
12
Organization for International Investment | ofii.org
Appendix A. Technical description of the data and modeling approach
T
he estimated employment contributions of TTIP
and TPP are based on the FDI impacts of TTIP and
TPP, the Bureau of Economic Analysis (BEA) data on
U.S. subsidiaries of foreign companies, and the IMPLAN model.
For TTIP, the estimated change in employment of
inbound companies is based on the Centre for Economic Policy Research (CEPR) March 2013 study.9
The study uses a regression analysis to estimate the
responsiveness of host country employment of EU
multinationals with respect to a change in a non-tariff
barriers (NTB) index. The index was developed from
a survey of multinational firms conducted on behalf of
the European Commission. If TTIP were able to reduce the non-tariff barriers between the United States
and European Union by 25 percent, the CEPR study
shows that there would be an approximately 9.44 percent increase in employment of U.S. workers by EU
companies. Based on the BEA 2012 survey data on
U.S. subsidiaries of foreign multinationals, the latest
available, EU companies account for approximately 56
percent of total U.S. employment by foreign multinationals. Therefore, it is estimated that TTIP would lead
to a 5.3 percent increase in total U.S. employment by
inbound companies.
For TPP, the report used estimated impacts of TPP on
the stock of U.S. inward FDI from the Peterson Institute
for International Economics (PIIE) study, which used a
general equilibrium modeling approach.10 The results
suggest that a fully phased-in TPP agreement would
increase the total stock of U.S. inward FDI by approximately one percent. The study assumes that the
change in employment is proportional to the change in
investment. As a result, it is estimated that TPP would
lead to an approximately one percent increase in total
U.S. employment by inbound companies.
The estimated changes in employment by inbound
companies derived from the CEPR and PIIE studies
constitute the direct impacts of TTIP and TPP on the
U.S/ economy presented by this report. In addition,
the employment impacts include activity related to U.S.
suppliers to the affected inbound companies (direct
impacts) and spending by employees of the inbound
Unleash global investment in America
companies and their suppliers (indirect contributions).
The total employment contributions of TTIP and TPP
are measured as the sum of direct, indirect, and induced employment contributions described below.
Direct impacts of inbound companies
The direct employment impacts reflect the change in
total number of full- and part-time employees that are
directly employed by inbound companies. The trade
agreements are expected to reduce trade and investment barriers faced by inbound companies in the United States and increase the amount of FDI that flows
into the U.S. economy. As a result, the new investment
from inbound companies into the U.S. economy can be
expected to create more jobs in these companies.
Indirect contributions related to suppliers
The indirect employment contributions of the trade
agreements are the U.S. supplier-related economic activities that result from purchases of goods and
services by inbound companies included in the direct
employment impacts. Purchases by inbound companies from U.S. businesses providing goods and services support employment in these businesses. In
turn, these suppliers purchase operating inputs, which
supports additional rounds of indirect employment contributions.
Induced contributions related to consumer spending
The induced employment contributions reflect the impacts from employee spending. Employees of companies directly and indirectly affected by the trade
agreements would use a portion of their incomes to
purchase goods and services from U.S. businesses.
These transactions would help support employment at
businesses such as retailers, restaurants, and service
companies.
The IMPLAN model describes payments made from
companies in one industry to other industries and employees. As these payments flow through the U.S.
economy or leave the U.S. economy when a good or
service is purchased from abroad, they have “multiplier” effects on the U.S. economy. The IMPLAN model
calculates the “multiplier” effect that captures the addi-
13
tional dollars of total economic activity that result from
subsequent rounds of re-spending for each dollar of
direct economic activity.
The baseline IMPLAN model is a model of the U.S. national economy. Inbound companies differ from U.S.based companies in a variety of ways. To account for
the differences between inbound companies and other companies in the United States, the analysis made
several adjustments to the baseline IMPLAN model.
Value added per worker and compensation per worker
Inbound companies, on average, are more productive
and pay higher compensation to workers. The BEA
2012 survey data suggest that the average value added per worker and compensation per worker of majority-owned U.S. subsidiaries of foreign headquartered
multinationals are higher than those in the baseline IMPLAN model.11 Value added per worker and compensation per worker were adjusted to be consistent with
the values reported in the BEA data.12
Intermediate inputs purchased within the United States
The extent to which intermediate inputs are purchased
locally affects the indirect contributions of U.S. suppliers of inbound companies, which may further affect the
induced contributions resulting from changes in spending of the employees of the suppliers. The regional
supply chain impacts may be different for inbound
companies and other companies in the United States.
The baseline IMPLAN model assumes that 81 percent
of intermediate inputs are purchased from suppliers
within the United States for the manufacturing industry,
while the BEA data suggest that inbound companies in
the manufacturing industry sourced 79 percent of their
intermediate inputs from U.S. suppliers.13 Therefore,
regionally purchased inputs as a share of total inputs in
the baseline IMPLAN model was reduced by approximately two percentage points for the manufacturing
industry. The regional supply chain relationship for all
other industries is assumed to be the same for inbound
FACT:
14
90% of America’s FDI
comes from TTIP and TPP
based companies
companies and other companies in the United States.
Intermediate inputs purchased
from other inbound companies
An inbound company may purchase inputs from another inbound company. If the indirect contributions
of suppliers, which are also inbound companies, have
already been included in the estimated impacts of TTIP
or TPP from the CEPR and PIIE studies, it should be
excluded from the IMPLAN model. The CEPR study
estimates the impacts of TTIP on aggregate host country employment and is likely to include the indirect contributions of inbound companies. The PIIE study is
based on a general equilibrium model that estimates
a “net” effect on FDI stock and therefore likely does
not include the indirect contributions of inbound companies.
The direct, indirect, and induced employment contributions of TTIP and TPP were distributed across the 50
states according to the following steps:
Direct impacts
Direct employment impacts were distributed by applying each state’s share of U.S. employment by inbound
companies in each industry.
Indirect contributions
Indirect employment contributions were distributed by
applying each state’s share of total U.S. employment
across each industry. Industry-level indirect employment contributions for each state were then aggregated to show total state-by-state employment.
Induced contributions
Induced contributions result from the increased consumer spending of direct and indirect employees.
States’ shares of direct and indirect employee compensation contributions were used to determine their
shares of the total induced employment contributions.
20% from TPP Countries
70% from TTiP Countries
Organization for International Investment | ofii.org
Appendix B. Detailed industry and state estimated impact tables
T
he following tables provide a detailed industry breakdown of the economic impacts of TTIP and TPP. Some
sectors shown in Figure ES-1, Figure 1, and Figure 2 are a combination of several industries listed below in
Table B1 and Table B2:
>
>
>
>
The professional and business services industry includes professional, scientific, and technical services;
management of companies and enterprises; and administrative, support, and waste management services.
The leisure and hospitality industry includes arts, entertainment, and recreation; and accommodation and
food services.
The education and health services industry includes educational services; and health care and social assistance.
The other industries category includes agriculture, forestry, fishing, and hunting; construction; mining, quarrying, and oil and gas extraction; utilities; real estate and rental and leasing; other services (except public
administration); and public administration.
Table B1. Estimated long-run contributions of TTIP, by industry
Billions of US dollars; number of full- and part-time employees (thousands)
on FDI
Industry Impacts
stock
Direct
impacts
Indirect
contributions
Induced
contributions
Total
contributions
Agriculture, forestry, fishing and hunting
$0.2
0.5
28.5
6.5
36.0
Mining, quarrying, and oil and gas extraction
$0.8
2.5
13.5
2.5
18.5
Utilities
$1.0
3.5
2.5
2.0
7.5
Construction
$1.1
3.5
9.5
4.0
17.0
Manufacturing
$52.8
112.0
59.0
23.5
194.5
Wholesale trade
$12.4
20.0
23.0
15.5
59.0
Retail trade
$2.9
38.5
5.0
76.0
119.5
Transportation and warehousing
$9.5
30.5
23.0
13.5
66.5
Information
$16.9
27.5
10.0
8.0
46.0
Finance and insurance
$26.3
15.0
24.5
34.5
74.0
Real estate and rental and leasing
$2.4
2.0
10.0
29.0
40.5
Professional, scientific, and technical Services
$7.3
17.0
52.5
24.0
93.5
Management of companies and enterprises
$0.1
0.5
18.0
4.0
22.5
Administrative, support, and waste mgmt. services
$6.0
19.0
48.5
28.0
95.5
Educational services
$0.2
0.5
0.5
18.0
19.5
Health care and social assistance
$2.5
8.0
-
89.0
97.0
Arts, entertainment, and recreation
$0.2
0.5
6.0
16.0
22.5
Accommodation and food services
$9.4
30.0
14.5
54.0
98.0
Other services (except public administration)
$0.6
2.0
23.5
27.5
53.0
Public administration
$0.0
0.0
9.5
9.5
19.0
Total
$153
333
380
484
1,200
Note: “-“ Less than 250. Scaled to the 2012 US economy. Estimates are based on fully phased-in agreements. Figures may not appear to
sum due to rounding.
Source: EY analysis using the 2012 IMPLAN model of the US economy; Centre for Economic Policy Research, “Reducing Transatlantic
Barriers to Trade and Investment: An Economic Assessment,” (2013); Peter A. Petri, Michael G. Plummer and Fan Zhai, “The Trans-Pacific
Partnership and Asia-Pacific Integration: A Quantitative Assessment,” (2011).
Unleash global investment in America
15
Table B2. Estimated long-run contributions of TPP, by industry
Billions of US dollars; number of full- and part-time employees (thousands)
Impacts on
FDI stock
Direct
impacts
Indirect
contributions
Induced
contributions
Total
contributions
Agriculture, forestry, fishing and hunting
$0.1
-
6.0
1.0
7
Mining, quarrying, and oil and gas extraction
$0.2
0.5
3.0
0.5
4
Utilities
$0.2
0.5
0.5
0.5
1.5
Construction
$0.4
1.0
2.0
0.5
3.5
Manufacturing
$7.9
35.5
12.0
4.5
52
Wholesale trade
$1.5
4.0
4.5
3.0
11.5
Retail trade
$0.3
3.5
1.0
14.0
18.5
Transportation and warehousing
$0.4
1.0
4.5
2.5
8
Information
$0.5
4.0
2.0
1.5
7.5
Finance and insurance
$3.1
3.0
5.0
6.5
14.5
Real estate and rental and leasing
$0.2
0.5
2.0
5.5
8
Professional, scientific, and technical Services
$0.5
4.5
10.0
4.5
19
Management of companies and enterprises
$0.1
-
3.5
1.0
4.5
Administrative, support, and waste mgmt. services
$1.5
3.5
9.0
5.0
17.5
Educational services
$0.1
-
-
3.5
3.5
Health care and social assistance
$0.4
1.0
0.5
17.0
18.5
Arts, entertainment, and recreation
$0.1
-
1.0
3.0
4
Accommodation and food services
$2.4
5.5
2.5
10.0
18
Other services (except public administration)
$0.1
0.5
4.5
5.0
10
Public administration
$0.0
0.0
2.0
2.0
4
Total
$20
69
76
91
235
Industry
Note: “-“ Less than 250. Scaled to the 2012 US economy. Estimates are based on fully phased-in agreements. Figures may not appear to
sum due to rounding.
Source: EY analysis using the 2012 IMPLAN model of the US economy; Centre for Economic Policy Research, “Reducing Transatlantic
Barriers to Trade and Investment: An Economic Assessment,” (2013); Peter A. Petri, Michael G. Plummer and Fan Zhai, “The Trans-Pacific
Partnership and Asia-Pacific Integration: A Quantitative Assessment,” (2011).
16
Organization for International Investment | ofii.org
Table B3. Estimated long-run contributions of TTIP, by state
Billions of US dollars; number of full- and part-time employees (thousands)
State
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Total
Impacts on FDI stock
Direct impacts
$2.3
$0.3
$2.0
$1.0
$16.7
$2.4
$2.7
$0.8
$0.6
$6.7
$5.0
$0.8
$0.3
$7.5
$3.8
$1.7
$1.6
$2.4
$1.3
$0.8
$2.3
$5.4
$4.8
$3.1
$0.8
$2.3
$0.2
$0.7
$1.1
$0.9
$6.8
$0.6
$13.6
$4.4
$0.4
$5.5
$1.2
$1.2
$6.8
$0.9
$2.7
$0.3
$3.1
$12.3
$0.9
$0.3
$3.3
$2.7
$0.6
$2.4
$0.2
$152.5
4,650
870
4,950
2,290
35,400
4,990
5,780
1,520
1,560
14,870
11,150
2,020
840
15,570
8,580
2,890
3,270
5,140
3,450
2,040
6,740
11,560
10,450
6,190
1,820
5,140
410
1,470
2,380
2,240
12,740
1,270
24,100
11,890
860
12,810
2,770
2,660
16,190
1,590
6,460
530
6,940
27,320
2,080
750
9,490
5,960
1,680
4,820
540
333,680
Indirect contributions Induced contributions
5,240
830
6,800
3,240
45,060
6,870
4,910
1,100
1,580
21,380
11,490
1,520
1,760
16,650
8,200
4,160
3,780
4,870
5,290
1,630
7,030
9,620
11,740
7,680
2,980
7,310
1,180
2,540
3,130
1,780
10,980
1,980
24,440
11,210
1,070
14,670
4,340
4,730
16,160
1,290
5,050
1,100
7,850
32,080
3,570
890
9,980
8,030
1,750
7,830
700
381,050
4,750
1,390
8,650
2,650
55,730
7,670
8,600
1,880
2,980
27,960
14,000
3,540
1,380
21,610
8,140
3,730
3,570
5,040
5,890
3,100
11,850
18,230
11,200
8,610
2,500
7,180
990
2,250
4,700
2,910
17,870
1,990
41,330
15,320
1,340
15,890
4,180
4,430
23,130
2,500
6,320
850
8,170
39,210
3,360
1,170
15,170
8,710
2,280
7,100
940
483,940
Total contributions
14,640
3,090
20,400
8,180
136,190
19,530
19,290
4,500
6,120
64,210
36,640
7,080
3,980
53,830
24,920
10,780
10,620
15,050
14,630
6,770
25,620
39,410
33,390
22,480
7,300
19,630
2,580
6,260
10,210
6,930
41,590
5,240
89,870
38,420
3,270
43,370
11,290
11,820
55,480
5,380
17,830
2,480
22,960
98,610
9,010
2,810
34,640
22,700
5,710
19,750
2,180
1,198,670
Note: Scaled to the 2012 US economy. Estimates are based on fully phased-in agreements. Figures may not appear to sum due to rounding.
Source: EY analysis using the 2012 IMPLAN model of the US economy; Centre for Economic Policy Research, “Reducing Transatlantic Barriers to Trade and Investment: An
Economic Assessment,” (2013); Peter A. Petri, Michael G. Plummer and Fan Zhai, “The Trans-Pacific Partnership and Asia-Pacific Integration: A Quantitative Assessment,”
(2011).
Table B4. Estimated long-run contributions of TPP, by state
Billions of US dollars; number of full- and part-time employees (thousands)
State
Impacts on FDI stock
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming
Total
$0.3
*
$0.3
$0.1
$2.1
$0.3
$0.4
$0.1
$0.1
$0.9
$0.7
$0.1
*
$1.0
$0.5
$0.2
$0.2
$0.3
$0.2
$0.1
$0.3
$0.7
$0.7
$0.3
$0.1
$0.3
*
$0.1
$0.2
$0.1
$0.8
$0.1
$1.6
$0.6
$0.1
$0.8
$0.2
$0.2
$0.9
$0.1
$0.4
*
$0.4
$1.7
$0.1
*
$0.4
$0.3
$0.1
$0.3
*
$20.0
Direct impacts Indirect contributions Induced contributions Total contributions
1,160
170
900
590
6,850
1,000
1,090
320
250
2,640
2,340
290
170
3,260
2,110
650
760
1,240
690
330
1,130
2,060
2,590
1,210
390
1,170
80
350
420
450
2,530
250
4,190
2,480
190
2,950
620
530
3,310
260
1,510
120
1,570
5,710
420
120
1,720
1,190
360
1,060
100
67,850
1,030
160
1,330
640
8,800
1,340
960
220
310
4,180
2,250
300
340
3,260
1,610
820
740
960
1,040
320
1,370
1,880
2,300
1,510
580
1,430
230
500
610
350
2,150
390
4,770
2,200
210
2,880
850
930
3,170
250
990
220
1,540
6,280
700
170
1,950
1,570
340
1,540
140
74,610
900
260
1,620
520
10,480
1,450
1,570
350
550
5,220
2,600
630
260
4,050
1,540
710
680
950
1,110
550
2,170
3,320
2,140
1,640
480
1,380
190
440
880
530
3,300
380
7,660
2,810
250
3,000
800
850
4,290
450
1,160
160
1,540
7,350
640
210
2,790
1,660
430
1,350
180
90,430
3,090
590
3,850
1,750
26,130
3,790
3,620
890
1,110
12,040
7,190
1,220
770
10,570
5,260
2,180
2,180
3,150
2,840
1,200
4,670
7,260
7,030
4,360
1,450
3,980
500
1,290
1,910
1,330
7,980
1,020
16,620
7,490
650
8,830
2,270
2,310
10,770
960
3,660
500
4,650
19,340
1,760
500
6,460
4,420
1,130
3,950
420
232,890
Note: “*” Less than $50 million. “-“ Less than 250. Scaled to the 2012 US economy. Estimates are based on fully phased-in agreements. Figures may not appear to sum due
to rounding. Source: EY analysis using the 2012 IMPLAN model of the US economy; Centre for Economic Policy Research, “Reducing Transatlantic Barriers to Trade and
Investment: An Economic Assessment,” (2013); Peter A. Petri, Michael G. Plummer and Fan Zhai, “The Trans-Pacific Partnership and Asia-Pacific Integration: A Quantitative
Assessment,” (2011).
Endnotes
1. Foreign direct investment (FDI) in the United States is defined as the ownership by a foreign investor of 10
percent or more of a U.S. business. The term FDI is commonly used to refer to both flows and stocks. FDI stocks
are also referred to as FDI positions. More information on the definitions of terms and concepts related to FDI
can be found in the OECD’s “Glossary of Foreign Direct Investment Terms and Definitions,” http://www.oecd.org/
daf/inv/investment-policy/2487495.pdf.
2. UNCTAD, “Global Investment Trends Monitor,” (January 2015).
3. Based on the 2012 Bureau of Economic Analysis survey data on foreign direct investment in the United
States; the latest available government data.
4. The 28 current European Union members: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta,
Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom.
5. Based on the 2012 Bureau of Economic Analysis survey data on foreign direct investment in the United States.
6. Ibid.
7. Ibid.
8. A detailed discussion of the data and methodology to derive the economic contributions of TTIP and TPP is
provided in Appendix A.
9. Centre for Economic Policy Research, “Reducing Transatlantic Barriers to Trade and Investment: An Economic Assessment,” March 2013, Table 43.
10. Peter A. Petri, Michael G. Plummer and Fan Zhai, “The Trans-Pacific Partnership and Asia-Pacific Integration: A Quantitative Assessment,” (2011).
11. Based on the 2012 BEA survey data, the average value added per worker and compensation per worker
were $134,088 and $78,927 for majority-owned U.S. subsidiaries of foreign multinationals.
12. Separate adjustments were made for TTIP and TPP based on values for U.S. subsidiaries of multinationals
from member countries of the two trade agreements.
13. Based on the 2012 BEA survey data, U.S. majority-owned subsidiaries in the manufacturing industry had
total sales of $1,569 million and value added of $353 million, which implies $1,216 million of total intermediate
inputs. These subsidiaries also imported $256 million in goods for further manufacture.
Unleash global investment in America
19
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