There is a lot of hype about the prospects of an EU-US free trade agreement, especially in the wake of Barack Obama’s State of the Union address last week. Supporters point to the benefits such an agreement could bring to both economies. Yet the costs are likely to outweigh the benefits. Most importantly, a transatlantic deal will undermine multilateralism, in particular the long-overdue completion of the Doha round, and weaken multilateral institutions such as the World Trade Organisation.

An FTA will of course bring some benefits to the EU and the US via enhanced trade. The removal of trade barriers might raise the gross domestic product of the EU by €190bn and of the US by €100bn, according to estimates by the German Marshall Fund.

While these figures are not negligible, they constitute rather modest gains – boosts of only 1.5 per cent and 0.9 per cent of GDP to the EU and US respectively. The largest potential benefit from an EU-US free trade deal would be enhanced competition among companies that become part of a much larger common market. Yet that is difficult to quantify.