Global trade agreements
The German automotive industry supports the worldwide dismantling of barriers to trade and investment. The objective is a so-called “level playing field” – namely equal conditions for all trade partners within the market. Free trade agreements are an important instrument here for the mutual opening up of markets. The EU has already concluded agreements with numerous countries; others are pending. In addition to TTIP, the priority for the German automotive industry is agreements with India, the ASEAN countries, Mercosur and Canada.
While the agreement with South Korea has improved market access for both sides, trade barriers are still to be encountered in South Korea, making access for European manufacturers and suppliers more difficult. The European commission has been negotiating on a free-trade agreement with Japan since 2013. The particular feature for the automotive industry is that Japan does not levy any import duties on vehicles and parts – meaning that they require no dismantling. Admittedly the share of the Japanese market accounted for by imports has been low for many years by international comparison; latterly it was 6 percent. One reason for this is non-tariff trade barriers. According to studies these have a cumulative customs equivalent of 50 percent. That is why it is important these barriers be dismantled. Japan has already responded and further opened its market. Other steps are still pending. The European Commission will continue to negotiate with Japan so that the agreement can be concluded.
Free trade agreement with South Korea, India and Canada
After the premature failure of a multilateral free trade policy, the EU has struck bilateral agreements and started new negotiations in recent years.
The free trade agreement with South Korea has been in force since 2011. In the negotiations, elimination of tariff barriers and some of the numerous non-tariff barriers to imports was agreed to. Since then, the market share of importers of passenger cars in South Korea has indeed risen to 16 percent, but this is still relatively low by international comparison. In addition, numerous market entry barriers for European suppliers and manufacturers are still in place. This includes a very difficult certification process for motor vehicle parts for the Korean market (“Korean marking”). The VDA thus supports the German government and the European Commission in their efforts to continue to eliminate the barriers still in place in South Korea.
The EU began negotiations with India in 2007 on a free trade agreement. The talks stalled, however, and negotiations were put on hold. An agreement would be desirable, especially from the viewpoint of the automotive industry, because India has enormous potential as a future production location and sales market. India has not yet been prepared to open its automobile market, however, and to significantly lower its high barriers with an agreement. India has nothing to fear from liberalization, however, especially in the automotive sector. Open markets could draw new investment and increase exports. After all, India already has a trade surplus with Germany in the automobile market.
Regardless of slow negotiations, the VDA and the Indian automotive industry associations ACMA and SIAM maintain a close partnership. As part of the German-Indian Automotive Industry Working Group since 2008, under the aegis of the Indian Industry Ministry and the German government, the current question of German-Indian cooperation is being addressed
A comprehensive economic and trade agreement (CETA) was negotiated with Canada, but is not to take effect before 2017. This agreement should eliminate tariffs on industrial goods. For European exporters, this means savings of around 470 million euros annually. Reformed investment protection was also successfully embedded in the agreement. A standing court and transparent processes with an appeals court are to be established.
Other important agreements from the viewpoint of the automotive industry are free trade agreements with ASEAN countries, Mercosur and Mexico. The EU is also currently negotiating an agreement with Japan. Additional concessions by Japan to remove non-tariff trade barriers are indispensible here. Negotiations with China about an investment agreement have been ongoing since 2013. The focus of interest there is on market access and protection of intellectual property.
TTIP - the big opportunity
For the German automotive industry, the planned transatlantic trade and investment partnership (TTIP) therefore offers a unique opportunity. Never before has a free trade agreement brought together a larger economic area than the United States and the European Union. The transatlantic economic zone represents 40 percent of the global automotive market and around 50 percent of total global economic performance. Meanwhile the USA and EU have only about 12 percent of the world’s population. Simply by removing tariffs from transatlantic trade, TTIP would save the German automotive industry more than one billion euros that could be invested sensibly. This has the power of an economic stimulus program. Companies, employees and consumers would all benefit similarly from the elimination of tariffs and increased regulatory cooperation.
Opportunities and risks with TTIP are the subject of controversial public discussion. But no one can really explain why vehicles in the EU and the USA need to have different turn signal indicators. In areas where the level of regulation is demonstrably similar, mutual recognition can only be advantageous. Regulatory cooperation in the automotive industry does not mean lowering safety standards. The rights of legislatures are also not limited. TTIP will also pave the way for additional cooperative measures within the United Nations, in order to create worldwide standards like those in the USA and EU.