Economic Policy and Infrastructure

Trade

Access to foreign markets is essential for companies in the automotive industry. Apart from the US market, growth mostly took place in the markets outside the triad countries in Eastern Europe, Asia, Latin America and other threshold countries with rising levels of motorization.

Trade and investment

The German automotive industry and its employees are dependent on international trade. Passenger cars produced in Germany are exported at a rate of over 77 percent. In order to secure and reinforce Germany and Europe as production locations, the EU should make efforts to pursue global free trade and eliminate trade barriers. 

When globalization and free trade are designed fairly, all participants can expect to gain prosperity. Impermissible price dumping as well as protectionist measures should therefore be tracked and eliminated by supranational organizations such as the World Trade Organization (WTO). As the guardian of free trade, the WTO has an important function, in that it monitors compliance with the rules and resolves trade conflicts with mediation procedures. 

Even though the Doha round has not yet obtained the desired results, it has provided important revitalization and will be developed further. This is because multilateral elimination of trade barriers would still be the ideal solution. As long as this is not possible, bilateral agreements will take center stage. In recent years, numerous agreements have been signed, and more are in negotiations. They also need to follow the rules of the WTO and meet minimum requirements for the scope of liberalization.

Protectionism

Many countries have difficulties eliminating trade barriers and attempt to protect their domestic economies by penalizing foreign providers. The automotive industry is especially hard hit by this around the world. Countries use high tariffs, for example, to force investment in local production. Often there are also non-tariff barriers to trade. These often take the form of technical regulations that importers can fulfill only with difficulty, if at all. Another instrument for protectionism is minimum requirements for local value added (local content). 

The WTO counted exactly 2,127 trade-limiting measures in place in G20 countries in the middle of 2016. Compared with the previous year, 154 new limitations were added. Although individual regulations were lifted, the number of protectionist measures in G20 countries rose by 11 percent. But protectionism cannot really succeed over the long term, because inefficient economic structures typically need to be set up or defended. 

Countries such as Mexico demonstrate that open markets and free trade, as opposed to protectionism, are the better basis for building a strong automotive industry. Eastern Europe, by joining the EU and opening its markets, has also shown that this creates jobs. Other countries, in contrast, use forcible measures. South America, in particular, as well as Russia, were noticed regarding that in the past. India, too, imposes import duties of as much as 100 percent.

Angela Mans Head of Foreign Trade and International Relations

Tel: +49 30 897842-352  
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