by Sabine Jost-Heil, Senior Manager, Trade and Industrial Policy, Daimler AG
The Transatlantic Trade and Investment Partnership, or TTIP, is of major relevance for the European automobile industry, and for Daimler. That’s because roughly 14% of all annual German exports of passenger cars – around 620, 000 vehicles – are exported to the US market, making the US the second most important export market for German manufacturers of automobiles. Taking Mercedes as an example, roughly 18% of all its passenger cars went to the US in 2015.
Despite this substantial trading relationship, Daimler and other automotive companies continue to face significant market access barriers that make trade with the US more difficult and more expensive. This includes tariffs. Despite the rather low tariff rates in comparison to other parts of the world – around 2.5% and 10% for passenger cars in the US and the EU respectively – these tariffs amount to €1 billion per year alone for the German automotive industry. EU commercial vans sold to the US, meanwhile, face a tariff of around 25% – ten times higher than a passenger car. This means that, to avoid these tariff payments, these vans are built in Germany, before being disassembled. The components are then put into different containers, shipped to the US, and assembled all over again there. Such expenses are wholly unnecessary and could otherwise be spent on additional research and development to improve our competitiveness and our products.
The same costs apply with non-tariff barriers to trade. According to a study by Ecorys, these market access barriers – mostly regulatory – between the EU and US are equivalent to a 26% tariff. Take the example of regulations on safety standards: both the EU and the US have the most stringent safety regulations in the world – with sometimes subtle differences. It is not possible to sell a European vehicle on the US market without accounting for slight modifications to things like the position of side mirrors, rear-view mirrors, and indicators. It means double research, double procurement, and double certification, without any additional benefit to the customer, the environment, or safety. The mutual recognition of crash tests and safety standards, for example, could lead to savings of up to 7% – depending on the level of mutual recognition.
A transatlantic free trade agreement could also provide real benefits to customers and employees. Higher competition could lead to increased consumer choice, while new innovations could also reach the market sooner. Meanwhile, lower tariffs and reduced regulatory costs could also lead to lower prices. Last but not least, employees in export-oriented sectors would benefit from a more competitive job market.
Now, TTIP has been the subject of a lot of attention from civil society across Europe. Criticism of the proposed deal must be taken seriously – any trade agreement has to be the result of a democratic process. But it should be stressed that the negotiations are ongoing, and it is still too early to assess whether the agreement has met EU commitments in sensitive areas such as public services, culture, or food standards. If and when the negotiations are concluded, the deal should then be assessed on its merits. What is important is that this debate is constructive and based on facts, not myths, and should acknowledge improvements made by the EU in areas such as transparency and accountability.
Our strong belief is that TTIP can greatly benefit the EU and the US, promoting jobs, growth and high standards between our two economies – as well as with the rest of the world. In a time of rapid globalization, and with strong growth in Asia and elsewhere, TTIP provides a unique opportunity for the EU to help shape this globalization and set standards for the rest of the world to follow. In areas such as e-mobility and autonomous driving, where technology is constantly evolving, and where the rules are being set, this is critical. By embracing TTIP, the EU and the US can shape the future – for the better.
Sabine Jost-Heil is Senior Manager, Trade and Industrial Policy, Daimler AG. Daimler AG is a member of AmCham EU.
AmCham EU Trade