Daimler CEO Dieter Zetsche, Volkswagen boss Martin Winterkorn and other captains of Germany’s automotive industry will gather in Berlin Wednesday to try to rally support for a transatlantic free trade deal that faces potential collapse.
Politicians on both sides of the Atlantic are pushing for an accord known as the Transatlantic Trade and Investment Partnership (TTIP) to eliminate all major trade and non-tariff barriers between the U.S. and European Union.
Auto bosses have endorsed the deal but Germany's powerful labor leaders are skeptical.
"We will not accept a softening of standards for environmental and consumer protection or a hollowing out of worker rights and the right to co-determination," trade union Detlef Wetzel of IG Metall said in a joint press release also signed by the German union representatives of Daimler, BMW, Ford, Opel and Volkswagen's divisions VW, Porsche and Audi.
The pact faces its biggest opposition from non-automotive interests including a variety of advocacy groups and globalization opponents fighting everything from vested corporate interests to genetically modified foods.
Since July 2013, the U.S. and EU have been negotiating the conclusion of the TTIP that could help liberalize market forces, spur growth and alleviate the economic crisis in Europe. The eighth round of discussions begins next Monday in Brussels.
Massive potential savings
If signed it could be the biggest bilateral free trade agreement in history, uniting economic blocks that combined account for about half of the world’s output of goods and services.
For the auto industry that means a market comprising almost 40 percent of all new car sales and a third of global car production. At stake are savings amounting to a collective 1 billion euros in trade duties -- and that is just for the German carmakers.
The European Commission estimates that a deal could bring economic gains of about 119 billion euros for the EU and a further $131 billion for the U.S. by 2027.
This translates to about 545 euros on average in disposable income gains each year for a family of four living in the EU and $910 for their counterparts in the U.S.
At about 80 percent, the lion’s share of these gains would stem from eliminating duplication costs that result from maintaining two sets of regulations and bureaucracies.
In a 2009 economic study conducted by Holland-based consultancy Ecorys for the Commission, researchers estimated aligning non-trade barriers in the automotive industry alone, such as safety and environmental standards, could increase total EU gross domestic product by 12 billion euros a year.
Nevertheless, trade discussions have met with fierce opposition.
Unions fear power loss
German unions say that while fewer tariffs and the establishment of common technical standards are beneficial, any trade deal should ensure that the right of labor representatives to vote on significant strategy goals should also be possible in the U.S., the statement said.
In Germany, labor representatives at large corporations get half the seats on the board of directors, giving the so-called works council a powerful voice in determining company strategy. In the case of Volkswagen, they can always veto any management plans to close a factory.
Volkswagen’s and Daimler's labor representatives have in the past flexed their muscles to force management to water down cost-cutting measures and even blocked the contract extensions of chief executives.
Advocates of the TTIP, including Daimler’s Zetsche and German Chancellor Angela Merkel, say the accord would bring big economic returns to Europe's weak economy by removing barriers to do business.
IG Metall, however, said key clauses of the TTIP are unacceptable to them -- in particular, the so-called investor-to-state dispute settlement (ISDS) mechanism, which allows corporations to sue governments for loss of revenue resulting from policy decisions.
The European Commission, which handles trade policy for the EU's 28 countries, has frozen negotiations with Washington on the ISDS issue and needs to restart them to win a deal with the U.S., which wants strong investor protection.
The European Parliament, which must ratify an agreement, says it cannot accept an EU-U.S. trade agreement that contains such provisions.
Consumer advocacy groups in the EU further claim TTIP is a trojan horse that could open the floodgates to a whole host of corporate lawsuits from the litigation-friendly U.S. companies, and potentially force legislators into submission when drafting future policy. Major U.S. multinationals already suffer from a poor image in Europe due to past scandals, such as the complicated tax avoidance schemes employed by Starbucks, Google, Amazon and Apple.
Additionally, Europeans fear it could deregulate important sectors of the economy and harmonize safety or product standards downward, damaging public health and the environment as a consequence.
Carmakers hope exactly this kind of regulatory convergence of non-tariff barriers could avoid the costly need to develop car components twice. Crash tests in the U.S. for example do not require front seat belts, whereas in Europe they do – part of the reason why Volkswagen never bothered trying to homologate its Amarok pickup for the U.S. market.
Engineers at General Motors European unit Opel even went so far as to show all the parts of an Opel Adam that would have to be modified were the car ever to be sold in the U.S. including even mundane elements such as windshield wipers.
Wednesday’s meeting of the auto industry heavyweights in Berlin to field reporters’ questions is unusual and was put together quickly with invitations sent on Monday, suggesting German car executives are concerned over the status of talks.
The latest signs have pointed to trouble on the horizon. Only days ago, headlines in Germany declared that Vytenis Andriukaitis, the EU’s health and food safety commissioner, considered a collapse of TTIP for conceivable.
“All member states must ratify it,” he told German daily newspaper Tagesspiegel. “At the moment, I don’t see any certain majorities for it.”
Reuters contributed to this report