The CEOs of Germany’s top auto companies said Wednesday that they could save roughly 5 billion euros in annual costs if the European and U.S. governments can agree on a landmark free trade deal.
Speaking at a press conference in Berlin that was also attended by Audi CEO Rupert Stadler, BMW Group chief Norbert Reithofer and Daimler boss Dieter Zetsche among other executives, said the so-called Transatlantic Trade and Investment Partnership (TTIP) offered the unique opportunity to harmonize technical standards and regulations, freeing up resources to invest elsewhere in new jobs and new technologies.
“We waste money, for example, because we need different mirrors, blinkers or rear lights depending on whether a car is sold in the U.S. or Europe, or because we need to meet different safety standards, for example, with crash tests,” Zetsche said. “As far as the demands go, Europe and the U.S. are in agreement, since we have the most stringent requirements in the world. Only in the details of their implementation do we differ. And these details force us to develop twice, procure twice and certify twice.”
The eighth round of negotiations between the EU and the U.S. over what is touted as the biggest free trade accord in history could unite two markets that together represent about half of the world’s annual economic output in goods and services.
The deal, which is under fire by globalization foes and consumer rights groups for reasons largely unrelated to the auto industry, is of fundamental importance to German carmakers. Issues like U.S. genetically modified food and hormone-treated meats entering the EU threaten the talks.
Public health concerns
Only recently EU Health and Food Safety Commissioner Vytenis Andriukaitis said he didn’t see the TTIP deal winning a majority vote from member states as a result of the public health concerns.
Zetsche said that auto industry executives are fully committed to the deal.
“We can’t even imagine that the talks could collapse since it would be so irrational and we would wreak so much damage on ourselves that it would actually not be conceivable to the reasonable person,” the CEO said
Matthias Wissmann, head of German auto lobbyist the VDA, was asked whether he and the auto company bosses decided to show solidarity for TTIP ahead of next week’s talks because they feared that Andriukaitis may be right about there being a serious threat to the deal “Today we did want to make an exclamation point, since we have naturally noticed that sentiment is being rallied against TTIP,” Wissmann said.
Through 11 months of 2014 the U.S. was the second-largest global export marker for German-built cars with 580,000 units. The UK was No. 1 with 773,000 units while China ranked third with 254,000 units as most German automakers build locally to circumnavigate high import tariffs.
Most important market
Moreover, when measured by value, the U.S. remains the most important export market for German carmakers, worth more than 20 billlion euros for 2014, according to official estimates from the German statistics office.
As a result Germany will likely enjoy a trade surplus forecast at 16.1 billion euros alone for car manufacturers. Suppliers will likely add a further 5.7 billion to that figure.
Carmakers hope 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 truck for the U.S.
Should TTIP be ratified by all EU member states, an outcome that is currently uncertain, they hope that in an initial step regulatory agencies would first recognize each other’s standards before then in a second stage harmonizing them.
The deal also would help eliminated import duties, which in the U.S. range from 2.5 percent at the lowest end to as much as 25 percent for transporters and heavy duty trucks. In total, German automakers spend 590 million euros annually for tariffs into the U.S. Furthermore they shoulder 330 million euros more for cars like the BMW X5 that are built in the U.S. and exported to the European Union, where the cars are slapped with an import duty of 10 percent.
The automakers also made a plea to preserve measures that would govern investment protection, which are highly controversial.
Germany's powerful trade union IG Metall has said it strongly opposes the so-called investor-to-state dispute settlement (ISDS) mechanism, which allows corporations to sue governments for loss of revenue if they choose to ban a product.
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 United States, which wants strong investor protection.
“The billions of euros in direct investments in many countries require protection,” Arndt Kirchhoff of development service provider Kirchhoff Holding said, speaking on behalf of the hundreds of German suppliers that shy away from a jump across the Atlantic due to the current high costs.
He argued the EU had a one-time opportunity to set a “gold standard” for investment protection that could serve as a blueprint for many other trade deals.
Reuters contributed to this report