One of the most debated free trade agreements to be concluded the coming years is the Transatlantic Trade and Investment Partnership (TTIP), which is the major trade deal between EU and US. The main objective of both Washington and Brussels is to eliminate and/or reduce tariff and non-tariff barriers to trade between both economies. It is expected that the deal will be a serious boost for trade. Especially the automotive industry has high hopes for this deal.
In order to facilitate mutual market access for car manufacturers and dealers, the negotiators intend to gradually decrease the import duties for vehicles – e.g. phasing out custom duties for cars from 10% (EU tariff) or 2,5% (US tariff) to 0% – which has an immediate cost-lowering effect for the business. This would certainly increase trade between EU and US car manufacturers and dealers and might even encourage smaller businesses to export vehicles and parts to EU or US.
Furthermore the deal intends to align EU and US technical standards for car production such as safety and environmental standards. This would have a cost- and time-saving effect, as exporters do not have to meet technical requirements that differ from home-ground requirements and there would thus not be a need to redesign or redevelop cars and trucks for exporting purposes.
Moreover, as the combined EU-US automotive sector represents approximately one third of the worldwide auto production and sales, mutual EU-US standards implemented by virtue of TTIP would strengthen the EU and US as worldwide auto standard setters.
Washington and Brussels will probably be facing the criticism that regulatory convergence will take the lowest common standard as the general rule in terms of safety and environment.
Apart from that, only plain statistics will show whether TTIP will ultimately constitute an export engine for the automotive sector. For instance, the free trade agreement between the EU and South-Korea, is for many sectors not the success that everyone has hoped for apart from the automotive industry. With respect to the latter it has been so far a success for the export of motor vehicles and car parts growing with double (or even triple) digit percentages in 4 years’ time (see annual report EU South-Korea FTA).
Although market-conditions of South Korea are different, TTIP certainly has in our view similar potential to boost the automotive industry in both jurisdictions.