Auto trade talks will target tariffs, unified rules
Obama plan wins wide support in Europe, U.S.
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WASHINGTON -- Automakers on both sides of the Atlantic are enthusiastically backing trade talks between the United States and Europe that President Barack Obama announced during his State of the Union address.
But a host of obstacles stand in the way of a trade deal: parochial auto safety standards, steep tariffs on light trucks and a thicket of unrelated political disputes in other industries such as agriculture.
"We are absolutely convinced that it will lower costs and it will make the business case for investment in the U.S. and Europe even stronger than it is right now," said Steve Biegun, vice president of international governmental affairs at Ford Motor Co.
Automakers are dissatisfied with current rules that force automakers to do engineering and testing work twice to satisfy regulators on both continents. These regulatory differences may cost automakers as much as a traditional tariff of 10 or 20 percent, Karel De Gucht, the European Union trade commissioner, recently told the BBC.
The chicken tax
Obama's speech "sent a clear message to the world" that trade is a top priority, Ivan Hodac, secretary general of the European industry trade group, said in a statement. "A comprehensive deal will deliver large benefits for producers and consumers," he added.
A group of top U.S. and European Union officials has recommended that negotiators aim for "full elimination of tariffs" through a trade deal, U.S. Trade Representative Ron Kirk told reporters during a Feb. 13 conference call.
That could spell the end of the "chicken tax," the 25 percent tariff on imported light-duty trucks and vans that the United States put in place in 1962 after Germany placed a tariff on chickens.
It initially was aimed at Volkswagen AG, which had become the first foreign automaker to grab a significant share of the American market.
Harmonized rules
The Detroit 3, which rely heavily on trucks for profits, may not wish to see the tariff eliminated quickly. They have "unique competitive interests," Biegun said, so they will not go into negotiations assuming all tariffs will disappear. But they agree eliminating tariffs should be a pillar of a deal, he said.
Aligning U.S. and European Union regulations may be more difficult. Even the United States and Canada have struggled to erase all differences between standards, said Matt Blunt, president of the American Automotive Policy Council.
For instance, in the United States, when a car undergoes crash testing, the test is repeated twice: once with the crash-test dummy wearing a seat belt and once without the belt. In Canada, the dummy always wears the belt.
Blunt's group and ACEA, the European industry trade group, put out a list of rules they would like aligned through trade talks. It includes 50 types of safety rules and 20 types of environmental rules.
"To achieve these goals, there must be overwhelming and sustainable political will at the highest levels," the document says. "Anything less and there is a significant risk that history will repeat itself and this harmonization effort will fail."
• Common standards for safety devices, lights and other auto equipment
• Lower tariffs; in the U.S. they are 2.5% for imported cars and 25% for light trucks. In the European Union they are 10% for cars and 11% to 25% for trucks.
• Collaboration on new rules. For instance, recent talks led the U.S. and Europe to adopt a common fast-charging plug for EVs.
You can reach Gabe Nelson at gnelson@crain.com.
