Ford calls for mutual U.S.-Europe auto standards in trade deal
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GENEVA -- Ford Motor Co. wants trade tariffs between the United States and Europe removed and believes the two markets' regulators should accept each other's safety and environmental standards.
"It will allow us far more flexibility to produce in the best place," Wolfgang Schneider, Ford's European vice president for governmental affairs, told Automotive News Europe in an interview. "Do we need this when we sell 500,000 units of a particular model in a country? No. But you are talking about 20,000 or 30,000, yes, because it enables you to bring in niche products."
Duties on cars and commercial vehicles shipped between the United States and European Union countries and differing vehicle-quality and emissions rules add cost burdens and prevent development of uniform models for global markets, Schneider said.
The benefits of a potential treaty that's now being considered may be seen by 2020, he said. He said that eliminating the tariff barriers is the first step but he believes that ending regulatory barriers is the "golden nugget."
A trans-Atlantic trade deal is progressing after President Barack Obama promised to pursue an agreement to expand the world's largest economic relationship in his State of the Union address in February.
EU Trade Commissioner Kerek De Gucht said on Feb. 13 the 27-nation bloc is targeting completion of the talks with the United States in two years to lower import tariffs, ease regulatory barriers and expand access in investment, services and public procurement.
Unpopular deals
Ford expects the negotiations to start midway through this year, Schneider said, who added that all automakers are in favor of the idea, which is not the case with the EU's free-trade agreement with Korea and its proposed deal with Japan.
"Some of our other FTAs are not so optimal, so we thought we should do one that is right," Schneider said, who will be a part of the talks on the U.S.-Europe trade deal along with representatives from automakers such as General Motors and Daimler.
Last November, EU trade ministers agreed to start negotiations toward a free-trade agreement with Japan despite resistance from European carmakers. The ACEA lobby group said a free-trade agreement with Japan will have a negative effect on the European auto industry and potentially lead to tens of thousands of job losses.
In 2011, the EU and South Korea signed a free-trade agreement with South Korea that is unpopular with a number of automakers, including Ford.
The company's CEO for Europe, Stephen Odell, has said the agreement with South Korea is "damaging" for Europe's auto industry. He believes that eliminating auto tariffs into the EU for exporting nations, with little or no export potential for the EU in return, seriously undermines auto manufacturing in Europe.
ACEA, based in Brussels, represents all major automakers that sell cars in Europe, including Toyota and Hyundai.
Tariff rates
Cars imported into the United States are charged a 2 percent duty, and those brought into Europe are charged 10 percent, he said. For commercial vehicles, the respective taxes are 22 percent on U.S. products and 10 percent on European models, Schneider said.
The full potential of creating the world's biggest free-trade zone would emerge from eliminating spending to design products to fit local requirements, Schneider said.
A trans-Atlantic trade deal would enable Ford and other car manufacturers to develop more vehicles on a global basis, which would improve margins and cut prices for consumers.
Global vehicles
The second-largest U.S. automaker has reported 14 consecutive quarters of net income and boosted profit margins under the One Ford strategy implemented by CEO Alan Mulally.
The program focuses on developing models to be sold worldwide, rather than creating different vehicles for various regions.
Schneider said the U.S. and Europe would have "significant difficulties" in specifying acceptance of each party's rules down to minutiae such as how crash-test dummies are used in safety testing.
Ford is calling instead for a more general "mutual recognition" policy in the treaty that doesn't focus on regulatory details, he said.
Bloomberg contributed to this report
You can reach Douglas A. Bolduc at dbolduc@crain.com.
