Time to start taking down regulatory barriers
The start of President Obama's second term is an auspicious time for his administration to accelerate homologation of global safety and fuel economy standards.
There can be no question about the value of homologation. Having to meet a single set of safety and environmental standards would reduce engineering costs for automakers and suppliers, resulting in savings that could be passed on to consumers or drop to the bottom line. Homologation also would make it easier for global companies to produce and ship vehicles from one market to another, facilitating truly global vehicles.
But for a variety of reasons, regulators have been parochial.
Sometimes, different standards are prompted by differing but intellectually honest views of what is needed to protect consumers and the environment in a particular market. In some instances, standards have evolved from local traditions and practices. But in other instances, standards have been imposed or retained as de facto nontariff barriers to trade.
Whatever the reasons, now is an opportune time for the Obama administration to advance the cause of homologation.
It could get things going as a corollary to trade talks between the United States and the European Union. The EU trade commissioner said last month that the 27-nation bloc would like to complete the talks within two years to lower import tariffs and ease regulatory barriers while increasing access to the U.S. and European markets. That squares with the goals laid out by President Obama in his State of the Union address.
Ultimately, achieving a trans-Atlantic trade pact that benefits the auto industry will depend on the willingness of both parties to relinquish tariffs on imported vehicles. That will require negotiations.
But the Obama administration could jump-start the process by unilaterally allowing automakers to sell cars in the United States that meet European safety and fuel economy standards.
With the European auto market stuck in the depths of an economic meltdown, that gracious show of good faith undoubtedly would be appreciated since it would open the healthy U.S. auto market to more European vehicles.
It also might lead to reciprocity, with the EU allowing vehicles that meet U.S. standards to be sold in Europe.
Global free-trade agreements are still out of reach because some governments manipulate their currencies, are in thrall to their subsidized agricultural sectors or erect nontariff barriers to protect their own industries. But global homologation should be easier to achieve.
The United States and the European Union can start by eliminating regulatory barriers that restrict intermarket car sales and deprive consumers on both sides of the Atlantic of a more affordable, better selection of vehicles.