Last year the EU automobile industry exported more than 6.2 million vehicles, generating a positive trade balance for Europe in excess of €100 billion. The United States is by far the biggest market for European motor vehicles, accounting for more than 20% of exports (or about 1.3 million units).
The other way round, the United States makes up for 8.1% of the 3 million vehicles that are imported to the EU annually. Looking at units, the US accounts for 9.7% of passenger car imports, but value-wise American imports are much more significant. 21.4% of all EU car imports by value came from the United States in 2015.
Given the role of the United States as Europe’s most important trade partner, the automobile industry strongly supports the ongoing negotiations for an EU-US trade agreement, known as the Transatlantic Trade and Investment Partnership (TTIP). On both sides of the Atlantic, manufacturers agree that the elimination of tariffs and of non-tariff barriers through regulatory convergence will enable the automobile sector to lower costs and improve efficiency, while upholding high safety and environmental standards.
When looking at non-tariff barriers, such as technical standards and requirements, divergent auto safety regulations in the US and the EU result in additional costs as high as $2.3 billion each year, according to a recent study by the Center for Automotive Research (CAR). According to the report, which was published earlier this month in light of the 14th round of TTIP talks, this amount also represents the potential gains of full auto safety regulatory convergence under the EU-US trade agreement.
The fact that manufacturers currently have to meet two different sets of standards, which achieve the same high level of auto safety performance and outcomes, clearly makes a case for covering automotive regulatory convergence in the on-going TTIP negotiations. This CAR report is only the latest study to confirm the potential of an ambitious automotive outcome of TTIP.
Last year, the Peterson Institute for International Economics (PIIE) already demonstrated that US-EU automotive regulatory convergence would deliver significant economic benefits. The PIIE study found that the elimination of regulatory differences could increase transatlantic automotive trade by 20% or more, resulting in economic gains of over $20 billion for the EU and the US. According to first estimates, this would come down to an annual increase in trade of over 240,000 vehicles, worth some $9 billion, and supporting tens of thousands of jobs.
However, regulatory convergence in the automotive sector will not only be of benefit to the industry, consumers are also set to gain from TTIP. First of all, consumers will benefit from better product choice as a result of regulatory convergence, as automakers can offer more vehicles. Moreover, both studies confirmed that TTIP would help to reduce regulatory costs. These savings would make the latest generation of safer and cleaner cars more affordable for both European and American consumers.
Given the gains for consumers and industry alike, ACEA continues to stress the importance of delivering a comprehensive and ambitious TTIP agreement. The automotive industries on both sides of the Atlantic are confident that regulatory convergence will result in large economic gains for both economies. From a European perspective, eliminating tariffs and delivering greater auto regulatory convergence will also improve the international competitiveness of Europe’s auto industry.
For Europe’s economy at large, TTIP also present an unprecedented opportunity to promote jobs and growth, providing a boost to manufacturing and trade. Although the EU car market continued its path of recovery last year, with some 13.7 million cars sold, it’s important to note that we are still far below the pre-crisis level of 15.5 million units. The same goes for production, even though both the number of passenger cars and commercial vehicles produced in Europe increased by more than 7% last year, we’re still not able to come close to 2007 levels.
With TTIP expected to increase automotive trade by billions according to various studies, the trade agreement offers great market opportunities for Europe’s automobile manufacturers. Hence, we need policy makers to safeguard the positive, yet fragile, momentum of our industry by continuing to stand by the principles of free trade.
Secretary General of ACEA