German carmakers push for zero tariffs to avert trade war


JULY 4, 2018

Inside BMW Factory Ahead Of Earnings Announcement… A Bayerische Motoren Werke AG (BMW) employee polishes the hood ornament logo on a 5-series automobile at the company’s factory in Dingolfing, Germany, on Monday, March 15, 2010. Bayerische Motoren Werke AG, the largest manufacturer of luxury cars, reported a smaller-than-expected decline in full-year profit and maintained its dividend to signal a recovery in the high-end market. Photographer: Guenter Schiffmann/Bloomberg

The heads of Germany’s big three automakers met the US ambassador on Wednesday to reaffirm their support for zero tariffs on EU-US trade in cars as they step up lobbying efforts to avert a trade war.

Two industry sources briefed on the talks said the chiefs of BMW, Volkswagen and Mercedes-parent Daimler met with Richard Grenell and said they would support the elimination of EU tariffs on cars imported from the US provided the US did the same — and dropped its present threat to increase them.

The German car bosses also said they could issue a pledge to maintain levels of investment in the US, provided a tariff spiral were averted. Such a pledge in fact carries an implicit threat to shift production out of the US if the Trump administration ramps up tariffs on car imports from the EU.

Last year every second car German brands built in the US was exported, according to the VDA, the national industry body; if trade barriers were raised, those cars could instead be produced locally in markets such as China.

It was the second meeting between Mr Grenell and top industry heads, following a first encounter on the sidelines of a quarterly gathering with the German Association of the Automotive Industry (VDA) on June 6.

EU tariffs on passenger cars are 10 per cent, versus 2.5 per cent in the US. President Trump has often railed against the discrepancy, although tends not to mention that the US also imposes tariffs of 25 per cent on vans and pick-up trucks — which the German carmakers would like abolished.

“The position was that the German industry doesn’t need to be protected by tariffs, so it’s fine getting rid of them,” one industry source said.

Neither the carmakers nor the German government has the power to negotiate a deal, which is up to the European Commission. But the executives wanted to size up how the Trump administration would respond to the suggestion of eliminating all trade barriers in the sector.

One person briefed on the talks said they had also discussed the lowering of non-tariff hurdles, such as by standardisation of parts.

One industry source said, for instance, that in Europe car bumpers were made to be soft — to protect pedestrians — while in the US they were made to be harder — to protect those inside the car. If the US and EU harmonised these standards, the production process for all brands would be simpler.

“All the automakers have issues with standardisation on parts,” one industry source said.

Removing barriers to trade in cars was an important element in talks on the Transatlantic Trade and Investment Partnership which foundered in 2016.

Participants included VW head Herbert Diess, Daimler chief Dieter Zetsche, BMW chief Harald Krueger, and Elmar Degenhart, chief executive of parts supplier Continental.

A fifth participant was Bernhard Mattes, president of VDA, who said on Tuesday the present situation with the US was “difficult” as he called for more talks. “Trade barriers can only be removed on both sides,” he said. “A WTO-compliant transatlantic agreement covering industrial tariffs — this could be a possible route. That would be a win-win situation.”

Courtesy/Source: Financial Times