In 2015, two years after the opening round of negotiations for the Transatlantic Trade and Investment Partnership (TTIP), the discussion in the media seems to revolve around how the proposed free trade agreement between the United States and the European Union will affect consumer products. But how will TTIP impact the B2B manufacturing sectors?
At the Strategic Investment Summit: USA on September 29th, 2015, we invited representatives from some of Germany’s industry associations to present their stances on TTIP, share their predictions on how the controversial agreement may affect industry in Europe, and discuss possibilities moving forward in the negotiations.
Moderated by Dr. Stormy-Annika Mildner from the BDI (Federation of German Industries), this interesting discussion included representatives of the ZVEI (Electrical and Electronic Manufacturers’ Association), the VDA (German Association of the Automotive Industry), and the VCI (German Chemical Industry Association). For those of you who missed the session, enjoy the protocol!
Johannes Kirsch - ZVEI (Electrical and Electronic Manufacturers’ Association)
Mr. Kirsch outlined the potential for a reduction of bureaucratic costs in electronic manufacturing when it comes to transatlantic trade. He describes the different technical standards in the U.S.-market compared to the EU for machinery of all kinds. One root cause for these differences is that in Europe companies produce according to IEC-standards (International Electrotechnical Commission) whereas in the U.S. several standards are applicable for one product, mostly not in compliance with IEC rules. The IEC motto is “One standard, one test accepted everywhere” – that is up to this point not consistent with the market access conditions in the U.S. market.
According to Mr. Kirsch, policymakers can facilitate transatlantic trade through mutual recognition of certification procedures, provided the standards have been harmonized in advance.
Without prior harmonization, mutual recognition is not acceptable for European industry. In the United States, the mandatory certification of electrical and electronic products is de facto monopolized in one laboratory. Therefore, ZVEI has developed a proposal to modernize the U.S. system of mandatory certification. Thus, innovations can be introduced into the market at a faster pace. However, Mr. Kirsch agrees with the other panelists that a prerequisite for a mutual recognition regime is the harmonization of standards. Based on that, regulatory cooperation between the U.S. and EU could become the next transatlantic endeavor.
Finally, Mr. Kirsch regards customs duties as a "piece of bureaucracy" and suggests their elimination.
More on the ZVEI's position (download PDF)
Dr. Martin Koers - VDA (German Association of the Automotive Industry)
Dr. Koers agrees with Mr. Kirsch on the eradication of tariffs. In his eyes, a removal of tariffs would increase car sales on both sides of the Atlantic. Currently imposed tariffs would represent additional costs which are often translated into higher consumer prices.
However, the regulatory aspects of TTIP have a much stronger impact on trade for the automotive industry. Dr. Koers emphasizes that regulators in both jurisdictions aim for largely the same goals. In first place, these goals comprise car safety and environmental protection. Together with its counterparts in the United States, VDA offers its expertise to regulators by analyzing where U.S. and EU regulations pursue similar objectives and lead to comparable results. In such cases, the automobile industry in both areas would recommend a mutual recognition of regulation.
Dr. Koers identifies new markets, such as the digitalization of mobility, as areas where common ground in future automotive regulation could be found. The purpose of TTIP should not be to achieve regulatory consensus on all issues. Going forward, TTIP should rather require regulators to collaborate wherever possible. Such an approach would strive predominantly for joint regulations on innovations. As older technologies may fade out over time, the regulatory gap between the EU and the U.S. might be narrowed over the long term. Dr. Koers emphasizes that such regulatory cooperation will only take place if policymakers oblige regulators to consult with their equivalents overseas. TTIP could serve as an institutional vehicle to manifest such a political will.
More on the VDA's position (download PDF)
Prof. Dr. Reinhard Quick - VCI (German Chemical Industry Association)
Prof. Quick points out that a broad regulatory harmonization appears unfeasible in the chemicals industry. It appears unlikely that the EU would cede from its REACH approach which requires companies to demonstrate their ability to manage risks associated to the introduction of chemicals. Likewise, the United States is not about to give up on the Toxic Substances and Control Act (TSCA) which allows government agencies to take action when chemicals have proven to be hazardous for consumers.
Room for improved harmonization can be found when it comes to the categorization of chemicals. The United States' and the European Union's different categorization schemes require producers to change pictograms for the same chemicals when exported to the respective other market. Such an agreement on harmonized classifications should be in reach.
Furthermore, Prof. Quick questions whether more harmonization is feasible within the U.S. since U.S. safety standards and procedures vary across states. TTIP could set incentives to work towards common rules and safety procedures for chemicals. Such rules would reduce administrative costs for multinational chemical producers. He argues, however, that such transatlantic convergence is a much larger project. In any case, he pledges for TTIP as a "living agreement", i.e. regulators should practice a mandatory exchange when drafting new rules. TTIP should not require regulators to reach an agreement in every case. However, a permanent dialog should be established to find common ground.
Lastly, Prof. Quick agrees with Dr. Koers and Mr. Kirsch that tariffs can be eliminated. According to his view, tariffs shield the chemicals industry while no protection is necessary.