German OEMs Anxious for Free-Trade Deal With U.S.

DETROIT – The German auto industry, a strong supporter of free trade between North America and the European Union, is lobbying hard for an agreement on the Transatlantic Trade and Investment Partnership treaty in the next two years.

If negotiations aren’t finished before 2016, when the next presidential race is heating up, chances of success in Congress will be lower, Matthias Wissmann, president of the VDA auto industry association, says at the North American International Auto Show.

“There are free traders in both Democrat and Republican parties,” he says, but the populist sentiment he expects to arise during the election cycle will make a bipartisan accord more difficult to achieve.

“The negotiations are very complex and harbor many challenges,” he says. “We need as soon as possible a reduction of tariffs and non-tariff barriers. A breakthrough in the next two years would be good for our employees.”

The biggest effect of the treaty would be harmonization and mutual recognition of standards so cars approved in one market automatically would be approved in the other.

German automakers saw car sales rise 5% in the U.S. in 2013 and SUV sales grow 9% from the prior year, reaching 1.33 million units. Wissmann expects the overall U.S. market to grow 3% this year, and he predicts the luxury segment could grow from 10% of the market in 2013 to 11%-12% this year, helping Mercedes-Benz, BMW, Audi and Porsche.

Vehicles made in the U.S. accounted for some 20% of the German OEMs’ 1.33 million deliveries in the country, and another 15% were made in Mexico. Half of the cars sold here were made in Germany.

In addition, of the 625,000 vehicles made in the U.S., 58% were exported to world markets, 150,000 of them to Europe.

Exports to Europe have been helped by exchange rates that have seen the dollar weaken against a strong euro, but Wissmann says economists expect the trend to reverse in 2014 and 2015 because “it is not probable that the euro is getting stronger.”

The German industry, he says, has been rapidly expanding production outside the country to reduce problems of currency exchange. German OEMs last year built 8 million vehicles outside Germany and 5.5 million in the home market.

The VDA is unique among industry associations in major automotive markets, as it combines both automakers and suppliers. While it conducts some small business activities such as auto and truck shows, most of its energy is devoted to “defending the interests of the automotive industry” in Brussels, Washington and elsewhere.