Proposed EU Measures Necessary But Not Sufficient, Auto Industry Says

BRUSSELS – European Union auto makers welcome a groundbreaking initiative this week by the European Commission that pledges future free-trade agreements will be assessed for their potential damage to the industry before negotiations begin in earnest.

The promise comes in a long-awaited EU policy paper called CARS 2020, which is part of CARS 21, an acronym for Competitive Automotive Regulatory System for the 21st Century.”

The initiative championed by the EC was launched in 2005 to strengthen competitiveness and employment in the automotive sector. It was re-launched in 2010 to coordinate industry and government reaction to the eurozone crisis.

Ivan Hodac, secretary general of the European automobile manufacturers’ association, the ACEA, tells WardsAuto the pre-screening of potential FTAs is both positive and novel. “This is news, it hasn’t been there before.”

CARS 2020 comes as the EU embarks on preparations for an FTA with Japan, which is raising significant fears among European car makers given their bruising at the hands of South Korean exporters since an EU-South Korea pact took effect last year.

The EU has been pushing for more bilateral FTAs to gain access to new markets as demand falls at home. But this sometimes has been done at the expense of the automotive industry.

“I know very well that the agreement with South Korea had good results for some industrial sectors, but not for the automotive sector,” admits EU Industry Commissioner Antonio Tajani at the CARS 2020 policy launch here. He says he opposes further sacrifices by European auto makers and warns of wider risks.

“Automotive is a crucial sector for our industrial policy; we cannot damage this sector,” Tajani says, noting the same goes for suppliers, especially the steel industry.

The ACEA firmly opposed the EU-South Korea agreement and now is bucking the Japan deal. However, the group does support a proposed EU-U.S. FTA, which could be signed as early as 2013, Tajani says.

“We are the first industry that has supported it,” Hodac says of a trade pact with the U.S., noting this is the first time he has seen so much political goodwill among auto makers for serious negotiations on a transatlantic FTA.

Cars 2020 includes a promise by Tajani to fight for a doubling of the budget for the EU’s European Green Vehicles Initiative during current budget negotiations for 2014-2020.

The program funds research and development of low- or zero-emissions cars. With a current budget of €1 billion ($1.27 billion), Tajani will have to push hard to secure the funding given the austerity measures facing many EU governments.

Another key issue is a commitment from the EC to simplify so-called “smart regulations.” For instance, Tajani says, rolling 15 different directives on car safety and security into one would make it easier for auto makers to comply with the law.

However, Hodac is skeptical that much progress will be made. “We have heard about smart regulation before, but this hasn’t been put in practice so far,” he tells WardsAuto.

Importantly, Cars 2020 also promises formal EU guidance by the end of the year on how its 27 member states should subsidize their national auto industries that are in commercial or financial trouble.

Tajani says he wants to allow governments more freedom but not make it a free-for-all of unlimited subsidies, which could damage Europe’s single, borderless market for vehicle sales. Hodac agrees with harmonizing the type of support given to the industry by national governments. “We cannot lose the internal market over this,” he stresses.

At the same time, Hodac questions whether the EU itself is prepared to spend sufficient funds directly to ease the pain of probable vehicle-plant closures, which he believes are “highly likely” in the coming months.

Indeed, the ACEA suggests the EC should “explore ways to improve labor flexibility and support the affected workers and regions.”

The Commission promises at the policy meeting this week to use EU regional development funds to retrain workers losing their jobs because of such closures, and Hodac believes more government programs should help the victims of industrial globalization.

Tajani also announces the Commission plans to propose legislation on a single standard for the recharging of plug-in electric vehicles in early 2013. Hodac welcomes the news and expresses his hope the EC will take into account the ACEA’s input on the single standard.

Tajani says he will meet with auto industry representatives and EU industry ministers by the end of the month to discuss his new policy proposals.

“Expectations are the same on both sides,” Hodac says of the meeting: “We will look at how this will be implemented.”