Ford Motor Co., the second-largest American automaker, called for the removal of trade tariffs between the U.S. and Europe and said the two markets’ regulators should accept each other’s safety and environmental standards.
Duties on cars and commercial vehicles shipped between the U.S. and European Union countries and differing vehicle-quality and emissions rules add cost burdens and prevent development of uniform models for global markets, Wolfgang Schneider, Ford’s European vice president for governmental affairs, said in an interview. The benefits of a potential treaty that’s now being considered may “kick in” by 2020, he said.
“The value of a free-trade agreement to us lies more in the elimination of regulatory barriers than in the elimination of tariff barriers,” Schneider said yesterday at the Geneva Motor Show. “Let’s eliminate the tariff barriers, but let’s also eliminate the regulatory barriers.”
A trans-Atlantic trade deal is progressing after President Barack Obama promised to pursue an agreement to expand the world’s largest economic relationship in his State of the Union address in February. EU Trade Commissioner Kerek De Gucht said on Feb. 13 the 27-nation bloc is targeting completion of the talks with the U.S. in two years to lower import tariffs, ease regulatory barriers and expand access in investment, services and public procurement.
Ford expects the negotiations to start “in earnest” midway through this year, Schneider said.
Cars imported into the U.S. are charged a 2 percent duty, and those brought into Europe are charged 10 percent, he said. For commercial vehicles, the respective taxes are 22 percent on U.S. products and 10 percent on European models, Schneider said.
The full potential of creating the world’s biggest free-trade zone would emerge from eliminating spending to design products to fit local requirements, Schneider said. A trans-Atlantic trade deal would enable Dearborn, Michigan-based Ford and other automakers develop more vehicles on a global basis, which would improve margins and cut prices for consumers.
“People are pretty much the same across the Atlantic,” he said. “The infrastructure is extremely similar, so it makes really no sense to maintain this different environment and safety standards.”
The U.S. carmaker has reported 14 consecutive quarters of net income and boosted profit margins under the “One Ford” strategy implemented by Chief Executive Officer Alan Mulally. The program focuses on developing models to be sold worldwide, rather than creating different vehicles for various regions.
Schneider said the U.S. and Europe would have “significant difficulties” in specifying acceptance of each party’s rules down to minutiae such as how crash-test dummies are used in safety testing. Ford is calling instead for a more general “mutual recognition” policy in the treaty that doesn’t focus on regulatory details, he said.
“We say a U.S. vehicle is safe, the U.S. says a European vehicle is safe,” Schneider said. “If we really start to go through side protection, airbags, roof protection, emission standards, this will be a long and tedious process. Past experience shows it’s almost impossible to get an agreement around that.”