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Swedish-German cooperation concerning the automotive industry

From Gasgoo.com| May 25,2007

Sweden and Germany are to set up an expert group to study what must be done to create a joint European and US automotive market. Inter-ownership back and forth across the Atlantic and US problems with the car industry's lack of profitability mean that an interest should exist, writes Minister for Foreign Trade Sten Tolgfors.

The automotive industry in G?teborg and West Sweden, where Volvo will soon celebrate 80 years of operations, would benefit greatly from increased trade policy cooperation between the EU and the US. This applies to automobile manufacturers like Volvo and Saab as well as to subcontractors of Swedish and European car and truck manufacturers. In all actuality, increased cooperation between Europe and the US is a vital measure for increased competitiveness for the automotive industry in Sweden.

The transatlantic automotive market is, in many ways, open. But much remains to be done to create common regulations and standards for cars and trucks in the EU and the US.

Studies show that costs could be reduced by between 5 and 7 per cent per each car manufactured if regulations for the automotive industry were harmonised between the EU and the US. A simple estimate based on this suggests that costs could be reduced by SEK 10 000 to SEK 15 000 per car just by implementing the same regulatory system on both sides of the Atlantic. Everyone can understand what that would mean in the form of increased competitiveness for our producers, particularly in competition with Asian manufacturers. Simplification and harmonisation of regulations can contribute to increased trade and more jobs.

Common view

What is at issue is better opportunities for using the same components, engines and accessories in both the US and European markets, and a common view towards green fuels. This would facilitate Swedish exports, trade across the Atlantic and strengthen investment opportunities in Sweden.

Sweden and Germany are two important manufacturing countries of both cars and trucks. We are therefore both very interested in arriving at common solutions with the US. Consequently, the Swedish and German governments have agreed to set up a joint expert group to identify the regulations and standards that must be changed so as to create a common European and US automotive market. The expert group will commence its work as soon as possible in the coming weeks, with an eye towards the Summit between the EU and the US in the spring during the German EU Presidency.

Test methods

Some examples of the measures that may be analysed by the expert group are various types of test methods for the automotive industry aimed at avoiding unnecessary tests, developing future global standards for vehicles, harmonising regulations for increased use of green fuels, harmonising regulations for heavy-duty diesel engines and mutual recognition of certification. The same car should be able to be sold in both the EU and the US with as few and as small adjustments as possible.

The expert group is being tasked with immediately consulting the Swedish and German automotive industries to identify which regulation discrepancies are causing problems today, and to propose solutions for the EU to present in discussions with the US. The US should be interested, not least due to the problems with the US car industry's lack of profitability, and inter-ownership of the automotive industry back and forth across the Atlantic.

60 per cent of the global economy
The background to this initiative, besides the special conditions facing the automotive industry, is the general development in trade between the US and the EU. Together, the EU and the US account for 60 per cent of the global economy and 40 per cent of world trade.

In recent years, trade across the Atlantic has made up some 20 per cent of US exports. US trade with the rest of the world is experiencing strong growth. Trade with the EU is considerable, but in relative terms it is standing still.

Last year, the total US trade with the EU amounted to USD 527 billion, while US trade with China accounted for USD 342 billion. Accordingly, US trade with China corresponds to only two thirds of trade with the EU. But the trend is clear. Five years ago US trade with China was only one third of trade with the EU. China is becoming an increasingly important trade partner to the US; in five years trade with China has tripled.

The Merkel initiative

There is a risk that the balance in US interests in the world will change. We must not allow a situation in which the US perceives trade with the EU as relatively less and less important, leading to reduced US interest in us or to our being shunted over into low priority political cooperation.

Trade between the EU and the US could increase if we could remove trade barriers such as different regulations and standards in the markets. The 'Merkel initiative', launched by the Federal Chancellor, aims at generally simplifying trade between the EU and the US through simplifying regulations and adopting a more common view towards standardisation.

We want to bring about negotiations so as to abolish trade barriers between the EU and the US. The go-ahead should be given at the Summit between the EU and the US at the end of the month, aimed at concrete negotiation efforts as soon as the WTO Doha Round is concluded.

The ambition should be to establish common goals and regulations, for example in the use of renewable fuels such as ethanol and biodiesel. This will expand the market, increase predictability for automotive manufacturers in the EU and the US, and thus strengthen their global competitiveness.

New agenda

The timing is appropriate for a number of reasons. The environment and climate debate is currently rearranging the political agenda and provides a new chance to strengthen economic relations with the US. Automotive manufacturers are calling for common regulations for emissions and fuel on both sides of the Atlantic. They can pretty much live with any requirements that are set - as long as they are identical.

The transatlantic market for motor vehicles is very important to Sweden and Germany. Trade with the US and mutual investments in the sector mean a great deal to employment and welfare. We must now move ahead and coordinate and improve the conditions for the Swedish, European and American automotive industries.

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