Brussels, 19/07/2012 (Agence Europe) - Following the agreement that entered into force in 2011 with South Korea, which they deem unbalanced, European car manufacturers are once again afraid of finding themselves in an uncomfortable position in the context of the free trade agreement with Japan that the Commission is proposing the EU should negotiate.
On Wednesday 18 July, following Commissioner De Gucht's statement regarding the European Commission's decision to negotiate a free trade agreement with Japan, the European Automobile Manufacturers Association (ACEA) expressed serious doubts in a press release, regarding the advantages of this agreement for their industry. ACEA considers that the preparatory work in the scoping exercise for the agreement was insufficient and did not create appropriate conditions for launching free trade negotiations with Japan. It also claimed that the “automotive roadmap” - one of the outputs of the scoping exercise - is too vaguely-worded, and lacks clarity in terms of the precise methods to be used to dismantle non-tariff barriers and the timelines for this to happen. The free trade agreement would require the EU to dismantle the existing 10% customs duties, representing a saving of €1.2bn a year for Japanese manufacturers and €1,500 for every Japanese car imported. This would trigger a higher flow of cars into the EU. Car production could go down by some 160,000 units as a result, leading to job losses, stated Ivan Hodac, Secretary General of ACEA, who warned that, “If Europe cuts tariffs, Japan must remove non-tariff barriers. Otherwise we don't have a level playing field”.
ACEA also wants its vehicles, which “are amongst the safest and cleanest in the world” to be able to enter and be sold on the Japanese market without modifications that need to be made in response to Japanese safety and environmental requirements. The European auto industry is also concerned by the special financial and other benefits enjoyed by kei cars. These very small cars control over 35% of market share. Either these advantages should be made available to similar European small cars, or they should be removed, argued Hodac. The secretary general of ACEA also underlined that Japan is not a growth market even for domestically-manufactured vehicles, and the outlook is “gloomy”. According to the Mitsubishi Research Institute, between 2010 and 2020 Japan's domestic market is set to decline by 660,000 units per year. Hodac warned that, “this free trade agreement represents an opportunity for the Japanese to shore up export levels into the EU, thereby compensating for their own declining market and helping maintain their employment levels in the sector”. ACEA is highly doubtful that such an agreement would help the EU automobile industry make stronger inroads into Japan, where EU-produced vehicles currently represent just 4% of total market share. It would also be likely to worsen the current trade deficit of the automotive sector, which currently stands at over €5bn in Japan's favour.
On Wednesday, Commissioner Karel De Gucht provided assurances that the EU would not reduce its tariffs before Japan had delivered concrete results regarding its lifting of regulatory barriers in the auto sector, as agreed in the roadmap. Nonetheless, questioned about the criticism raised in the car sector, De Gucht called on the European auto industry to restructure rather than blame its competitiveness difficulties on free trade agreements with Asia. (EH/trans/fl)