The United States and the European Union will begin talks on a free-trade agreement, which may take as long as two years to complete. The deal is expected to be worth some $613 billion annually, and could have some interesting implications for the auto sector.
The first and most obvious possibility is the end of import duties for passenger cars and light trucks; 2.5 percent for cars and 25 percent for trucks. Such a deal would amount to an end for the “chicken tax” for European made light trucks.
This may have an impact on the manufacturing profile for the world’s automakers as well. Mexico is currently in vogue due to low labor costs and the ability to export Mexican made cars to the United States and Europe. But with a US-EU free trade deal, there may be an extra incentive to bring some production to Europe, particularly if there’s unused capacity burning a hole in their pocket.
Also worth keeping an eye on is vehicle safety standard harmonization. The FMVSS standards vary from the UN/ECE standards used by pretty much everyone else, and this deal may bring about some kind of agreement on harmonization between the two. The FMVSS is frequently cited as a non-tariff barrier to trade by many observers. Not many would be sad to see it go.