The U.S.-European Union trade agreement currently being negotiated will definitely affect the auto aftermarket. The fourth meeting between the parties takes place in March.
Impetus has been provided by a recent bipartisan agreement in Congress on the terms of a new trade promotion authority (TPA) bill. It would apply to all trade negotiations, not just the current ones with the EU and a second one with Pacific Rim countries.
A TPA bill, if passed, would allow President Obama to submit the proposed U.S.-EU Transatlantic Trade and Investment Partnership (TTIP) and the Pacific Rim Trans-Pacific Partnership (TPP) to Congress without the threat of either the House or Senate adding objectionable amendments. There would have to be a clean up-or-down vote.
The Obama administration has been constrained to some extent in moving forward in both cases because of concerns on the part of the European and Pacific nations about environmental, labor, investment and other restrictions the Congress would want to include in either deal. The TPA legislation called the Bipartisan Congressional Trade Priorities Act establishes positions in those areas, which both Democrats and Republicans agree on. So the Obama administration now knows how far it can go in various areas, or how far it must go, depending on the issue, in order to win easy congressional approval.
With regard to the auto sector, both the TPP and TTIP aim to open foreign markets for U.S. automakers. But a letter from the Automotive Aftermarket Industry Association (AAIA) to U.S. Trade Representative on the eve of initiation of the TTIP negotiations last year suggests that the aftermarket has a lot at stake, too.
"While the automotive sector has been identified as a key sector with a significant transatlantic relationship, and where the biggest relative increase in trade resulting from the TTIP is expected to take place, the expected impact may actually be understated," said the letter signed by Andres Castrillon, director, International Trade. "This is because much of the data focuses exclusively on the potential increase in motor vehicle imports and exports, while ignoring the significant trade increases that will also result in the automotive aftermarket."
In his letter to the USTR, Castrillon mentioned a number of specific issues the AAIA felt needed addressing. Those were things like the complete elimination of tariff and non-tariff barriers, "simple and efficient" rules of origin and allowing mutual recognition of existing regulations unless convincing and reliable data exist demonstrating a safety or environmental deficiency.
Tariffs on imported auto parts aren't pervasive and where they exist they are low. In 2009, the last year for which the Commerce Department shows statistics, U.S. aftermarket retailers and their distributors imported $12 billion of auto parts from Europe. That compares with $13.5 billion from Japan and $11 billion from China. But the value of imported auto parts as a percentage of total auto parts sold in the U.S. has been steadily rising over the past decade. Some parts from Europe and TPP countries come in free, some don't. The chart listing tariffs on auto parts is dizzying in its complexity.
Eliminating non-tariff trade barriers is the more important issue for the U.S. auto aftermarket, and the bigger challenge, too. "Harmonization of standards for auto parts will be a key issue in the TTIP," says Castrillon. "The outcome of the negotiations could affect some of the products U.S. aftermarket retailers will carry on their shelves, or the labeling of those products, for example."
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