US administration creates opening in car tax dispute
American ambassador in Berlin, Richard Grenell, has called upon the bosses of the German car industry to make them a surprising offer: abolish car import taxes completely on both sides.
Several company’s CEOs and political authorities all over the world have recently sent messages to the Trump administration, trying to avoid a commercial war about import taxes on foreign cars.
German car bosses invited
Apparently, these interventions have made an impact, because the American ambassador in Germany invited Harald Krüger (CEO BMW), Dieter Zetsche (CEO Daimler), Herbert Diess (CEO VW Group) and Elmar Degenhardt (CEO Continental) to make them an astonishing offer: abolish car taxes completely between EU and the US.
From the political side in Germany the reactions are positive: Chancellor Merkel has declared to be open to all negotiations, pointing out, nevertheless, that an agreement should be with all the countries Germany is having commercial relations with, not only the EU and the US.
According to Merkel, the EU authorities are working on a common policy, but she also declared that “the US proposal is an option I can imagine to be realized.”
Bilateral? Only cars?
From what is known a bilateral agreement between the EU and the US only on car import taxes can cause problems. Experts on the matter say that the agreement should concern all (worldwide) partners in the car industry, including the Japanese, the South-Koreans and China, others state that an agreement between the EU and the US should be for the global industry relations.
Seeing that at the moment there is a real escalation of hostile talk between China and the US, this could create problems too. You can even see it in the reaction of the Chinese customer towards foreign cars in general and American cars in particular: if they have to pay up to 40% more on taxes, they’re not interested anymore in buying a foreign car.
When it comes to the WTO (World Trade Organization), bilateral or multilateral agreements between member states are possible, but the 164 members have to approve unanimously the bilateral agreements or the agreements have to be the same for the 164 member states.
Within the European Union there are many doubts about the feasibility of such an agreement. There are doubts about president Trump’s real intentions because he has until now always shown to be in favour of bilateral agreements, the US feeling stronger there, and there is also the scepticism of France.
President Macron of France tends to be very strict and inflexible towards the US at the moment. The withdrawal of the US out of the Paris Climate Agreement, the US sabotaging the Iran deal has caused doubts in Paris about Trump’s real intentions.
Agrarian lobby in France
Furthermore, a total trade agreement between the EU and the US would also concern the agrarian sector and Macron doesn’t want to anger the very important agrarian lobby in France. Also other EU voices have their doubts about the real intentions of President Trump and advice to be careful.
When EU Commission President Jean-Claude Juncker goes to Washington later this month he will have to take all these things into account. The Germans are raising the pressure, nevertheless, their car industry is of utmost importance to them with over 800.000 people working in that sector.