The 8th round of negotiations on the Transatlantic Trade and Investment (TTIP) agreement between the European Commission and the United States government took place in February with both sides hailing the meetings as ‘constructive’ amidst wider criticism on the slow pace of progress.
Whilst it remains hard to predict if and when new rules designed to relax trade restrictions between the two regions will come into force, the TTIP could eventually make it much easier for European machine tool manufacturers to do business with their American counterparts. The US currently represents the second largest export market for European firms which collectively export around 16% of their products with a combined value of around €2bn across the Atlantic each year, according to estimates from Filip Geerts, director general of the European Association of Machine Tool Industries (Cecimo).
EC and US governments making progress
“They [the EC and US government negotiators] are making progress and both sides of the ocean are taking it very seriously. But sometimes they can come up against other priorities or political intervention that mean it might have to be postponed for a while,” said Geerts.
The draft TTIP proposal was delayed in 2014 for example when the US insisted that financial services should not be included in the TTIP negotiations, whilst there is continuing disagreement of the investor-state-dispute-settlement (ISDS) cause which would allow investors to take governments to international arbitration tribunals rather than domestic courts. Non-governmental organisations such as Friends of the Earth Europe, Compassion in World Farming and the Institute for Agriculture and Trade Policy have also argued that the terms of the TTIP will compromise food safety and animal welfare standards in support of faster trade, but Geerts doubts any significant protests from the machine tooling industry or business community.
Rather, any objections which do surface are more likely to derive from concerns over health and safety practices, with the TTIP targeting several technical requirements, standards and conformity assessments which are specific to engineering. The US is a member of several ISO working groups for machine tools, including the working group ISO/TC 39/SC 10 on machine tools safety for example, and CECIMO believes that any international standard should provide a straightforward way to meet technical regulatory requirements in both Europe and the US.
Harmonisation with the US will enlarge the Portuguese tool making industry’s recognition in the market
“Normally the tools produced in Portugal follow the European laws and procedures on health and safety issues,” added Manuel Oliveira, secretary general of the Portuguese Association for the Mould Industry. “Any harmonisation with the US in this sense will enlarge its [the Portuguese tool making industry’s] recognition and competitiveness in the market.”
Geerts feels that the removal or reduction import and export tariffs – which he currently estimates vary between 2% and 4.4% – are not as big an issue for European tool and machine manufacturers as non-tariff barriers around bureaucracy and working visas for qualified staff. This may be particularly true for small to medium enterprises (SMEs) within the machine tooling industry estimated to export 50% of their production outside the European Union, but which have limited resources to devote to export activities.
“There are still some [tariff] barriers and it would be better if they were completely abolished but they are not really an obstacle for us,” he said. “The non-tariff barriers – more the technical barriers and the red tape issues, as well transatlantic mobility [immigration issues] which allow us to send qualified people from here to there to do servicing, maintenance and maintenance [on short term entry visas or temporary contracts] for example – those could all be improved.”
Even so the impact of trade tariffs may vary from one European country to another. Portuguese tool and mould makers – which are estimated to currently export 90% of their wares to other countries according to Cefamol – are expected to benefit from the removal of tariff barriers to a certain extent.
“Portuguese companies don’t feel too many constraints on their business related with rules, regulations or bureaucracy, [but] the removal of tariff barriers will certainly increase our competitiveness in the US market, which until the beginning of the 1990s was our main market,” said Oliveira though he points out that any relaxation of rules could also have unwelcome consequences in opening up domestic markets for cheaper imports.
Wider market, increased competition
“If you remove trade barriers you will have a wider market with additional opportunities for development and growth, but on the other hand you will enter an arena where competition comes at you from many different places in the world,” he added.
Geerts calculates that imports from the US specifically are ‘very, very small’ however, representing only around 5% of the total and trailing Japan, Taiwan and China by a big margin.
Any harmonisation around interoperable technology delivered by the TTIP may also help European companies modernise their advanced manufacturing equipment, with Oliveira anticipating greater support for Portuguese mould makers’ efforts to reduce production costs, shorten time to market for new products, and improve their client service and support functions for example.
Implementing new business models
“To succeed, you need to be better and/or different from the others,” said Oliveira. “This situation will lead European companies to implement new business models, introduce new technologies, widen the value chain and invest more heavily in research development. In certain cases, it may help [them] to develop their cooperation activities with clients, suppliers or competitors.”
The TTIP is a huge cross industry initiative which may have far reaching effects on many vertical sectors including agriculture and textiles. But ultimately its impact on the European tool and mould making industry, whilst positive, is likely to be far less profound.
“When I speak to our sister organisation in the US – the American machine tool association – they are even less interested in this subject [the TTIP] than we are,” said Geerts. “I don’t know why, but like us they probably don’t have a real problem with tariffs. We just want to make it even better.”