Ford of Europe CEO, Stephen Odell, has called for the creation of a comprehensive industrial policy across the European Union. Speaking at the Society of Motor Manufacturer’s and Trader’s International Automotive Summit in London, Odell said there was a need for a more strategic approach to support Europe’s manufacturing industry – including its all-important automotive industry, which accounts for 10% of all manufacturing by output, and 35% of employment.
Odell also criticized a proposed Korean trade agreement, which in a different form is also controversial in the U.S. However, Ford in the U.S. supports a pending Korean FTA, which is opposed by all major U.S. unions except for the United Autoworkers, and is opposed by Korean unions as well. A Ford spokesperson said the conflicting positions arise from a key difference in that the U.S. deal is “far better structured, hence we’re offering support to the U.S.-Korea FTA. The EU-Korea FTA was not equitably balanced, and despite some late additional amendments, we’re concerned that they will not be strong enough to provide adequate access to the Korean market for European-based OEMs.”
The proposed Korean Free Trade Agreement (FTA) with the U.S. should be rejected by the Congress because its investment and government procurement provisions will encourage “offshoring,” according to AFL-CIO President Richard Trumka.
His statement came after the Detroit Three auto companies and the UAW endorsed a revised FTA earlier this week because of concessions on the importation of 75,000 cars into the closed Korean market. (See Korean Free Trade Agreement gets UAW, Ford Support)
Some of the biggest U.S. sales gains in May were posted by Korean automakers Hyundai (up 20.7% versus a year ago) and Kia (up 53.4%). Combined, the two Korean automakers sold more than 100,000 vehicles for the month. Korea is the fifth largest producer and fourth largest exporter of motor vehicles in the world.
However, Korea ranks at the very bottom — 30 out of 30 among the largest automotive markets — for auto market access. The average among major developed economies is 40% market penetration by imported automobiles, but in Korea, the total of import vehicles from all global manufacturers in all countries entering the Korean market is around 3.6%. This is about 40,000 vehicles in a market that buys roughly one million vehicles annually.
“The EU-South Korea Free Trade Agreement is damaging for the EU automotive industry. It gives improved market access for Korean manufacturers in Europe, while export opportunities for European-based manufacturers are likely to remain strictly limited in South Korea,” Odell said.
“ In fact, we’re already hearing some disconcerting rumors from Korea concerning the strengthening rather than the weakening on non-tariff trade barriers. This at a time when one of Korea’s manufacturers is stating it expects its sales to increase by 40% in Europe over the next few years,” said O’Dell.
Odell did address some areas of common concern between Europe and U.S. automakers. “Sadly, we are seeing an increasingly industry-skeptical political environment at the European level, with rising costs of what are often marginal and unnecessary regulation, unbalanced trade agreements, and anti-car European Commission strategy papers on the future of transportation.”
The EU has proposed the banning of all conventionally fueled cars in cities, a 50% shift of medium distance intercity passenger and freight movements from road to rail and waterborne transport. Combined with the mandatory use of large amounts of “sustainable low carbon fuels” in aviation, the EU says that there will be at least a 40% decrease in shipping emissions.
(See also Korean Automakers Post Huge U.S. Sales Gains as Disputed Free Trade Agreement Heads for Congressional Approval and UAW Defends Korean FTA as Other Unions Protest Deal and AFL-CIO Rejects Korean FTA. New Trade Policy Called For and Korean Free Trade Agreement gets UAW, Ford Support and EU Proposes Banning Cars from Cities. Automakers Protest)