Enabling Automotive Trade:
Firstly, the WTO should review the local trade requirements and investment incentives used by its members; by focusing on the extent to which these elements distort trade, it can develop and suggest ways of improving visibility and reducing those distortions. Different processes and standards for foreign direct investment (FDI), as set by various state governments or different ministries, slow the process of opening new plants. And in many emerging markets, the transparency and reliability of local trade authorities still requires strengthening. Often, companies entering a new market encounter unforeseen difficulties. These markets struggle to enact universal standards and to create a more predictable and welcoming environment for business. A central authority is needed to provide guidance and set norms. The WTO is ideally placed to fulfil this role.
As a second area, the WTO should support bilateral dialogue to address issues such as different safety and/or environmental standards (e.g. standards between the EU and US). While FTAs can help drive this bilateral dialogue, the WTO should ensure that negotiations are goal-oriented.
Lastly, the WTO could act as a forum for discussions among its members and the automotive sector to identify existing practices and problems encountered in border management and duty drawback systems. Such consultations should lead to the development of best practices in these areas, among other outcomes. This kind of service is especially vital for emerging markets.
Of course, the governments of major automotive markets must retain a key role. In particular, the US and EU have created billions of dollars in extra costs for automotive companies in these markets due to different standards for manufacturing and selling vehicles and automotive parts. Similar yet different safety standards in the US and EU markets burden automakers without benefiting consumers. Coordinating these standards will lead to tremendous cost savings for manufacturers by reducing production lines for lights, door locks, brakes and steering systems, among others.
In the future, harmonizing different regulations will have an even greater impact on the automotive industry. In 15 to 30 years, traditional carbon-dioxide-emitting vehicles may have been largely replaced by a new generation of alternative fuel vehicles such as plug-ins and fuel cells. Battery and vehicle recycling will require consistent environmental standards across markets – standards that should be considered and established well in advance of when needed. Bilateral negotiations and dialogue on this issue should begin now, before differing standards become entrenched and create new barriers between markets.
The Bali agreement demonstrated again the significant role of the WTO as a forum for international trade negotiation. Trade wars involving different national and regional economies always result from conflicts of interest. Clearly, addressing these conflicts is challenging and will not always result in concrete agreements. However, as we observed from the Bali deal, a practical, operations-focused approach to negotiations can create a platform for the WTO to act.