New start for trade relations with the USA

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As an export industry, mechanical and plant engineering relies on free world trade and partnership-based forms of conflict resolution. The election of Joe Biden as US President provides an opportunity to revive the multilateral approach to trade policy. The new Asian free trade area RCEP underlines the need to see trade policy also as a strategic issue. In addition, Biden's announcements offer approaches for making progress in climate protection, also to the benefit of German industry.

Reliable relations

Despite all diplomatic disagreements: The USA was the largest export market for German mechanical and plant engineering in 2019, with exports of around 20 billion euros. Many special machines are no longer produced in the American domestic market. With Joe Biden, reliability and honesty will move back into the White House. However, the basic situation will not change: even under President Biden, the USA will remain domestically oriented. In terms of trade policy, the focus will clearly be on China.

Climate protection offers opportunities

The announced return to the Paris climate protection agreement and Biden's announcement that he will devote more attention to climate protection offer great opportunities for the mechanical and plant engineering industry. In order for the USA to become climate neutral by 2050, 1,700 billion dollars are to be invested, primarily in renewable energies. But the US President will not be able to realize these plans with the claim "Made in all of America" alone. The mechanical and plant engineering industry is ready to supply the necessary energy and environmentally friendly technologies.

Broad-based trade agreement

The new Asian free trade zone RCEP is a wake-up call for the USA and also for Europe. The U.S. will need to recommit to the Asia-Pacific region. At the same time, the Biden administration will improve cooperation with the WTO. From VDMA's point of view, now is a good time to enter into talks with the USA for the conclusion of a transatlantic trade agreement. The goal here should not be a "TTIP 2.0", but an industrial goods agreement and agreements on the mutual recognition of conformity assessments.

Did you know that a complete elimination of customs barriers in transatlantic mechanical engineering alone would lead to cost savings of 850 million euros per year?

Extraterritorial sanctions

Germany and the EU do not recognize the extraterritorial application of laws enacted by third countries and consider them to be contrary to international law. The USA currently has a corresponding sanctions policy against Iran and Russia, among others, but also against Germany (North Stream II) and China. The economy needs political, legal and financial support measures here in order to be able to cushion extraterritorial sanction risks. This includes, in particular, secure and reliable payment channels to all countries.

Reject Buy American

The VDMA rejects the tightening of "Buy American" laws put forward by the new US president. The US should ensure transparent, open and predictable public procurement procedures. Procedures should always be based on the principle of equal treatment. Ultimately, full market liberalization as in the EU must be pursued and equal treatment of foreign bidders guaranteed at all policy levels of government procurement.

Strengthening Europe globally

If the EU does not want to be torn between the USA and China, it must position itself confidently and develop common strategies. Only in this way can the EU achieve better cooperation with the USA under the Joe Biden administration. At the same time, the threat of coercive economic measures (economic coercion) will continue to pose enormous challenges for the EU in 2021, especially extraterritorial measures such as export controls and sanctions, the forced transfer of sensitive data and punitive tariffs.

Conclusion

The EU must now specifically seek solidarity with the US. Only together can we shape issues such as WTO reform and a level playing field with China. By eliminating all industrial tariffs and dismantling technical barriers to trade we can deepen the transatlantic economic area. A self-reliant and capable EU on the one hand and clear transatlantic ties and partnership on the other are not contradictory. Quite the contrary.

Contact

Ulrich Ackermann, Head of VDMA Foreign Trade,
Phone 49 63 6603-1441, e-mail ulrich.ackermann@vdma.org

Boris Greifeneder, VDMA Capital Office,
Phone 49 30 306946-15, e-mail boris.greifeneder@vdma.org

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