The impact of trade liberalisation on the EU automotive industry: trends and prospects

In this report, we quantify the impacts for the automotive industry in the EU of a series of Free Trade Agreements (FTAs) with EU trade partners.

Detailed analyses of 19 FTAs with existing and potential EU FTA partners show that free trade is a win-win situation for the automotive industry in Europe and its partners. The automotive industry has a large economic footprint in the EU today, and this footprint is likely to grow even larger if the 19 FTAs are fully implemented. Our analysis covers cars, light vehicles and parts and components.

If both tariff and non-tariff barriers are reduced, completing and fully implementing all 19 possible FTAs would increase EU car production by 4 per cent, or almost 580,000 more cars, even after taking into account the increased competition in the home market.

Both in relative and absolute terms, the changes in EU exports are expected to exceed the change in imports, and free trade is more likely to be an opportunity than a threat to the EU’s automotive industry as a whole. That being said, Europe’s automotive industry is in a difficult situation and due care is needed in sequencing and refining the agreements to ensure a successful transition to more open trade. Seen in a broader perspective, the EU automotive industry should find good opportunities from the full menu of FTAs that is on the table and should not be threatened by fears and lose their appetite for more open trade.

The study is commissioned by DG Trade at the European Commission