European Office
VDMA´s Priorities
on
Crosscutting
Issues
in the context of the
Transatlantic Trade and
Investment Partnership
(TTIP) Negotiations
Registration number
in the register of representative bodies:
976536291-45
March 2014
VDMA´s Priorities on Crosscutting Issues
in the context of the Transatlantic Trade and Investment
Partnership ( TTIP) Negotiations –
We call for …
1. The complete elimination of tariffs
2. Business-friendly rules of origin
3. The facilitation of custom procedures
4. The facilitation of Transatlantic mobility
5. Unconditional and transparent access to public procurement at all levels
6. Effective investment protection
7. Transparency and harmonization of intellectual property rights
8. The elimination of extraterritoriality
9. The transparent development of technical regulations on product safety
10. Encouragement of regulatory cooperation
11. Mutual recognition of conformity assessment procedures
12. Accreditation according to internationally recognized rules
VDMA - Verband Deutscher Maschinen und Anlagenbau e.V. – German Engineering Association
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I. Introductory remarks
Who are we?
The German Engineering Association (VDMA) is the largest association representing the
mechanical engineering industry in Europe. Its approximately 3,100 German and
international member companies have a total of approximately 993,000 employees in
Germany and account for a level of production worth around 200 billion EUR. A key feature
of the mechanical engineering industry is its large number of SMEs. About 86% of VDMA
members are SMEs - according to the EU definition - two-thirds of them even employ fewer
than 100 persons.
VDMA covers the entire process chain which covers everything from components and plant
manufacturers, system suppliers and system integrators through to service providers. We
reflect the varied customer-supplier relationships all along the value-adding chain, permitting
both industry-specific and intra-industry cooperation.
We represent an extremely export-oriented industry. Our share of exports in the German
mechanical engineering industry is approximately 77 %. Of that figure, approximately 59 % is
exported to countries outside the EU-28.
The importance of the Transatlantic mechanical engineering business
The mechanical engineering industry is a major sector of industry in both the US and the EU.
Around three million people are currently employed in the mechanical engineering industry in
the EU and around one million in the US. The European mechanical engineering industry
has a high export ratio while the US mechanical engineering industry has primarily served
the domestic market to date. However, current US industry policy is generally focusing on
increasing US exports and underlines the major importance of this for the development of the
US labor market.
Transatlantic trade in mechanical engineering products accounts for a significant share of the
total volume of trade between the EU and the US. In 2012, machinery supplies constituted
over 9% of total EU imports from the US (the supply volume of trade in machinery stood at
€16.7 billion) and made up just under 13% of total EU exports to the US (the supply volume
of trade in machinery amounted to over €37 billion). The European mechanical engineering
industry therefore achieved a higher export volume to the US than the European automotive
industry.
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Within the EU-28, Germany is the most important supplier of machinery to the US by some
margin (2012: 36% share of supply), followed by Italy, Great Britain, France and the
Netherlands. The US is the second most important export market for German mechanical
engineering companies (+15% (2012), + 0.9% (2013)).
The significance of transatlantic trade in machinery is also reflected in investment levels. The
latest figures indicate that investment in the US mechanical engineering industry makes up
over 20% of the direct foreign investment made by the German mechanical engineering
industry, making the US the most important investment location outside Germany. The
European mechanical engineering industry is a top investor in the US overall, well ahead of
the European automotive industry. Only the European chemical industry invests more heavily
in the US.
II. VDMA calls for …
1. The complete elimination of tariffs
Whereas the tariffs for machinery imports from the US to EU are around 1.5% to 3% on
average, the tariffs for EU machinery exported to the US stand at around 2% to 4.5%. Based
on these figures, tariffs are not the major obstacle to transatlantic trade for the mechanical
engineering industry.
But if the tariffs of only the three largest European mechanical engineering branches to the
U.S. in terms of EUR net exports were eliminated completely, the European mechanical
engineering industry would save about 106 million EUR.
For German mechanical engineering sector, power transmission engineering, the machine
tools section and materials handling and logistics technology are the largest branches in
terms of export to the US. The potential financial gains from eliminating the tariff for these
branches would come to around 90 million EUR.
The TTIP should therefore ensure the full elimination of tariffs, resulting in savings of
hundreds of millions of EUR for the Transatlantic mechanical engineering industry even
though tariffs are not the major obstacle to Transatlantic trade.
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2. Business-friendly rules of origin
For the European mechanical engineering industry it is very important that the Rules of
Origin (RoO) in the mechanical sector (HS 84, 85 and 90) are similar to those in other FTAs,
e.g. proposals for CETA or the recent proposals for new Pan-EURO-MED-rules. The sector
needs alternative value added rules.
Having different RoO will lead to there being an additional bureaucratic burden on European
mechanical engineering companies (mainly SMEs). The danger is that these companies will
not take advantage of the benefits of TTIP.
The TTIP should therefore ensure that business-friendly Rules of Origin are put in place.
3. The facilitation of custom procedures
For quite some time more substantial requirements have to be complied with when
completing forms, especially by the Importer Security Filing and Additional Carrier
Requirements (10+2-Rule), introduced in 2009 by the US Customs and Border Protection
Authorities. In the requested documentation, e.g. in bills, a lot of information has to be
provided. Obtaining that information is often very difficult for companies. In addition, the US
Container Security Initiative (CSI) leads to delays during the exporting process. The mutual
recognition of customs security programs (AEO and C-TPAT) are the first positive signals to
have been observed for EU exporters.
The TTIP should therefore ensure further facilitation for approved AEOs. Furthermore, the
EU should keep on monitoring the suspended US initiative of 100 percent screening of cargo
containers.
4. The facilitation of Transatlantic mobility
As part of the acquisition of foreign machinery and components by US customers and the
assembly in the US of systems purchased abroad, commissioning and assembly and repair
and servicing work are generally agreed. There is a lack of transparency over the extent to
which foreign assembly specialists can perform these tasks themselves within the scope of
US legal provisions on entry and employment (“hands on” vs. “supervision”). This also
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applies to arrangements where foreign parent or affiliated companies provide the service for
a US subsidiary or affiliate or where the service is provided for other foreign contract partners
of the US customer in the US.
The TTIP should therefore ensure the facilitation of short-term entry for business purposes
and temporary assignments in order to provide after-sales service, perform repairs,
collaborate with colleagues etc. Furthermore, TTIP should cover the facilitation of short-term
entry and the assignment of intra-company transferees.
In addition, TTIP should make it easier for foreign professionals to utilize their skills and
education through enhanced transatlantic cooperation on the licensing and recognition of
professional qualifications.
5. Unconditional and transparent access to public procurement at all levels
In recent years, German mechanical engineering companies have taken part in public
tenders, e.g. for metro systems and airports, which are highly lucrative and account for a
large amount of the companies´ business activity. However, with the ‘Buy America’ clauses –
which apply to all federal procurement procedures - and their different levels, it is very
difficult to be successful in such tenders in general. This has led to the fact that foreign
tenderers are always represented by local US subsidiaries. But even the US subsidiaries
have problems understanding the requirements of ‘Buy America’ and under what conditions it
is possible to supply from the EU. Increased transparency is therefore much needed.
Furthermore, it is remarkable that 17 US States have so far not signed up for the
Government Procurement Agreement (GPA) at the World Trade Organization (WTO) level.
The potential gains for the European mechanical engineering industry from further market
openings in the field of public procurement are huge and account for several billions of EUR.
Due to a VDMA member´s inquiry, many different US states are of particular interest in terms
of business opportunities, such as New York, Pennsylvania and Florida but also many
others.
Furthermore, major US business hubs are attractive places to place a bid in the course of a
public tender. Such cities include, for example, New York, Chicago, Washington, Boston, Los
Angeles etc. These places often have a metro system under construction, under expansion
or that requires equipment to be replaced.
.
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The TTIP should therefore ensure transparent public procurement procedures at all levels,
based on the principle of equal treatment. Any requirements for local content should be
abolished and precluded. Furthermore, it should contribute to the full participation of all US
states to the GPA.
6. Effective investment protection
The European mechanical engineering industry is a top investor in the US. Ensuring effective
investment protection within the framework of the TTIP negotiations is therefore an important
issue for the European mechanical engineering industry.
The negotiations on an investment chapter have currently been suspended to allow civil
society to engage into a dialogue to a greater extent with the decision-makers. A heated
debate arose over whether there should be an investor-state dispute settlement procedure.
Under the Lisbon Treaty, EU Member States have assigned powers to negotiate investment
agreements to the European Union and a chapter on investment protection is consequently
also to be negotiated within the framework of TTIP. An investor-state dispute settlement
procedure is typically part of such investment agreements, also to provide companies with
protection from arbitrary state decisions.
Apart from that, the inclusion of settlement procedures for investor-state disputes in
investment protection agreements is in line with German trade tradition. Even today, there
are approximately 90 German investment protection agreements that contain an investorstate arbitration clause.
The TTIP should therefore have a chapter on investment protection and include an investorstate dispute resolution procedure.
7. Transparency and harmonization of intellectual property rights
Different requirements in relation to patent laws and lack of knowledge of the intellectual
property system constrain the US’s activities particularly of European SMEs (with regard to
patents and trademarks). US patent litigation is often unaffordable and extremely
burdensome (in particular due to rules on evidence and damages) and the threat of a patent
lawsuit can be used to force companies into a settlement.
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The EU should therefore provide additional information and support, in particular to SMEs,
with regard to the protection and enforcement of intellectual property rights in the US. In the
past, the EU-supported project ‘Transatlantic IPR Collaboration’ has been an important step
in this direction. Also - in a different region - the China IPR SME Helpdesk has provided
excellent advice and information material to EU companies operating in this market. Any
follow-up or comparable measure for the US would be appreciated.
Nevertheless, as there are still major differences between the patent laws of the US and the
EU, it would be advisable to continue with further harmonization of substantive patent laws.
The TTIP should therefore ensure further harmonization of patent laws.
8. The elimination of extraterritoriality
National laws and regulations with extra-territorial effect not only violate international law, as
they disregard the political sovereignty of other states, but they are also a huge obstacle to
global economic cooperation. Anyone who assumes the ultimately incalculable risk of trade
restrictions that apply extra-territorially through the installation of foreign components into
machinery will inevitably consider switching to “unencumbered” suppliers. VDMA is familiar
with cases where German companies have restricted supplies from the US to an absolute
minimum to avoid the extra-territorial US export controls as far as possible.
The TTIP should therefore ensure that no export restrictions with direct and indirect extraterritorial effect can be issued and that existing regulations with extra-territorial effect are
rescinded. This applies both to trade and economic sanctions as well as to regular export
control provisions for capital goods (dual-use export controls). Extra-territorial-oriented reexport restrictions (both in embargos and in regular export controls), supplier and
performance restrictions directly aimed at extra-territorial companies as part of national
embargos and business activity restrictions aimed at certain citizens working for companies
headquartered abroad as ex-patriots should be abolished in particular.
9. The transparent development of technical regulations on product safety
VDMA is campaigning for there to be only one standard for a technical situation that is
international. The necessary standard is then highlighted in consensus with all the interested
parties as a cornerstone for a consistent and coherent set of standards. In the context of the
VDMA - Verband Deutscher Maschinen und Anlagenbau e.V. – German Engineering Association
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TTIP negotiations, one should strive to achieve a corresponding agreement on the basis of
the existing ISO and IEC standards.
Furthermore, planned standardization procedures or regulations must be announced in a
transparent way. Those involved and those who have not yet been involved must be given
the opportunity to comment before the drafting process is completed. The comments
received must be discussed in a public meeting and a consensus must be reached there.
Standardization proposals are to be described in advance on a shared website of the TTIP
partners. This will ensure that standardization applications, standardization drafts and the
final version are available to everyone.
In that respect, these conditions must be fulfilled in the development of standards: national
principle of delegation, principle of consensus, public survey, voluntary application, basically
no definition of the conformity assessment procedure and technology neutrality.
If proposed legislation for the safety of machines and/or electrical products is planned, then
these proposals, the drafts and the final legal documents will be published on a shared
website of the TTIP partners. In addition, the body responsible for drafting the legislation will
be published. What is more, adequate transition periods are needed until the new regulation
is applied.
The TTIP should include a uniform approach to drawing up relevant standards recognized by
both sides, in order to make use of its great potential in relation to breaking down trade
barriers. The quickest and easiest path to harmonization is international standards at the
ISO/IEC level.
10. Encouragement of regulatory cooperation
In order to encourage the regulatory cooperation, a mutual information, commenting and
advisory platform should be prepared for current standardization projects coordinated by
CEN and CENELEC (from the EU side) and ANSI (from the US side). The goal must be that
this facilitates targeted informal commenting by interested parties from the other side of the
Atlantic at the stage of the drafting of the standards (for CEN and CENELEC: prEN) and an
approximation of the technical requirements in the standards is thereby promoted.
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The TTIP should make such a platform available to the participating and interested parties in
order to support the harmonization of standards as part of the drafting process.
11. Mutual recognition of conformity assessment procedures
Product safety is not only of key importance when it comes to consumer products, but also
with regard to capital goods. Transatlantic trade would be considerably easier if the "tested
once, accepted everywhere" principle applied for product safety. A first step in this direction
is the approval of different conformity assessment procedures regarding conformity with
fundamental, harmonized safety requirements. Accordingly, self-certification by the
manufacturer (as is the case in the EU in accordance with Module A of Regulation
768/2008/EC) should be valid for transatlantic trade. Only in exceptional cases, such as for
machines with particular hazard potential, should other conformity assessment procedures
(e.g. third-party certifications) be considered.
At once one has to bear in mind that costs of a third party certification are being completely
passed on to the companies. In addition, the third party certifier does not take on any liability
for the certified entity. This liability remains much more with the entrepreneur. The European
system of self-certification takes the burden off the company and does not at the same time
involve any losses of safety.
The TTIP should therefore contain an approach for mutual recognition of conformity
assessment procedures, accompanied by harmonization of requirements in advance, in
order to avoid unnecessary duplicate testing on both sides.
12. Accreditation according to internationally recognized rules
If the conformity assessment procedure calls for the involvement of a third party, this party
must be accredited in accordance with the internationally-recognized IAF/ILAC (International
Accreditation Forum/International Laboratory Accreditation Cooperation) rules and possess a
Mutual Recognition Arrangement (ILAC-MRA) or Multilateral Recognition Arrangement (IAFMRA). This would provide the basis for mutual recognition according to the "tested once,
accepted everywhere" principle.
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The TTIP should take advantage of uniform and internationally recognized rules for the
accreditation of third-party certification bodies in order to allow the mutual recognition of
third-party certifications.
III. Final Remarks
This VDMA position paper is supplemented by the VDMA position paper entitled ‘VDMA on
Transatlantic Trade and Investment Partnership’ (August 2013).
Both VDMA position papers can be downloaded in English from the websites of the VDMA
and the VDMA European Office, which are available in German and English.
http://www.vdma.org/article/-/articleview/1725910
https://www.vdma.org/en/article/-/articleview/1725910
https://euro.vdma.org/article/-/articleview/1725910
https://euro.vdma.org/en/article/-/articleview/1725910
Contact
Ulrich Ackermann
Managing Director
VDMA Foreign Trade
Lyoner Straße 18
60528 Frankfurt
Tel: + 49 69 6603 1441
Email: [email protected]
Daniel Kern
Advisor
VDMA European Office
Boulevard A. Reyers 80
1030 Brussels
Tel: + 32 2706 8207
Email: [email protected]
Naemi Denz
Managing Director
VDMA Technical and Environmental Affairs
Dr. Gerhard Steiger
Managing Director
Normenausschuss
Maschinenbau (NAM) im DIN
Lyoner Straße 18
60528 Frankfurt
Tel: +49 69 66 03 1341
Email: [email protected]
Lyoner Straße 18
60528 Frankfurt
Tel: +49 69 66 03 1226
Email: [email protected]
Gabriele Welcker-Clemens
Advisor
VDMA Foreign Trade
Lyoner Straße 18
60528 Frankfurt
Tel: + 49 69 6603 1437
Email: [email protected]
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