The consequences of the submarine dispute for the German car industry

The consequences of the submarine dispute for the German car industry Tobias Kaiser 3 min. ago | After the US went it alone with Australia and the UK, France wants to block a trade pact with Australia that is almost ready for negotiation. This would have considerable consequences for key German industries. The Australian market is attractive for German carmakers - but now the French submarine dispute could spoil opportunities. It was a gesture of accommodation that would have had the potential to smooth the waters between Paris and Washington. But it did not work. Just at the beginning of the US trip of the French-born EU Internal Market Commissioner Thierry Breton, the USA announced the end of the entry ban for Europeans. Breton was delighted, posing in Washington with Jeff Zients, the Covid 19 coordinator at the White House - but the mood remains spoiled. In the meantime, even the EU demonstratively rushed to France's side. Commission President Ursula von der Leyen declared that the behaviour was "unacceptable". The submarine deal between the USA and Australia with the junior partner Great Britain has caused anger in Paris. The anger in the Elysee Palace could cost uninvolved German companies dearly, as the dispute jeopardises a largely negotiated free trade agreement between the EU and Australia. Indeed, clear words already came from Paris at the weekend: the agreement could be scrapped, French Minister for European Affairs Clément Beaune let it be known. Beaune belongs to the closest circle of power of French President Emmanuel Macron and is considered his whisperer in European affairs. "Keeping one's word is the condition of trust between democracies and allies," Beaune told the Politico information service. "That's why it's unthinkable to continue with negotiations as if nothing happened with a country we no longer trust." Should the negotiations be massively delayed or should the agreement even fall through, companies in Germany in particular would suffer. This is shown by an impact assessment of the European Commission for the free trade agreement. The economic significance of the agreement would be limited, but an ambitious agreement would still contribute around 3.9 billion euros to the EU's economic output in 2030. Exports from Europe to Australia could increase by almost a third in 2030. In Europe, according to the report, car manufacturers, suppliers and mechanical engineers would benefit most from the agreement - all of which are industrial sectors with above-average strength in Germany. "If the free trade agreement with Australia is delayed, this will be a problem for German industry in particular," says Bernd Lange, Chairman of the Trade Committee in the European Parliament. "German car manufacturers have a great interest in selling their cars there. This is especially true for the premium manufacturers. Australia still has a luxury tax for higher-value vehicles, but German manufacturers are counting on that falling with the agreement." In fact, Australia no longer has a domestic carmaker whose business would need to be protected with such a luxury tax. Holden, a subsidiary of US conglomerate General Motors that built cars for the Australian market based on Opel models, among others, ceased production on the continent in 2017. This year, the brand is set to disappear. German machine builders and manufacturers of tooling technology would also have been among the beneficiaries of a deal, especially companies that make equipment for mining and coal extraction. "With every month of delay, companies lose potential sales," warns SPD politician Lange. It is true that the member states do not negotiate directly with Australia, but the European Commission, which has far-reaching powers in the area of trade and represents the 27 member states, conducts the talks. The Directorate-General for Trade, headed by Sabine Weyand of Germany, is in charge. However, the Commission is in permanent consultation with the Member States and the European Parliament; after all, the Parliament and the Member States have to approve the finalised agreement. France's vote is crucial because the Australian side wants to sell meat and dairy products more easily into the EU in future. Australian cattle farmers would be the biggest beneficiaries of the agreement on the Australian side, according to the Commission's impact assessment. They have a big interest in securing new customers in Europe because political tensions between Australia and China are causing the Chinese sales market to collapse. "France has to make compromises for easier market access for Australian agricultural companies, and that's what we have to do.