Benefits of trade liberalisation measures on automobile industry

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Trade liberalising measures have played a major role in the development of transnational production network in both Europe and Asia, claims Dr Heribert Dieter from the Notre Europe think-tank.

In a comparing European and Asian examples, the author demonstrates how national and international regulations affect the decision of private-sector players for production arrangements. In particular, Dieter analyses the effects of regionalisation on the automobile industry as well as the regionalisation process in general. 

Herbert says that European examples, such as Audi in Hungaria and Renault in Romania, show the advantages of cross-border trade and transnational production network for the private-sector strategies. The relocation of production in low-cost countries in eastern Europe enabled the European industry to be more competitive, the author states. 

The example of the joint-venture agreement, creating Toyota-Peugeot-Citroën Automobiles, shows how Asian car manufacturers took advantage of globalisation and the emergence of eastern Europe as a location for car production in an innovative manner. The integration of the Czech Republic in the EU has been the decisive factor determining the success of the venture, the paper argues. 

Even if both Europe and Asia have initiated process of transnational division of labour, the process is more fragile in Asia as a consequence of the rules of origin. According to the author, a major advantage of European industries is the free-trade area that allows companies to source inputs into a range of countries without having to consider their origin. 

Therefore, the author recommends the creation of an East Asian customs Union, which would represent a more advanced form of regionalisation than a free-trade agreement. Apart from the impediment that Asian countries would have to overcome, this single regulatory scheme would be an improvement for transnational production networks. 

To access the full policy paper on Notre Europe’s website, please click here 

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