Populism threatens the prosperity of the automotive industry

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Results of global sales in 2016 – Source: JATO

In the year 2016, we have verified how the populist movement are gaining prominence, but not in developing countries, but in the most powerful economies in the world. This trend is causing a climate of instability, driven by politicians who don’t think about the consequences of what they are enacting.

This industry is fully global

Virtually no you will find examples of cars that are manufactured in the same country, whereas up to the last screw. If we ignore the economic theory in force, the nations are wealthier the more they trade with other countries, although it is always best that the trade balance of payments is favorable (more sales than purchases).

populism has not invented the mr. Trump nor the supporters of leaving the European Union. We can cite an example in present-day Russia, ruled at pleasure by Vladimir Putin. Your cravings expansionary in Eurasia have achieved an economic blockade internationally that profoundly affects its economy. The trend is not going precisely to the low, hence we have the eurosceptics in France, the Netherlands…

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Countries that are signatories of the Treaty Trans-Pacific today. Image: Wikimedia Commons

The preconditions of stability and harmony promoted by many trade agreements in which the signatories undertook to facilitate the exchange of goods, services, industrial property, and a long etcetera. The united states and the European Union were negotiating over the years, the famous TTIP, or Transatlantic Partnership for Trade and Investment, that Trump has finished burying. I wasn’t sure that was entirely beneficial to the europeans, the US is a country less a friend of the regulations.

The Administration of Donald Trump also scuppered the launch of the Treaty Trans-Pacific (TPP), which would boost the trade of several nations bathed by the largest ocean in the world. The signatories were Brunei, Chile, New Zealand, Singapore, Australia, Canada, the united States, Japan, Malaysia, Mexico, Peru, and Vietnam. Without the main partner, the TPP will not have many hopes.

Another danger is the Treaty of Free Trade of North America (NAFTA), as Donald Trump intends to return to your country production that has been outsourced to Mexico, as if that could be done in the evening to the morning, under penalty of heavy tariffs on companies that are investing in that country. Under his simple reasoning, all those cars could be produced in the united States. There may be a train crash between the two neighbours.

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Factory Hyundai in Nosovice (Czech Republic)

In the European Union the threat more clearly represents the “Brexit”, by which the United Kingdom will cease to form part of the common market and the free movement of people and goods. The Premier british, Theresa May, has already made it clear that his country wants a “Brexit” hard, that is to say, that there will be no free movement of people. Hence, there will be no free movement of goods, and access to the common market.

Out of a free trade agreement urges all to both sides of each border

The concern of the manufacturers is on the rise, but can do little until they are realized the conditions of “divorce”. Nissan, owner of the main factory of automotive british received assurances from Theresa May that the Uk will continue to be a good place to do business. The details are not known by the public, nor by the competitors of Nissan.

there are Already consequences although the United Kingdom remains in the European Union: the impact on the pound, which has lost value against the euro, has been losing hundreds of millions of euros to the automotive. To the british it costs them more money to import vehicles and parts, and have already seen increases of tariffs to compensate for devaluation. To manufacturers of low volume, such as Aston Martin, benefits them: their cars exported give the most money in pounds.

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In the medium and long term, if the competitiveness of the countries that are out of the agreements they will at least is going to produce the opposite effect of that which you seek to politicians. Just imagine the impact for the French industry of the car if the Front National to consume the output of the country of the EU can be a nightmare. The money avoids the problems and go to places where you do business you have less uncertainties. Economic protectionism is like naphthalene, is old-fashioned.

In what affects us? If the car is going well, there is more competition, prices adjusted and more efficiency in the whole process. In contrast, if these firms go bad, it reduces the range of models, prices rise to compensate for the losses and lose more money in tariffs and barriers to trade global. Our country is a good example of an appropriate place to do business, despite the political instability intrinsic that we have, the less national politicians care about this industry due to its importance.

Our country exports about 80% of the production of cars

If it were not an attractive destination to invest, the money would go to Eastern Europe or even north african. Recent history reminds us of dozens of factory closures in Europe and the united States, in addition to the almost bankruptcy of General Motors and Chrysler. That might appear to have learned the lesson, even if it is just a little bit. This industry was going in a straight line to recovery, the populism is going to be like dropping anchor without looking at the depth.