With global uncertainty looming large over international business and finance even the most adventurous manufacturers and exporters are dithering in making any business plan. However, a more pragmatic analysis of our economic environment shows us that, despite the geopolitical troubles, there are many foreign opportunities for the machine tool industry.
Roland Feichtl, President of CECIMO, stated, “The MT market appears to be slowing down, due to the increasing difficulties in the international political scenario.” Total orders for Q2 in 2019 have gone down 19% with respect to Q1 and around 24% if compared to Q2 in 2018. Economic factors are, indeed, behind this apparent change of cycle, but geopolitical issues also hold sway over this. One of these is well known, as it has been at the centre of the European political debate since June 2016: Brexit.
Since 2018, British machine tool builders have been CECIMO’s seventh largest producer, contributing more than 500 million euros in goods (a share of 2.3%), as well as the seventh largest consumer, with 4.2% of overall CECIMO consumption (around 730 million euros). They are CECIMO’s ninth largest exporter, providing more than 560 million euros to the total sales abroad.Whatever the outcome, the UK will remain a strategic member within CECIMO, and it will support the association’s efforts to ensure that trade will continue as smoothly as possible.
The world economy faces another challenge: the United States-China trade war. Aggressive tariff policies have harmed the trade relations between the two countries. Though these tariffs have mainly harmed Chinese and American goods, they have also affected CECIMO customers. In 2018, CECIMO’s national producers held significant trade surpluses with China (a positive balance of 2.7 billion euros) and the US (1.7 billion euros). Considering these are two of the largest markets in the world, this trade war could possibly diminish CECIMO’s competitive edge.
Another issue is the Russia-Ukraine conflict. In 2014, Russia was sanctioned by the US and the EU over its political interference in neighbouring Ukraine. These measures, however, have not settled the dispute and have hampered European businesses, especially companies that trade in the Russian industrial markets. Russia is currently CECIMO’s fifth largest export market, with a 4.6% share of total exports.
The current Iran conflict also poses difficulties for a number of MT builders. Machine tool exports to Iran have plummeted since 2010, when they reached their peak (157.3 million euros), to a mere 4.2 million euros in 2018. The restriction on trade of dual-use goods has limited CECIMO’s business potential in the Iranian market, and it will surely continue holding back Iran’s transition to a manufacturing-based economy.
In spite of the above problems, the Juncker Commission paved the way for the signing of new trade agreements with MERCOSUR — a regional trade bloc that currently comprises Brazil, Argentina, Uruguay and Paraguay- and with some strategic, export-oriented countries, such as Mexico and Vietnam.
Regarding MERCOSUR, on the 28 June 2019 the EU and South American trade bloc representatives reached a political agreement to sign a new bi-regional trade deal. One of its main features is the removal of certain high customs duties, which will particularly benefit key industrial sectors, such as cars (35%), car parts (14%-18%) and machinery (14%-20%). In 2018, EU exports in goods to MERCOSUR were worth 45 billion euros and imports, around 43 billion euros.
Beyond trade, our members are demonstrating how the manufacturing businesses continuously improve their productivity by investing in advanced digital systems and highly innovative technologies, even when economic perspectives seem unclear. CECIMO urges the European Union to support the Industry 4.0 with clear and concise policies and by counteracting technophobic discourses. Investing in new technologies is the key to future success, even in a difficult economic period, and this edition of EMO Hannover 2019 highlights it more than ever.
