As 2017 commences, several new factors have come into play in Europe and around the world that have the potential to impact the U.S. pump industry’s business significantly in the coming years. Many of these factors relate to the ongoing political/economic instability in various parts of Europe, but in today’s interconnected global economy, innumerable current events and trends can impact the industry. While this is not an exhaustive list, end users can expect the following six factors to affect the pump marketplace.
1. U.S. Presidential Election
The first major factor that could affect the industry in 2017 is Donald Trump’s election as U.S. president. As the nation awaits inauguration day, it is difficult to know how Trump’s administration will affect the economy in the long-term.
While it appears that a Trump White House could be less committed to maintaining the global business system that has existed in some capacity since World War II, how far the administration deviates from the status quo will help determine how the business climate in Europe will change.
If the Trump administration makes trading with Europe more difficult, the U.S. pump industry could face unforeseen consequences. On the other hand, if Trump’s policies treat European partners more as traditional allies with whom good relations are paramount, they could end up benefitting trade.
Trump’s apparent mercurial personality makes it difficult for pump companies to plan their European strategies given that the range of potential outcomes is much larger than what the U.S. would likely have with a more traditional president-elect.
The second major factor affecting the industry is Brexit. The vote of the British to leave the European Union (EU) sent shock waves throughout global markets. While the economic doomsday predictions that followed were overblown, the impact on European-American trade has yet to be determined and will largely depend on the final Brexit negotiations.
American pump companies doing business in Britain and the rest of Europe will face the challenge of operating in two different regulatory environments. Exactly how different they will be depends on the negotiations—the outcome of which remained unknown at press time. The Brexit vote has depreciated the British pound substantially, and this has made American exports into the U.K. less competitive at the very least (all things being equal).
3. Anti-Globalist Trends
Another issue is the rise of hard-right/anti-globalist parties in various parts of Europe. The free-trade paradigm that has been more or less in place in Western Europe since the end of World War II is being called into question. In 2017, France could end up with a president from the National Front, an anti-globalization party that, up until a few years ago, was not largely taken seriously. The migrant crisis—and Germany’s unpopular response to it—is fueling segments of the German political spectrum that are less sympathetic to open borders and free trade.
Across Europe, right-wing/anti-globalist parties that either were not taken seriously or maybe did not even exist 10 to 15 years ago are helping to set the agenda in many countries. The result is likely to be a Europe less open to free trade, which means that doing business in Europe may be more difficult in the future.
4. Resurgence of Russia
The fourth major factor is the resurgence of Russia. One of the major foreign policy challenges for the West is how to manage Russia’s attempts to flex its political and military muscle. A consequence is that Russian movements, which can be unpredictable, may have impacts on foreign currency markets for years to come.
5. U.S. Commitment to NATO
There is some question regarding Trump’s commitment to the North Atlantic Treaty Organization (NATO). While Trump may have been hyperbolic on the campaign trail, any indication (true or not) that he is softer on NATO than prior U.S. presidents could cause Russian President Vladimir Putin to be more aggressive than he otherwise might have been. To the extent that the Russian threat to the Eastern European Union seems to be growing, this could cause a depreciation in the euro and make U.S. products sold in Europe more expensive.
The converse is also true. These currency fluctuations are likely to complicate planning for U.S. companies doing business in Europe. While many factors cause currency fluctuations, Russia has not been a factor in the past but is likely to be one for the foreseeable future.
6. Regulatory Environment
Both current and possible future regulations for energy savings are themes on which the pump industry in Europe will remain focused. Currently, building circulators and certain other pumps have regulations in place regarding minimum efficiency requirements. Working groups in Europump (the European Association of Pump Manufacturers) are involved in defining proposed efficiency standards for wastewater and other types of pumps.
While getting agreement and implementing and enforcing these regulations across the EU can be challenging and time-consuming, these new rules will be implemented likely in the next three to five years. U.S. pump manufacturers must be aware of the ramifications regarding exporting product into the EU.
Other recent EU regulation changes and implementations will affect pump manufacturers. Recently new ATEX rules took effect. The changes basically modify definition and paperwork procedures, but it is important to be aware of the new requirements.