30 September 2020

FT: EU won’t grant preferential trade terms to UK car industry, admits Frost

Chief Brexit negotiator says Brussels not willing to be flexible on zero-tariff access to bloc.The British car industry will face new barriers exporting to Europe even if a UK-EU trade agreement is agreed later this year, the UK’s chief Brexit negotiator has admitted.

The UK has been pushing during trade negotiations for manufacturers to be able to count, or “cumulate” Turkish, Japanese or other non-EU inputs as “local” for the purposes of exporting under the agreement but Brussels has rejected the request.

Under standard EU trade rules, a vehicle must typically be 55 per cent “locally made” in order to qualify for zero-tariff access to the bloc. The letter raises fears in the industry that a lopsided trade deal will allow European cars from Germany or France to be imported to the UK without tariffs, but that British-built models will be penalised for not meeting the rules — pressuring manufacturers to raise prices or shift production to the continent to remain competitive.

In the letter, first reported by the BBC but seen by the Financial Times, Lord Frost said that UK negotiators had argued that so-called “cumulation” would have “significant benefits for business and consumers” and that the UK had put forward detailed proposals. “But once again the [European] Commission has made clear that it will not agree third country cumulation in any circumstances, which we regret, but obviously cannot insist upon,” he wrote.

The letter, dated September 7, said that the UK had lobbied Brussels’ negotiators for more flexible arrangements on so-called “rules of origin” — in line with requests from the auto industry — but without success. “We have shared details of this approach with the commission but I am sorry to say that so far they have neither been willing to discuss these nor to share any proposed text with us,” he wrote. Four out of five of cars made in the UK are exported, with the majority going to Europe.

Plants owned by Toyota, PSA and Honda are all dependent on EU sales for most of their business. While many of Britain’s car plants rely on parts from Europe some, such as Nissan and Toyota, also import a significant proportion of their components, such as hybrid systems, from Japan....

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