Even With A Brexit Deal, UK Car Industry To Face A Blow

Even if the United Kingdom and the European Union manages to strike a deal on Brexit, the car industry of Britain runs the risk of losing out, claims a report published by the BBC based on documents seen by the media.  

Some experts see imposing higher tariffs for car parts imported from Japan and Turkey and used in the UK auto industry as those will not be treated as British.

So far, the UK government has not been successful in getting the car parts deal it wants and “obviously cannot insist on it”, said Britain’s chief Brexit negotiator in a letter.

A key to a free trade deal is being able to have enough auto parts that are sourced within the UK and EU.

The European Commission has already rejected one of the key priorities of the UK – that of treating the parts and components imported into Britain from Japan and Turkey count as British in any deal, says chief negotiator Lord Frost in a letter to the car industry and seem by the BBC, the repot claimed.

The meaning of this could be that some of the automobiles manufactured in the UK is likely to attract taxes or trade – also known as tariffs, when the finished products are exported into the EU even if the UK manages to strike a “zero tariff” trade deal with the EU.

Another of requests made regarding UK’s manufacturing industry as made by the UK’s negotiating team is a request for lenient treatment and being treat as British made for electric cars, batteries, and bicycles that are made the UK but with majority of components being imported into the country, said the BBC report based on data from a separate draft legal text.

The letter says: “I am sorry to say that so far they [EU negotiators] have neither been willing to discuss these nor share any proposed text with us”.

The requirement of the UK manufacturers being able to prove that the goods that are exported from the UK are one that have actually completely been made in the country – and within the specified threshold of British parts, even with a free trade agreement with the EU, has also been  mentioned in the document, the report claimed. It is expected that the specified threshold of British parts will be kept at about half of the total components. 

Any components from EU countries can count as British – something known as “cumulation” according to the terms of an anticipated deal with the EU.

But according to the BBC report quoting the letter, it is required that the above condition be also extended to other partners of the UK and EU, in particular Japan and Turkey, which has been refused by the EU.

Much of the manufacturing in the UK is below the required threshold and the reverse is not the case for the European Union. This issue is more acute in the case of electric vehicles because a larger proportion of imported components are used in this segment and a large proportionfo the value of an electric car is contained in the battery.

“The commission has made clear that it will not agree third-country cumulation in any circumstances, which we regret, but obviously cannot insist upon,” says Lord Frost’s letter, written on 7 September.

(Adapted from BBC.com)

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