Car manufacturers in Europe have called on the EU to take a less restrictive stance on the UK's future market access, saying that some aspects of Brussel’s current position are “not in the long-term interests of the EU automotive industry”.
German automotive industry
According to reports in the FT, the European Automobile Manufacturers’ Association (ACEA) - a group that represents companies including Fiat, BMW and Toyota - sent a letter to Commission President Ursula von der Leyen urging Brussels to “reconsider its position” on rules for determining whether goods will qualify for tariff-free trade.
ACEA's demands include that the EU should lower the percentage of components in a car that must be either European or British for the vehicle to qualify for the benefits of any EU-UK trade deal.
The group is also asking for a “phase-in period” of these new rules to help the sector better adapt to the new business environment. The letter is seen as a sign of how key EU industries are concerned about the potential economic fallout of Brussels’ approach to the negotiations.
EU-UK talks remain at a standstill following demands from UK prime minister Boris Johnson for a “fundamental” change of approach.
Both sides’ stated goal remains an agreement providing tariff-free, quota-free trade on all goods. But Michel Barnier, the EU’s chief Brexit negotiator, has said that businesses should be prepared to accept “short-term adaptation costs” in the name of protecting the bloc’s “long-term economic interests”.
He has been vocally adamant that Brussels should not sugar-coat the UK’s decision to leave the single market and customs union, and has questioned whether the UK should be allowed to retain the “prominent position” on the EU market that it currently enjoys.
The hardline stance is prompting increasingly urgent warnings from companies about the potential economic consequences for Europe of weaker trade ties. In June, more than 50 food and drink trade associations from the EU and UK wrote to Brussels urging it to take a more “flexible” approach to future arrangements, warning that a tariff-free trade agreement will be “meaningless” unless measures are taken to ensure companies can take advantage of zero-tariff rates.
The "rules of origin" in a future EU-UK trade deal are a particular cause of concern for different European industries. Such rules are a standard feature of trade agreements and establish the extent to which a company can source components from different parts of the world while still counting the finished product as European, and therefore remain eligible for tariff-reduction benefits.
London entered future-relationship talks with Brussels looking to establish arrangements that would allow companies to count all content from the EU and the UK as local, as well as content from other countries, such as Japan, with which both the EU and UK had deals. However, Brussels pushed against including such content.
The EU also pushed a restrictive line on how much foreign content is allowed, partly out of concern that Brexit Britain could become a manufacturing assembly hub for the EU market, of 45% of a car. ACEA wants that number pushed up to 50% to be "in line with the UK position".
ACEA says that advances in technology, such as autonomous vehicles, will mean auto firms seek out "hardware, firmware and software" from other countries as a necessity.
The group is also looking for a "phase-in period", which would allow greater use of non-local components for a limited time frame.
“Brexit is a unique and unprecedented situation that creates new barriers in the shape of rules of origin where none existed before,” the FT reports the association saying in the letter. “Long-term supplier contracts bind manufacturers to specific suppliers for many years and this should be taken into account in the FTA.”
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