Car makers risk losing out in 'zero-tariff' Brexit trade deal

3 October 2020 - autocar

Car makers risk losing out in 'zero-tariff' Brexit trade deal

Letter sent to British manufacturers claims they could still face punitive tariffs, even under a 'zero-tariff' deal, on components sourced from Japan and Turkey

The EU has rejected the UK's bid to have cars made using parts sourced from Japan and Turkey treated as British in a post-Brexit trade deal, a letter sent to UK car makers from the UK's chief Brexit negotiator reveals.

This means that even if UK prime minister Boris Johnson renegotiates a deal with the EU, the British car industry could still face a hit because such cars might not be considered British made and therefore subject to EU tariffs. Crucially, this remains the case even if the UK government strikes a 'zero-tariff' deal.

In order to qualify as British made and be exported to the EU without tariffs, cars made by UK manufacturers will have to have a specified threshold of British parts, expected to be around half.

The terms of an expected deal with the EU would allow components sourced from EU countries to count as British. However, this privilege does not extend to non-EU countries such as Japan and Turkey.

According to a draft legal text seen by multiple outlets, the UK has requested that manufacturing of electric cars, batteries and bicycles be counted as British even if many of the components used to make them are sourced from elsewhere.

But in a letter to the car industry, Britain's chief negotiator, Lord Frost, admits that Britain has so far failed to secure the car parts deal it wants and "obviously cannot insist on it".

The consequences of this could be severe for UK car makers, particularly those that rely heavily on parts sourced from Japan and Turkey, such as Toyota and Nissan.

Mike Hawes, chief executive of The Society of Motor Manufacturers and Traders, said: "The UK government has repeatedly expressed support for our automotive industry as the nation's biggest exporter of goods.

"Given its importance to the economy and livelihoods and the damaging consequences of tariffs, we need the sector prioritised in negotiations, not traded off against other industries.

"Any agreement must work for automotive so we need both sides to strike a deal that safeguards the global competitiveness of the sector and consumer choice in the market."

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