Brexit blow to car industry as EU rejects crucial UK plan to avoid export tariffs

Rob Merrick
·2-min read
The EU wants to prevent the UK being an offshore assembly hub – as it seeks to woo manufacturers across the Channel (PA)
The EU wants to prevent the UK being an offshore assembly hub – as it seeks to woo manufacturers across the Channel (PA)

Brexit has delivered another blow to the struggling UK car industry after the EU rejected a crucial UK plan to avoid tariffs on exports.

Ministers had asked for parts brought in from Japan, South Korea or Turkey to be treated as British, to qualify under strict rules-of-origin if a trade agreement is struck.

But, in a letter to car bosses, Britain's chief Brexit negotiator has admitted he has failed to persuade the EU to accept the proposal – and “obviously cannot insist on it”.

It means exports now face tariffs unless the majority of their value originates from the UK or EU. Typically, the figure is only 44 per cent for a car assembled in this country.

The EU rejected the idea because it saw the UK effectively pleading for the benefits of a customs union – despite Boris Johnson insisting the UK is leaving the trading arrangement.

It is determined to prevent the UK, outside the EU, being an offshore assembly hub –as it seeks to woo car manufacturers across the Channel.

The problem is particularly acute for electric vehicles, where a large proportion of the value of the car is contained in the battery.

Privately, car bosses are believed to be furious, believing ministers are fighting much harder for the tiny fishing industry than for its manufacturing jobs.

In his letter, obtained by the BBC, David Frost, the UK’s negotiator, admitted he had failed to persuade the EU to even “discuss” the plan – called ‘cumulation’.

“The Commission has made clear that it will not agree third-country cumulation in any circumstances, which we regret, but obviously cannot insist upon,” it states.

The defeat lays bare how even a trade deal – which still hangs in the balance – will not spare domestic producers from the harsh effects of leaving the single market and customs union.

They also face the loss of ‘just in time’ production with massive queues looming at UK ports, and a ‘passport’ required for lorries to enter Kent.

The automotive sector was worth £18bn to the UK economy in 2018, directly employing 168,000 people and hundreds of thousands more in supply, retail and servicing.

However, the failure to secure the same exemptions from tariffs as for UK-made components also has implications for prepared foods and other manufacturing.

The Brexit deal negotiated by Theresa May, but thrown out by parliament, contained proposals to minimise restrictions on rules of origin.

But that option was stripped out of the withdrawal agreement signed by Mr Johnson last year, as he sought a harder Brexit.

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