European automotive industry leaders warn of €110 billion ‘no deal’ Brexit disaster
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With just 15 weeks before the Brexit transition period ends, European automotive industry leaders have joined forces to call for the EU and UK to secure an ambitious free trade agreement (FTA) without further delay.
If a deal is not in place by 31 December, the UK and the EU will be forced to trade with each other under World Trade Organisation (WTO) non-preferential rules, including a 10% tariff on cars and up to 22% on vans and trucks.
In order to avoid a ‚no deal’ scenario at the end of the transition period, negotiators on both sides are being urged to reach an agreement. A recent calculation estimated a lack of an FTA would cost the pan-European automotive sector some €110 billion in lost trade over the next five years, putting jobs at risk in a sector that supports 14.6 million livelihoods and represents one in 15 EU and UK jobs.
In an official press release published on Monday, the European Automobile Manufacturers Association (ACEA) said that the EU and UK automotive leaders are united in their call for an urgent agreement of an ambitious free trade deal before the end of the transition period. According to the statement, new calculations show the catastrophic impact of ‘no deal’, with WTO tariffs putting the production of some 3 million EU and UK built cars and vans at risk over the next five years.
The ACEA argue that ‘no deal’ would mean combined EU-UK trade losses of up to €110 billion by 2025 – a figure that doesn’t include the €100 billion in lost production value due to the coronavirus crisis. To avoid a second economic hit to the sector, which employs some 14.6 million people, the industry has urgently called for negotiators to secure a deal that delivers zero tariffs, modern rules of origin and avoids different regulations between the two parties.
Tariffs would be passed on to the customers
The ACEA’s stance matches that of other leading organisations representing vehicle and parts makers across the EU, namely the European Association of Automotive Suppliers (CLEPA) and its 21 national associations, including the Society of Motor Manufacturers and Traders (SMMT), the German Association of the Automotive Industry (VDA), Comité des Constructeurs Français d’Automobiles (CCFA) and La Plateforme automobile (PFA). All of the above have warned that the sector could face severe repercussions.
Indeed, economies and jobs on both sides of the channel are at risk of a second devastating hit in the shape of no deal coming on top of around €100 billion worth of production lost so far this year due to the coronavirus crisis. European Automobile Manufacturers Association
Moreover, the ACEA and the above signatories warn that the aforementioned tariffs, which are far higher than the small margins of most manufacturers, would almost certainly need to be passed on to consumers. That would make vehicles more expensive, reduce choice and impact demand. Furthermore, automotive suppliers and their products will be hit by tariffs too, resulting in higher production costs and/or a rise in imports of parts from other competitive countries.
Zero tariffs are a must
Achieving an ambitious EU-UK FTA with automotive-specific provisions is critical to the European automotive industry’s future success, the industry says. Any deal should include zero tariffs and quotas, appropriate rules of origin for both the internal combustion engine and alternatively fuelled vehicles, plus components and powertrains, and a framework to avoid regulatory divergence.
The European automotive industry leaders also stress that companies need concrete info on the trading conditions they will encounter in 2021, as final preparations need to be made now:
Crucially, businesses need detailed information about the agreed trading conditions they will face from 1 January 2021 to make final preparations. This, combined with targeted support and an appropriate a phase-in period that allows for greater use of foreign materials for a limited period of time, will ensure businesses are able to cope with the end of the transition period.
Photo: gblaskovics/ Wikimedia Commons