The UK car industry may be hit by tariffs even if a free trade deal is agreed with the EU, the BBC reported today, due to issues over the provenance of certain car parts.
Turkish and Japanese car parts used in cars made in this country will not be classed as British, meaning that some exports could face higher duties.
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The problem was revealed in a letter to the car industry from the UK’s chief Brexit negotiator David Frost.
In the letter seen by the BBC, he said that the negotiators had thus far failed to get the bloc to agree to the car parts deal the UK wants and that he “obviously cannot insist on it”.
Under the terms of the deal, car parts made in EU countries and used in UK models can count as British, in a process called “cumulation”.
However, the demand that the same status be applied to partners from outside of the bloc is being refused.
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The chief executive of trade body the Society for Motor Manufacturers and Traders said that the car industry should not be traded off against other sectors.
“The UK government has repeatedly expressed support for our automotive industry as the nation’s biggest exporter of goods”, Mike Hawes said.
“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.”
A separate legal document also showed that negotiators had asked for leniency on electric cars, batteries, and bicycles manufactured in the UK but containing foreign parts.
Under the terms of the deal it is expected that the UK will have to prove that its exports are actually British-made, with a possible parts threshold of 50 per cent.
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Last week Europe and Britain’s car industries warned a no-deal scenario could spark a €110bn (£101.5bn) black hole in trade over the next five years.
In a joint statement, 23 auto associations said that in event of a failure to agree a deal, 3m vehicles could cease to enter manufacture, costing EU production sites €57.7bn and £52.8bn for UK plants.
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