Are we ever going to hear something positive about Brexit or NAFTA?
We’re waiting for the white smoke, either from North America or the UK or from the European Commission. So far, there’s hardly been a whiff. It’s not as if these negotiations are minor or even relatively unimportant, especially for the automotive industry. It’s probably fair to say that they are the most crucial ever undertaken. The signs are that the Japanese vehicle manufacturers operating in the UK are becoming very concerned about the prospect of a so-called ‘hard’ Brexit. At a high-level Downing Street meeting just a couple of weeks ago, the Japanese ambassador to the UK warned Prime Minister Theresa May that the three Japanese manufacturers currently building cars and engines in the UK, Nissan, Toyota and Honda, were likely to consider pulling out if favourable trade agreements between the UK and the EU were not forthcoming. Between them, these three directly employ some 13,000 UK workers, not to mention those indirectly dependant on their plants. As around 80% of UK-built cars are exported, this should not be seen as an idle threat.
Automotive manufacturers with plants in Britain,the others include BMW, PSA and Volkswagen, have been asking the UK government to ensure that vehicles and components can continue to enter and leave the country with minimal trade barriers once EU ties end. PSA Group warned three months ago that the UK plants it acquired when buying General Motors’ European operations will need to become more competitive to offset risks from Brexit. Mrs. May’s government needs to make its intentions clear, and soon.
Meanwhile, the latest round of NAFTA talks in Montreal has yet to produce any concrete and mutually acceptable breakthroughs. Canada and Mexico are reluctant to give in, and say that US demands to shrink its trade deficit would cause more harm than having no North American Free Trade Agreement at all. The main sticking point appears to be President Trump’s insistence on raising the automotive rules of origin to 85% from 62.5% and to add a US-specific requirement of 50%. He also wants to expand the so-called tracing list that, while raising the amount of paperwork required, would also expose parts that are foreign but are being counted as domestic under the current agreement. Canada and Mexico may be prepared to accept a modest increase in the rules of origin, but not to the extent proposed by President Trump.
Simon Duval Smith
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