The draft UK-EU agreement – which came into play on 1 January – has alleviated some of the no-deal insecurity for the UK automotive industry. The Trade Cooperation Agreement (TCA) secures tariff and quota-free trade for the industry ‘in principle’, providing the foundations for its recovery.
According to a statement from the Society of Motor Manufacturers and Traders (SMMT), whilst the agreement helps to address immediate industry concerns, the TCA is by no means a substitute for the seamless trade enjoyed by members of the EU.
SMMT chief executive, Mike Hawes, explained the implications of the TCA across tariffs & rules of origin, regulatory barriers, customs & trade facilitations, and people & movement.
The SMMT has called for immediate ratification and implementation of the draft TCA, alongside the establishment of a phase-in period to help businesses adapt.
Tariffs & rules of origin
Despite securing tariff-free, quota-free trade “in principle”, Hawes believes the TCA carries little weight if the UK does not “secure at pace investment in battery gigafactories and electrified supply chains” across the six-year phase-in period.
Such battery production infrastructure is crucial if the UK is to maintain its international competitiveness.
According to Hawes, the lack of solid commitments from either party on the recognition of standards beyond UNECE and close regulatory cooperation within automotive is “disappointing”.
Hawes continued: “We urge the UK and EU to commit to addressing these challenges once the TCA is ratified. Businesses in the UK and EU alike will incur additional costs arising from a lack of mutual recognition of type approval or technical services, and we may face capacity issues and delays in testing and bringing new products to market.”
Customs & trade facilitations
Concerning customs and trade facilitations, frictionless trade within automotive hinges on just-in-time supply chains. Hawes commented: “The commitment to simplify customs procedures is welcome as it will reduce time and costs for all – but with no detail or timeframe for implementing reform, immediate costs and friction are inevitable.”
Suppliers and manufacturers on both sides should expect to face significant administrative challenge, limiting productivity and increasing operating costs. Subsequently, customs facilitation must be accelerated to support universal growth.
People & movement
Finally, Hawes believes the industry will suffer due to limitations on movement of individuals. He explained: “While the TCA does include provisions that may ease some of the administration and costs that will be involved as the UK adopts a new points-based immigration policy, we await further guidance from Home Office as to its implementation.”
Moving forward into 2021, Hawes believes the government must now pursue the wider trade opportunities that Brexit is supposed to deliver while advancing the transition to electric vehicle manufacturing.
Hawes concluded: “With the deal in place, government must double down on its commitment to a green industrial revolution, create an investment climate that delivers battery gigafactory capacity in the UK, supports supply chain transition and maintains free-flowing trade – all essential to the UK Automotive sector’s future success.”