Today's agreed sale of General Motors' European arm, including Vauxhall, to France's PSA Group, which owns Peugeot and Citroen, highlights the need for an EU/UK customs deal post-Brexit, says leading Conservative MEP for East of England and Internal Market Committee Chairman Vicky Ford.
Current EU Customs Union arrangements mean that a car or van can be made up of components sourced from all over the EU and sold as a European product to customers in non-EU countries under the beneficial tariff arrangements that the European Union has negotiated. This is the so-called "rules of origin" element of the Customs Union relationship
Mrs Ford, who chairs the European Parliament committee for the Internal Market, which includes responsibility for Customs Union, said: "It is crucial for operations like the Vauxhall van manufacturing in Luton that new arrangements on rules of origin are clearly defined as soon as possible.
"This production line is one of the most efficient General Motors has anywhere in the world and has had close ties to Peugeot for many years. Peugeot has a production line in France that mirrors much of the British facility, making a different vehicle but using many similar parts. Hence why it makes logical commercial sense that many of the components used on the Luton assembly line are sourced from the French supply chain.
"There are similar supply chain arrangements all across the British automotive sector; the engines in a West Midlands-assembled Range Rover are made in Germany and Ford engines, made in Dagenham, are sent to Turkey to be put into vehicles. Restructuring supply chains is possible, though significant investment in time, capital and skill will be needed before the fruits will begin to show.
"In the immediate period as we leave the EU, we need to resolve how products made up of parts sourced from across Europe will be treated. If there is no new arrangement on country of origin rules then many British based manufacturers are concerned that they may not be able to benefit from any new UK trade deals that we ourselves negotiate as the assembled products may not be sufficiently 'British' under the WTO rules.
"Conversely, without a specific deal there is a risk that vans like those made in Luton would not be able to benefit from low tariff rates the EU has negotiated with those countries because significant parts of the vehicle will come from outside the EU27.
"Last week I met representatives from the European automotive suppliers association who pointed out that many continental manufacturers want the negotiations on cars to be resolved urgently. Not only are British buyers a large source of revenue but we are also Europe's most significant market for new vehicles. Without sales to British consumers it is likely that many continental companies will fail to achieve legally binding targets on sales of modern lower emissions products.
"The Prime Minister has made it clear that the UK intends to leave the Customs Union but has also stated that she wishes to see a new customs arrangement negotiated. There are countries outside the EU Customs Union which have specific relationships with it on country of origin rules. For example there are rules agreed with Norway that allow for cumulation, so that goods are counted together as coming from one country.
"Negotiations on EU/UK trade post Brexit will inevitably have a political dimension and General Motors may have concluded that finding a technical solution for the Vauxhall plants may be more amicably agreed with a French owner in the driving seat rather than an American one.
"This is a complex area, but it's also one where negotiators on both sides of the Channel need to invest energy in examining options and finding solutions that fit the needs of modern manufacturing economies."
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