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Europe’s carmakers published a joint statement demanding that the European Union (EU) and Britain forsake a ‘no deal’ Brexit because the consequences would be catastrophic.
Britain is scheduled to leave the EU on October 31, although there is some doubt over the exact date because the U.K. Parliament recently ruled that if a Brexit deal couldn’t be achieved, an extension should be agreed to the end of the year.
In a joint statement issued Monday, lead organizations representing the European auto industry including those from Germany, Britain, the European Automakers Association, known by its French acronym ACEA, and supplier organisations, joined forces to underline the impact a ‘no deal’ Brexit would have on what it called one of Europe’s most valuable economic assets.
There is something illogical about the demand against ‘no deal’. Britain’s opposition Labour party has demanded that the U.K. itself must not countenance ‘no deal’, but Conservative member of the European Parliament Dan Hannan said that makes no sense.
“To see how ridiculous that argument is, try the opposite. Imagine that, during the (Brexit) referendum campaign, someone had said: “If we vote Leave, fine, but we won’t actually be able to do it unless we then get the EU’s explicit permission.” No one would have dared say anything so absurd. But wanting a deal is not the same thing as giving the other side a veto over whether you leave,” Hannan said in his Sunday Telegraph column.
Monday’s joint statement said barrier-free trade was crucial for the continued success of the highly integrated European auto sector. The application of World Trade Organisation (WTO) tariffs would cost industry and consumers 5.7 billion euros ($6.3 billion).
The statement said the automotive industry is one of the EU’s biggest success stories and contributors to growth and wealth, producing 19.1 million vehicles a year and employing 13.8 million people across the wider sector – one in 16 of the EU’s workforce.
They said the repercussions of a ‘no deal’ would be severe.
“The U.K.’s departure from the EU without a deal would trigger a seismic shift in trading conditions, with billions of euros of tariffs threatening to impact consumer choice and affordability on both sides of the Channel. The end of barrier-free trade could bring harmful disruption to the industry’s just-in-time operating model,” the statement said.
“Automotive manufacturers believe that such disruption and cost must be avoided, and that all effort should be made to deliver an orderly withdrawal of the U.K. from the EU,” the statement said.
If the EU and Britain failed to agree a deal on October 31 and WTO trade terms were invoked, that wouldn’t mean ‘no deal’ forever. Talks would likely continue and an agreement on a suitable free trade deal might well be reached in days or weeks or perhaps months.
The European auto industry has become increasingly shrill lately in voicing its opposition to a ‘no deal’ Brexit, using words like catastrophic, which sound bad but don’t actually mean much.
PSA Group CEO Carlos Tavares said failure to agree a deal would destroy the lives of the next generation of people in the U.K. That was a week after Tavares told the BBC failure to agree would be like a train-wreck.
“(U.K. Prime Minister Boris) Johnson and (EU chief negotiator Michel) Barnier, they have to find a solution and that’s all. There is no other way. Anything else will be a disaster for everybody as much for the U.K., as much for my employees, as much for continental Europe,” Tavares said.
“With a no-deal (Brexit) you are going to destroy the lives of the next generation of people in the U.K. and that’s not fair, so a deal is a must,” Tavares said.
British PM Johnson has said Britain will leave the EU on October 31, “no ifs, no buts” because it is now about 3-1/2 years since the referendum vote decided to end the membership. Any further delay is not acceptable, according to Johnson. Britain had been scheduled to leave the EU on March 31, then again the next month.
The best case scenario for the industry would be a free trade deal under which nothing really changes from the current setup. The worst case would be a ‘no deal’ Brexit with no formal deal, and Britain reverting to WTO terms. That would restore a tariff regime, but given around half of Britain’s foreign trade is conducted under WTO rules now, that shouldn’t cause many problems. But manufacturing industry fears that any change to its current free access to imports and exports might disrupt the smooth flow of its just-in-time supply chains.
Roger Bootle, chairman of Capital Economics, said in his Daily Telegraph column Monday that use of the phrase ‘no deal’ distorts reality.
“What leaving without a deal means is simply leaving without an overarching agreement as laid down in Article 50 of the Lisbon Treaty (under which countries can leave the EU). It does not mean a breakdown of relations, nor a cessation of trade. Nor does it necessarily mean the absence of a trade agreement in due course,” Bootle said.
If there was ‘no deal’, Britain and the EU could continue to trade without tariffs by mutually agreeing to do so under the General Agreement on Tariffs and Trade’s Article 24, pending the conclusion of a Free Trade agreement, Bootle said.
