British car manufacturers could still face higher export tariffs even if there is a post-Brexit trade deal with the EU, according to a letter to the car industry from Britain’s chief Brexit negotiator.
In the letter seen by the BBC, Lord David Frost said the European Commission had rejected proposals for components from non-EU countries used on UK car production lines to be considered British.
Lord Frost admitted in the letter to the car industry that the UK had failed to persuade the EU to agree to the idea – adding that they “obviously cannot insist on it”.
This means that even if a zero tariffs trade deal is agreed between the two parties, UK-manufactured vehicles that do not have enough British components will attract tariffs when exported to the EU.
The BBC said it has also obtained a separate draft legal text in which the UK requested the manufacturing of goods such as electric cars and batteries to be treated leniently, even if the majority of components are imported.
An anticipated deal is expected to allow any components sourced from EU countries to count as British, an idea known as “cumulation”.
However, the letter from Lord Frost says the EU has denied the request to extend cumulation to include other partners of the UK and EU, including Turkey and Japan.
According to the BBC, the letter said: “The commission has made clear that it will not agree third-country cumulation in any circumstances, which we regret, but obviously cannot insist upon.
“I am sorry to say that so far they (EU negotiators) have neither been willing to discuss these nor share any proposed text with us.”
Trade body the Society of Motor Manufacturers and Traders (SMMT) called for the sector to be prioritised in the negotiations, “not traded off against other industries”.
Chief executive Mike Hawes said: “The UK Government has repeatedly expressed support for our automotive industry as the nation’s biggest exporter of goods.
“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.”
The Prime Minister’s official spokesman said the Government remained committed to “working with the automotive industry to try to ensure an outcome that reflects business interests across the UK”.