The Consequences of Brexit (part 2)

[I1L2T3]

Why don't remainers stop trying to second guess and read what the business secretary says about the deal= https://www.theguardian.com/business/2016/oct/27/new-nissan-super-plant-hopes-for-tariff-free-eu-access

 

The thing is that statement removes the guesswork. That's the point.

[mafya]

The thing is that statement removes the guesswork. That's the point.

 

From the article=

 

"The Guardian understands the government has privately told executives in the car industry that it is confident the sector can retain tariff-free access to the single market. The government and senior executives believe the UK automotive industry is in a strong position when it comes to negotiations about leaving the EU because Britain imports more cars from Europe than it exports."

 

Now if the sector cannot retain tariff-free access to the single market then there is no promise of financial compensation or state aid being offered =

 

"Speaking on BBC1’s Question Time on Thursday night, Clark indicated there had been no offer of financial compensation or state aid. “There’s no cheque book. I don’t have a cheque book,” he said.

[I1L2T3]

From the article=

 

"The Guardian understands the government has privately told executives in the car industry that it is confident the sector can retain tariff-free access to the single market. The government and senior executives believe the UK automotive industry is in a strong position when it comes to negotiations about leaving the EU because Britain imports more cars from Europe than it exports."

 

Now if the sector cannot retain tariff-free access to the single market then there is no promise of financial compensation or state aid being offered =

 

"Speaking on BBC1’s Question Time on Thursday night, Clark indicated there had been no offer of financial compensation or state aid. “There’s no cheque book. I don’t have a cheque book,” he said.

 

That's the point. I'm not claiming there is any offer of state aid. If there is no offer of state aid then:

1. We will be in a customs union

2. Or remaining in the EU

 

If there is state aid it will be in the domesday scenario of WTO rules and transference of tariff duties via the government to private enterprise. Like I said earlier corporate cronyism or lefty intervention....

 

None of the options are good. All worse than now.

[unbeliever]

Nissan was certainly fearful of them. Nissan don't primarily care about the macro effects of Brexit on the UK economy. The primary concern was its own bottom line. That is what the story this week was all about, the fact it has been told by the government that its bottom line wont be impacted. The point I'm making is whatever it was told it can only mean, in a rational world, one of two things:

1. That we will be in a customs union

2. We will not leave the EU

 

The undesirable irrational alternative is the use of tariffs collected on imports to provide state support for Nissan, and presumably all other impacted exporters. That would mean that hard Brexit ushers in an era where all exporters suckle on the teat of the state. Not at all what we want. There is every chance that the EU could block our exports if that was happening because of rules around state aid for private companies. Which leads us back to the only possible things Nissan could have been told:

1. That we will be in a customs union

2. We will not leave the EU

 

 

This is far fetched wishful thinking.

Nissan have likely been reassured that in the event of the maximum 10% tariffs, the government will take reasonable steps to cushion the effect on their business.

 

This is cost neutral as the tariff money is extra revenue that we didn't really want to collect and we shan't hand it to them, just cut their taxes to compensate for the tariffs. This would be my guess anyway.

But I really don't think it will come up as the first thing that the EU will put on the negotiating table will be "What will it take for you to not put tariffs on our car and agricultural exports to the UK?".

 

It is likely (although not certain) we shall agree a wide range of drastically reduced (compared to WTO MFN) tariffs and other restrictions with the EU.

It is not likely in my view that we shall agree to apply the same external tariffs as the EU to other nations. There's no reason to do so. Therefore we are (again in my view) talking about a free trade agreement, not membership of a customs union.

The EU may not understand the difference. If so we shall have to educate them.

Edited October 30, 2016 by unbeliever

[I1L2T3]

This is far fetched wishful thinking.

Nissan have likely been reassured that in the event of the maximum 10% tariffs, the government will take reasonable steps to cushion the effect on their business.

 

This is cost neutral as the tariff money is extra revenue that we didn't really want to collect and we shan't hand it to them, just cut their taxes to compensate for the tariffs. This would be my guess anyway.

But I really don't think it will come up as the first thing that the EU will put on the negotiating table will be "What will it take for you to not put tariffs on our car and agricultural exports to the UK?".

 

It is likely (although not certain) we shall agree a wide range of drastically reduced (compared to WTO MFN) tariffs and other restrictions with the EU.

It is not likely in my view that we shall agree to apply the same external tariffs as the EU to other nations. There's no reason to do so. Therefore we are (again in my view) talking about a free trade agreement, not membership of a customs union.

The EU may not understand the difference. If so we shall have to educate them.

 

It's not wishful thinking at all. It's the reality of it. The only way for Nissan's supply chain and EU sales not to be impacted would be for us to remain in a customs union. It may be a specific customs union for vehicles and automotive parts but it's the only way the government can make good its promise to Nissan of tariff-free trade.

[lizmachin]

It's not wishful thinking at all. It's the reality of it. The only way for Nissan's supply chain and EU sales not to be impacted would be for us to remain in a customs union. It may be a specific customs union for vehicles and automotive parts but it's the only way the government can make good its promise to Nissan of tariff-free trade.

Wouldn't the same apply to Renault trying to sell cars to the UK?

[I1L2T3]

Wouldn't the same apply to Renault trying to sell cars to the UK?

 

The impact depends on their supply chain. For example how much of their logistics involve components and materials going to/from the UK.

 

Given that Nissan and Renault are in a kind of logistics alliance I'd bet that the dependence of the Nissan plant on materials and components coming from the EU is much greater than the dependence of Renault plant in Europe on materials and components coming from the UK. The latent manufacturing capacity in Europe is going to be adequate to produce substitutes anyway if sourcing components from the UK became prohibitive due to tariff costs.

[Robin-H]

https://www.theguardian.com/business/2016/oct/30/nissan-eu-tariff-free-brexit-sunderland

 

Nissan apparently told the UK is seeking tariff-free EU deal for carmakers.

[unbeliever]

It's not wishful thinking at all. It's the reality of it. The only way for Nissan's supply chain and EU sales not to be impacted would be for us to remain in a customs union. It may be a specific customs union for vehicles and automotive parts but it's the only way the government can make good its promise to Nissan of tariff-free trade.

 

No. A customs union includes an agreement to apply common external tariffs. All we need for this is an agreement not to impose tariffs on each other. That's a free trade agreement.

We don't need a customs union, we want a free trade agreement.

The UK government is also continuing to build a UK based supply chain for cars which will have helped to attract Nissan. The more this is built up, the less the impact of tariffs if they do come. The UK government is also contributing to training in this area, which makes the UK an attractive place to build cars anyway.

[I1L2T3]

No. A customs union includes an agreement to apply common external tariffs. All we need for this is an agreement not to impose tariffs on each other. That's a free trade agreement.

We don't need a customs union, we want a free trade agreement.

The UK government is also continuing to build a UK based supply chain for cars which will have helped to attract Nissan. The more this is built up, the less the impact of tariffs if they do come. The UK government is also contributing to training in this area, which makes the UK an attractive place to build cars anyway.

 

We can't start negotiating any free trade deal until we leave the EU. At that point it's WTO or customs union membership in the interim. The free trade deal will take years to negotiate from that point.

 

Nissan has been told that it won't be impacted by tariffs. A customs union is the only viable way to achieve that in the medium term.

 

At least hard Brexit is off the agenda. Thank goodness.