Motor Sector: Export Markets

Question

Asked by

To ask Her Majesty’s Government what recent discussions they have had with United Kingdom-based motor manufacturers about access to export markets for that sector.

My Lords, the Government engage frequently with all the leading car manufacturers in the UK, including in relation to exports. A cross-section of UK vehicle makers is represented on the new trade advisory group and took part in the first meeting on 31 July to discuss access to those export markets involved in current free trade negotiations.

My Lords, Nissan’s head of operations has said that its Sunderland plant will be unsustainable if there is no deal with the EU and we have to move to WTO terms so damaging for our motor industry. Can the Government give an assurance that there will be a deal guaranteeing a future for Nissan in Sunderland, the UK’s number one car maker?

My Lords, the Government are working very hard to achieve a successful negotiation with the EU which will benefit our manufacturers, but I would draw the attention of the noble Baroness to the Japan FTA which we signed on Friday, to show what can be done. It allows UK auto manufacturers to access lower tariffs and tariffs that will, over a number of years, reduce to zero on a number of auto components such as road wheels, suspensions, systems and clutches. For some specific car parts, including speed indicators, the tariffs will reduce to zero.

My Lords, is the Minister aware that there is a problem not only with exports but with imports, where the UK is a manufacturer of leisure vehicles such as caravans and mobile homes? This issue was brought to my attention by a member of my extended family who runs such a business in the Midlands, and I declare that interest. Germany has supported a boom in its leisure vehicle industry, with the reduction of VAT on parts, and as a result it has become increasingly difficult to purchase parts for the UK’s industry, which currently has such potential for expansion. To avoid a serious drop in production and sales, and potentially in UK staycations, will the Minister consider whether such an incentive could be provided in the UK to support a similar rule here?

My Lords, the noble Baroness makes a very good point and I am aware of the great enjoyment that these vehicles give to people throughout the United Kingdom. I do not have the details of those matters, but I will write to the noble Baroness with them.

My Lords, after everything that the Government have said over recent days and recent years about the need to retain or gain complete autonomy and freedom over state aid rules, would it not be inconceivable that the deal with Japan that the Minister referred to would in effect put into a treaty—which we would have to put into domestic law—the EU regime of restrictions that the Government say they need freedom from in perpetuity? Surely that cannot be the case, so can the Minister reassure all those Brexit supporters in the north-east and elsewhere that the reports in the press about this action by the Government potentially replicating it are surely inaccurate?

My Lords, the UK-Japan agreement contains standard FTA provisions on subsidies. Motor manufacturers, including those in the north-east, and their representative organisation have strongly welcomed the UK-Japan deal. These subsidy chapters in trade agreements help ensure that fair and open competition exists for both parties by working to limit the effects of trade-distortive industrial subsidies. The subsidies chapter in this UK-Japan FTA rolls over the provisions from the EU-Japan EPA.

My Lords, can my noble friend the Minister tell the House what opportunities there are for UK motor manufacturers to diversify their supply chains so as to widen their sources of parts production to third countries which may be able to supply equivalent high-quality parts at competitive prices? Can he also say whether such opportunities will be only with countries with which we will have entered into FTAs by 31 December 2020, or whether they also include countries with which we expect to trade on WTO terms?

My Lords, my noble friend makes an excellent point. Of course, these supply chains cannot be turned off and on overnight, but I have no doubt that our FTA programme in general is already helping auto manufacturers in this area, and our new Japan EPA has already demonstrated this utility. Our automotive sector deal supports the industry’s ambition to increase the level of UK content by value in domestically built vehicles to 50% by 2022, so we do not have to see these supply chains only located overseas. It is of course a huge benefit to the United Kingdom if they can be located in our country as well.

My Lords, some time back, the Government announced the formation of regional trade commissioners with great fanfare and a road map that would include the preparation of action recommendations. Despite multiple requests through Questions for Written Answer that progress be made available, to date nothing of substance has been forthcoming. What is the status of each of them? What consultations have there been with individual sector providers, and, importantly, when can Parliament finally assess progress as the result of a more transparent process to be established by the Government?

My Lords, the noble Viscount refers to regional trade commissioners. These are senior officials who are in place throughout the world overseeing our investment and export activities overseas. He may be referring to the trade envoys system, which allocates parliamentarians to individual countries to support trade activities in those countries. These trade envoys do very good work and I am pleased to say that we expect to announce a list of new trade envoys very shortly.

My Lords, will not the problem here be rules of origin and the target of 50%, which the noble Lord referred to in an earlier response? However, according to the SMMT, the proportion of a car made in the UK is currently less than 25%. Does the noble Lord agree with the SMMT that, if the current UK and EU FTA negotiations fail to deliver rules of origin provisions, there will be a 10% tariff on finished vehicles and trucks and up to a 4% tariff on parts when exporting to the EU, and that this will cost the industry more than $4.5 billion annually? Therefore, is there a plan?

My Lords, of course there is a plan. It is to conclude a successful negotiation with the EU in relation to these matters. That is vital because the automotive sector is extremely important to the UK. The UK exports 80% of vehicles manufactured, which accounts for no less than 14% of UK-manufactured exports.

My Lords, this industry is deeply integrated with the EU and was already suffering because of Brexit. Honda in Swindon and Ford in Bridgend are both casualties, and the decision has been made by Ineos not to build in Merthyr. The pandemic has added more problems. Vehicle manufacturers need zero tariffs and the same regulations as the rest of Europe. Will they get that, and what tariff mitigation measures are the Government putting in place to protect the industry if there is no deal?

My Lords, we know that the automotive industry has concerns about the cost implications of any tariffs, frictions at borders and divergence in regulation following the end of the transition period. These are the very reasons why we want a relationship with the EU based on friendly co-operation between sovereign equals and centred on free trade. Those are the objectives we are working towards.

My Lords, the Minister said that new markets cannot be turned on overnight, but existing markets can certainly be lost overnight if there are punitive barriers in the form of high tariffs. What specific help will the Government give car manufacturers such as Toyota in Flintshire if they lose their European markets as a result of the Government’s failure to secure an adequate deal?

Because we recognise the importance of the automotive industry to the UK, we have various schemes in place to help support its transition and development. For example, we have our £1 billion automotive transformation fund, which is helping to develop supply chains and UK alternatives for the large-scale production of electric vehicles in the United Kingdom.

My Lords, the time allowed for this Question has elapsed.

My Lords, we need to have a five-minute break, as usual, so the House will adjourn until 2.06 pm.

Sitting suspended.