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Brexit and cars! September 20, 2017

Posted by WorldbyStorm in Uncategorized.
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I really hope Philip Inman is wrong in this analysis in the Observer, but I fear he may be right…

The Leavers are still convinced that German car companies hold all the aces. It is certainly a popular view inside the Department of International Trade, and even in David Davis’s Brexit department.
Davis, after all, is the chief negotiator who used his first tour of Europe following the referendum result to taunt local politicians about their lack of influence once the likes of Renault, BMW or VW started making their voices heard.
Davis is more hard-boiled than he was when he started, and more realistic that the terms of engagement are more complicated than he had first envisaged. But, ultimately, he falls into the camp that still believes economics will overtake politics in the final straight, allowing his team to extract the kind of business-friendly deal, with an extended transition period, that the CBI is calling for so vociferously this weekend.

And:

None of these arguments are outlandish. Privately, German car companies are against holding the UK to a hard Brexit. It’s just that the idea economics will win the day appears to ignore all the important messages from those who will influence events.

But I think Inman is making an error. For the EU this isn’t politics, it’s economics. The integrity of the single market and customs union trumps all else. And that is fundamentally an issue of economics.

Sure, he clothes it as follows:

Clamping down on free movement wouldn’t fit with attempts to deepen the structures of the EU and make it function more as one country, or at least create a eurozone that becomes more of a unitary entity. That is the Franco-German answer to the long-term repair of the EU’s battered economy. And that is the project that should make Remainers despair.

But the truth is that all that is kite flying. The EU as is requires cohesiveness of the EU as is. There’s no more than that. And in that regard Inman is incorrect. Forget the future and the lofty rhetoric of a supposed federal EU which many states simply won’t go for when push comes to shove (and how rapidly people forget that a two-speed EU is already on the cards). It is the current single market that will see the UK treated as a third country. Not some misty eyed europhile nonsense.

So even in a reasonably hard-headed analysis in an effort to make some sort of dubious parity between Remainer and Leaver positions (though given Remainer is now a position that has no real effect I’m not certain I see the point unless it is to avoid the brick bats from die-hard Leavers) even he falls into the same rhetorical traps as so many Leavers.

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1. bjg - September 20, 2017

This from Sky is, I think, closer to the mark. It focuses on the car industry in Britain (there isn’t much of a British car industry) but the point is how deeply integrated everything is across the EU. http://news.sky.com/story/brexit-forensics-why-car-industry-is-getting-worried-11041671

Britain will be lucky if “Vauxhall” at Ellesmere Port survives, by the sound of it.

bjg

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2. bjg - September 20, 2017

You say

The integrity of the single market and customs union trumps all else. And that is fundamentally an issue of economics.

But it is also fundamentally an issue of law. The structure of the single market is based on a very long and complex set of agreements and regulations, which took a lot of people a lot of time to negotiate. Davis expects the EU to dump all that at a wave of his hand and to make some sort of immediate agreement, without the details and the underpinning structures and procedures, to accommodate Britain’s wishes. I’m channelling Richard North here, but Davis and Inman seem to have no idea of the way trade actually works and how much effort goes into making it so.

bjg

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3. GW - September 20, 2017

The fact is that the European vehicle industry is increasingly integrated, with perhaps hundreds of crossings of intra-EU borders of components making up a vehicle.

These manufacturing networks are moving eastwards within the EU. With Brexit I can’t see the Japanese and other vehicle manufacturers that remain in the Kingdom of Ukania wanting to remain, unless a single market deal is reached.

Whether we should continue to to invest so much effort in a dead end fossil fuel industry is another matter.

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4. FergusD - September 20, 2017

GW, hopefully the internal combustion engine is on the way out, but I suspect that many will replace their ICE car with an electric one. Current vehicle manufacturers will make those so from a medium term economic perspective the loss of vehicle manufacturing in the U.K. due to Brexit could still be a significant blow.

Also, I wonder if the switch to electric and hybrid would be an additional incentive for manufacturers to quit the UK, along with Brexit? The technology change would mean some retooling etc, why not do that somewhere in the EU rather than investing in the U.K. out of the EU?

Finally, some months ago I read a statement from a German vehicle manufacturing company or association to the effect that although the U.K. was an important market the continued integrity of the EU was more important and they wouldn’t imperil that in any way even if it meant increased prices for EU made vehicles in the U.K.

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GW - September 20, 2017

The problem is Fergal – the electric car is a complete crock in terms of reducing CO2 emissions. The CO2 emissions required to create it and replace the batteries is comparable to a ‘normal’ petrol car. It’s just that the pollution effects are felt in the poorer parts of the world and allows the ‘developed’ world to feel good and have cleaner air.

The only way to make a real change is comprehensive public transport driven by renewable energy networks and stop subsidising flying and the private car industry (fossil fuel or electric).

Which won’t happen under capitalism.

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5. FergusD - September 20, 2017

GW – it may well be but I was just considering the e Ono mic effects of Brexit combined with the change in vehicle technology. Actually the Sky News article does specifically mention that with regard to the electric Mini, it could be the additional incentive to switch assembly and the large majority of manufacturing to the EU27.

That article also mentions that the UK gov’s response to the industry concerns about customs delays is that they can set up in-house customs administration, funded by the industry. The EU allows this apparently. This was not well received and it would need 100s if not 1000s of suppliers to do it. The industry seems to be amazed at the Tories ignorance of modern industry.

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