Summer recess over, Brexit and CO2 policy take centre stage – Newsletter Editorial September 2020
With an Indian summer sweeping over Brussels, the heat is on politically as well with important dossiers gearing up for conclusion. More short-term oriented, the negotiations between the EU and the UK merit close attention, aimed to ensure an orderly split once the transition period ends at the end of the year. Longer-term focussed, and in every other sense also more far-reaching, all eyes are on the Europe’s climate policy.
European Commission President Von der Leyen is reported to propose next week to lift the overall carbon-reduction target for 2030 to 55% instead of the currently 40%. The European Parliament is aiming for still higher numbers, as indicated by parliamentary committee votes this week, and the Council of Member States is expected to take a decision in October.
The key question remains not if, but how to achieve the objectives, securing innovation, manufacturing and employment in Europe as well as reaching the climate goals
The outcomes will inevitably increase the pressure on all key sectors to deliver. The automotive industry is fully behind the goal of carbon-neutrality by 2050. In sync with economic recovery efforts, industry is marching full speed ahead, and ready to work alongside policy makers and other stakeholders to bring solutions to reality.
The key question remains not if, but how to achieve the objectives, securing innovation, manufacturing and employment in Europe as well as reaching the climate goals. The Commission is setting important directions with increased attention for a full battery supply chain in Europe, a hydrogen strategy and partnerships for R&D funding. But the scale of transformation in the automotive sector, affecting millions of livelihoods, needs a far more integrated and technology-open approach.
A no-deal scenario would disrupt the integrated automotive supply chain and hit industry at a critical moment
As for Brexit: the significant and on-going impact of the Covid crisis may have shifted attention away somewhat from the Brexit implications, however the concerns about a departure by the UK from the EU without a trade deal have not become less grave. With six weeks of negotiation time left the omens do not bode well.
A no-deal scenario would disrupt the integrated automotive supply chain and hit industry at a critical moment. The industry is in the midst of the investment-heavy transition towards carbon-neutral, connected and automated mobility. The economic crisis already adds tremendous pressure, with a loss of revenue and an acceleration of the restructuring needs in the sector. An disorderly exit of the UK will exacerbate the stress.
The impact of Brexit will be felt far beyond the bilateral trade streams alone, because of the highly-integrated nature of the automotive manufacturing value chain. This deep integration is a key factor in the global competitiveness of the sector, which will be hurt by the UK leaving. The UK is the Europe´s second biggest new car market, but also a significant manufacturing country, with some 2500 automotive components makers including global players.
To illustrate the deep integration: three quarters of imported automobile components into the UK are coming from the EU, while two third of British-built components are exported to the EU. The UK is a major hub for Europe-made vehicles and automotive components to other parts of the world.
It’s in Europe’s and the UK’s interest to support the sector’s integrated value chain with as frictionless trade as possible
In short, the sector needs negotiators to strike a deal. And equally important, the sector needs a deal that maintains the industry’s global competitiveness. Achieving an ambitious EU-UK FTA with automotive-specific provisions is critical. Any deal should include zero tariffs and quotas, appropriate rules of origin and a framework to avoid regulatory divergence.
It’s in Europe’s and the UK’s interest to support the sector’s integrated value chain with as frictionless trade as possible, and continue to reap the benefits from this key manufacturing industry within their perimeters.
Sigrid de Vries
CLEPA Secretary General
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In: CLEPA News