More discussion following - "Where have all the Cars gone"

March 20, 2013 10:38 AM

Car ExportsSteve Coltman - Loughborough

Most of us will have just received this (attached) from the EM web-site, stating that 82% of cars made in the UK are exported, and half of these go to the rest of the EU. It goes on to claim that POTENTIALLY 3% tariff could be imposed on our car exports to the EU if we left. Note the weasel-word 'potential'. Note the implied threat to jobs and exports.

It seems to me that much of the arguments for remaining in the EU come in the form of threats, some of which, like this one, are empty threats. 80% of the cars sold in the UK are imported. Has anyone noticed how many come from Germany? How loud do you suppose the Germans would scream when we impose a 3% import tariff on their cars imported into the UK, and how long before it was quietly agreed not to impose any tariffs at all?

There is legitimate debate and there is low propaganda, please keep the latter off the EM web-site.

Bill Newton Dunn - MEP

I agree, Steve.

There is no basis for a potential 3% tariff. Nothing has been discussed in Brussels. Because they all hope the UK will remain members.

Incidentally, there will be a referendum, maybe around 2017, not because of Cameron's half-promise, but because the other member countries are intent on another new Treaty to take them towards "ever closer union" and when that treaty appears, it will trigger referendums in various countries including of course the UK.

So Cameron's "offer" was actually cleverly worked out so that he can say "there you are, and I offered it voluntarily..."

Chris Nelson - Kettering and Wellingborough

I'm sorry Stephen, but I disagree that this is "low-level propaganda" but rather it's a realistic possibility. Let's be clear - one of the main reasons why Britain currently makes more cars than Italy or Spain is because non-European carmakers such as Toyota and General Motors want to use the UK as a base from which to access the European Union market and to avoid the very tariffs discussed in this article.

Our workers are skilled, our transport links are good and our labour practices are competitive - and above all, by assembling cars in Britain, you can access the largest and most lucrative single market in the world. Without that market access, why not move production to Italy, Spain, Germany or Poland? You say that there would be "an outcry" from German manufacturers about their imports - ignoring the fact that most of the "outcry" so far in Germany has been political rather than economic. But ask yourself this:

  • Would these non-European car manufacturers really continue making cars in the UK if there is no benefit to them in terms of avoiding import tariffs?
  • Would British car makers be as competitive on the continent if our cars had to pay such tariffs?
  • And would we "really" stop importing foreign cars? They're actually rather good - and if our own car makers are struggling for market share, it's going to be difficult to compete.
  • There's also the added issue of labour rules - namely the common market is based on different countries having similar labour laws to prevent a "race to the bottom".
  • If the Tories were able to use withdrawal to scrap the working time directive, say, EU countries would be distinctly less willing to give UK manufacturers equal access to EU markets.

Now it may well be that on exit from the EU that we could negotiate a better deal than this - that we "might" be able to negotiate tariff-free trade. But what price would we need to pay to do so? We should be under no illusions of who needs the other in which trading relationship. The European Union is our biggest export partner. We, however, are much less significant to the European Union - they'd like to trade with us, but not at any price. In short: we need them more than they need us, and that makes for a lousy negotiating position. So what would we need to do instead?

  • Pay a hefty membership fee?
  • Accept unfavourable trading terms on other goods?
  • Have to agree to be subject to laws to which we genuinely have no say in drafting, and which is framed to benefit the Eurozone? (As in Norway
  • Or something else unpalatable?

Any scenario in which Britain leaving the EU is actually financially beneficial to the UK is fantasy land - and it's not "propaganda" to say so.

Steve Coltman - Loughborough

The UK is the eurozone's largest single export market (accounting for 25% of their exports according to one report I read). When free-trade agreements are being negotiated else where it seems highly unlikely that anyone on either side of the English Channel would want to erect tariff barriers where none now exist. Furthermore, tariff barriers are not an insuperable obstacle to us trading with the USA, which is our largest trading partner as defined by country.

My real point is this - the euro-enthusiasts seem to have no arguments to deploy except threats. If you want to win this debate you will have to think of something better with which to persuade the electorate.

J George Smid, MEP Candidate:

It seems to me that there are potentially two arguments going on here: the threats of tariffs (introduction and retaliation) and the membership of the EU (gains and benefits). And cars are (for obvious reasons) very good example to illustrate the points.

There will be a tariff if we leave the EU. It might not be as much as 3% of the price but it will be an additional cost: anybody who imported from the previous non-members will tell you how much easier and less costly it is now, when the country has become an EU member. So leaving the EU does introduce additional cost. Fact.

To import/export cars efficiently we need a lot of 'market infrastructure': norms, legal framework, financial services, functioning logistic. The tariffs of X% are applied only when some of the patchwork of a functioning market is missing or skewed.

The argument for Europe should be made in favour of that market functioning: if I am buying a car from Romania I want to be sure that it is of the same standard as the one made in Germany. So I need a legal framework (norms). And I want to be present when that legal framework is being put in place. I want to be sure that my car supplier is viable so I have a valid guarantee and spare parts for next three years - so I need a financial supervision. And I want to be there when that supervision is implemented. I want to be sure that VW in Slovakia is not using dumping prices to put UK manufacturers out of business. So I want to be there when the pricing and dumping and workers' position is decided.

I therefore see a direct benefit in just 'to be there': to present my own selfish position and to take note of others' selfish position. 'To be there' I need a forum - and the EU is the best alternative currently available. Steve Coltman says: the euro-enthusiasts seem to have no arguments to deploy except threats. If you want to win this debate you will have to think of something better with which to persuade the electorate. That quote should be enlarged: The Euro-sceptics seem to employ a dogma of a 'never land' where everything is perfect once the UK leaves the EU, the euro-enthusiasts seem to have no arguments to deploy except threats about an uncertain future if we leave.

I would agree with that enlarged statement and its conclusion: we need to develop a coherent argument for staying in the EU. The need to influence the decision making is a powerful argument - otherwise we will be at the receiving end, continually trying to catch up with our European 'trading partners'. Take the current negotiations about the carbon footprints for cars and trucks. If you were a car manufacturer would you want your representatives to be there or would you rather do nothing and wait for the results, knowing that your opinion and your specific needs will not be taken into account? Or take the current negotiations about creating EU-US trade free zone: it makes me mad that the bulk of the negotiations is carried out by the Germans. Whose cars will be in the back of minds of the negotiators? Prestige top or mass produced? With or 'historical special relationship' we should be 'driving' that negotiations.

Michael Rich - Broxtowe

Sorry Steve, I think you are missing the point.

The UK collects taxes and import duties on the goods coming from outside the EU, such as the engines for the Toyota factory. Once the duties are paid, the goods, and any other product of which they form part, are in free circulation.

Who do the duties belong to? The British government? No, they essentially are our "contribution" for membership of the EU club, a customs union. If we left the club, have no doubt the British government would continue to collect the duties, but do you think the other countries would let the goods in free of any additional tariff? Of course not.

Also, if we abolished the minimum wage, the working place standards, if we imported lots of cheap labour and worked them until they dropped, would it be fair on the German workers and would they continue to happily buy our Toyotas? Of course not.

There appears to be a part of the British establishment that thinks we should go it alone in a race to the bottom in terms of manufacturing, whilst preserving our position as an offshore refuge for dodgy capital in what was previously described as the "engine of our economy", the City of London. Is that what you want for Britain?

It's not a question of perceived threats.The reason for staying with the EU is to protect our economy from outside competition by maintaining high standards, not least in the workplace and in the markets. Ok, there are problems, but if we are on the inside we can work on them. Nothing is perfect, yet, but do you want to walk away to an uncertain future at such a difficult time.

P.S. In the latest demonising of the EU by the UK press, the EU is robbing depositors in Cyprus of 10 % of their savings. I have seen the value of my savings reduce in value by 25% since 2008, because of the devaluation of Sterling against the Euro. I feel robbed, mostly by the previous government, but also by this one who have continued with QE.

Steve Coltman - Loughborough

You are missing my point Michael, which is that we would impose import duties on EU goods coming into the UK if the EU imposed duties on our exports to them. Given that we are the rest of the EU's largest export market they would not want that and neither would we. The whole question of tariffs would get quietly dropped in everyone's interest. That is why I think the argument about tariffs is scaremongering, an empty threat put about by those who have no better arguments to put forward. Your points about " if we abolished the minimum wage, the working place standards, if we imported lots of cheap labour and worked them until they dropped, etc" is irrelevant as I don't think anyone intends to do this.

Michael Rich - Broxtowe

You are obviously unaware of how these things work. If the situation is as you suppose, let's say the (remaining) countries of the EU decide to restrict the import of product x from China, perhaps by imposing a tariff of 50%, to allow the domestic industry to compete.

Britain might, under your scenario, decide to import large amounts of product x and ship it to the EU without any tariff. Do you think that would work?

I know this an extreme example, but this is how the world of international trade works. I worked in it very successfully for nearly 50 years, despite the obstacles put in place by politicians. The EU, or some similar trading block structure, is the only way of making progress.

Do you know about GATT?

Are you perhaps in favour of closer cooperation with the USA? This is under negotiation with the EU at the moment, although I am sceptical about it working, having had a lot of experience of American protectionism.

Bill Newton Dunn - MEP

Negotiations for a free trade agreement between the USA and the EU now have positive momentum because both sides want the extra trade and extra jobs.
But the USA would give priority to agreeing free trade with the EU without the UK rather than with the UK because of the numbers, 450 million continental customers against 60 million Brits.
It's the same US view that the UK is much better inside the EU than outside.

Ian Shephard - Louth & Horncastle

In any sale of goods the supplier has to offer products that meet the customer's standards both in terms of quality and conditions of manufacture. If these standards are not met, then either the customer must compromise those standards or the supplier must comply with them.

Our membership of the EU not only gives us the right to participate in the definition of the standards that apply across the EU but also the opportunity to define those standards in a way favourable to UK manufacturers. We are not good enough at this - our mentality has been to waste our membership fee by accepting whatever is thrown at us (and making it worse by gold plating) or crying foul and threatening to run away.

We need to vigorously fight our corner, impose our standards on the EU and make a profit out of our EU membership. The alternative, outside the EU, is to have no say and be forced to comply with EU standards whether we like it or not. Trade sanctions, such as tariffs, would be the mechanism for enforcing that compliance.

The USA is adept at imposing standards on suppliers which favour its own industries. The forthcoming trade agreement should align EU and USA standards and make it easier for UK firms to trade with the USA.