As the UK government and EU struggle to find agreement on the terms of the UK’s exit from the EU next year (in March) – especially with respect to trade arrangements – Ford has told just-auto that a no-deal Brexit would ‘severely damage the UK’s competitiveness’. The company also said it will take ‘whatever action is necessary to protect our business’.
Ford of Europe chief Steven Armstrong said that a hard Brexit would present a significant threat to much of the auto industry in Britain. “For Ford, a hard Brexit is a red line,” he said. “It could severely damage the UK’s competitiveness and result in a significant threat to much of the auto industry, including our own UK manufacturing operations.
“While we think this is a worst-case scenario and that a UK-EU deal will be reached, we will take whatever action is necessary to protect our business in the event of a hard Brexit.”
“We know from our own experience that a Canada-style deal will not deliver a seamless UK-EU border.”
Armstrong also warned that a free trade deal along the lines of the EU’s trade deal with Canada would add new border checks and therefore introduce new costs for international shipments between the UK and EU. In particular, it would undermine just-in-time international supply lines. “It’s vital that any UK-EU deal maintains frictionless trade, and we know from our own experience that a Canada-style deal will not deliver a seamless UK-EU border,” he said.
“We export engines and import vehicles under the current EU-Canada deal and there are significant customs and border checks at both ends. If this was introduced for all UK-EU trade, the level of congestion and blockages at the ports would undermine our just-in-time manufacturing system.
“If the UK is to remain competitive, any UK-EU trade deal must ensure guaranteed frictionless trade so that industry can plan for the longer term.”
Complex UK-EU negotiations stalled
A meeting of EU heads of state this week is due to assess the state of current UK-EU negotiations on an agreement, but reports suggest there remain significant barriers to striking a Brexit deal and that it cannot be announced this week, as some had hoped.
The land border between the Irish Republic and Northern Ireland (part of the UK) is presenting a particularly difficult area because possible customs check arrangements come with added sensitivity due to the island of Ireland’s history of civil strife between separatists (so-called ‘nationalists’) and those who support the United Kingdom’s union (ie pro-UK ‘loyalists’). The two communities – also partly defined by historical religious denominations, Catholics and Protestants – form a highly divisive fault line in Northern Ireland’s politics that the ‘Good Friday agreement’ papered over in the 1990s to bring peace between the two factions and their associated armed extremists (who subsequently largely disarmed). An essential element in that agreement, which successfully diffused tensions, was a free and invisible Ireland/NI border with sensitive nation-state symbols – such as border posts and security checkpoints – removed.
Both London and Brussels have said that they do not want to introduce new border apparatus or checks in Ireland that could potentially re-ignite political tensions.
The EU has proposed a so-called ‘backstop’ – supported by the Irish Republic – which would guarantee Northern Ireland (but not the rest of the UK) stayed in the EU’s customs union indefinitely if the UK and EU cannot agree a wider trade deal. Such a hypothetical arrangement would indeed maintain the status quo of no checks on the Irish/NI border but would potentially introduce a new customs border between Northern Ireland and the rest of the UK, something that London has said is unacceptable.
Adding to the political complexity in Britain is arithmetic in the House of Commons where prime minister Mrs May’s governing Conservative Party is in power with a minority administration that could be outvoted by all opposition members. The UK government in London is currently reliant on the support of a small number of representatives from Northern Ireland (from the DUP) who represent the province’s ‘loyalist’ (pro-UK) political tradition. Their support for Mrs May’s minority government gives them a certain amount of leverage and they are firmly against anything – hypothetical or not – that downplays Northern Ireland’s status as a nation (like England, Scotland and Wales) that is fully part of the larger nation of the UK.
A so-called ‘Hard Brexit’ would follow a no-deal scenario between the UK and EU which would likely mean resorting to World Trade Organisation (WTO) trading conditions on UK-EU trade. Under WTO, that would mean new tariffs applying to goods shipped from the UK to the EU’s customs union territory as well as new border checks. The land border between the Irish Republic and Northern Ireland would likely be unable to avoid new customs checks, though there is some debate on how these could operate, and whether modern technology can make customs checks smoother.