British Automotive Industry Can Thrive Under WTO Deal

World Trade Deal is An Opportunity for British Automotive Industry

The automotive industry views Brexit as a problem to be mitigated and therefore it is unsurprising that they have welcomed the draft Withdrawal Agreement brought forward by the Government. They are fearful of a future where they may have to compete beyond the realms of Europe and have therefore postulated dire predictions of leaving the EU with no deal. This fear has meant that the industry has become hysterical, rather than practical.

“A hard Brexit will cost Jaguar Land Rover more than 1.2 billion pounds ($1.5 billion) a year – it’s horrifying, wiping out our profit, destroying investment in the autonomous, zero-emissions (world) we share,” Ralf Speth, the CEO of British-based and Indian owned Jaguar Land Rover, was quoted as saying.

The Brussels-based European Car Manufacturers Association, has also pointed out the damage a “no-deal” scenario would bring to the European industry, which would threaten the business model.

But this goes to very crux of the issue. These industries want no disruption to their business model. They are therefore only inclined to paint a picture of doom for the UK, presenting only problems and no solutions. The realities of leaving the EU with no deal according to trade experts are however, far from the predictions promoted by the automotive industry.

Michael Burrage, the director of Economists for Free Trade, has said that these predictions are mostly baseless:

“Do these people forecasting catastrophe (from “crashing out”) have any data to back this up? All this scare stuff about massive delays and motorways blocked by trucks around Dover is fantasy. Car manufacturers might have to tweak their computer programmes a bit and face some initial delays, but it is very difficult to believe that this is going to be devastating.”

Our time would be better spent, Burrage has argued, focussing on tweaking our own practices so that we can trade with the rest of the world, pointing to the fact that 56% of Britain’s foreign trading which takes place under WTO rules has grown more rapidly that its trade with the EU.

Given the unpopularity of the Government’s Draft Withdrawal Plan, both within the Parliament and even within sections of the Confederation of British Industry, it is time to focus on what would actually happen if we have a no deal and move towards a World Trade Deal.

The economic adviser to Arbuthnot Banking Group, Ruth Lea, has always said that a World Trade Deal is far more preferable to the Government’s plan:

“Trading under the WTO option is my preferred alternative to Chequers, as was – and most certainly is to be preferred to the current “deal.”

Victoria Hewson, international trade and competition expert at the Institute of Economic Affairs, has said that of course it is understandable that the industry would want to protect its business model but that if managed sensibly, a World Trade Deal would be easily workable.

“If the system was changed to WTO rules there would be new customs requirements. If handled properly and sensibly – like trading between the U.S. and Canada, and Switzerland and the EU – there needn’t be any disruption or delays,” Hewson said.

Hewson went on to say that if the normal procedure of checking 2 trucks per ferry took place, there would be little disruption.

But moving towards a World Trade Deal is also an opportunity for reform. The European automotive industry supply chains are often wasteful, in terms of fuel consumed, time taken, truck miles and highways worn out.

This is a chance for our industry to innovate and change. Moving towards a World Trade Deal, will give us complete regulatory independence and sovereignty. This should be an opportunity to reform the way supply chains work, address inefficiencies and foster an industry that is tailored to our own economy.

Rather than looking at Brexit as a problem to be mitigated; the automotive industry needs to look at it as an opportunity to embraced. It’s time to think more globally, be innovative, examine business practices and reform the industry. Let’s be practical not hysterical.