Automakers Rage Against UK's Possible 'Brexit' From EU
A handful of European automakers are lashing out against the prospect of the United Kingdom’s “Brexit” from the European Union via referendum in 2017.
Ford Europe, Renault-Nissan and BMW have made it known there would be serious ramifications for the European auto industry and the U.K.’s role in it if the nation left the E.U. following the results of a referendum vote in 2017, The Detroit News reports. Both Ford Europe CEO Jim Farley and BMW board member Ian Robertson have said the U.K. should remain in the union for the sake of the nation’s auto industry, while Renault-Nissan CEO Carlos Ghosn said he would have to reconsider his company’s dealings across the Channel if the so-called Brexit became reality.
However, the trio of automakers, as well as the European Automobile Manufacturers’ Association (ACEA), may be doing more harm to themselves by joining in the political conflict than anything the Brexit could muster upon execution. Garel Rhys, emeritus professor of Motor Industry Economics and director for Automotive Industry Research at the Cardiff Business School, explains:
It’s possible I suppose that there could be a massive trade war, with protection and trade barriers but I think that’s very unlikely. Firstly the WTO (World Trade Organization) would have a view on that. But much more importantly, Britain has a huge balance of trade deficit with the rest of the E.U.. It’s a tremendous market for E.U. countries for a whole range of goods and especially for upmarket BMWs, Audis and Porsches.
Rhys adds a free trade agreement following the Brexit would be “very, very likely” and in the best interests of both parties, saying fear of change is the main driver for the automakers opposed to the U.K.’s departure. Cimigo analyst Michael Burrage agrees with the assessment, stating the opposition should have done more research into the Brexit and its effects before sounding the alarm:
Companies with serious interests at stake should conduct risk assessments and ask if these serious consequences are likely. I don’t believe they have taken serious studies. I believe exit would be far less disturbing than these large manufactures would wish us to believe, and they need to do studies. I would listen more seriously if they showed some research. This is just off the top of their heads. It is very superficial>
The Brexit referendum in 2017 comes amid increasing disapproval among Britons with how a trade agreement approved in a 1975 referendum became loaded with political ramifications over the decades to the point, according to the U.K. Independence Party, where 70 percent of all legislation in the U.K. comes from Brussels.
[Source: Jaguar]
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If the UK leaves the EU this will not impact the auto industry. The only issue I can see if the UK "succeeds" from the EU is if anti competitive tariffs are put in place. This isn't viable as well as the WTO will not like this very much and the UK does tend to tow the WTO line. The auto makers especially the German's don't like this as the Germans are the largest EU vehicle manufacturers. Ghosn and the other manufacturers are playing politics. Ghosn should be more worried about the interventionist French government than a free market like the UK.
As the article pointed out, the UK leaving the EU will simply result in trade agreements taking the place of membership, with the UK free of EU regulations. In any event, the timing is important, since any time in 2017 will be in the middle of elections on the continent, and moving up to 2016 will put it in the middle of the US presidential election. From a political standpoint, earlier is better, since the glow and clout of an election victory fades over time. The Tories have already said 2017 is a deadline, not a date, and have already begun the process of setting up the referendum. If the House of Lords holds up the issue, the earliest date would be July 2016, or more likely September, when the US election is in full swing. If the Lords agree, the referendum could occur as early as next Spring. At any rate, the UK is too lucrative a market for the EU to throw up the trade barriers automakers and other industrial and financial interests fear.