Economic Policy and Infrastructure

Rules of origin in the prospective EU-UK free trade agreement

The automotive industry is an essential part of the European economy and the United Kingdom (UK) has been an integral element for decades. In 2019, motor vehicles worth around €48 billion were traded between the European Union (EU) and the UK. About 80 percent of cars made in the UK were destined for export in 2019, of which more than half of the car exports went to the EU. For the German automotive industry, the UK is an essential export market as more German cars are exported to the UK than anywhere else. Bilateral trade in automotive parts between Germany and the UK accounted for €5 billion in 2019, and between the EU and UK for almost €15 billion. Any change to the deep economic and regulatory integration between the EU and the UK will have an adverse impact on automobile manufacturers with operations in the EU (and the UK), as well as for the European economy in general.

For this reason, an EU-UK free trade agreement (FTA) is of major importance to remove uncertainties in the automotive sector caused by Brexit and to ensure that trade frictions remain limited. The EU and the UK should agree to a FTA that provides for completely tariff-free trade in automotive goods (passenger cars, commercial vehicles, motorcycles, engines as well as parts and components) between the signatory states with entry into force of the agreement. In this context, the rules of origin (RoO) play the most important role. Complicated RoO that are associated with excessive bureaucracy and which cannot be satisfied must be avoided. Equal importance must be given to the implementation period, which for the automotive industry, easily requires more than six months. Anchoring simple and practicable RoO in the agreement is thus key to greatly improve its use rate.




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