What did Theresa May promise Nissan?

by Michael Emerson | 30.10.2016

Everyone in the UK is happy that Nissan has announced plans to expand the production line of its major car manufacturing plant at Sunderland. This followed a conspicuous call upon No. 10 by Carlos Ghosn, the Nissan boss, as a result of which it is said that Nissan was given guarantees that its business conditions would not be adversely affected by Brexit. What could that mean?

Was it just the vague language that Theresa May is producing in public about how the government will pursue the best possible deal for continued access to the single market? This would hardly seem likely to satisfy Ghosn. At present, nobody outside the secret conversations of the cabinet Brexit committee can have any idea what more could have been promised? But what might be the hypotheses?

A/ Full single market inclusion. This would be a technically good solution for Nissan, if the government opted to join Norway in the European Economic Area, but that would mean a huge U-turn in announced intentions. It is hard to believe that Ghosn was given this as a secret commitment.

B/ Continued participation in the customs union. This also would be a good solution for Nissan, but again it would mean the government had made a fundamental policy choice, which is known to be controversial in the cabinet committee. It’s not a bad idea, but again could Ghosn have been given a secret promise ahead of parliament?

C/ Some special deal to assure carve-out of the automobile industry from tariffs that might be introduced. This idea has been floated in media comment. If one takes the idea seriously, it implies that such a mechanism might be negotiated at some stage in negotiations between the UK, the EU and WTO. But preferential deals of this kind are not allowed as derogations from the general “most favoured nation” tariff schedules to be agreed with the WTO. Free trade areas are of course allowed under the WTO as long as “substantially all sectors” are covered, but this would mean A/ or B/.   

D/ Compensation for Nissan in the event that tariffs are introduced? Some media comment has as suggested that Nissan could get a rebate of tariffs imposed on either its supply chain imports of parts from, and/or for its exports of finished goods to the EU. But this would clearly be against EU competition and anti-subsidy rules.

E/ Finally there might be offered a more generous investment grant than already available, or even resurrection of some version of the UK’s former regional employment subsidy.

One must presume that Ghosn needed a bankable guarantee, going way beyond the vague best endeavours language. But from the above it is not evident what any such guarantee could have been.

Does Ghosn know something important that Parliament is not informed about, in which case there is a serious non-transparency issue, to say the least. Or is it an understanding that if A/ and B/ fail to materialize there will be concocted a mechanism of compensation under some version of C/, D/ or E/?

For the time being this is a mystery, meriting at least some questions from MPs on the floor of the Commons.

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    Edited by Hugo Dixon

    Tags: , , Categories: Articles, Industry

    3 Responses to “What did Theresa May promise Nissan?”

    • Some form of subsidy or compensation promise would be tricky and possibly full of loopholes, but it wouldn’t necessarily be a breach of EU regulations as it would presumably only kick in at the point when we’d actually left. But this would make it politically awkward to openly discuss what was offered, giving not just a domestic audience but also EU negotiators cause to be less than impressed. I think there must have been some kind of solid financial guarantee involved, as no successful company would take this government’s private word on anything, especially when any negotiations will involve two sides and the UK’s desired outcome is unlikely to be met.

      But my biggest objection, even more than the special government intervention to insulate the workers of Sunderland from the negative effects of their own decision, is that a Japanese company now appears to know more about the country’s position than the public or even parliament. So much for taking back control!

    • The secrecy involved in this sordid affair speaks volumes about the politicians who appear to be muddling along and making it all up as they go along. All to pander to a few extremely unpleasant right-wing bigots.

    • All companies negatively impacted by Brexit should look to Ireland. Ireland didn’t vote and yet will be detrimentally affected more than any other European country. All imports to Ireland may increase due to taxes especially food produce which travels through UK to get there. Ireland is technically advanced and has hugh potential to deliver high quality engineering and production. UK HAS SOLD OUT Ireland can recover it for you. Failte romhat go leir!!!!