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What did Nissan get?

by Michael Emerson | 31.10.2016

InFacts published a note of mine on what the government was failing to say about the Nissan deal just before Greg Clark, the business secretary, said quite a lot on the BBC’s Andrew Marr Show. What did we learn, and what remains unclear?

Preface: congratulations to Marr. His show comes first, Parliament later.

The main news is that the government will aim at access to the EU market “without tariffs and without bureaucratic impediments”. This free trade deal could in theory be achieved in a number of ways, first by staying fully in the single market (European Economic Area), but that seems to have been ruled out by the Prime Minister; secondly by remaining in the customs union; or third by a free trade agreement outside the customs union.

The expression “without bureaucratic impediments” points in the direction of the customs union, since the third option would involve bureaucratically burdensome customs checks over conformity with rules of origin, etc. However the language chosen is fuzzy, and may reflect ongoing disagreement within the cabinet over whether to go for the customs union or not.

If the government opted for free trade within the customs union it would presumably want to set this within a more comprehensive free trade agreement, governing services as well as goods, but that goes beyond Nissan’s interests.

The government has earlier said that in any case Nissan should not be disadvantaged. Since there is no guarantee that a free trade agreement could be reached with the EU, this raises the question how otherwise Nissan might avoid being disadvantaged by the introduction of tariffs. Clark said nothing on this account. Various hypotheses have been floated in the media, like a carve-out for the sector from tariffs, or rebating of the costs of customs duties, but such ideas would be illegal under either EU or WTO law (or both) – as Clark himself acknowledge.

Instead the business secretary could only offer a number of soft options, including funds for training and skills, support for R&D, and vague intentions for the UK to remain competitive.

However NIssan’s Carlos Ghosn bought the package. Since this tough business leader could be expected to insist on a bankable guarantee, one wonders whether there is more in the still unpublished letter that Clark sent to Ghosn, or maybe other assurances not in the letter. Or did Ghosn simple accept a “best endeavours” pledge? So it is all still something of a mystery, leaving parliament something to do.

However, if the government wants to give maximum reassurance to industry it should opt for a free trade agreement incorporating the customs union.

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Edited by Hugo Dixon

Tags: , Categories: Articles, Industry

One Response to “What did Nissan get?”

  • Is this any different to the Leavers’ long stated ambition of tariff-free access to the EU and access to the Single Market which combines with their ambition to have full control of migration from the EU?

    And are we any closer to understanding how they propose to achieve this?

    Or possibly Nissan reckon it will take at least half the projected life of the new models before we achieve Brexit, and, if they didn’t plan for Brexit, are prepared to suffer risks for the remainder of the model life as the lesser of two evils on the basis the the next models won’t be built here.