Written evidence from The Society of Motor
Manufacturers and Traders (SMMT)
INTRODUCTION
1. The Society of Motor Manufacturers and Traders
(SMMT) is the leading trade association for the UK motor industry,
providing expert advice and information to its members as well
as to external organisations. It represents companies throughout
the automotive sector ranging from vehicle manufacturers, component
and material suppliers to power train providers and design engineers.
The motor industry is a crucial sector of the UK economy, generating
a manufacturing turnover of £51 billion, and contributing
well over 10% of the UK's total exports.
2. SMMT welcomes the opportunity to provide written
evidence to the House of Commons Business, Innovation and Skills
Select Committee inquiry on rebalancing the economy: trade and
investment. SMMT responded to the Department for Business, Innovation
and Skills (BIS) call for evidence on the government's forthcoming
Trade White Paper, in which we stressed the need for government
to pursue a positive trade policy that looks to encourage manufacturing
in the UK and promote the UK as an attractive business location
for international investors. Government's ability to provide long-term
certainty for investors will be a key factor in leveraging investment
in the UK. An open trade policy that is fair to all sectors is
a crucial element in implementing government's objectives to rebalance
the economy and stimulating export and private sector-led growth.
GOVERNMENT'S
TRADE WHITE
PAPER
3. As outlined above, the automotive industry
is a vital part of the UK and European economy, being the largest
investor in research and development (R&D) in Europe at €20
billion, with UK manufacturers supplying over 100 markets worldwide.
The automotive sector is a strategic industry in the UK, where
the value of UK automotive exports is £26.6 billion. Government
should consider automotive as a strength and as an area of comparative
advantage within their White Paper.
4. Government must provide long-term certainty
to investors that the UK is an attractive business proposition
and implement coherent policies that look to leverage investment
in the UK. Crucial in this is for government to demonstrate through
the White Paper how it will coordinate policies across government
departments to create a positive business environment. Government's
approach in its White Paper should take into account how the UK
is seen as an investment location compared to other competing
locations across Europe and globally. Where specific policies
on manufacturing and R&D are key to industrial growth, policies
around taxation, business rates and intra-company transfers, for
example, are as equally important tools that government can use
to attract investment.
5. The White Paper must set out a policy approach
that demonstrates not only government's commitment to their objective
of export-led growth but ways in which it plans to work with businesses
across sectors in creating value-added opportunities. The White
Paper must complement government's overarching policies that look
to encourage sustainable, low carbon growth, and a rebalanced
economy.
THE ROLE
OF THE
DEPARTMENT FOR
BUSINESS, INNOVATION
AND SKILLS
IN SUPPORTING
EXPORTS AND
INVESTMENT
6. UK government's role in trade policy on a
national, European and international basis should promote the
UK's export industries, encourage foreign direct investment into
the UK to build sustainable industrial capacity, as well as contributing
to open, fair and balanced discussions in trade negotiations for
UK exporters to take advantage of new markets.
7. As the government department responsible
for trade policy, BIS must take into account the opportunities
within the automotive sector and how a positive trade and investment
policy can assist the industry in taking advantage of opportunities
to increase investment in design, development and manufacture
of vehicles and components. BIS should ensure that its formation
of trade policy and the White Paper complements work being taken
forward in government's framework for advanced manufacturing and
growth review.
8. The UK automotive industry has benefitted
greatly from direct foreign investment, particularly in low and
ultra-low carbon vehicles, as well as supporting the UK production
of premium and luxury vehicles. Decisions by global vehicle manufacturers
to invest in UK manufacturing and R&D facilities is a credit
to successive government policy that has supported improvements
in conventional technology and ultra-low carbon vehicles. The
automotive industry is at the forefront of the low carbon economy;
a trade and investment policy that looks to build on this success
and future new opportunities is crucial for the UK to establish
itself as the European leader in low carbon industrial and research
capacity. This approach will bolster the UK's competitive advantage,
continue to enable automotive to add significant value to the
UK economy, as well as having the potential to spur further large
scale investments in the sector. Future export capability lies
in the successful growth of advanced manufacturing sectors such
as automotive.
9. The role of BIS in WTO and EU negotiations
on trade is vitally important. In discussions with European Commission
officials, BIS should use automotive as an example of an important
sector of the economy, where growth potential through exports
and investment in manufacturing is communicated as key UK industrial
strength. SMMT calls on government and BIS to prioritise an effective,
balanced and fair conclusion to the Doha Development Round of
WTO trade talks, which mean that improvements to the flexibilities
in the Non-Agricultural Market Access (NAMA) chapter should be
encouraged. The opportunities to increase international competition
as a result of a fair agreement for all sectors will benefit the
industry and increase market access for our members.
10. The European automotive industry voiced
concerns over elements of the EU-South Korea Free Trade Agreement
(FTA), where concessions were given to other sectors of the economy
at the potential detriment to automotive. Trade agreements must
not look to negotiate sector by sector - a comprehensive assessment
of the impacts of trade deals on all economic sectors must be
undertaken by UK government before the European Commission opens
negotiations with third countries looking to enter into economic
partnerships or trade agreements. UK government should call on
the European Commission to review its procedures in trade negotiations
that have resulted in the South Korea agreement being unbalanced
for the automotive industry, with a likely negative impact on
the sector. BIS should ensure that unbalanced duty drawback mechanisms
and other articles related to Rules of Origin do not set a precedent
for future negotiations, particularly in the current negotiation
process looking to form a Free Trade Agreement with India.
11. Where the EU seeks to open Free Trade Agreements
or Economic Partnership Agreements, BIS has a responsibility to
ensure the agreements are truly 'free' and include full elimination
of all tariff lines and address non tariff barriers. The UK automotive
industry is supportive of efforts at a European and international
level to facilitate free trade, but the mechanisms by which trade
agreements operate must be transparent and truly beneficially
reciprocal. Impact assessments should be used to formulate government
positions in trade negotiations; ensuring economic sectors such
as automotive are not unduly harmed or put at risk. It is crucial
that UK government is thoroughly consulting the automotive industry
prior and during negotiations. Enabling a positive and coherent
approach to EU trade policy will ensure that market and investment
opportunities are utilised to full potential.
THE ROLE
OF UKTI
12. The work of UK Trade & Investment (UKTI)
is crucial in supporting businesses expand overseas and promoting
the UK as a leading location to invest. SMMT has a close working
relationship with UKTI and is a key delivery arm for the UKTI
Automotive Sector Group as an Accredited Trade Organisation (ATO),
providing contract delivery, project management and matched funding
for inward and outward trade missions, overseas seminars, trade
shows and exhibitions. SMMT supports UKTI activities that support
SMEs, and develop market opportunities, particularly though the
Overseas Market Introduction Service (OMIS), Export Market Research
Study (EMRS), and Tradeshow Access Program (TAP).
THE EFFECTIVENESS
OF THE
EXPORT CREDIT
GUARANTEE DEPARTMENT
AND THE
FLOW OF
TRADE CREDIT
13. In the review of support for exporters through
the Export Credit Guarantee Department, government should commit
to providing assistance as firms emerge from recession and look
to diversify and expand their business presence. This type of
support should be more accessible than it has been in the past
and reflect the constrained business conditions firms have been
operating in. This is a key example of where government facilitation
can support businesses throughout the automotive supply chain.
14. Other EU member states such as Germany have
implemented greater levels of support to increase the flow of
trade credit for domestic exporters, as well as providing more
substantial support in assisting with export trade credit insurance.
Government should review its position in assisting those firms
in the UK that are looking to expand their operations and further
increase export value. Support to enable more accessible export
trade credit insurance for smaller firms is a particularly important
in the automotive sector, where many suppliers operate in international
markets, and experienced a tightening of the availability of products
from financial institutions.
SECURING OPPORTUNITIES
FOR GROWTH
15. Government has an opportunity to implement
a set of positive business priorities in its White Paper that
will present the UK as a leading location for investment, and
provide the opportunity for private sector growth. Investments
being made in the automotive industry, particularly around low
carbon vehicles and technology are key. SMMT hopes that government
uses its White Paper to demonstrate how it will spur further investments,
strengthening industrial, manufacturing, research, design and
development bases.
16. Promoting trade facilitation and supporting
businesses through mechanisms such as export trade credit insurance
are practical ways in which government can assist firms as they
emerge from difficult financial conditions, as well as those companies
that are looking to expand overseas. Continued support through
UKTI is a crucial element of government's trade policy, identifying
market opportunities for UK business.
17. Government should pursue a considered, balanced
and fair trade policy at an EU and international level. The promotion
of government's objectives to rebalance the economy, reinvigorate
manufacturing and promote sustainable growth should be communicated
through its involvement with European and WTO trade negotiations.
January 2011
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