Chapter 8: Summary of sector issues
Pharmaceuticals and chemicals
|
Significance of trade |
In 2015, the exports of the sector were worth £51.2 billion and imports amounted to £50.6 billion.473 |
|
Tariffs |
Up to 6.5%.474 There is a ‘zero-for-zero’ regime for pharmaceutical products and chemical intermediates used in the production of pharmaceuticals through the WTO Pharmaceutical Agreement.475 |
|
Supply chain |
Highly integrated supply chain across Europe.476 In some cases no domestic substitute is possible, for example basic chemical feedstocks.477 |
|
Rules of origin |
The cost of providing the proof of origin for a chemical or other manufactured product could outweigh the value of tariff reductions under an FTA.478 |
|
Laws and regulations |
Regulatory harmonisation, and mutual recognition and common labelling requirements are important for pharmaceuticals.479 Compliance with COMAH and REACH are important for the chemicals industry if it is to trade with the EU.480 |
|
Agencies and standards |
Active participation in the European Medicines Agency is important to the pharmaceutical industry, and ongoing collaboration would be welcomed.481 |
|
FTAs with non-EU countries |
Current EU FTAs are very important.482 The chemicals industry would like to preserve current preferential access to Korea and Switzerland.483 The pharmaceuticals and chemicals sector would welcome new FTAs with Brazil, Canada the US and China.484 |
Capital goods and machinery
|
Significance of trade |
The UK exported capital goods worth £36.7 billion and imported capital goods worth £57.2 billion in 2015.485 |
|
Tariffs |
Vary widely, from 2.4% for electrical machinery, to 14% for electrical machinery and 22% on transport equipment.486 |
|
Supply chain |
Highly integrated supply chain across Europe, and components may cross borders a number of times.487 |
|
Rules of origin |
A concern to the sector. 488 |
|
Laws and regulations |
Membership of the Single Market, a single regulatory and legal environment, has reduced the cost of doing business.489 |
|
Agencies and standards |
No evidence provided. |
|
FTAs with non-EU countries |
Would like to preserve current preferential access,490 in particular to Switzerland, Korea, Turkey and Mexico.491 Would welcome new FTAs with US, China, India, and Canada.492 |
Food and beverages
|
Significance of trade |
Exports of food and non-alcoholic drinks were worth £12.3 billion in 2015 and imports amounted to £35.1 billion.493 |
|
Tariffs |
Vary widely for example from 3.8% on whole, fresh sweet potatoes to 25% for confectionery and 87% for frozen beef.494 |
|
Supply chain |
Significant impact, including the possibility of double imposition for food manufacturing with particular significance for Northern Ireland.495. |
|
Rules of origin |
Would result in additional technical barriers and paperwork.496 |
|
Laws and regulations |
Any significant divergence from EU standards could prevent the sale of UK goods in the EU.497 The UK could potentially apply different standards according to the export market, but this could be costly and have a deleterious impact on ‘Brand Britain’.498 |
|
Agencies and standards |
Ongoing participation in the EU’s Rapid Alert System for Food and Feed (RASFF) would be welcomed.499 |
|
FTAs with non-EU countries |
The FTA with Korea is important, and preferential access to West African countries via ACP arrangements, the South African EPA and the association agreement with Egypt.500 Future preferential trade deals with Canada, Vietnam, North Africa, the US, China and Japan would be welcomed.501 |
Oil and petroleum
|
Significance of trade |
Oil exports were worth £21 billion and imports were worth £29.3 billion in 2015.502 |
|
Tariffs |
Tariffs are relatively low; the average MFN tariff on petroleum imports to the EU is 2.5%.503 The downstream sector is concerned by potential tariffs on equipment and spares.504 |
|
Supply chain |
No evidence provided. |
|
Rules of origin |
No evidence provided |
|
Laws and regulations |
The downstream industry is “very keen” to maintain COMAH.505 A number of directives specify the quality of petrol, diesel fuels, and gas-oil, which are important for consumer confidence.506 The upstream sector is not directly regulated by the EU, but is influenced by environmental standards and energy market standards and would like to continue to influence such standards.507 |
|
Agencies and standards |
Technical standards for the downstream sector are determined by European Committee for Standardisation (CEN), and Brexit “should make no difference”508. |
|
Non-EU FTAs |
No evidence provided. |
Automotive
|
Significance of trade |
Exports were worth £34.3 billion and imports were worth £52.1 billion in 2015.509 |
|
Tariffs |
The EU’s external tariff on cars is 10%. Tariffs also apply to car components, ranging from 2.5–4.5%.510 |
|
Supply chain |
A highly integrated supply chain within the EU. 80% of the parts that go into a car are not made in the UK and there is no domestic supplier.511 |
|
Rules of origin |
The current level of imported materials would be contrary to EU rules of origin if the UK were outside the EU.512 This was “a threat” to future investment in the sector.513 |
|
Laws and regulations |
No evidence provided. |
|
Agencies and standards |
Whether the Whole Vehicle Type Approval system will remain valid for UK-made vehicles required “urgent legal clarification”. The UK should seek to maintain its influence on standard setting.514 |
|
Non-EU FTAs |
The current access provided by EU FTAs is “very important” to the sector, for example the FTA with Korea.515 Maintaining the current level of access should be the Government’s focus, before pursuing new bilateral trade negotiations.516 |
Aerospace and defence
|
Significance of trade |
The industries’ combined exports were worth an estimated £33.1billion in 2015.517 Import figures are not available for the defence sector, but imports of air, spacecraft and related machinery were worth £19.8 billion in 2015.518 |
|
Tariffs |
Trade in aircraft and complete parts is tariff free between signatories of the WTO Agreement on Trade in Civil Aircraft.519 |
|
Supply chain |
Some raw materials and part-finished goods are not included in WTO Agreement on Trade in Civil Aircraft.520 This is currently addressed by the EU’s Inward Processing Relief regime521, which the Government will need to consider when the UK leaves the EU. |
|
Rules of origin |
Would be “a particular challenge” as the sector does not currently monitor origin and can move parts freely across EU countries. This would be a significant burden in terms of cost and expertise.522 |
|
Laws and regulations |
No evidence provided. |
|
Agencies and standards |
The European Aviation Safety Agency (EASA) is the industry’s “route to market” and remaining a member was the industry’s “number one ask of the UK Government”.523 The UK should seek full access to the European Space Agency’s programmes, including the ability to tender for future EU space programmes.524 |
|
Non-EU FTAs |
No evidence provided. |
473 Written evidence submitted to the EU Internal Market Sub-Committee, 5 December 2016 (Session 2016–17) TAS0064 (Office for National Statistics)
475 During the WTO Uruguay Round, the WTO Pharmaceutical Agreement was signed between Canada, the European Union and its Member States, Japan, Norway, Switzerland, the United States, and Macao, China. Office of the United States Trade Representative, ‘Pharmaceuticals’: https://ustr.gov/issue-areas/industry-manufacturing/industry-initiatives/pharmaceuticals [accessed 10 February 2017]
485 ONS, The Pink Book—2016, Chapter 2—2.1 Trade in goods summary table (29 July 2016): https://www.ons.gov.uk/economy/nationalaccounts/balanceofpayments/datasets/2tradeingoodsthepinkbook2016 [accessed 9 February 2017]
486 WTO, ‘Tariff profile—European Union’: http://stat.wto.org/TariffProfiles/E28_e.htm [accessed 10 February 2017]
487 Q 27 (Fergus McReynolds) and MTA, Brexit priorities, p 2: https://www.mta.org.uk/sites/default/files/page/downloads/Brexit%20and%20the%20MTA.pdf [accessed 10 February 2017]
492 EEF, Britain and the EU: manufacturing an orderly exit (21 September 2016), p 3: https://www.eef.org.uk/resources-and-knowledge/research-and-intelligence/industry-reports/britain-and-the-eu-manufacturing-an-orderly-exit [accessed 20 January 2017]
493 FDF, ‘UK-EU food and drink statistics’: https://www.fdf.org.uk/eu-referendum-food-drink-statistics.aspx [accessed 23 February 2017]
494 Written evidence from AHDB (FTG0007); WTO, ‘Tariff profile - European Union’: http://stat.wto.org/TariffProfiles/E28_e.htm [accessed 10 February 2017] and written evidence from FDF (FTG0021)
502 ONS, The Pink Book—2016, Chapter 2—2.1 Trade in goods summary table (29 July 2016): https://www.ons.gov.uk/economy/nationalaccounts/balanceofpayments/datasets/2tradeingoodsthepinkbook2016 [accessed 9 February 2017]
503 WTO, World Tariff Profiles 2016, Applied MFN tariffs (2016), p 81: https://www.wto.org/english/res_e/booksp_e/tariff_profiles16_e.pdf [accessed 16 February 2017]
509 SMMT, Motor industry facts 2016, p 9: https://www.smmt.co.uk/wp-content/uploads/sites/2/SMMT-Motor-Industry-Facts-2016_v2-1.pdf [accessed 21 February 2017] and written evidence from the Society of Motor Manufacturers and Traders (FTG0009)
512 Written evidence from Peter Wells (FTG0013); Automotive Council UK, Growing the Automotive Supply Chain, Local Vehicle Content Analysis (September 2015): http://www.automotivecouncil.co.uk/wp-content/uploads/2015/09/UK-local-sourcing-content-research-September-20151.pdf [accessed 16 February 2017]
518 ONS, Publication Tables, UK Trade, CPA (08) (21 December 2016): https://www.ons.gov.uk/economy/nationalaccounts/balanceofpayments/datasets/publicationtablesuktradecpa08 [accessed 1 March 2017]
520 Ibid.
523 Ibid.