Recommendation 20

HM Government Accepted

A) Increased global challenges, geopolitical tensions, and a more fragmented global economy all present risks to the UK’s manufacturing sector, including the trend from free international trade towards more managed trade. The UK’s resilience is increased through an open global economy and a free trading system that increases fair competition. This must be coupled with going further in mitigating the risks of economic coercion and market distorting practices in our high value manufacturing sectors. B) In December 2023, the UK and EU agreed to extend zero-tariff trade on electric vehicles until the end of 2026 to keep costs down for manufacturers and consumers. This agreement facilitates UK-EU tariff-free trade in electric vehicles and prevents 10% tariffs being levied on this trade from January 2024. Industry expects this will save car manufacturers and consumers up to £4.3 billion in additional costs and provide long term certainty to the sector as we continue to scale up our domestic battery supply chain and work to deliver our net zero commitments. This agreement is further evidence that our more constructive relationship with the EU is delivering for UK citizens and businesses. The agreement comes as both the Prime Minister and President of the EU commission committed to working together to bolster our domestic battery supply chain, showing that the Government is taking the lead on securing tariff-free access to global markets for electric vehicles manufactured in the UK and their batteries. C) Our approach in the Advanced Manufacturing Plan aligns with the Integrated Review Refresh 2023, which sets out how we are stepping up work to protect our economic security while preserving the UK’s strengths as a great place to invest. We will continue to advance fair, free and open international trade in manufacturing goods and services for the UK and globally, as well as support UK manufacturers in taking advantage of the international opportunities it provides. We will deepen our collaboration with international partners to increase resilience for our supply chains critical to manufacturing, whilst boosting our UK capabilities and strengths. We will also continue to work with international partners to tackle forced labour and ensure business respect for human rights. D) The Department for Business and Trade (DBT) has an ambitious programme of Free Trade Agreement (FTA) negotiations – the largest such programme in the world – to help our nation become a truly Global Britain. We are also leading a truly whole of Government effort to tackle barriers to trade in direct response to business. • The Government has secured trade deals with 73 countries plus the EU, partners that accounted for £1.1 trillion of UK bilateral trade in 2022. • Our comprehensive FTA programme continues at unprecedented pace. We will not, however, sacrifice quality for speed and will only agree a deal if it is right for British businesses and consumers. • In addition, we estimate that 46 of the barriers which we resolved in 2022- 23 alone could boost UK exports by around £6.5 billion over the next five years. • We want to go even further, focussing on 100 priority barriers which if resolved could boost UK exports by another £20bn over five years. • Success in reducing these barriers and enabling trade in the automotive sector include: • Negotiations launched for a Critical Minerals Agreement following the signing of the Atlantic Declaration with the United States of America. The the UK to be used in clean vehicles benefitting from the Section 30D clean vehicle tax credits of the Inflation Reduction Act. • UK businesses depend on critical minerals like lithium, cobalt, and graphite to create essential components for electric vehicles and more. This agreement will strengthen companies’ access to these resources so that they can produce the technology we need in the UK. • In parallel with trade engagement with the US federal government, the UK also signed Memoranda of Understanding on trade and economic cooperation with Indiana, North Carolina, and South Carolina in 2022-23. These Memoranda of Understanding provide a framework to unlock trade barriers, realise investment opportunities, and share expertise – supporting growth in bilateral trade. • Since February 2023 the Brazilian market has improved access via accelerated approval processes in the automotive sector – worth an estimated £25m to UK certification companies. • Joining CPTPP, following the signing the Accession Protocol in July 2023, means over 99% of current UK goods exports to CPTPP will be eligible for zero tariffs. Reduced tariffs on imported goods will benefit British consumers as well, who could receive better choice, quality, and affordability. E) To facilitate green trade, the UK is working with international partners to align environmental standards and remove barriers to trade. For example, the UK advocates for collective agreement at the Trade and Environmental Sustainabil