Brussels plans to tie UK to EU car parts market in Brexit trade talks

Brussels wants to tie UK car manufacturers into sourcing parts from the EU rather than cheaper imports from elsewhere in the world in trade negotiations with Britain next week.

Michel Barnier, the EU's chief negotiator, warned that Brussels would never sign away thousands of European jobs just for the UK's benefit, speaking ahead of month-long intensified talks that start on Monday.

British negotiators are seeking to use most of the leverage they have over the EU fishing industry's dependence on UK waters to secure major concessions on "rules of origin" trade rules.

The British proposals for the tariff-free Brexit trade deal would mean UK car manufacturers could assemble vehicles with parts from around the world before exporting them to the EU tariff free, Mr Barnier said.

"The UK tells us this is in both our interests," he said at the European Policy Centre think tank in Brussels. "But frankly speaking, why make it easy for UK manufacturers to source nearly all their parts from elsewhere?"

Mr Barnier said: "We produce those very same parts here in the EU," adding that 80 percent of parts imported by UK car manufacturers come from the block.

"Nothing would justify us encouraging UK manufacturers to start sourcing their parts outside of the EU, nothing would justify us signing away tens of thousands of European jobs for the UK's benefit," he said.

About 55 per cent of the UK's 1.06 million car exports went to the EU last year. On Tuesday, the Society of Motor Manufacturers and Traders warned that Brexit negotiations must deliver a "comprehensive zero-tariff free trade agreement" or the UK automotive sector risks £40 billion production losses by 2025.

Failure to strike a deal before the end of the year will mean the UK and EU trading on less lucrative WTO terms, which will mean tariffs as well as customs checks slowing imports and exports of cars and car parts.

"I believe, once again that the deal is still possible," Mr Barnier said. He added that the EU was ready to compromise to break the deadlock over fishing and the "level playing field" guarantees.

"We will be constructive, as we have always been and respectful and we are ready to be creative to find common ground. But we will never, never sacrifice your long term economic and political interests for the sole benefits of the UK.

"We will not put into question the integrity of our union, our single market, our sovereign capacity to set our own rules. Our duty is and will always remain, until the end, to protect the interests of European citizens and European businesses."

The EU would never abandon its demand for "level playing field" guarantees which would protect European businesses from unfair British competition, he said.

"Even if you were to maintain tariffs on some goods [...]the EU will still demand strong 'level playing field' guarantees," he said. "It is a core part of our modern trade policy and we refuse to compromise our values to benefit the British economy."

David Frost, the UK's chief negotiator, said, "This needs to be a real negotiation, and some of the EU's unrealistic positions will have to change if we are to move forward.

"We have noted carefully what the EU has said in recent days on this subject, and look forward to discussing it.

"UK sovereignty, over our laws, our courts, or our fishing waters, is of course not up for discussion.   Equally we do not seek anything which would undermine the integrity of the EU's single market."

Mr Barnier accused the British Government of backtracking on commitments in the non-binding joint Political Declaration, which sets out the aspirations for the trade agreement and demanded a "clear signal" that Britain was willing to abide by the "spirit and the letter" of the declaration.

After Boris Johnson met the three EU presidents on June 15, the Prime Minister said he saw no reason why a trade agreement could not be finalised in July rather than October, which is the EU's target date.

Mr Barnier said such an outcome would need progress on all topics, including the deadlocked issues of fishing and the "level playing field" guarantees.

He blamed Brexiteers in the Tory party for the lack of progress and accused them of making it impossible for the Government to compromise, saying: "We have the Brexiteers and a good part of the Tory party keeping a very hard line on full sovereignty for the UK [...] and no concessions even if it means no deal."