Saturday 15 October 2016

Nissan CEO meets PM

There is an intriguing article on the front page of today’s Financial Times (paywalled link) concerning yesterday’s meeting between the Prime Minister and the CEO of Nissan, Carlos Ghosn. Nissan are important, practically and symbolically, in terms of foreign investment in Britain. Practically important because they account for about a third of UK car manufacture, and a decision about whether to build the new Qashqai model in its Sunderland plant is due by the end of this year. Symbolically important both as a leading foreign investor but also because Sunderland voted by one of the highest margins to leave the EU. Ghosn has recently said that Nissan would not invest before Brexit terms were known unless the government offered compensation for any future tariffs (in parenthesis, it is by no means clear that this would be legal under WTO rules). This connects with the wider concerns raised by Japan about Brexit.

According to the FT report, rather than making any offer on tariff compensation, Theresa May apparently assured him that there would be no additional tariffs and that trading conditions will not change for Nissan post-Brexit. The FT takes this to imply that specific industrial sectors will remain a part of the single market and customs union, specifically industries, like motor manufacturer, with complex international supply chains.

If this is the case it raises some huge questions which the FT does not ask. First of all, it is not clear to me how May could guarantee this, as it would inevitably require the agreement of the EU in negotiations that have not even started yet. But it seems highly improbable that May would have given such a guarantee (assuming the FT reporting is correct) had she not had good reasons to think it is true – or, if not, and she is wrong, the backlash from Nissan and others will surely be huge. Does that mean that she has received some firm assurances from the EU on this point?

Second, if this is indeed what is envisaged, how would it work? The boundaries around particular industries or sectors are not, after all, clear cut. If a textiles firm, say, supplies fabric for Nissan car seats are they to be deemed to be in the motor sector? And for all of their business or just the segment that produces that particular fabric? Suppose Nissan changes suppliers – does that new supplier get shifted into the single market? More generally, does it mean that, somehow, part of the UK economy will remain inside the single market and part will lie outside it? Whatever the answers to these questions, any idea that Brexit on these terms will mean the reduction of ‘red tape’ promised by the leave campaign is illusory!

Third, and however sectors are bounded, it seems inconceivable that these could be deemed to be inside the single market without corresponding freedom of movement within those sectors. Would this mean that car workers would be able to move in and out of the UK at will but not others? And if those workers do have freedom of movement then how could they be prevented from changing jobs whilst in the UK? What, then, would this mean for May’s red line of ‘control of borders’?

If all that seems inconceivable then surely impossible would it be for May also to honour her pledge at the recent party conference to exempt the UK from the European Court of Justice (ECJ) since by definition at least those sectors within the single market would have to be subject to its jurisdiction.

This was a high profile meeting of key significance. The things said cannot have been casual. And although I haven’t seen any other media outlet reporting it as they do (elsewhere there are just anodyne statements from the two parties) the FT is a highly reputable and reliable source of business news. If their report is correct then it gives an important insight into how the government are approaching Brexit, but one which makes that approach seem, to say the least, deeply perplexing and raising more questions than answers. What Nissan made of it may become clear when the Qashqai investment decision is made.

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