In a recent turn of events that diverges from initial Brexit expectations, the relaxation of previously negotiated trade terms has resulted in a setback for Paris. The term "treasure island," once used by Brexiteers to describe the United Kingdom (UK), alluded to the billions of euros that the UK was expected to generate annually for Berlin's economy following Brexit. However, the recent adjustment of trade terms marks a significant shift in this anticipated economic landscape to the disadvantage of Paris.
Relaxed Trading Terms: The Catalyst
Under the influence of German and British automakers, the European Commission has granted a three-year reprieve from Brexit tariffs on electric vehicles traded across the English Channel. The proposed tariff of 10% would have imposed excessive costs on European manufacturers, leading to potential losses of up to €4.3bn (£3.7bn) and cuts in production of almost 500,000 electric vehicles between 2024 to 2027.
Paris's Opposition and the U-Turn of the European Commission
Initially, France opposed the idea of the UK being offered relaxed trade terms, arguing that any delay to tariffs risked setting a precedent that the UK could exploit to secure further changes to the Brexit deal. Despite this resistance, the European Commission has decided to delay a 10% tariff on electric car sales between the EU and UK for three years.
The Future of the Brexit Trade Deal
The European Commission seeks a one-off extension until December 31, 2026, following concerns raised by the EU automotive industry about the substantial costs that would arise from a post-Brexit 10-percent tariff. This extension proposal from the commission now awaits formal approval from the EU member states. The implications of this decision could potentially reshape the economic dynamics in the EU, particularly for Paris, which had been banking on stricter trade terms with the UK.