Industry experts are praising a new UK trade agreement which could be worth £300million, saying it has helped the motoring sector avoid a major cliff edge.
The UK has agreed a trade arrangement with Mexico which was due to expire on January 1, 2024, under an extension to the “rules of origin”.
Under the new agreement, British manufacturers will access lower or zero tariffs when selling products to Mexico.
This is especially important for the motoring industry, with road vehicles accounting for almost £300million in exports to Mexico, almost 20 per cent of all goods exported.
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The arrangement will come into effect from January 1, 2024, and will remain in place until a new UK-Mexico Free Trade Agreement is introduced.
Mike Hawes, SMMT Chief Executive, hailed the tariff extension, highlighting the importance of UK-Mexico relationship to the motoring industry.
He added: “We welcome this pragmatic decision as it avoids duty liabilities from June 2024 which, given the long standing and productive relationship between the UK and Mexican automotive industries, would have undermined our mutual trade.
“Mexico is among the top 10 global markets for UK car exports and so we now need the swift agreement of a modernised trade deal as this would deliver even more benefits for both sides, boosting bilateral trade in hybrid and ICE technologies as well as zero emission vehicles.”
Mexico is the 14th largest economy in the world and second largest in Latin America, with demand for imports forecast to grow by 42 per cent between 2001 and 2035.
The SMMT said agreements with the likes of Mexico, Canada and South Korea could offer “enhanced market access and commercially meaningful opportunities”.
Nusrat Ghani, Minister for Industry and Economic Security, praised the deal and its benefits to the UK automotive sector.
The Conservative MP for Wealden in East Sussex said: “Ensuring UK goods avoid higher tariffs is essential for British businesses to stay competitive in this huge and dynamic market of over 130 million people.
“This extension will provide UK businesses exporting to Mexico with certainty as they plan for next year and beyond while the UK and Mexico negotiate an exciting new trade deal covering the 21st century economy.”
Electric car prices could rise by a staggering £3,400 if the rules of origin agreement are not sealed before January 1, making it almost impossible for UK manufacturers to remain competitive.
Electric vehicles which do not meet the new thresholds will be subject to a 10 per cent tariff when traded across the Channel if negotiations fail or stall further.
If an agreement is not reached, electric cars made in the UK and EU would most likely result in price rises with Chinese manufacturers being able to undercut all other brands thanks to cheaper production and vehicle costs.
At the end of 2020, trade was worth £7.4billion, with a huge uplift being seen in the past 12 months, reaching £15.3billion last year.
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The UK-Mexico agreement will come into force on January 1 next year
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Speaking previously, Mike Hawes said: “A three-year delay is a simple, common-sense solution which must be agreed urgently.”