Impact of the Single European Market Programme on the Automotive Industry
The Single European Market is referred to as “one territory without any internal borders or other regulatory obstacles to the free movement of goods and services”. (European Commission, 2018). The main aim when the EU was introduced was to make Europe a war-free zone, so they developed both a joint system of law and making the member states economies within completely co-dependent. The Single European Market encourages more competition, trade and driven economic growth, which makes the day-to-day running for businesses much easier. A sector within the Single European Market, which is otherwise known as SEM, that covers a substantial proportion of Europe’s economy is the automotive industry. This sector is a vital party for Europe, as it provides jobs for 12 million people and also represents 4% of the EU’S GDP. The automotive industry is extremely important for multiple reasons, some of these being: links to other sectors, employment and economy.
The automotive industry within the EU is one of the world’s largest producers for motor vehicles, and also represents one of the biggest private investors in research and development (R&D). This industry is one of the most productive compared to different manufacturing sectors as it employs 169,000 people directly and 814,000 in connection to supply chains throughout the UK. The Single European Market can impact the automotive sector in many ways, as it is one of the most integrated sectors within the EU, so having things such as complex supply chain. can be both a positive, and a negative. Tariff barriers, movement of labour and low barriers to entry different things that can have a large impact on the automotive sector within the Single European Market.
The backbone for the European economy is the automotive sector, so the vision of trade is a large aspect for this industry. Within the UK, they export around 80% of the cars that are produced here, and around 56% of those go the rest of the EU. In regard to Brexit, when the UK will not be a member of the Single European market they will not have the ability to trade freely with EU members, which means their export costs to companies within the EU after Brexit has come into play will increase. However also 86% of the vehicles that are sold in the UK are imported and around 70% of these are from the rest of the EU itself. This will impact the UK a great deal unless both parties can negotiate and come to an agreed arrangement, which allows free trade within the Single Market and the UK, which would benefit both. According to George Osborne and Nigel Farage “the Norway option of leaving the EU but joining the European Economic Area (EEA) might be on the cards”. (The Institute for Government, 2018). The Norway option is that the UK would stay in the EU Single Market and leaving the customs union, but by doing this they would still have to accept the EU four freedoms even though they would have full access to the single market for goods and services.
Nissan which are one of the Europe’s largest car plants and is one of the most productive factories in the UK. Many of the parts for Nissan’s cars are imported from countries within the Single Market and 55% of all cars produced are exported within the EU. Trade is a positive of how the Single European Market has impacted this the motor vehicle sector, because Nissan trades a lot with the EU, this saves them a lot of money as they don’t have to pay import and export taxes on any of the parts they buy or the cars they import/export. This also means they have an integrated supply chain, meaning it will be easier for the company to trade to get different parts. The Nissan Qashqai is Europe’s top selling cars, which suggests that there is a higher demand for it in different countries of the EU, so being able to Trade freely within the Single Market will generate economic growth for the EU.
The four freedoms which are also known as the founding principles of the EU are the movement of goods, services capital and labour. The movement of labour is a large part of the automotive sector within the EU as, it gives people the right to work in a different country without having to apply for a visa. Having free movement of labour benefits all countries in the EU also as it means that workers can look for jobs in other countries which would benefit their economy. The Single European Market play a big part in the movement of labour for the motor vehicle industry. The movement of labour within the SEM can impact the automotive sector in many ways, as a lot of companies within this sector look to different member states within the SEM and the UK to fill any job vacancies they may have. This is a positive aspect for the motor vehicle sector as a company are creating a new car or are starting another project and have a specific job vacancy that needs filling. This means they are then free to advertise that job different countries within the EU that are more specialised to the that specific role, which means the person can go and work on the project without having to apply for a visa. By doing this the consumer will be getting a better-quality product at the end of the day as there would be people working on the project that specialise in certain fields.
However there is also some negative aspects that can come with the movement of trade in the Single European Market in the automotive sector. One of these aspects is that many businesses in the Single European Market could lose a lot of workers is there wasn’t movement of trade. The reason for thing being is that businesses would be limited in where the advertise for employees as they wouldn’t only be able to come from that specific country as if they wanted anyone else from specialist countries then that would be a long process as they would need to get a visa and get that approved in order for them to be able to work in the country. As there are many foreign specialist workers and eastern Europeans in Nissan that work on specific areas developing different parts for cars.
Another factor of the Single European Market that can have an impact on the automotive sector is CO2 emissions. Within the EU cars are responsible fort around 12% of the total emissions of carbon dioxide (CO2), which is the main greenhouse gas. A negative point of this is that once the UK leaves the European Union, we are launching our own emissions trading system or reverting to a carbon tax. Every two years the cap is changed on CO2 emission meaning car manufacturers would have to constantly change their engines. This would be a negative aspect for car manufacturers such as Nissan when Brexit comes into play the British government may decide to switch from the EU’s Emissions Trading Systems to a new UK Emissions Trading System. This means that car companies would have to re make a new engine in the middle of the term so they would be losing money and they would have to hire a specialist out to re design the engine to make it more efficient, and then ship in the parts from different areas, all which are costs that could be avoided by striking the correct negotiation deal. As the motor vehicle is one of the largest sectors in the single market, the CO2 emissions is something that affects them as all companies want to do their part to reduce the carbon footprint. The UK has a target of planting 11 million new trees over the course of the next 25 years, however Brexit will also have an effect on this target according to the Environment Secretary, Michael Gove.
The EU currently have an agency with overlooks the plants and trees that get imported in the UK to make sure no diseased plant life are entering the UK. As Britain gets most of their trees imported, when Brexit gets enforced this can become a problem as Britain would have to import trees in and run the risk of having diseased trees or stop the imports totally but have high risk of missing the target. As trees take in the carbon dioxide that the cars give out, by having less trees this could harm the country in multiple ways.
The Single European Market has many laws and regulations for a lot of the automotive sector. Car Insurance Regulations is one of these important aspects that the single market has an effect on, in the motor vehicle. The cost of car insurance is already high for anyone however the single market a few years ago made sure that insurers weren’t allowed to take someone’s gender into account when they are looking to ask for a quote. This is a positive thing for all consumers when looking at trying to find the best quote they can they know that they are getting a fair quote, not being judged based on if they are a man or a woman. However, the referendum may cause some changes in the prices of insurance, but there is no major indication of it. Although there is nothing set that there will be any price change in general for insurance, as the UK will no longer be in EU they don’t have to abide by any European Laws, so the price of insurance could decrease for woman and increase for men. As statistics show that men have received more traffic violations and are seen as liable for a larger number of car accidents, therefore needing higher insurance, and women’s will go down as they’re deemed safer drivers for the population.
One of the largest scandals in motor vehicle history, was Volkswagen’s Dieselgate. On the 17th of September 2015, Volkswagen was on a steady growth path on the American Market, however that all changed on September 18th as the EPA (Environmental Protection Agency) tested the companies new Diesel-powered cars which failed under the grounds of violating the Clean Air Act. The cars had been proven to be a lot cleaner and safer for the environment. The company had been using a special software that allowed the car to pass emissions testing to the highest level, which then automatically shut off going back to normal driving. After this, all cars that were fitted with this type of software, ended up polluting almost double the amount of emissions that had been predicted for the year. The company also claimed to all their consumers that these cars where the cleanest on the market which was a statement their consumers bought into when purchasing the car. After recalling as many of the cars as possible and letting all consumers know they are free to send their car back to a dealership to get the software removed and apologise on the company’s behalf. The Single Market received some bad publicity in the years following this disaster as many people believed they didn’t do as much to help the environment following the event. Alongside Volkswagen there are multiple companies that are showing too high emission levels in different driving circumstances. This will affect how the EU react in different environmental issues, and what they do in those situations that can help benefit not only the businesses involved but the environment too.
To sum up, there are many different factors of the Single European Market Programme that could and have affected the Automotive industry. The Referendum, Freedom of Trade, Movement of Labour, CO2 emissions, Insurance, and the environment alongside Dieselgate are all major contributors of the Single European Market Programme impacting the Automotive sector. The motor vehicle industry is one of the largest contributors to the Single Market and while has multiple positive and negative aspects, they all affect everyone in in different ways. Brexit is one of the largest unknown factors for the UK and the Single European Market to date, and while no one is completely certain on the outcomes that it will have on the automotive sector in the UK, each one of these factors even with their own connections to the Single Market Programme, will try and predict the best possible future for the Automotive industry. The Single European Market Programme in connection to the automotive industry has affected the economy in more ways than one, and free trade allows many different business connections to happen so companies can expand their supply chain and integrate it with other sectors. Movement of Labour allows consumers to receive the best quality product they are able to, as companies can hire certain people for specialist jobs from anyway within the SEM, which improves productivity. CO2 emissions alongside the Dieselgate disaster have impacted this industry for many years to come, which will in the end benefit future generations who are currently being inspired by the work that goes into this sector to make it one of the largest and most productive there is. There will always be implications in any sector that has a partnership with the Single European Market Programme, however having faith in the current partnerships that each business has made, and having a vote of confidence in the government and how they will handle the UK the SEM is the most important part.
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