Most Favoured Nation: Norwegian Batteries

More rules of origin.

Welcome to the 92nd edition of Most Favoured Nation. This week’s edition is free for all to read. If you enjoy reading Most Favoured Nation, please consider becoming a paid subscriber.

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A couple of weeks ago, I wrote about the fast-approaching cliff edge facing firms that trade electric vehicles (EVs) between the EU and the UK. The short story is that the Trade and Co-operation Agreement contains EV-specific rules of origin that gradually become stricter over time, with the first tightening happening on 1 January 2024.

(The EU and UK will hopefully decide to do something about this, because otherwise you will have an absurd situation next year where petrol and diesel cars can trade tariff-free, but EVs will be hit with a 10% tariff.)

Close readers of the previous post will have noticed a footnote, making reference to the fact that Norway [reminder: not in the EU but for the most part in the single market as a member of the European Economic Area] has its own beef with the TCA arrangements.

So let’s discuss this footnote!

The basic problem is … well … Norwegian-produced batteries do not count towards the local content requirements of the TCA’s EV rules of origin requirements. This is really annoying if you are a Norwegian battery producer because it means that EU car makers with an interest in both the EU and UK markets probably will not want to use your batteries.

The Norwegians have been complaining about this for a while, understandably.

But the EU is not that interested in helping them out.

Last year, in a joint statement between Maroš Šefčovič, European Commission Vice-President for Interinstitutional Relations and Foresight, and Jan Christian Vestre, Norway’s Minister of Trade and Industry, Norway and the EU announced the following:

The two Parties will discuss the application of the rules of origin laid down in the EU-UK Trade and Cooperation Agreement for battery packs and battery cells of Norwegian origin installed in electric vehicles produced in and traded between the EU and the UK.

But in this week’s new EU-Norway Green Alliance … nothing. No mention of working together to find a way to address this problem. And believe me, this is not because the Norwegians didn’t ask for it! (They did.)

I suppose the solution could be for the EU, UK and Norway to agree to some sort of trilateral rules of origin protocol that allows for diagonal cumulation between the three territories. Equally, if there was some way of fudging it legally, it could work for the UK to join the Pan-Euro Mediterranean (PEM) convention and run its diagonal cumulation provisions in parallel to the TCA … providing carmakers with the option of using either the TCA RoO or the PEM RoO. Alternatively, the EU and UK could just agree to account for Norweigan battery content as originating for the purpose of meeting the TCA’s RoO criteria.

So there are options. Unfortunately (for the Norwegians), no one seems to care.

[Apologies for the short edition this week. As I started writing, my daughter decided to vomit everywhere.]

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Best wishes,

Sam