By Paul Sandle
LONDON (Reuters) - Britain told Nissan <7201.T> it would aim for tariff-free trade with Europe for the motor industry after Brexit, persuading the Japanese company to invest in the country's biggest car plant, a cabinet minister said on Sunday.
Last month Nissan's CEO Carlos Ghosn said he would need a guarantee of compensation to offset any tariffs imposed when Britain leaves the European Union, before deciding whether to build new models at the Sunderland factory in northeast England.
Business Secretary Greg Clark said the government was determined the motor industry would remain competitive, and he had told Nissan it wanted to negotiate tariff-free trade for the sector with the remaining 27 EU members.
"Our objective would be ensure we have continued access to the markets in Europe and vice versa without tariffs and without bureaucratic impediments, and that is how we will approach those negotiations," he told BBC television.
However, he added that a promise of money to compensate for tariffs was not part of an agreement with Nissan.
Nissan announced on Thursday that it would build the next generation of its Qashqai and X-Trail models at Sunderland, which directly employs around 7,000 people and exports 55 percent of its cars to Europe.
A source told Reuters the government promised extra support to Nissan in a written assurance that Brexit would not hit the competitiveness of the Sunderland plant, which built nearly a third of Britain's 1.6 million cars last year.
The British government has sent conflicting signals about what kind of relationship it wants with Europe after divorce talks end.
Prime Minister Theresa May has made comments pointing towards a "hard Brexit", where Britain would limit immigration at the cost of leaving the huge European single market.
Clark's pledge to Nissan, however, indicates that Britain wants to remain part of an EU customs union - which would allow some controls on free movement of people - or negotiate a special free trade deal for the industry, even if it does not stay in the single market.
He said he was asking industry what it needed from Brexit, and the government hadn't made a decision on "what that crystallizes into in terms of what we want to achieve".
PLEDGES FOR ALL
As a member of the EU customs union Turkey, for example, remains outside the bloc but trades freely within it. However, were Britain to adopt a similar model, it would not be able to sign separate trade deals with countries like India and China, which was an objective of some Brexit campaigners.
Clark said Nissan's confidence in the government's position meant it could invest in the new models and safeguard thousands of jobs.
Britain's agreement with Nissan, details of which had not been made public, has led rival car makers to seek their own assurance that they won't be hurt by Brexit.
Industries such as pharmaceuticals, banking and aerospace are likely to want similar assurances that their interests will be protected after Brexit.
The opposition Labour Party said the pledges given to Nissan needed to be made more widely. "All businesses and workers across all regions deserve the Nissan treatment and a clear answer from government about whether they are aiming for full single market access, a customs union, or some other set of arrangements," Labour's business spokesman Clive Lewis said.
"Clark should make a statement to Parliament immediately about what he said to Nissan and how he plans to support the whole economy through Brexit."
Clark said a lot of the assurances made to Nissan applied to the auto industry generally.
A customs union-type agreement, however, would not allow Britain's services sector, including the City of London financial industry, to retain access to European markets.
Clark said Brexit talks needed to approached in a "considered and sober" to make sure all of the different sectors, including the hugely important financial services were considered.
(editing by Larry King and David Stamp)