LONDON -- The U.K. is under pressure to align with the European Union's trade defense measures, including the imposition of tariffs on China-produced electric vehicles, if it wants to be exempt from the bloc's "Made in Europe" localization rules.

The rules are set to apply to everyone outside of the EU and form part of the bloc's Industrial Accelerator Act (IAA) aimed at bolstering domestic manufacturing against Chinese competition in key sectors including EVs, solar panels and steel. The act also protects the EU procurement market worth around 2 trillion euros ($2.25 trillion) annually.

The U.K. is keen not to be locked out of the EU market and the Labour government has sought closer ties with the bloc, its largest trade partner, since coming into power over two years ago. France and Germany, on the other hand, want to close any loophole that can be exploited to send Chinese car imports from the U.K. into the EU.

The EU's two largest economies want the U.K. to pay the price of following the EU's trade action against China for access to the bloc's market. The Franco-German plan still needs approval from the European Parliament and EU member states, and agreement from Britain. The EU has already imposed import tariffs of up to 45% on EVs made in China and recently agreed with Beijing to limit its hybrid exports to the bloc.

For Chinese carmakers, the U.K. market has become increasingly important over the last two years, given that they also face 100% import tariffs in the U.S. Nearly 18% of new car registrations in the U.K. in the second quarter of this year were Chinese imports, which are subject to just 10% duties. BYD's largest market outside of China is the U.K. A person close to the U.K. government discussions told Nikkei Asia that Britain is now more likely than not to impose tariffs on Chinese EVs, provided it "secures satisfactory terms for inclusion in 'Made in Europe.'"

"The economic modeling shows that the U.K. would be better off getting a win on 'Made in Europe' than the likely costs of Chinese retaliation, which are more difficult to quantify," the person added. China's Commerce Ministry warned on Monday that it would take countermeasures against the U.K. if it aligns with the EU's trade rules.

The Labour government has sought a more stable relationship with Beijing and had held off imposing tariffs that could trigger Chinese retaliation against British car exports, particularly on Jaguar Land Rover. China is the U.K.'s fourth-largest trade partner, absorbing 3.4% of British exports of goods and services, according to data from the Office of National Statistics.

Cars form 19% of those exports to China, the largest segment, followed by medicines and pharmaceuticals at 11.4%, and crude oil at 9.8%. Conversely, the U.K.'s top imports from China are telecoms and sound equipment, with cars in third place. Separately, the U.K. exported 56% of its cars to the EU, including 46%, or 150,000 vehicles, from Nissan's Sunderland plant in northern England, according to evidence the company submitted to parliament.

The U.K. automotive industry has maintained that an open market offers consumers greater choice and lower prices.

Mike Hawes, chief executive of trade association the Society of Motor Manufacturers and Traders (SMMT), said in January that none of its members were calling for additional tariffs on Chinese vehicles. An SMMT spokesperson said this week that the priority is a "pragmatic agreement" recognizing the U.K. as a trusted "Made in Europe" partner, warning that excluding British-built vehicles would put at risk the bilateral automotive trade worth around 80 billion euros annually.

Japanese and South Korean carmakers are also stepping up their lobbying efforts.

With more than 5,000 amendments submitted, lobbyists say they are struggling to secure access to members of the European Parliament, with one saying "they are simply too flooded." At a briefing last week, Matt Harrison, chief corporate officer of Toyota Motor Europe, said that the IAA should recognize long-standing investors and trusted production partners, including the U.K., Turkey and Japan. Toyota shipped $4.4 billion worth of vehicles out of Turkey last year, making it the country's second-largest auto exporter behind Ford.

Around 57% of its output went into the EU, the company said. Turkish government officials have been lobbying the EU to be treated as an equal partner under the IAA since it is a Customs Union member and because of their highly integrated automotive sector.

Trade Minister Omer Bolat said recently that 75% of Turkey's automotive manufacturing activity is carried out by EU companies, subsidiaries or joint ventures. The automotive sector accounts for 26% of bilateral trade, he said. "What is needed on both the EU and Turkish sides is for the Industrial Acceleration Act and the 'Made in EU' project to treat Turkey as an equal partner from the very beginning," Bolat said on Oct. 13.

"This will be in the interest of both sides."

Joseph Dellatte, a resident fellow at Paris-based think tank Institut Montaigne who is familiar with the French position, suggested that the Franco-German move would give the EU a way to "negotiate better access to public procurement markets in allied countries and closer alignment on trade defense measures." "Japanese and Korean actors that want to be included will try to negotiate comparable terms," he said, adding that Japan may need to open up its procurement market in exchange, while South Korea may have some leverage, given Europe's need for access to battery supply chains.

The EU-U.K. summit is planned for Nov. 20, while talks between the trade heads of Brussels and Beijing are set to take place online next January.

Clement Ngu is a contributing writer. Additional reporting by Sinan Tavsan.