UK-Japan FTA: A more detailed look at an historic deal

Legislation | | MIC Customs Solutions |

Here, we'll take a closer look at the UK-Japan Comprehensive Economic Partnership Agreement and what it might mean for both nations.

Earlier this month, Japan and the UK signed an historic free trade agreement (FTA). Not only was the deal the first for the UK as an independent nation from the EU, but it also raised eyebrows as to the speed at which it was concluded.

Negotiations for the FTA only began in June 2020, with most of the talks happening remotely due to travel restrictions caused by the coronavirus pandemic.

On September 11th 2020, Britain's international trade secretary Liz Truss and Japanese foreign minister Motegi Toshimitsu held a video call in which the UK-Japan Comprehensive Economic Partnership Agreement was formally agreed in principle.

The final text of the agreement is likely to be published next month, with both sides now awaiting ratification from their respective governing bodies.

Both Japan and the UK were keen to ensure business continuity between their nations, hence the swift conclusion of the discussion process. Under the Brexit transition period, the UK remained part of the Japan-EU treaty that took effect in February 2019.

However, had no Japan-UK deal been reached by January 1st 2021 when this transition period ended, tariffs on traded goods would have increased as the UK became governed by World Trade Organization default rules.

Areas covered in the UK-Japan Comprehensive Economic Partnership Agreement include customs and trade facilitation, Rules of Origin, technical barriers to trade and much more.

As part of the deal, British businesses will benefit from tariff-free trade on 99 per cent of their exports to Japan, while more liberal Rules of Origin mean producers of products such as knitwear and biscuits can source their materials from around the world before sending their finished wares to Japan.

There will be many more geographical indications (GIs) under the new agreement, which means products such as English sparkling wine and Welsh lamb will be covered as brands and may therefore be able to gain more recognition in Japanese markets.

Car manufacturing will also be supported through lower tariffs on automotive parts coming from Japan, resulting in more streamlined regulatory procedures.

Market access has been guaranteed for UK malt exports thanks to a more generous quota, while the agricultural industry will enjoy tariff reductions for UK pork, beef and salmon exports.

For Tokyo's part, it was eager to protect the interests of Japanese companies operating in the UK amid the uncertainty surrounding Brexit, something it has now been able to do. It also wanted to avoid having no deal in place by the end of the transition period to avoid any trade disruption caused by WTO terms.

As part of the discussions, Japan did want Britain to remove tariffs on cars more quickly than the EU. However, it was ultimately only able to persuade the UK to eliminate the ten per cent tariffs on cars imported from Japan by 2026, which is the same timeframe as under the EU-Japan deal.

Essentially, this new deal does very much resemble the one between Japan and the UK, although there are new elements such as digital and data provisions.

Commenting on the signature of the agreement in principle, Ms Truss said: "This is a historic moment for the UK and Japan as our first major post-Brexit trade deal. The agreement we have negotiated - in record time and in challenging circumstances - goes far beyond the existing EU deal, as it secures new wins for British businesses in our great manufacturing, food and drink, and tech industries."

Japan's foreign minister Toshimitsu Motegi told a news conference: "It was a tough negotiation, but we have been able to reach a broad agreement in just three months. As we have agreed to the deal, which is more advanced and of a higher level than the Japan-EU EPA, we expect that trade and investment between Japan and the UK will be facilitated."

An unnamed official from Japan's foreign ministry said that being able to include additional tariff removals and specifics on digital trade was "a great achievement" given the time constraints.

British prime minister Boris Johnson was also quick to applaud the conclusion of the deal as the first under his nation's new circumstances, writing on Twitter: "We have taken back control of our trade policy and will continue to thrive as a trading nation outside the EU."

The UK-Japan Comprehensive Economic Partnership Agreement is widely being seen as a stepping-stone towards Britain joining the Trans-Pacific Partnership, something Mr Johnson has repeatedly expressed interest in.

Commenting on the developments, The Diplomat said Japan and the UK are "perfectly placed to envision a new model of economic partnership" and that this could "send a strategic message to the world" on trade partnerships.

It will be interesting to see if other nations now follow suit in concluding their own agreements with Britain in short order.

Japan is the UK's 13th-most important goods export market, according to the Office for National Statistics.

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