The UK is close to securing a deal with Japan in what could be billed as the first post-Brexit trade agreement for the government.
The UK can negotiate its own trade deals for the first time in decades, having formally left the EU on 31 January 2020.
Negotiations with Japan began in June with the pre-existing EU-Japan deal, which came into force at the start of last year, forming the basis for the talks.
Rushed talks
However, Japan demanded a quick deal with the UK, arguing talks would need to be concluded by the end of July to give enough time for ratification in the Japanese parliament before the end of 2020.
If a UK-Japan deal is not secured and ratified in time to take effect from the start of 2021 – when the UK will have left both the EU and the bloc’s trade agreements – UK-Japan trade would revert to being governed by WTO rules.
The talks are likely to miss the end-of-July deadline given by Japan, but the FT reports there is wiggle room going into August.
Continuity but with digital perks
Due to the rushed timeline, the UK-Japan deal is likely to provide continuity rather than enhanced market access, with Japanese chief negotiator Hiroshi Matsuura telling the FT last month that both sides would need to “limit their ambition”.
As a result, the UK has had to concede on issues, including its demand for “preferential treatment for British food exports”, the Guardian report.
However, it is understood that the deal will go further than the EU deal in relation to data and digital services.
The Guardian also reports the deal is likely to include zero tariffs on Japanese cars imported into the UK.
Still in talks
The UK is still pushing for further enhancements of the deal, including demands for reduced regulatory barriers to services and investment.
The UK is also pushing for “extended cumulation” in relation to rules of origin. This would allow goods to count as originating from the UK, even if a lot of the components come from Europe.
Japan and trade
Japan has become a champion of trade agreements in recent times, counting the EU deal and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) among its recent successes.
However, the ‘land of the rising sun’ has not always been open to foreign markets and was largely shut off to global trade till World War II.
A significant post-war US-influence saw Japan become one of the world’s leading economies in the latter half of the 20th century, in part due to its thriving electronics and automotive industries.
Now the world’s third largest economy by GDP, Japan’s total trade with the UK in 2018 was valued at £29bn, according to the government.
Japan was also the UK’s 13th largest export market in 2017, according to the World Economic Forum.