The UK has struck a new trade agreement with Japan, its first major post-Brexit deal. The move comes as the UK is struggling to finalize any deal with its allies in the EU and officials claim it will add approximately $1.9 billion to the economy.
UK International Trade Secretary Liz Truss hailed the agreement as a ‘historic moment’ for both sides and said the deal, which has been agreed in principle, meant 99% of Britain’s exports to Japan would be tariff-free.
“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,” Truss said.
“From our automotive workers in Wales to our shoemakers in the North of England, this deal will help build back better as we create new opportunities for people throughout the whole of the UK and help level up our country.”
Truss added that she believed the deal is a crucial step towards joining the Trans-Pacific Partnership and thus putting Britain right in the centre of a network of free trade networks.
Additionally, a number of major Japanese investors in the UK, such as Nissan and Hitachi, will financially benefit from a reduction in tariffs on parts coming into the country from Japan, as well as streamlined regulatory procedures.
“UK food and drink manufacturers are delighted to hear the UK has concluded a comprehensive new trade deal with Japan. As the world’s largest net importer of food and drink, this deal with Japan improves our existing terms of trade and offers significant new growth opportunities for quality UK manufacturing,” Dominic Goudie, the UK’s Head of International Trade, Food and Drink Federation said.
“We particularly welcome the additional flexibility this deal delivers in terms of rules of origin which are so crucial for our industry.
“The agreement recognizes the unique challenge posed by seasonality and provides confidence for UK exporters across a wide range of product categories. This deal can make a vital contribution towards the UK’s economic recovery and our industry is ready to deliver for every community across the UK.”
Japan wanted to have the deal agreed on in principle by the end of the week before a change in government caused talks to drift. The ruling party will elect a new leader on Monday to succeed Prime Minister Shinzo Abe, who has been forced to step down for a second time for health reasons.
Japan’s Foreign Minister Toshimitsu Motegi, who is the country’s trade negotiation leader, may also have to step down when the new leader takes their place which could have potentially set talks back to square one. Now, however, Japan will submit the agreement to parliament, expected to convene later this year, with Motegi aiming to have the deal come into force by January.
“Whilst this agreement is undoubtedly cause for celebration, securing a Free Trade Agreement with the EU remains critical to the future of businesses in the UK,” the director general of the British Chambers of Commerce, Adam Marshall, said.
“We urge ministers to redouble their efforts to reach a comprehensive partnership with our largest trading partner at a crucial time in the negotiations.”
UK Prime Minister Boris Johnson has said that Brexit gives the country freedom to strike up new trade deals with other nations from all across the world, but critics say such agreements will be insufficient in replacing exports lost to the EU if no deal can be finalized with the bloc.
“As we look to the UK’s global trading future, trade deals we sign should be about businesses of all sizes, which is why we are delighted to see a UK-Japan trade deal today that includes a comprehensive chapter for SMEs,” Chair of the Federation of Small Businesses, Mike Cherry said.
“FSB has long campaigned for these chapters to be included in trade deals, to give UK small businesses the support and tools they need to reach new markets.
“The UK-Japan trade deal therefore marks a major moment. It provides access to a major global market for the UK’s small business exporters, with one in ten viewing Japan as a crucial market to tap into,” said Cherry.
“With over 130,000 small businesses already exporting to Japan, this should provide small businesses looking to grow, maintain or start exporting to Japan with the certainty they need for the future.”
Multiple members of the EU and its negotiating team have urged Johnson and his staff to cancel plans to break their already agreed upon divorce treaty but the UK government has refused, putting four years of trade talks between the two sides in jeopardy.
This agreement is undoubtedly a success for the UK government but they will need to make it just one of many if they hope to get close to replacing what they may potentially be losing with the EU.