UK and Japan aiming for FTA “before December 2020”

UK and Japan aiming for FTA “before December 2020”

11/01/19

Ed Ratcliffe, Head of Research and Advisory

The UK and Japan have “committed” to bringing a new free trade agreement into force next year, the Department for International Trade has announced.

In a statement issued after Japanese Prime Minister Shinzo Abe’s visit to Downing Street yesterday, DIT announced that the countries are working towards having an FTA in place by December 2020.

Liam Fox, UK Secretary for International Trade, said: “The UK and Japan are among the strongest champions of free trade and an even closer relationship as we leave the European Union will help us to rally against the protectionist measures around the world that risk making us all poorer.

“That’s why today we have committed to reduce global trade tensions, reform global trading rules and bring a new UK-Japan free trade agreement into force before December 2020.”

However, given that an FTA usually takes several years to complete – the EU and Japan started more than five years ago – the 2020 deadline is highly ambitious, though there may be ways to speed up the process.

One way to develop a UK-Japan FTA quickly could be to use the recently negotiated EU-Japan FTA as a blueprint. There are complications however, beyond the obvious fact that the UK’s trade relationship with the EU will be the basis for both the UK and Japanese negotiating position. Much of Japanese business interest at the moment relies on EU market access.

There are potential areas of convergence however. The UK would likely be less resistant to market access for Japanese cars – compared to French and German negotiating positions. Similarly, agriculture is less important to the UK economy than the economies of many EU member states.

Japan will be looking for more than access for cars and food however; Japan has significant offerings for high-tech infrastructure projects involving high-speed trains and nuclear energy. More problematically Japan will be forward-looking and will be seeking access for its growing services industry – the most important area of the UK economy and exports.

The UK has so far focused on quick wins. A raft of trade deals between UK-Japan manufacturing, retailing and agriculture companies worth £200m was also announced during Prime Minister Abe’s visit, in which he met with UK Prime Minister Theresa May.

While these are good news in a time where it feels like there is very little, in the longer term, the UK risks wishing it was under the EU’s trade umbrella rather than braving the cold world outside, alone.

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