The Commons: The Future of Japan-UK Trade
bgblue
The UK began post-Brexit trade talks with Japan on June 9th. The discussion marks a profound intersection of economic challenges, brought about by both Brexit and COVID-19. To add further stress to an already important discussion, Japan is the UK’s fourth-largest non-EU trading partner and a key to the UK’s influence in and expansion into Asia-Pacific. Undoubtedly, the outcome of these negotiations will make waves in the British economy, but even more importantly in Britain’s reputation moving forward.
With Brexit in mind, the transition period – which set to last until December 31, 2020 – protects the current status of the Japan-UK economic partnership. But, if the two nations are unable to implement an arrangement before the end of the year, their current relationship – defined by the Japan-EU Economic Partnership Agreement – disintegrates, leaving in its place trade on WTO terms and welcoming massive disruption to the Japan-UK trade flow.
That being so, these trade talks are not only pivotal for Britain’s future economic security, they are also set to proceed on an exceptionally contracted timeframe. Hiroshi Matsuura, Tokyo’s lead negotiator, announced that Japan would give the UK until the end of July to finalize a deal – six weeks. As the Diet expects to proceed with an extra session in the fall, Matsuura has made it clear that in order to approve any agreement in that session and thus before the end of the year, these talks must be brief. With this in mind, Japan has expressed that both nations will have to drastically “limit their ambitions” so as to promptly finalize a deal. Though, it would seem this sentiment may be lost on the Britons.
In a recent statement, International Trade Secretary Liz Truss announced that the UK aims “to strike a comprehensive free trade agreement that goes further than the deal previously agreed with the EU, setting ambitious standards in areas such as digital trade and services.” In the eyes of the UK, Japan is key to their economic rebound post-COVID-19 and post-Brexit.
In a time of colossal economic insecurity, Britain hopes to negotiate an FTA with Japan that not only makes accessible new sectors for the British economy but also creates a pathway for greater British involvement in Asia-Pacific. With an aim to expand digital trade into key sectors and secure the “UK’s position as a technology superpower,” Britain recognizes the significance of Japan, a nation leading the Asia-Pacific in “the areas of AI, data and ageing society.” Negotiations with Japan are strategic not only in the UK’s relationship with the fellow island nation, but as they will impact British interaction with the entirety of the region. The UK hopes that these trade talks will be a “stepping stone” in their joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), an arrangement that would give them privileged access to significant markets in Asia and Latin America.
Notably, there exists a concerning variation between British and Japanese ambitions going into these talks. Unlike Britain, with lofty hopes to expand trade, Japan – beyond predictable bids on reduced tariffs and preferential trade – is concerned primarily with preserving access to the European market for Japanese industries based in the UK. For years, Japan has maintained “manufacturing and services subsidiaries that rely on easy access into the EU from their British base,” hence, any kind of Japan-UK deal will hinge largely on the future relationship of Britain to the European market. Unfortunately for Japan, this relationship is fragile as are the talks that accompany the British exit from the EU. While Japan and the UK have agreed to base these rapid negotiations primarily on the preexisting Japan-EU setup, there is still a chance that Japanese industries may fall victim to the ongoing and uncertain relationship that exists between Britain and the continent.
On the whole, the next 6 weeks are crucial to the UK’s economic future. The negotiations will either maintain or disrupt current Japan-UK trade, as well as bearing the possibility of British expansion into emerging markets. Beyond the material outcome of these talks, to many spectators, these negotiations are poised to be a barometer for Britain’s ability to draft trade deals now they have left the EU. Considering that Britain hasn’t done this alone 40 years, all eyes are on Boris Johnson’s government to produce a sustainable arrangement with Japan moving forward.