UK and Japan Reach Post-Brexit Trade Deal, with Limitations and Risks

Strategic Insights -

UK and Japan have announced their first substantial post-Brexit trade deal, reflecting the potential opportunities and limits for the UK outside the EU. The agreement largely replicates the existing EU-Japan deal with some areas going further. It includes provisions on digital rules, tariffs, and agriculture, but the UK's agricultural gains are less substantial than claimed. The deal is expected to increase UK-Japan trade by £15 billion, but it will add only 0.07% to the UK's gross domestic product in the short term. The real significance of the agreement is as a bridge for the UK to join the Trans-Pacific Partnership (TPP) trade deal, which would provide access to sizeable markets like Canada, Australia, and New Zealand.

Key Takeaways:

  • The UK-Japan trade deal is a significant achievement for UK negotiators, achieved within months, and in some areas goes further than the existing EU-Japan deal.
  • The deal mainly replicates the existing EU-Japan agreement, but has some new provisions on digital rules, tariffs, and agriculture.
  • The UK did not secure new tariff rate quotas for agriculture, a priority area, and will have to rely on quantities left unfilled by the EU.
  • The deal is expected to increase UK-Japan trade by £15 billion, but will add only 0.07% to the UK's gross domestic product in the short term.
  • The real significance of the agreement is as a bridge for the UK to join the Trans-Pacific Partnership (TPP) trade deal, which would provide access to sizeable markets like Canada, Australia, and New Zealand.
  • Japan is keen to welcome the UK into the TPP, seeing it as a way to counter Chinese influence in the Asia-Pacific region.
  • The TPP includes provisions on state subsidies, competition, and foreign investors' ability to sue governments, which the UK is chafing at in its EU talks.
  • The UK's participation in the TPP could be affected by its behavior towards the EU, particularly its stance on Northern Ireland.

Statistics:

  • £15 billion: Expected increase in UK-Japan trade due to the deal.
  • 0.07%: Expected increase in the UK's gross domestic product in the short term.
  • 5%: Forecasted loss of GDP from leaving the EU customs union and single market, cited by government economists.
  • 11 countries: Existing members of the Trans-Pacific Partnership trade deal.
  • 25 products: Number of agricultural products covered by the EU-Japan agreement, of which the UK will receive quota quantities.
  • 10 products: Number of agricultural products the UK can use to fill gaps left by the EU.
  • £: Currency used for trade figures.

Sources:

  • "UK and Japan Reach Post-Brexit Trade Deal, with Limitations and Risks" (The Economist)
  • "UK and Japan agree post-Brexit trade deal" (BBC News)