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Following the 2016 nationwide referendum that formally separated the future of the United Kingdom with that of its longtime friend – the European Union – countries worldwide have had to re-adapt to these changes. Brexit meant that if nations, such as Japan, formerly had direct relations with the EU as a whole, Japan would be soon required to reinvent its bilateral relations with the EU and the UK separately. Talks on trade deals have continued for years, but it seems that 2020 could be the year to revolutionize these dynamics.
Since early January 2019, it was believed that the UK would accompany the EU in similar talks with Japan, but the time occupied by Brexit implied that the would UK arrive over a year later at that same table. In fact, whilst the EU-Japan trade deal was agreed in the first few months of 2019, the UK agenda predicts closing its “continuing” deals with Japan at the end of August 2020. New agreements with the UK have been extremely complicated and these agreements have become even more complicated amid the Coronavirus outbreak.
What does the EU-Japan deal consist of?
According to BBC News, this was the world’s biggest trade deal in 2019, covering a third of the global GDP and involving over 600 million people. The main concern was that of scrapping import duties. The EU is among Japan’s top importers of food and beverage services, therefore this deal could eventually lead to the “progressive reduction of nearly €1bn ($1.1bn; £0.9bn) of tariffs – nearly 40% on beef, up to 30% on chocolate, 15% on wine and up to 40% on cheese”, says BBC. Likewise, the EU would commit to reducing 10% on the import of Japanese cars to zero by 2027.
Not only this would allow the EU and Japan to engage in closer diplomatic and economic ties, but it would also create more opportunities for their citizens, mainly in the services sector. In fact, with lower tariffs, it is likely that financial and business firms would remain in European or Japanese territory due to a more convenient environment to grow in. This means that employers of all kinds would be encouraged to stay in these territories at lower costs, without feeling the need to relocate to developing countries while providing services for the EU or Japan from abroad.
A video by EuroNews below, however, presents issues arising from this trade deal.
Why is a deal with the UK harder to secure?
Brexit has inevitably revolutionized the position of the UK in geopolitics, and the UK has had to start exploring opportunities for agreements globally. Finding itself in such a globalized environment that demands deals to be made quickly to avoid bringing side-effects to the global economy, it is obvious the UK has faced an unprecedented workload to address these new relationships with foreign countries. Whilst the global economy runs extremely fast, it is inevitable and obvious that the UK has been wanting to prioritize agreements that would bring win-win benefits for its growth as an individual power. These, including the deal with Japan, take time to perfect.
Japan is the UK’s fourth largest trading partner outside the EU, and, as the Evening Standard reports “trade with Japan was worth more than £30 billion last year.” Negotiations between the two countries have been going on since early 2020 and are still unresolved as of August 15th, 2020, because International Trade Secretary Liz Truss wants to prove the UK can get better deals with Japan than the EU. On Tokyo’s negotiation team, Chief Negotiator Hiroshi Matsuura believed it was possible to complete negotiations by the end of July but the global pandemic that has so aggressively impacted both economies did not help secure agreements on time. London and Tokyo, however, both expect to close the deal by September, so that it is officially enforced by the end of the year.
How would the UK-Japan partnership overtake the previous EU-Japan deal?
Compared to the EU, the UK has been pushing for a better agreement in services and e-commerce. Truss says UK and Japan “have reached consensus on the major elements […] including ambitious provisions in areas like digital, data and financial services that go significantly beyond the EU-Japan deal.” The UK Parliament also believes this deal will take the UK one step closer from joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which not only includes Asian nations but stretches to Australia and Chile. Brexit may provide an opportunity for the UK to reaffirm the great power it once had around the globe.
The UK-Japan trade deal is broadly based on the one Tokyo has made with the EU, however, the UK has worked on renegotiating further tariff reductions on the automobile, tech, and food imports/exports. Whilst, as previously mentioned, the EU is committing to remove the 10% duty on imported cars by the end of the decade, the UK is immediately negotiating for the application of zero tariffs by end of 2020. This competition between the UK and the EU inevitably puts Japan in the best position, as both will race to strike better and better deals.
Because of the lack of time available for in-depth discussions due to the end of the Brexit transition period on 31st December 2020, the UK is leaving out sectors that will need further attention in the future. For instance, agriculture-related subjects must be specified in future UK-Japan talks, according to The Guardian. In fact, workers in the UK food and beverage sector particularly complain about the poor negotiations made to value British products such as the British blue cheese.
As shown in the video below from CNA, Japan and the UK are also dealing with the anxiety that the WTO standard regulations will start taking over by the beginning of 2021 if the bilateral deal is not secured earlier.
- Do you think the UK will fare better or worse following Brexit?
- Should the UK prioritise a trade deal with the EU?
- Are the UK acting irresponsibly in trying to outdo the EU and their trade deals?
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