Japan signs first post-Brexit trade deal with Britain, but UK-based Japanese firms still nervous

The pact largely replicates an existing Japan-EU accord that will no longer cover Britain after the Brexit transition period ends in December
Japanese companies welcomed the deal, but those based in Britain and operating in continental Europe are still wary about the future

Japan

Kyodoin Tokyo

Published: 12:00pm, 23 Oct 2020

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Japan and Britain signed a post-Brexit bilateral free trade agreement on Friday, paving the way for its implementation on January 1 next year to ensure continuity in trade and investment beyond the end of London’s transition period out of the European Union.

Foreign Minister Toshimitsu Motegi and British International Trade Secretary Elizabeth Truss signed the deal in Tokyo. The pact, which largely replicates the existing Japan-EU free trade accord, will enter into force after domestic ratification procedures.

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The two countries had negotiated the deal as the Japan-EU pact will not cover Britain after the completion of the Brexit transition period in December.

While Japanese companies welcome the deal, those based in the United Kingdom and operating in continental Europe are still wary about whether London will reach a free-trade agreement with the bloc by the end of the transition period.

Cars are seen outside a Toyota car showroom in Stockport, Britain, in May. Photo: Reuters

Without such a deal, the Japanese firms’ European businesses could be disrupted.

The deal with Japan is the United Kingdom’s first trade pact with a major economy following its exit from the EU in January 2020, as it has yet to wrap up trade talks with the bloc, the United States, Australia and New Zealand.

It is also an important step toward London’s aim to join the Trans-Pacific Partnership regional trade pact, which covers 11 countries including Japan, Australia and Mexico, accounting for about 13 per cent of the global economy.

The new deal removes tariffs on Japanese cars in stages to zero in 2026, which is the same as in the existing Japan-EU agreement, while London will immediately scrap tariffs on railway cars and auto parts.

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Japanese tariffs on British farm products are kept at the same level as under the agreement with the EU.

Rules on e-commerce and financial services have become more ambitious than the Japan-EU pact, including the prohibition on governments requesting businesses to disclose algorithms used in artificial intelligence technology and encryption data.

After launching the negotiations in June, Motegi and Truss reached a substantial agreement on most areas in August following talks in London and clinched an agreement in principle in September via videoconference.

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