UK - Japan Free Trade Agreement signed.

[Chester1]

Britain and Japan sign post-Brexit trade deal

The countries formally sign a deal described by the UK's international trade secretary as "ground-breaking".

www.bbc.co.uk

Britain and Japan have formally signed a trade agreement, marking the UK's first big post-Brexit deal.

The deal, unveiled last month, means nearly all its exports to Japan will be tariff free while removing British tariffs on Japanese cars by 2026.

UK International Trade Secretary Liz Truss called it a "ground-breaking, British-shaped deal".

But critics have said it will boost UK GDP by only 0.07%, a fraction of the trade that could be lost with the EU.

The two countries had reached a broad agreement in September, and the deal is expected to boost trade between the UK and Japan by about £15bn.

The deal, which was negotiated over the summer, will take effect from 1 January 2021.

But some experts said it was a missed opportunity between the UK and its 11th biggest trading partner.

Japan said UK-EU deal was still crucial for Japanese business, especially its carmakers.

Dr Minako Morita-Jaeger, international trade policy consultant and fellow of the UK Trade Policy Observatory at the University of Sussex, said: "Given that Japanese FDI (Foreign Direct Investment) has been playing an important role in the UK economy and retaining its existing investment in post-Brexit is crucial, the UK government should have shown a strong commitment to Japanese investment by including a comprehensive investment chapter encompassing investment protection and dispute settlement," said

She added that Japan was the largest investor abroad in the world, accounting for 14% of the world total in 2018.

The new deal is very similar to the existing EU-Japan deal, but has an extra chapter on digital trade.

"It used to be said that an independent UK would not be able to strike major trade deals or they would take years to conclude," said Ms Truss at a joint press announcement with Japan's Foreign Minister, Toshimitsu Motegi.Mr Motegi said a deal between the UK and the EU was still crucial for Japanese business, particularly carmakers such as Nissan and Toyota who use parts from across Europe in vehicles they assemble in the UK."It is of paramount importance that the supply chain between the UK and the EU is maintained even after the UK's withdrawal," he said.

I suspect brexiteers will make a big deal out of this and remainers will dismiss it as rolling over the EU - Japan deal. It does seem to be more the latter but there are some modest improvements (particularly around data and visas). Its a better deal than I expected, especially considering the absurdly tight timeframe. It leaves Canada as the only major country that has yet to agree to temporarily roll over the EU FTA or agree a new one (talks ongoing). If there is a EU - UK agreement, then combined with the other FTAs there will be a basic safety net in place for 1st January.

 

[Sad Sprinter]

Britain and Japan sign post-Brexit trade deal

The countries formally sign a deal described by the UK's international trade secretary as "ground-breaking".

www.bbc.co.uk

I suspect brexiteers will make a big deal out of this and remainers will dismiss it as rolling over the EU - Japan deal. It does seem to be more the latter but there are some modest improvements (particularly around data and visas). Its a better deal than I expected, especially considering the absurdly tight timeframe. It leaves Canada as the only major country that has yet to agree to temporarily roll over the EU FTA or agree a new one (talks ongoing). If there is a EU - UK agreement, then combined with the other FTAs there will be a basic safety net in place for 1st January.

It's a start, but we're not out of the woods yet. I really do hope they don't go for a US trade deal, though.

 

[yorksrob]

This is certainly good news. I think generally replicating what we already have with friendly countries as far as possible is a desirable outcome.

As far as these new 'super' trade deals go, I'm not convinced that they're actually desireable between mature democracies. They seem to mainly involve dismantling "non tariff barriers" a.k.a countries democratic control over how their economies operate, in favour of multi-nationals.

 

[najaB]

I suspect brexiteers will make a big deal out of this and remainers will dismiss it as rolling over the EU - Japan deal. It does seem to be more the latter but there are some modest improvements (particularly around data and visas). Its a better deal than I expected, especially considering the absurdly tight timeframe.

I'll need to study the detail but something that's worth highlighting is that the massive 0.07% boost to GDP was predicated on the assumption that we would have a full free trade deal with the EU - which is looking exceedingly unlikely at the moment.

 

[yorksrob]

I'll need to study the detail but something that's worth highlighting is that the massive 0.07% boost to GDP was predicated on the assumption that we would have a full free trade deal with the EU - which is looking exceedingly unlikely at the moment.

Even the proposed one with the USA was estimated to have a miniscule economic benefit.

 

[Chester1]

I'll need to study the detail but something that's worth highlighting is that the massive 0.07% boost to GDP was predicated on the assumption that we would have a full free trade deal with the EU - which is looking exceedingly unlikely at the moment.

It was built on the assumption of an EU-UK no tariffs, no quotas free trade agreement. Due to the complexity of tariffs negoiations and lack of time that is what we will get (or nothing). There is an attempt amongst some remainers to rubbish any agreement before it is done by arguing that its thin etc. If it is agreed it will be as full as an FTA gets. That is certainly thin compared with being in the single market but would be pretty good by global standards e.g. comparable Canada - US trade.

Even the proposed one with the USA was estimated to have a miniscule economic benefit.

Frankly I found that very suspicious. An assessment that a full free trade agreement with the worlds largest economy (that is 7 days away on a cargo ship) would only add 0.2% sounds like the Treasury officials wanted the status quo. Its clearly wouldn't be anywhere as good as being in the EU. However, I don't believe that few or no tarrifs with the USA would have economic benefit with a margin of error of being zero or even negative. That sounds completely implausible.

Our best chance of a good free trade deal with the US would be joining the CPTPP and waiting for them to join it.

 

[najaB]

There is an attempt amongst some remainers

I really wish people would put this childish name-calling behind us.

Frankly I found that very suspicious. An assessment that a full free trade agreement with the worlds largest economy (that is 7 days away on a cargo ship) would only add 0.2% sounds like the Treasury officials wanted the status quo.

Given what we will have to give up in order to get a full free trade agreement, the status quo is considerably more attractive!

 

[LOL The Irony]

I hope this trade deal is just the start of good international trade relations, and it incentivises Nissan and Toyota to keep Sunderland & Derby respectively. I don't think it'll make Honda do a 180 though. Had this deal come sooner, Honda would still have a factory.

It's a start, but we're not out of the woods yet. I really do hope they don't go for a US trade deal, though.

I see no problem with a US trade deal if we still keep our strict standards. If you're wondering why I'm not mentioning the NHS, it's because putting it on the table would be political suicide.

 

[Chester1]

I really wish people would put this childish name-calling behind us.
Given what we will have to give up in order to get a full free trade agreement, the status quo is considerably more attractive!

I voted remain but I accept that the country didn't (both the UK as a whole and the constituent country I live in, England). There is a section of people who voted remain who are incapable of accepting that the country can do OK outside of the EU. I don't mean that they think on balance won't (a reasonable view point), I mean incapable of giving it any meaningful consideration. Have a look at some of the comments below the BBC article in the OP, plenty both pro and anti EU are deranged.

I don't disagree with you that a bilateral trade deal with the US isn't worth the conditions (e.g. farming). I do however think a 0.2% GDP increase prediction is utter rubbish and the Treasury need a model that passes a common sense test.

If we join CPTPP before the US then we would be negoiating alongside 11 countries. CPTPP would have 16% of global GDP if the UK joins i.e. bigger than the US. We would almost certainly get better terms than from a bilateral deal. Joining CPTPP is the right policy for the UK after brexit regardless of whether the US joins it (but that would be a bonus).

 

[yorksrob]

It was built on the assumption of an EU-UK no tariffs, no quotas free trade agreement. Due to the complexity of tariffs negoiations and lack of time that is what we will get (or nothing). There is an attempt amongst some remainers to rubbish any agreement before it is done by arguing that its thin etc. If it is agreed it will be as full as an FTA gets. That is certainly thin compared with being in the single market but would be pretty good by global standards e.g. comparable Canada - US trade.



Frankly I found that very suspicious. An assessment that a full free trade agreement with the worlds largest economy (that is 7 days away on a cargo ship) would only add 0.2% sounds like the Treasury officials wanted the status quo. Its clearly wouldn't be anywhere as good as being in the EU. However, I don't believe that few or no tarrifs with the USA would have economic benefit with a margin of error of being zero or even negative. That sounds completely implausible.

Our best chance of a good free trade deal with the US would be joining the CPTPP and waiting for them to join it.

I'm not convinced, when you consider that we have a very good trading relationship already. I get the feeling that any new "deal" would be scraping the barrel with controversial rubbish that neither side really wants.

That said, I like the idea of a deal with the CPTPP, if it offers genuine benefits, rather than just a watering down of national legislative powers against multinationals.

 

[deltic]

I don't disagree with you that a bilateral trade deal with the US isn't worth the conditions (e.g. farming). I do however think a 0.2% GDP increase prediction is utter rubbish and the Treasury need a model that passes a common sense test.

Applying a common sense test.

UK GDP $2.9trillon
0.2% of that is $5.8bn

UK trade to US in goods and vice versa in over simplified terms is $70bn in each direction

Assume exports and imports increase by the same amount as a result of a free trade deal and lets say they double in value

GDP = Consumer expenditure + Investment + Government spending + exports – imports

Those $140bn worth of US imports need to be cheaper than imports from elsewhere by 4% to give consumers an extra $5.8bn spending boost that they have to spend only in the UK.

The situation is obviously far more complex but a quick back of the fag packet calculation suggests a 0.2% increase in GDP passes a common sense test.

 

[Domh245]

Had this deal come sooner, Honda would still have a factory.

I'm curious why you think this? One of the big factors behind the closure of Swindon was the Japan-EU trade agreement, making it viable for Honda to produce EU (and UK) vehicles in Japan and import them. Additionally, it's the UK-EU agreement that's key for the vehicle manufacturers in the UK - the main market for NMUK and TMUK (and formerly Honda) is European export which will be significantly damaged by a lack of deal between the UK & EU. Nissan & Toyota Manufacturing UK have little to gain from this particular trade deal

 

[Chester1]

Applying a common sense test.

UK GDP $2.9trillon
0.2% of that is $5.8bn

UK trade to US in goods and vice versa in over simplified terms is $70bn in each direction

Assume exports and imports increase by the same amount as a result of a free trade deal and lets say they double in value

GDP = Consumer expenditure + Investment + Government spending + exports – imports

Those $140bn worth of US imports need to be cheaper than imports from elsewhere by 4% to give consumers an extra $5.8bn spending boost that they have to spend only in the UK.

The situation is obviously far more complex but a quick back of the fag packet calculation suggests a 0.2% increase in GDP passes a common sense test.

If it was only goods then it would be a reasonable estimate (4% average tariff reduction is in the right ball park). There is the element of better competition for existing suppliers to consider but that is very hard to quantify. Any US - UK FTA would include some stuff on services. Even the Japan deal does (on data and easier skilled worker visas) and those additions have been cobbled together within a few weeks.

I'm curious why you think this? One of the big factors behind the closure of Swindon was the Japan-EU trade agreement, making it viable for Honda to produce EU (and UK) vehicles in Japan and import them. Additionally, it's the UK-EU agreement that's key for the vehicle manufacturers in the UK - the main market for NMUK and TMUK (and formerly Honda) is European export which will be significantly damaged by a lack of deal between the UK & EU. Nissan & Toyota Manufacturing UK have little to gain from this particular trade deal

The trade deal allows EU parts to count towards % to be classed as British for purposes of exporting to Japan. Its not a core market for their British factories but it was sufficient to lobby for it.

 

[Domh245]

The trade deal allows EU parts to count towards % to be classed as British for purposes of exporting to Japan.

The Japanese manufacturers in the UK don't export to Japan though! It's good(ish) news for other manufacturers in the UK though, not that Japan is a big market for British cars

 

[Chester1]

The Japanese manufacturers in the UK don't export to Japan though! It's good(ish) news for other manufacturers in the UK though, not that Japan is a big market for British cars

Maybe they wanted to keep their options open. Its not specific to cars. I might misunderstood and it was other Japanese firms wanting to make it easier to pivot UK production towards their home market.

 

[najaB]

I might misunderstood and it was other Japanese firms wanting to make it easier to pivot UK production towards their home market.

There really can't be many things that would be cheaper for Japanese companies to make in the UK and ship to Japan for domestic consumption rather than make at home (or somewhere closer to home).

 

[yorksrob]

There really can't be many things that would be cheaper for Japanese companies to make in the UK and ship to Japan for domestic consumption rather than make at home (or somewhere closer to home).

Exactly, this will be a reiteration of the status quo, and no bad thing for that.

I do wonder whether new trade deals ought to be ratified by referendum, then we'll see whether the public believe that the various trade-offs are actually worth it. Given current circumstances, I'd exempt deals that just recreate what we already have.

 

[87 027]

The Daily Telegraph is reporting this morning (behind a paywall) that the UK has agreed to stricter conditions on State Aid in the Japan deal than they were initially prepared to offer the EU, and that by now offering the same to Brussels has helped to unlock the current round of negotiations.

 

[nlogax]

I do wonder whether new trade deals ought to be ratified by referendum, then we'll see whether the public believe that the various trade-offs are actually worth it. Given current circumstances, I'd exempt deals that just recreate what we already have.

No. I rather we didn't get into further referenda. They got us into this mess and I have zero faith in them improving the situation now.

 

[yorksrob]

No. I rather we didn't get into further referenda. They got us into this mess and I have zero faith in them improving the situation now.

On the contrary, the democratic deficit is what led to the upset in the referendum.

These trade deals seem to be pursued on the basis that they supposedly lead to greater economic growth, even though what economic growth there has been over the last twenty years has been achieved with stagnating wages, greater inequality, greater job insecurity etc. Has anyone bothered to ask populations whhether this type of growth is worth it ?

 

[deltic]

On the contrary, the democratic deficit is what led to the upset in the referendum.

These trade deals seem to be pursued on the basis that they supposedly lead to greater economic growth, even though what economic growth there has been over the last twenty years has been achieved with stagnating wages, greater inequality, greater job insecurity etc. Has anyone bothered to ask populations whhether this type of growth is worth it ?

The problem is no one knows what the counter factual would have been.

 

[yorksrob]

The problem is no one knows what the counter factual would have been.

True.

I think people should get the chance to see the executive summary of such deals setting out the pro's and con's.

 

[nlogax]

On the contrary, the democratic deficit is what led to the upset in the referendum.

Let's not revisit what caused the referendum result - it's been done to death here and most who remember the Brexit thread would rather leave it be.

These trade deals seem to be pursued on the basis that they supposedly lead to greater economic growth, even though what economic growth there has been over the last twenty years has been achieved with stagnating wages, greater inequality, greater job insecurity etc. Has anyone bothered to ask populations whhether this type of growth is worth it ?

I sincerely doubt there is any sort of appetite for multiple referenda of the sort you're suggesting. A public vote on a US trade agreement is the only one I see worth considering, bearing in mind the potential widespread changes in terms of food, environment, business, internet and manufacturing standards and regulations which could affect us all.

 

[yorksrob]

Let's not revisit what caused the referendum result - it's been done to death here and most who remember the Brexit thread would rather leave it be.



I sincerely doubt there is any sort of appetite for multiple referenda of the sort you're suggesting. A public vote on a US trade agreement is the only one I see worth considering, bearing in mind the potential widespread changes in terms of food, environment, business, internet and manufacturing standards and regulations which could affect us all.

Well, you've hit the nail on the head. All such trade deals would involve giving something up for something else, and If you believe that the public have an interest in such trade-offs with the USA, why not with other powers ?

 

[nlogax]

Well, you've hit the nail on the head. All such trade deals would involve giving something up for something else, and If you believe that the public have an interest in such trade-offs with the USA, why not with other powers ?

Only a potential US deal would have such far reaching consequences on our daily lives. The United States is our top trading partner. The bulk of the rest of the top trading partners are EU countries.

 

[najaB]

A public vote on a US trade agreement is the only one I see worth considering, bearing in mind the potential widespread changes in terms of food, environment, business, internet and manufacturing standards and regulations which could affect us all.

Good luck on that! Even parliament isn't getting a vote on it.

 

[route101]

Maybe we will see more Japanese beef on our shelfs?

 

[yorksrob]

Only a potential US deal would have such far reaching consequences on our daily lives. The United States is our top trading partner. The bulk of the rest of the top trading partners are EU countries.

I can think of a few world powers where the public would have an interest in scrutinising such deals.

Generally though, I think we need to move towards a more 'Swiss' style of direct democracy.

 

[najaB]

Maybe we will see more Japanese beef on our shelfs?

It makes zero economic or environmental sense to ship Japanese grass to the UK when we've got plenty of grass here (quality beef just being concentrated grass), so... yes, probably.

 

[Domh245]

I can think of a few world powers where the public would have an interest in scrutinising such deals.

Generally though, I think we need to move towards a more 'Swiss' style of direct democracy.

I think you're massively over-estimating the public interest. Even the EU wasn't exactly of interest until the referendum, and even that was only driven by the relatively small UKIP brigade using it as a scapegoat, most of the population couldn't care less about the minutiae of international trade and relations. Most people will only be aware of these deals when they catch mention of it on the news or in the social media feeds, there really isn't any interest in scrutinising it at all amongst the wider population

Direct democracy works when you have a small, well engaged population. The UK does not have that