UK-Japan Free Trade Agreement: The UK’s Strategic Approach
Japan is the UK’s third most important market for fashion and textiles and UKFT has been actively and consistently lobbying the government to deliver an FTA with Japan as soon as possible. We therefore welcome the government’s commitment to an ambitious free trade agreement between the UK and Japan.
The UK government will begin negotiations on a UK-Japan free trade deal next week. In advance of the negotiations the UK government has published its Strategic Approach to the negotiations.
The document sets out the UK’s vision for the agreement. It is the result of extensive research, including submissions and recommendations from UKFT. The sector is specifically mentioned very early on in the document as an industry that expects to see substantial benefit from a UK-Japan FTA.
The document maintains that a UK-Japan FTA is important for the UK as it recovers from the Covid19 pandemic, which is true, but an agreement is made all the more urgent by the UK’s decision to leave the EU and, with it, the EU’s existing FTAs which have clearly benefitted UK exporters. The document predicts an increase in trade as a result of the FTA but it does not comment on the potential loss of trade if the UK were to leave the EPA without having its own bi-lateral arrangements in place. Significantly, the government acknowledges that most industries, including ours, have stressed the key importance of having the UK-Japan FTA agreed, ratified and implemented before the UK leaves the EU-Japan agreement on 1st January 2021.
Looking to the future, the approach positions a UK-Japan agreement as an important stepping stone to membership of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). UKFT is supportive of this ambition whilst noting that the UK-EU FTA is an essential first step for the ongoing prosperity of the country. However, CPTPP is an important partnership as it also includes Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam although the degree of integration between these partners is generally lower than it would be under any bi-lateral FTA.
In particular, the document highlights that Scotland, the East Midlands and London stand to make important gains from a UK-Japan FTA. Again, this is in line with UKFT’s assertion that an agreement with Japan would be especially important for UK manufacturers throughout the UK.
The document commits to protect and innovate the UK’s IP regimes as part of the agreement. This is an important step as the UK is very much in the lead on IP protection compared with Japan. UKFT have campaigned energetically for this to be included as there are very large differences between the West and Asia, including Japan, on IP protection for the creative industries.
The document also commits the UK to advancing the country’s commitment to protecting the environment and promoting green growth through the UK’s existing commitments on climate change. Whilst the industry would like to see the UK go further on these issues, the commitment not to compromise on the UK’s current standard is welcome.
The approach includes a chapter to support SMEs, again an important part of UKFT’s own submissions and recommendations and the UK commits to do everything possible to achieve efficient and transparent customs procedures to minimise the cost and administrative burden on British exporters. For example, there is a plan to ensure that British goods can be tested to Japanese standards in the UK. SMEs make up the majority of the fashion and textile industry and UKFT is campaigning for much more to be done to support and encourage SME companies and retailers as a central pillar of its Covid19 industry recovery plan.
Whilst the government recognises that some industries will see an increase in Japanese imports, UKFT sees Japan as a market with clear potential to increase our exports, especially for goods made in the UK.
One of the challenges in these negotiations is going to be reaching agreement on Rules of Origin. The approach commits to developing a “simple and modern set of Rules of Origin” and the EPA definition currently works well for the industry as there has been a lot of flexibility on the Japanese side. UKFT would also like to see “triangulation” added to the agreement whereby in addition to good manufactured in the UK, UK exporters of goods also made in the EU or another Japanese FTA territory would qualify for tariff-free access. This has not made it into the document but UKFT will continue to campaign for it to be included. On the other hand, the UK has committed to simplify documents and standards by working on the same format of Statement of Origin as Japan has with other FTA partners, including the EU27. This is also a positive step for UK exporters as it potentially simplifies procedures in time.
Overall UKFT supports the governments approach will be working closely with the government to try and deliver an ambitious UK-Japan FTA can be in place by 1st January 2021.
Read the Department for International Trade announcement on the negotiating objectives for a free trade agreement with Japan here.
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