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The UK’s approach to Negotiations with Japan

Department for International Trade written statement – made on 13th May 2020.

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Photo of Elizabeth Truss Elizabeth Truss The Secretary of State for International Trade and President of the Board of Trade, Minister for Women and Equalities

Coronavirus is the biggest threat this country has faced in decades. The Government is doing all it can to protect business from the worst effects of coronavirus in the immediate term. We must take steps to support our economy, reduce impacts and provide opportunities for the future economic recovery.

More trade is essential if the UK is to overcome the unprecedented economic challenge posed by coronavirus. It can give us security at home and opportunities abroad – opening new markets for business, bringing investment, better jobs, higher wages and lower prices just as we need them most. At a time when protectionist barriers are on the rise, all countries need to work together to ensure long-term prosperity and international trade is central to this cooperation.

That is why we will use our voice as a new independent trading nation to champion free trade, fight protectionism and remove barriers at every opportunity. The Government’s ambition is to secure free trade agreements (FTAs) with countries covering 80% of UK trade within the next three years, to become a truly Global Britain.

An enhanced FTA with Japan, the 3rd largest economy in the world in 2018, represents significant opportunities throughout the economy, from agriculture to digital. It will also help us increase the resilience of our supply chains and the security of our whole economy as we diversify our trade.

A deal with Japan will be a driving force to maximise the UK’s advantage in the opportunities Asia Pacific affords. These bilateral negotiations are a logical first step to joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), given that Japan is CPTPP’s largest economy.

Japan is a developed economy with high standards and we are major investors in each other’s economies. Trade with Japan is integral to UK jobs and businesses. In 2018, around 9,500 VAT registered businesses exported £6bn worth of goods to Japan, employing 2.4 million people. Around 6,700 VAT registered business, employing 2.5 million people, imported £10bn worth of goods from Japan.

An enhanced FTA with Japan is therefore expected to deliver a significant and sustained long term boost to every region in the UK. Our analysis shows that in the long run, the UK economy could benefit from a £1.5 billion boost, as the trade deal could increase trade flows between both countries by £15.2 billion. UK workers’ wages could increase by £800 million in the long run as a result of the deal.

Total annual tariff reductions on goods imports from Japan could be worth up to around £275 million per year in the long run. Some 59% of all Japanese goods imported into the UK and 44% of all UK goods exported into Japan are used in supply chains (average 2016-2018). So as well as reducing the price of consumer goods, lower tariffs could also cut the costs of domestic production in both countries.

Removing trade barriers with Japan could deliver huge gains, both for the 8,000 UK Small and Medium-Sized Enterprises (SMEs) across the UK already exporting goods with Japan as well as those making plans to enter the Japanese market. For example, total annual tariff reductions on goods exports to Japan could be worth around £33 million per year in the long run.

The deal will also provide cutting edge provisions on digital trade that maximise opportunities for trade across all sectors of the economy, providing trust and stability for UK businesses, entrepreneurs and exporters. Such provisions will reduce trade barriers and make it easier for the SMEs already exporting goods to Japan. UK businesses will have the opportunity to lead on innovation, supporting the development of important emerging technologies, such as quantum computing. E-commerce and the creative industries will also benefit from the free flow of data and strong copyright provisions.

That is why today, the Department for International Trade is publishing a comprehensive document setting out the UK’s strategic approach to an enhanced FTA between the UK and Japan. We will be placing copies in the House libraries. The document is set out in three parts:

  • The Government’s negotiating objectives for an enhanced FTA with Japan, using the existing EU-Japan Economic Partnership Agreement as a basis.
  • The Government response to the Call for Input on trade negotiations with Japan, providing an overview of the responses received and setting out how these have fed into our policy development.
  • A Scoping Assessment providing a preliminary assessment of the potential long-term economic impacts of an enhanced FTA between the UK and Japan.

The objectives published today are informed by our Call for Input, which ran for six weeks between 20 September and 4 November 2019 and gave businesses, interest groups and members of the public the opportunity to highlight their priorities for a potential future agreement with Japan.

A deal with Japan will help us to deliver opportunity and unleash the potential of every part of our United Kingdom. Analysis in the Scoping Assessment shows a UK-Japan enhanced FTA could have a positive impact on every UK nation and region in the long run, with Scotland, the East Midlands and London expected to benefit the most.

We are engaging with the devolved administrations, crown dependencies and overseas territories to ensure that we develop an enhanced FTA that works for the whole of the UK.

Our negotiating objectives clearly set out our priorities for an ambitious and comprehensive agreement, which will build on our existing EPA to strengthen the economic relationship with one of our largest bilateral trading partners.

The Government is committed to transparency and we will continue to ensure that parliamentarians, UK citizens and businesses have access to the information they need on our trade negotiations.

This statement has also been made in the House of Lords: HLWS233