UK’s first post-Brexit deal, first of many to come?

Japan, Tokyo

Britain has signed its first major post-Brexit trade agreement with Japan, effective from the day Britain leaves the EU on January 1, 2021. Signed by UK International Trade Secretary Liz Truss and Japanese Foreign Minister Toshimitsu Motegi on Friday (October 23). It was largely agreed in September and it took only a few months to reach the final deal, giving the UK government leverage in showing trade deals outside the EU are possible to be negotiated. Truss said, “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.” This has been a sticking point and caused concern as Britain slowly but surely crashes out of the EU.

Britain and Japan currently have an existing trade agreement but this new deal takes it’s a step further by including an extra chapter on digital trade, the removal of export tariffs to Japan on items such as cheese and agricultural produce as well as eliminating British tariffs on Japanese cars. According to the UK Department for International Trade, the deal is expected to bring a further £15bn worth of trade, however, the BBC reported that critics are saying it will only boost trade by 0.07%. The general concern from many parties is that new post-Brexit deals won’t make up for the huge loss of EU deals and as a no-deal is now practically certain, it’s probable.

In terms of the logistics implications of the deal, the current trading system has proven fruitful as Japan has made use of the UK’s position to enter European markets. Motegi commented, “To this day, many Japanese companies have expanded their business to the UK as the gateway to continental Europe, it is of paramount importance that the supply chain between the UK and the EU is maintained even after the UK’s withdrawal.”

A current feature in the relationship is the automotive industry. Many Japanese car manufacturers such as Honda and Nissan obtain their parts from all over the EU, they assemble cars in the UK and export them back to the EU. Motegi expressed hopes that there will be a deal between the UK and the EU to enable the continuation in the automotive supply chain. This kind of trade has been able to happen seamlessly since the advent of the EU and its multilateral deals, but Brexit is potentially jeopardising Britain’s relationships with other EU countries. It is of course in the nation’s interests to maintain this close relationship with the EU despite the seemingly ‘bitter divorce’.

A big factor in Britain leaving the EU was the fact it could not participate as freely as it may have wanted in other trading partnerships around the world. As the UK prepares to leave and strengthens ties with Japan, it has now declared intent to join the Trans-Pacific Partnership which, if eventually ratified, would enable the trade agreement with a whole host of new countries including Canada, New Zealand and Australia. Whilst Brexit was the main reason for Truss’ visit to Tokyo, regional security was also on the agenda. It seems Japan is hoping the stronger British influence in the region may also provide support as Chinese expansion persists and North Korea continues to flout UN sanctions. It is clear this deal is mostly about trade but of course geopolitical aims, on both sides, are underlying.

The deal is yet to be ratified but it looks set to go ahead without contention. This is a step forward for British trade post-Brexit and it has shown deals can be made. However, Britain is to leave on in little over two months time and this is the first major deal. Whilst Truss has hailed this a “ground-breaking, British-shaped deal”, the deadline is fast approaching, and ‘no-deal’ is becoming more likely prompting the question of where are the other trade agreements?

Source: Transport Intelligence, October 27, 2020.

Author: Holly Stewart