Japan and UK sign post-Brexit free trade agreement

Japan and the United Kingdom signed a post-Brexit bilateral free trade agreement Friday, paving the way for its implementation Jan. 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 Liz Truss hailed the “landmark” agreement as promoting free trade and strengthening bilateral ties after inking the deal in Tokyo, with London seeing it as a step to join the Trans-Pacific Partnership grouping 11 Pacific nations.

“It provides British businesses with the gateway to the Asia-Pacific…and it paves the way for the accession to the Trans-Pacific Partnership,” Truss said in a joint press announcement with Motegi, referring to the framework including Japan, Australia and Mexico and accounting for about 13 percent of the global economy.

Motegi said, “Japan also welcomes the United Kingdom’s interest in acceding to the TPP 11 and will continue to give necessary support.”

The Japan-U.K. pact, which largely replicates the existing Japan-EU free trade accord, will enter into force after domestic ratification procedures.

The two countries had negotiated the deal as the Japan-EU pact will not cover the United Kingdom 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. Without such a deal, the Japanese firms’ European businesses could be disrupted.

Noting that many Japanese companies have expanded their business to Britain as the gateway to continental Europe, Motegi said, “It is of paramount importance that the supply chain between the United Kingdom and the European Union is maintained even after the United Kingdom’s withdrawal from the European Union.”

“Japan has high hopes that an agreement is reached soon on the negotiations between the United Kingdom and the European Union on their future partnership,” he said.

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

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.

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

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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