UK and Japan agree historic free trade agreement

People walking across the Shibuya crossing in Tokyo, Japan

The UK has secured a free trade agreement with Japan, which is the UK’s first major trade deal as an independent trading nation and will increase trade with Japan by an estimated £15.2bn.

The UK-Japan Comprehensive Economic Partnership Agreement was agreed in principle by International Trade Secretary Liz Truss and Japan’s Foreign Minister Motegi Toshimitsu on a video call this morning.

The deal is tailored to the UK economy and secures additional benefits beyond the EU-Japan trade deal, giving UK companies exporting to Japan a competitive advantage in a number of areas. It will help to create jobs and drive economic growth throughout the whole of the UK.

The deal is also an important step towards joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). This will give UK businesses a gateway to the Asia-Pacific region and help to increase the resilience and diversity of our supply chains.

UK businesses will benefit from tariff-free trade on 99% of exports to Japan. Government analysis shows that a deal with Japan will deliver a £1.5bn boost to the UK economy and increase UK workers’ wages by £800m in the long run.

The UK and Japan have a long-shared history as free trading nations and this deal marks an historic moment that will deepen the partnership between two democratic island nations.

International Trade Secretary Liz Truss said: “This is a historic moment for the UK and Japan as our first major post-Brexit trade deal. The agreement we have negotiated – in record time and in challenging circumstances – goes far beyond the existing EU deal, as it secures new wins for British businesses in our great manufacturing, food and drink, and tech industries. Strategically, the deal is an important step towards joining the Trans-Pacific Partnership and placing Britain at the centre of a network of modern free trade agreements with like-minded friends and allies.”

Industry reaction

Chair of the Federation of Small Businesses, Mike Cherry said: “As we look to the UK’s global trading future, trade deals we sign should be about businesses of all sizes, which is why we are delighted to see a UK-Japan trade deal today that includes a comprehensive chapter for SMEs. FSB has long campaigned for these chapters to be included in trade deals, to give UK small businesses the support and tools they need to reach new markets.

“The UK-Japan trade deal therefore marks a major moment. It provides access to a major global market for the UK’s small business exporters, with one in ten viewing Japan as a crucial market to tap into. With over 130,000 small businesses already exporting to Japan, this should provide small businesses looking to grow, maintain or start exporting to Japan with the certainty they need for the future.”

Director General of the Confederation of British Industry, Carolyn Fairbairn said: “The signing of the UK-Japan trade deal is a breakthrough moment. It will be welcomed by businesses across the country. The Government and business now need to work together to make the most from the deal. It’s a huge opportunity to secure new Japanese investment across a wider range of sectors and UK regions.

“Business will help support the Government in its efforts to secure more trade deals around the world and promote their benefits to communities. The Japan deal can be the first of many.”

CEO of TechUK, Julian David said: “TechUK welcomes the conclusion of the UK-Japan Economic Partnership Agreement with its comprehensive digital trade chapter. Today’s agreement improves an already flourishing relationship between the UK and Japan tech sectors and creates significant opportunities for trade and investment for both our countries.

“Since 2018, in partnership with JEITA, we have run a successful UK-Japan Tech Forum to enable our members to develop a closer relationship with Japan and we look forward to working with the Government and our partners in Japan to assist the tech sector in taking full opportunity of this agreement.”

Jim Walker, Managing Director of Walkers Shortbread said: “We welcome the news that a UK-Japan agreement has been agreed today. Japan remains one of Walkers’ most important markets and sales have grown steadily there since first launching in Japan over 40 years ago. This deal will help provide certainty and create more opportunities to continue building sales in the future in a market where our products already enjoy success.”

Dominic Goudie, Head of International Trade, Food and Drink Federation said: “UK food and drink manufacturers are delighted to hear the UK has concluded a comprehensive new trade deal with Japan. As the world’s largest net importer of food and drink, this deal with Japan improves our existing terms of trade and offers significant new growth opportunities for quality UK manufacturing. We particularly welcome the additional flexibility this deal delivers in terms of rules of origin which are so crucial for our industry.

“The agreement recognises the unique challenge posed by seasonality and provides confidence for UK exporters across a wide range of product categories. This deal can make a vital contribution towards the UK’s economic recovery and our industry is ready to deliver for every community across the UK.”

Andrew Hood, a Partner specialising in EU, Trade, Regulatory, Public Affairs and Public International Law at European law firm, Fieldfisher, said: “The announcement that the UK has agreed a trade deal with Japan is great news for businesses in the UK that already trade with Japan, and for businesses that will seek to do so in future. It is also positive news that the Government has opened the door to support trade in new areas, like financial services.

“This new deal means there is now certainty for businesses in the UK about what happens to their trading relationship with Japan on the 1st January 2021. While we congratulate the UK Government for securing this agreement, there remains more work to be done with the EU and the rest of the world to bring that certainty to other trading relationships.

“Japan is only one of more than 60 countries the UK currently trades with under EU free trade agreements. On New Year’s Day 2021, the UK ceases to be a party to those agreements and by that date must either negotiate a bilateral free trade agreement with each of those trading nations, or failing that, will have to trade under WTO and other international obligations.”