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Trade

Japan fails to win early end to auto tariffs in UK trade deal

Levies to expire in 2026 as agreement on farm goods needed to seal pact

Newly manufactured Honda cars await export in a port in Yokohama.   © Reuters

TOKYO -- Japan and the U.K. will agree to eliminate British tariffs on Japanese autos by 2026, despite a push by Tokyo for an earlier phase out, Nikkei has learned.

The two countries are working toward an agreement in principle on a trade deal by the end of this month, ministers said Friday.

Cars and agricultural products are two of the thorniest issues in the negotiations. Tariffs on individual farm goods have yet to be decided.

The Japan-U.K. economic partnership agreement seeks to prevent trade and investment disruption when the Brexit transition period concludes at the end of this year and Britain's trade policy becomes independent of the European Union.

Under Japan's economic agreement with the EU, import tariffs on Japanese autos will be cut to zero in stages ending in 2026. Tokyo had sought a faster pace of reductions in its negotiations with the U.K. but has settled for the status quo.

The auto tariff issue became part of a compromise in which both sides will agree to no new tariff-free quotas for farm goods beyond what is in the Japan-EU agreement. Japan has sought throughout the negotiations to limit concessions on agricultural trade to what it had agreed on with Brussels.

Japan and the U.K. have reached a "substantive agreement" in "most" areas, Japanese Foreign Minister Toshimitsu Motegi told reporters in London on Friday after talks with Liz Truss, Britain's state secretary for international trade.

As they seek a broad agreement by month's end, both sides need to hammer out the details on farm trade. One outstanding issue is cheese. The U.K. seeks more preferential terms for blue cheeses, a local specialty. Japan looks to hold the line on EU-agreed levels.

U.K. Prime Minister Boris Johnson's government is under pressure from British growers to secure favorable terms on agriculture. The looming loss of EU subsidies and the risk posed by cheap imports from potential new trade deal partners like the U.S. are creating anxiety for farmers.

The Japan-U.K. economic pact will extend beyond tariffs, including such tech areas as algorithms for artificial intelligence.

Assuming an agreement in principle is reached this month, both governments would take the next steps of signing the deal and winning parliamentary approval. Motegi said the goal is to have the pact take effect on Jan. 1, 2021.

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