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Trade

Japan ratifies UK trade deal to take effect Jan. 1

Car companies and train makers to benefit from tariff cuts

The Japan-U.K. economic partnership agreement "ensures continuity for Japanese and British companies," Japanese Foreign Minister Toshimitsu Motegi says. (Nikkei montage)

TOKYO -- Japan's parliament on Friday completed ratification of a free trade deal with the U.K., a key move for supporting Japanese auto companies, railcar makers and other industrial groups through Britain's looming exit from the European Union.

The economic partnership agreement, set to take effect Jan. 1, saves Japanese manufacturers operating in the U.K. from a Brexit "cliff edge" at the end of this month.

But a trade deal between the U.K. and EU remains necessary to ensure these companies have frictionless commerce with the European bloc after Brexit.

The Japan-U.K. agreement "ensures continuity for Japanese and British companies, and it is hoped that bilateral trade and investment will advance under the agreement's high standards," Japanese Foreign Minister Toshimitsu Motegi told reporters Friday following a cabinet meeting.

While smoothing the way for trade, London and Tokyo are also exploring closer ties in the security field, including sharing with Japan intelligence gathered by the "Five Eyes" arrangement of the U.S., U.K., Canada, Australia and New Zealand.

Lawmakers in Japan's legislative Diet pass the free trade deal with Great Britain on Dec. 4. (Photo by Uichiro Kasai)

The economic partnership agreement will abolish tariffs on industrial goods imports and exports in terms of quantity and value. Tariffs on Japanese exports of passenger cars to the U.K. will be cut stepwise until they are eliminated in 2026 -- just like Japan's arrangement with the EU

Tariffs will immediately be abolished on such items as rail cars and components, turbojet engines and control panels for electric vehicles.

Many Japanese companies operating in the U.K. use parts shipped from continental Europe to build their products, which are then shipped back to those markets. In order for them to continue operating smoothly following Brexit, the U.K. will also need to sign a trade deal with the EU.

For agricultural imports into Japan, the new agreement will not establish any new quotas under lower tariffs, though London wanted to expand Stilton blue cheese exports.

Tokyo compromised by allowing the U.K. to export agricultural products at the same tariff rate as the EU as long as imports from the EU do not reach a certain volume. Duties for forestry and fishery products will also basically follow what is in force with the EU.

When it comes to rules governing the transfer of digital data, Japan and the U.K. agreed to regulations that are at a higher level than was settled in the EU trade deal or the 11-country Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

Companies that expand to the British or Japanese market will be protected from having to reveal trade secrets to the government or any businesses in the destination country. The CPTPP and the Japan-EU trade deal forbids states from requesting companies reveal source codes. Japan and the U.K. will go further by banning forced disclosures of artificial intelligence algorithms and encryption keys.

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