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Trade

Japan wants auto tariffs scrapped immediately in UK trade treaty

Tokyo and London seek to quickly seal a post-Brexit deal to take effect 2021

British Prime Minister Boris Johnson led the Conservative Party to a decisive victory in parliamentary elections, making it all but certain that the UK will soon leave the European Union.    © Reuters

TOKYO -- Japan will seek an instant and complete removal of auto tariffs as it negotiates a trade treaty with the U.K. that the partners aim to take effect at the start of 2021.

British Prime Minister Boris Johnson led the Conservative Party to an overwhelming victory in parliamentary elections Thursday, making it likely that the U.K. will leave the European Union as scheduled at the end of January.

Trade between the two nations will operate under the Japan-EU economic partnership agreement during a grace period that expires at the end of 2020. But afterward, tariffs would rise to the level that existed prior to the agreement.

Tariffs on passenger cars imported from Japan to the EU currently have decreased to 8.8% from 10% prior to the agreement. These levies for imports into Britain would revert to 10% at the start of 2021 if Japan and London fail to reach a new trade treaty. Tariffs for many auto parts, now at zero, would rise to a range of 3% to 8%.

Japan and Britain had begun discussions before the U.K. election on a new trade deal targeted for January 2021. Tokyo will push for more liberal terms exceeding those in the pact with Brussels, which took effect this year. Japan aims to go beyond a treaty that minimizes the impact of Brexit, working instead for a trade deal that energizes commerce between the two partners.

Auto tariffs that began at 10% in the Japan-EU agreement fall to zero in the eighth year of the treaty. But Japanese officials say they will ask London for an immediate elimination. Automobiles are the third-largest export from Japan to the U.K., totaling 63.1 billion yen ($577 million) in 2017, trailing only aircraft parts and rail cars.

But Britain appears more cautious about an immediate elimination of tariffs. London could seek a more gradual reduction like that found in the EU treaty.

Tokyo also intends to pursue more liberal rules governing so-called digital trade that go beyond the Japan-EU agreement.

The 11-nation Trans-Pacific Partnership and the Japan-U.S. Digital Trade Agreement, which comes into force Jan. 1, are governed by three principles. Governments are prohibited from requiring companies to disclose source code. They also are prohibited from requiring foreign companies to locate IT facilities such as servers in their territory. Lastly, governments are required to protect the free flow of data across borders.

The Japan-EU agreement prohibits only demands to disclose source code, and the other principles remain under discussion. Tokyo wants to establish all three principles in a deal with London, looking to create an environment in which companies can easily exchange data across borders.

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