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Interview

UK hopes Japan trade deal pays digital dividends and paves TPP path

Trade Secretary Truss says pact will 'help set standards elsewhere'

British Trade Secretary Liz Truss speaks with Nikkei in Tokyo on Oct. 23. (Photo by Kosuke Imamura)

TOKYO -- Britain's international trade secretary expressed confidence on Friday that her country's economic partnership agreement with Japan, signed the same day, will benefit both sides in the fields of digital technology and data handling -- while giving the U.K. a steppingstone to the revised Trans-Pacific Partnership.

"I think this deal is very suited to both the U.K. and Japan economies because we are both strong in technology, research and development, and advanced manufacturing," Secretary Liz Truss said in an interview with Nikkei.

She added that the pact will "improve the mobility of professionals" and said there will be "improvements in manufacturing in terms of reduction in tariffs of car parts."

"It also helps set standards elsewhere. Japan and the United Kingdom are both free-market democracies. We both believe in the rules-based trading system."

Truss on Friday met with Japanese Foreign Minister Toshimitsu Motegi in Tokyo to sign the EPA.

The deal is based largely on the economic partnership between Japan and the European Union, which covers Britain until the end of the year when a Brexit transition period expires. The Japan-U.K. pact generally follows the preferential tariffs that are included in the Japan-EU agreement.

London's tariffs on Japanese cars will be removed in stages, with a plan to bring them down to zero by 2026. Tariffs on electronic control panels -- used in electric vehicles and railway cars -- exported to the U.K. will be removed immediately.

Truss said the U.K. expects to secure "15 billion pounds ($19.6 billion) of additional trade" with Japan, with benefits that go beyond the ambitions of the 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership -- previously known simply as the TPP.

The Japan pact marks the first major trade deal for London since it left the EU earlier this year, and is seen as a step toward Britain joining the TPP. Truss said the U.K. will apply "early next year."

"The U.K. is very committed to the rules-based trade that the TPP represents," she said, adding, "We have so far had a positive response including from Japan and a number of other TPP members."

As for the bilateral deal with Japan, the two parties aim to implement it in January 2021, after domestic ratification.

On the tech front, the agreement includes a rule against governments requesting businesses to reveal the algorithms they use for artificial intelligence and encryption.

When asked whether the U.K. plans to expand the deal with Japan, Truss said: "The world is developing all the time. We are seeing new technologies like artificial intelligence. We cannot predict what the technology of the future might be."

The arrangement, she continued, "allows us to develop as time goes on, incrementally, to make sure we are capturing all of the benefits of new technologies."

Meanwhile, London has resumed talks with the EU on a post-Brexit trade agreement at an "intensified" pace, she said.

Truss acknowledged that this will have a significant impact on Japanese businesses, saying: "We want to get a good deal from the EU. I know that is important for Japanese investors in the U.K. ... We are working very hard to secure that."

A number of Japanese companies have expressed concerns about the outlook. Although talks are progressing, Truss said it would be "prudent" for Japanese companies to prepare for an Australia-style arrangement.

The EU and Australia do not have a free trade pact but trade largely under World Trade Organization rules.

Truss stressed that the U.K. wants to get the best deal possible with the EU and that it is "fully aware of the issues raised by Japanese companies."

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