LONDON: The UK government has celebrated its trade agreement with Japan, lauding the ability to strike its own deals as a key dividends of Brexit. But the accord largely preserves the status quo, and will bring only a limited effect to Britain’s economy.
Signed by International Trade Secretary Liz Truss and Japanese Foreign Minister Toshimitsu Motegi last Friday, the accord is expected to boost Britain’s gross domestic product by 0.07% over the next 15 years, according to the UK government. That’s equivalent to about £1.5bil (US$2bil).
In substance, the text is almost identical to the accord the European Union signed with Japan in 2018, of which the UK is currently a beneficiary.
UK Prime Minister Boris Johnson has been keen to talk up the value of the deal with Japan, touting it as one of the first major benefits of Brexit. In Parliament this week, Cabinet Office Minister Michael Gove said it gives the UK “far more favourable access” to Japan’s economy than the EU’s agreement with Japan.
To be sure, the deal does have some extra provisions on financial services, digital trade, and data – such as not requiring a British company to host its data in Japan if it wants to operate there.
That will benefit companies such as TransferWise Ltd and Revolut Ltd, trade minister Greg Hands told Bloomberg Television.
But the deadline pressure imposed by the end of the Brexit transition period on Dec 31 – at which point the UK and Japan would have otherwise defaulted to commerce on terms set by the World Trade Organisation – limited the scope and ambition of the deal.
In a sign of the speed at which the document was drafted, large sections are lifted from the existing EU agreement.
Japan also appears set to be the greater beneficiary of the accord: its exports to the UK are expected to grow by £13bil, whereas UK. exports to Japan will only grow by £2.6bil, according to the British government.
The bigger prizes for the UK will come from striking new free trade agreements with countries that haven’t signed ones with the EU.
The UK is already in talks to reach accords with the United States, Australia and New Zealand.
But even then, the economic impacts are expected to be relatively small: the UK government expects trade deals with those three nations to boost GDP by 0.16%, 0.02% and nothing respectively.
UK’s Global Trade Deals still pose a huge pre-brexit challenge. — Bloomberg
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