The UK and Japan have agreed a free trade deal, as Britain races to secure easy access to overseas markets in preparation for leaving the Brexit transition period at the end of the year. Liz Truss, the international trade secretary, said the agreement with Japan was a “historic moment” for both countries. However, the deal takes place against the backdrop of a bitter dispute between London and Brussels after the government admitted it was preparing to break international law by unpicking parts of the withdrawal agreement. Speaking after signing off a deal in principle with the Japanese foreign minister, Toshimitsu Motegi, Truss said the agreement was expected to boost UK trade with the world’s third-largest economy by an estimated £15.2bn. Japan is the UK’s 13th-most important goods export market, accounting for about 1.9% of all products sold overseas last year, according to the Office for National Statistics. Including trade in services, imports and exports were worth a total of £31.6bn last year, with 9,500 UK-based firms exporting goods to Japan. According to the Department for International Trade, the deal will increase UK GDP by 0.07% – or £1.5bn – after 15 years.
Business leaders welcomed the Japan trade deal as an important signal of progress being made to expand British business in major overseas markets, but warned that a deal with the EU should still be the government’s top priority. Adam Marshall, director general of the British Chambers of Commerce, a business lobby group, said: “Whilst this agreement is undoubtedly cause for celebration, securing a free trade agreement with the EU remains critical to the future of businesses in the UK. We urge ministers to redouble their efforts to reach a comprehensive partnership with our largest trading partner at a crucial time in the negotiations.” The EU is the UK’s biggest single export market, accounting for 46% of UK goods exports. Including services trade, imports and exports between Britain and the EU were worth a total of £672.5bn last year, more than 20 times the value of UK-Japan trade. Heralding the deal as a major step forward, Truss said it was an improvement on the Japan-EU free trade agreement, which entered into force last year but will no longer cover the UK when the transition period ends on 31 December. She said: “The agreement we have negotiated – in record time and in challenging circumstances – goes far beyond the existing EU deal, as it secures new wins for British businesses in our great manufacturing, food and drink, and tech industries. “From our automotive workers in Wales to our shoemakers in the north of England, this deal will help build back better as we create new opportunities for people throughout the whole of the UK and help level up our country.” Truss said the agreement was “an important step” towards the UK eventually joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which would secure the country access to markets in 11 countries in the Asia-Pacific region. Earlier this month the government confirmed Tony Abbott would serve as a UK trade adviser in a push to build links in the region, despite widespread condemnation of the former Australian prime minister’s record of misogyny and homophobia and his views on global heating. Japan and Britain have been negotiating a deal since June. The talks missed an end-of-July deadline to strike a deal after the international trade secretary insisted on preferential treatment for stilton cheese amid pressure on Boris Johnson from British farmers concerned about the imminent loss of EU subsidies, according to the Nikkei Asian Review business newspaper. Britain exported £18m of blue cheese globally last year, with just £102,000 worth going to Japan.
The Department for International Trade said Britain would “continue to benefit from access to the low tariffs for key food and drink products covered by quotas”, including stilton cheese. Japanese business leaders have voiced alarm over the potential impact of a no-deal Brexit. About 1,000 Japanese companies employing 180,000 people have a presence in the UK, including major employers such as Nissan, which has 6,000 staff at its car manufacturing plant in Sunderland. Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, welcomed the deal, but added: “We hope the deal can be ratified swiftly but, for both sides to benefit fully, we still need to urgently complete an ambitious and tariff-free UK-EU deal – and time is rapidly running out.”