Wilf Stevenson on a government trade strategy that is high on rhetoric and low in detail
Japan’s decision not to rollover its EU Free Trade Agreement with the UK was driven initially by a combination of ambition and great uncertainty about the future relations between London and Brussels. Over time, however, pressure from Japanese businesses has seen 'continuity' take priority – not least to ensure the smoothest possible transition into 2021 with the country’s main European hub.
So, in October, the UK-Japan Comprehensive Economic Partnership Agreement (CEPA) was signed. International Trade Secretary Liz Truss called it “ground-breaking” and the start of a new era of free trade. But beyond that bluster, and the echoing of the Prime Minister’s approach to UK trade, it is hard to see the agreement in anything more than rollover terms.
CEPA is also tilted in Japan’s favour, with the final impact assessment revealing that 83% of the projected £15.66bn in increased trade will go to Japanese exporters – almost five times the share going to UK exporters.
So, what are the benefits? The UK Trade Policy Observatory believes there are some "finely narrowed-down improvements in rules", including e-commerce, rules of origin, and financial services. And it also highlights the UK’s immediate reductions of tariffs on some car and rail manufacturing products – including a 5% reduction of the threshold of automotive components down to 50%.
Any further gains are difficult to gauge. The EU has 25 separate tariff-rate quotas with Japan on agricultural goods, of which the UK has managed to secure partial access to ten. And while much has been made of the UK getting eleven tariff concessions, these are in categories that our exporters sold no goods to Japan in 2019, for example dried eggs and ostrich leather.
Employment provisions have not advanced from the EU deal either, and these remain weak and unenforceable. Yes, there’s still a commitment to International Labour Organisation rights but it only allows violations to be tackled through discussion and the establishment of advisory panels. Trade unions were not allowed to provide any input during the negotiations.
On state aid, meanwhile, the government told the EU in negotiations that the maximum rules it will accept is the same as the EU’s FTA with Canada. But it has simultaneously accepted rules in the UK-Japan deal that go further.There are also no direct clauses relating to Investor-state dispute settlements (ISDS). Just a commitment to revisit the issue if the UK agrees future deals that contain ISDS, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Given we are the second-largest foreign direct investment destination for Japan, it is notable that this is largely untouched in the agreement – bar references to ‘liberalisation’.
The government has promised to sign new free trade agreements with countries that cover 80% of the UK trade by 2022. To do that, ministers must learn from the unevenness of this agreement and the inconsistencies in their position over state aid. If ambitious rhetoric isn’t matched by finer detail, UK businesses and workers will suffer from the negotiating away of standards, protections, and rights.
Lord Stevenson of Balmacara is Shadow International Development Minister in the House of Lords. He tweets @WilfStevenson
Published 26th November 2020