THE TTALK QUOTES

On Global Trade & Investment
Published Three Times a Week (with occasional bonus quotes) by
The Global Business Dialogue, Inc.
Washington, DC  20006
No.68 of 2020
MONDAY, SEPTEMBER 14, 2020

Click HERE for last Friday's quote on the UK's
Internal Market Bill.


THE UK'S NEW TRADE DEAL WITH JAPAN

“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."

Liz Truss
September 11, 2020
CONTEXT
Following a video call last Friday morning, Liz Truss, the UK Secretary of State for International Trade, announced that she and Japan’s Foreign Minister Motegi Toshimitsu have come to an agreement on a UK-Japan trade deal. The statement the UK government released describes a fairly comprehensive agreement and emphasizes, as today’s quote does, that in some areas the UK-Japan deal goes beyond what is in the EU-Japan agreement. 

Among the areas highlighted in the British government’s statement on the agreement are the provisions on digital trade and data flows, financial services, mobility for business employees, and geographical indications or GIs. In the case of the latter, the statement explains that the UK-Japan agreement,

“…increase[es] geographical indications from just seven under the terms of the EU-Japan deal to potentially over 70 under our new agreement, covering goods including English sparkling wine, Yorkshire Wensleydale [cheese], and Welsh lamb.”

Because these pages have recently dealt with issues of cheese and pork, here is more on those products from the Department of International Trade’s statement on the new agreement:

We have negotiated a deal that sees tariffs fall on pork, beef, salmon, and a range of other agricultural exports. We will continue to benefit from access to the low tariffs for key food and drink products covered by quotas, such as Stilton cheese, tea extracts and bread mixes. This forms a pathway to further market access under CPTPP, which has been committed to by Japan as part of our agreement.

To state the obvious, the deal still needs to be approved by the UK and Japanese parliaments. Presumably, the goal is to have it enter into force in January 2021.
COMMENT
Reportedly, the formal negotiations between the UK and Japan began on June 9 of this year. If that is the case, if it was really a deal in three months, it was indeed remarkable. And Ms. Truss was right to point out that the negotiations were done “in record time and in challenging circumstances.”

Like others, we expect to take a closer look at some of the individual provisions of the UK-Japan deal in the months ahead. Today, however, it is the mere fact of the agreement that draws one’s attention, or, more accurately, the fact of the agreement at this time.  

We are just three full months away from the “deal or no-deal” decision that the UK and the EU will make together between now and the 31st of December. And once again an adage we associate with fighter pilots comes to mind: “No decision plus time equals a decision.”  That reality colors everything, including, of course, the reaction to the news of this new agreement in the UK. 

Two elements in particular stand out. The first is that in the UK, virtually all parties view it, not solely or even primarily in its own terms, but in the context of how it might affect the UK’s negotiations with the EU. That is certainly the case of those who disagree, and disagree strongly, with Boris Johnson’s tough approach to those negotiations – and in particular to the Internal Market Bill highlighted in our last entry. 

It is true as well of Mr. Johnson’s government, which is using this new agreement to show that it can chart a positive post-Brexit course for the UK economy. So, it is not surprising that the UK was in a hurry to get this done. The question is, why did Japan agree to move so quickly? We can only speculate, and we do so as follows.

In terms of both investment and trade there are strong economic incentives for Japan to nail down its post-Brexit relationship with the UK. But there is more than economics at play here, and a deal done now is likely to underscore the importance of the friendship between Japan and the United Kingdom in a way that a deal done later could not have.

But sticking with economics, Japan has been a leader in the geopolitics of trade these last few years, most significantly by saving TPP/CPTPP after the U.S. withdrew in January 2017. We imagine Japan would like to see CPTPP become even more important, as it surely would if the UK were to join.

Finally, whether or not the British government decides to send its flagship carrier, HMS Queen Elizabeth, to the South China Sea, the fact that such a deployment is under consideration at this critical time is a reminder of the fact that Japan-UK trade exists within the context of a much broader relationship.

SOURCES AND LINKS
Deal with Japan takes you to a statement on this agreement, issued last Friday by the UK Department of International Trade. The statement includes highlights of the agreement and remarks by the UK Secretary of State for International Trade, Liz Truss. This was the source for today's featured quote.

State Aids, the UK, Japan, and the EU. This Financial Times article opens with a criticism of the UK-Japan deal on the grounds that it offers more to Japan in the new agreement than in it does to the EU in the current negotiations. While we doubt the validity of that argument, what is noteworthy is the point of view. It reinforces the fact that all concerned are judging this agreement against the backdrop of the on-going, highly contentious negotiations between the UK and the EU.

Scottish Salmon Producers Pleased is an article from Undercurrent News that emphasizes this point, which may be more significant politically than economically.

HMS Queen Elizabeth Deployment is an article from The Diplomat on the question of whether this ship should be sent to the South China Sea.

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