UK and Japan strike Major Trade Deal: How UK Firms Stand to Benefit
Frustrated by the Brexit talks, the UK has decided to join hands with Japan. But how will the UK companies benefit from this decision, and what kind of impact will it have on both countries?
Since no real progress has been made in the Brexit negotiations, the UK has begun looking for new trade deals with other countries. In fact, the UK has already started talks with Japan, with International Trade Secretary Lizz Truss labeling the move as a “historic moment” for both countries. The deal is expected to boost trade between the two economies by almost $20 billion.
Benefits for UK Exporters
Japan is one of the UK's biggest trade partners. According to the Office for National Statistics, it is the UK’s 13th biggest goods export market and was responsible for 1.9% of products sold overseas in 2019, with 9,500 UK-based businesses exporting to Japan. With the new trade deal, UK businesses will benefit from tariff-free trade on 99% of exports to Japan. It also includes digital and data provisions that enable free data flow while protecting personal data, which will benefit Fintech companies like Transferwise and Revolut.
The deal also includes better market access for UK financial services, which currently account for about 28% of all UK exports to Japan. It also entails improved protection of intellectual property rights, better mobility for companies, and more support for major Japanese investors like Nissan or Hitachi when accessing the British market.
Minor Impact Compared to Brexit
The trade deal is estimated to increase the UK’s GDP by about 0.07% in 15 years. That may be progress, but compared to the potential fallout of failed Brexit negotiations, which could reduce the UK’s GDP by 4-6%, it may bring more harm than benefit.
Adam Marshall, the Director General of the British Chambers of Commerce, has recognized this issue, stating, “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.”
For firms that focus on trade with Japan, the deal will certainly bring improvements. It is also a step towards the UK joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). However, the UK must be careful and weigh out all possibilities before making any drastic changes.
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