But Britain may cease to benefit after the Brexit transition, says a former Ambassador in Tokyoby David Warren / July 19, 2018 / Leave a comment
In an unpredictable world, the EU-Japan free trade agreement signed in Tokyo on 17th July by Japanese Prime Minister Shinzo Abe, and European Council and Commission Presidents Donald Tusk and Jean-Claude Juncker, is a good news story.
The European Union and Japan together account for over a quarter of the world economy: their combined populations total over 600m. After nearly five years of negotiations, they have agreed to remove 99 per cent of remaining tariffs on Japanese goods coming into the EU, and 94 per cent, eventually rising to 99 per cent, of tariffs on EU goods into Japan. These cost European exporters about €1bn a year. Some estimates have the deal adding 0.8 per cent to the EU’s economy and 0.3 per cent to Japan’s—around $1.3bn in all, creating jobs, bringing down prices and opening up trading opportunities.
European and Japanese leaders have not been slow to point out the contrast with what is going on elsewhere in the world, as President Donald Trump sets in train a trade war of potentially gigantic proportions—planning tariffs of another $200bn on trade from China, and threatening more tariffs against European cars.
It is not just the United States President’s rejection of the principles of free trade and undermining of the institutions of the international trading system. It is the realisation that we have a leader in the White House taking aim at the values of the post-war liberal international order, in pursuit of “America First” to the exclusion of all others. International agreements are thus reduced to a series of aggressive, zero-sum transactions. Against this chaos, the painstaking way in which the second and fourth largest trading blocs in the world have negotiated this treaty—one that represents what might be achieved by sharing and compromise—really is a statement of common values. In Tusk’s words it is a “light in the darkness.”
It is not perfect: it has already been criticised for saying too little on data. Trade agreements, as Britain will discover as and when it leaves the EU, take time to negotiate. Behind the headlines on liberalised trade lie disappointed sector interests. This is especially true in Japan, where the lifting of high tariffs on imported European cheese, wine and other food products, has been secured in the teeth of opposition from the Japanese agricultural lobby, which has long had a stranglehold on government policy disproportionate to its share of the Japanese economy. Trade liberalisation means painful and difficult political judgments. Trade deals proceed by incremental steps, moving conservative interests slowly in the direction of structural reform.
The EU-Japan agreement was on the cards long before negotiations formally opened. When I was British Ambassador in Japan at the time of the terrible earthquake and tsunami in 2011, I advised that—in addition to immediate assistance to the rescue operation—the single most important expression of solidarity with Japan was to get positive EU language on opening trade talks, which we knew were the then Japanese government’s highest priority. Encouraged by Prime Minister David Cameron, the EU duly gave that cautious commitment in the European Council conclusions of March 2011—only seven years and three months ago. Whether or not the mills of God grind slowly, the mills of international trade negotiators certainly do.
How credible is the talk of Britain rolling over this agreement as a bilateral deal with Japan, post-Brexit? I am sceptical, once the transition period is over. Britain will certainly have no difficulty approaching negotiations with Japan from a position of shared values. And it will want to maintain the economic partnership built over the past 40 years, mainly on the basis of the success story of Japanese investment in the UK as the best platform from which to access the European market. But no negotiations can start until both parties have a clear idea of what Britain’s post-Brexit trade relationship with the EU will be. (The same of course applies to the other idea on the table—that the UK might accede, as any jurisdiction can in principle, to the Trans-Pacific Partnership, from which the US has withdrawn but which Japan has led a successful action to salvage).
Even on the most favourable assumptions, Japan will want to consider what objectives it wishes to secure from the UK bilaterally, that it could not get in negotiations with it as one of 28 member states. The same should be true for the UK government: after all, Britain will not enjoy the rights negotiated with Japan once it has transitioned out of the EU. It will be a case of starting, if not from scratch, then quite close to scratch. Let’s hope it does not take seven years and three months to get beyond square one.