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BREXIT UPDATE - TRADE DEALS

Japan trade deal to be the UK’s first:  Negotiators have largely agreed the terms of a free trade agreement with Japan, which is expected to be the first deal done by the UK since Brexit.  The deal is expected to be signed within weeks (once it has been approved by the Japanese Parliament, at which point it is expected to be published (with a full impact assessment), and ratified.

The main significance of the deal for the manufacturing/engineering sector is that it largely carries forward the terms of current arrangements in the EU-Japan Economic Partnership Agreement that came into force in January 2019.  Tariff liberalisation will be the same as in that EPA, including tariff-free access for car and other components - automotive covers 20% of Japan-UK trade.  The deal includes a mutual recognition agreement, impacting conformity assessment.

Without a deal, those arrangements would have been lost and tariffs charged, at the end of the EU transition period.

The government says that the deal could increase trade by £15.2 billion in the long run, which is generally taken to be 15 years.  That is compared with no trade deal and the figure is almost identical to the benefit envisaged for an FTA with the USA, put at £15.3 billion over the long term.  The figure was release in a note posted a response to media reports of the deal, which took no issue with the accuracy of media reports.

An outstanding issue for Japan’s manufacturers with a presence in the UK is likely to be the terms of any deal between the UK and the EU.

UK starts talks with CPTPP:  The UK has opened discussions to join the 11-country CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership), which it describes as “one of the world’s largest and most dynamic free trade areas” - yes, the Government really said that without the slightest hint of irony!  They went on to assert that membership “would bring new opportunities for our go-getting businesses, more choice for our consumers, and provide us with greater economic security.  Strategically, it would help us forge closer ties with the wider Pacific region and put us in a stronger position to reshape global trading rules alongside countries who share our values”.

CPTPP is a relatively new entity, currently comprises Australia, Brunei, Canada, Chile, Japan, Malaysia, New Zealand, Peru, Singapore and Vietnam.  The US was part of the original negotiations but withdrew in 2017.  The full announcement is available at https://www.gov.uk/government/news/uk-takes-major-step-towards-membership-of-trans-pacific-free-trade-area?utm_source=8a42cd5b-12c5-45ba-be1a-2bd9cbbaae78&utm_medium=email&utm_campaign=govuk-notifications&utm_content=daily and a policy paper was published this summer on joining the group which you can see at https://www.gov.uk/government/publications/uk-approach-to-joining-the-cptpp-trade-agreement.

UK-EU deal:  In contrast, the deal between the UK and the EU has become mired in the debate about the UK Internal Market Bill - when we have some concrete news on which members can plan activities, we will, of course, let you know.  At this stage, all we can really say is that it passed its 2nd reading in the house of Commons and now continues through the parliamentary process where a number of amendments can be expected and it is likely to face stiff opposition in the House of Lords.

In this context, it is worth noting that the European Automobile Manufacturers Association (ACEA) wrote an open letter warning of the implications of a “no-deal” for the automotive industry.  In it, they said that their latest calculations would cost the pan-European automotive sector some €110 billion in lost trade over the next five years (2021-25) and that this is on top of on top of around €100 billion in lost production value so far this year because of coronavirus crisis.  In unit terms, “no-deal” threatens the production of around 3 million cars and vans over this period.  You can read the paper at https://www.acea.be/press-releases/article/only-weeks-left-to-save-eu-and-uk-auto-sectors-from-110-billion-no-deal-bre.