Ever since leaving the European Union (EU), the UK has been trying to secure trade deals with some of its major trading partners. Thus, in October 2020, the UK officially signed a free trade agreement with Japan, marking its first major trade deal as an independent trading nation. Here’s how the new deal will affect both countries.
What the New Deal Will Bring to Both Sides
The new deal will help the UK increase its trade with Japan by up to £15.2 billion and boost the UK’s GDP by around 0.07%. The UK government estimates it would add another GBP 15 billion annually and allow UK businesses to benefit from tariff-free trade on 99% of exports to Japan. The deal also includes digital and data provisions that enable free data flow and protect personal data, benefiting UK-based Fintech companies like Transferwise and Revolut.
The new agreement is also being viewed as a bridge to the UK joining the Trans-Pacific-Partnership (TPP), which includes countries like Singapore, Vietnam, Australia, New Zealand, and Mexico. It offers better market access for UK financial services as well, which currently account for about 28% of all UK exports to Japan. Moreover, the deal 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. Japan believes UK tariffs on railway and automobile materials will now drop faster than under the previous EU deal, helping many Japanese exporters.
The UK’s Response to the Trade Deal
The UK government has welcomed the new deal as a necessary step in its post-Brexit journey. This deal appears to be fairly important for the UK, especially since Japan is the third-largest economy in the world and is viewed as a major hub for technology and automotive firms. The UK government also believes that it will open the way for other trade deals and is particularly keen on increasing trade with countries that are located in the Asia-Pacific region in order to boost its economy.
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