In 2013 the European Union and Japan began talks aimed at a free trade agreement. On Monday both parties said they’d made strong progress as a number of key obstacles on tariffs and protections.
At last! After 18 rounds of talks, the political will to finalise the deal had been found and success was in sight.
Across the world headlines heralded what Japanese Prime Minister Shinzo Abe described as “the birth of the world’s largest, free, industrialised economic zone,” and what the European Union described as “the most important bilateral trade agreement ever concluded by the EU”.
A deal this big is a big deal, it’s one that the UK has been integrally involved in as part of the EU and which it has strongly pursued. There are some really large barriers that are being brought down that have been making our lives more expensive and while we're party to the agreement we should celebrate these.
It’s also, crucially, a hint about what the UK can get from our own negotiations. Not because the UK wants a deal like Japan’s - it’s nowhere near the level of access that we have now. But it shows the EU is looking to promote free trade and have bespoke deals.
There’s also a nice omission that might just work to our advantage later on.
Some of the important parts of this agreement:
• Tariffs on more than 90% of EU Exports to Japan will be removed. This means in the end that 97% of all goods duties will have been removed and all other tariff lines are subject to partial liberalisation (through quota growth or tariff reductions).
• Japanese and EU made cars will now have safety and environmental standards that mean certification and testing for exported cars will not be needed. This simplifies exports massively.
• Medical devices in Japan will be subject to the Quality Management System international standard which will speed up licensing.
• Most advanced provisions on movement of people for business the EU has negotiated so far. Covers all traditional categories of intra-corporate transferees, business visitors for investment purposes contractual services suppliers, independent professionals and new short-term business visitors and investors.
• EU Commissioner for Jobs, Growth and Investment – Jyrki Katainen – has said that investment may be left out of the deal due to no agreement around arbitration.
This last point is really important. While I would normally complain about the lack of agreement on investment arbitration, in this case it shows flexibility on the EU’s part – as well as an understanding that their preferred long-term solution of a global multilateral court is probably off the table for the time being.
This is actually really beneficial for the UK; our arbitration courts (including the London Court of International Arbitration) are global leaders. An attempt by the EU to shoehorn continental control of arbitration into international treaties could potentially threaten London’s pre-eminent position for arbitration as we leave the EU. While the EU commits to pushing for it in future their current failure to get it into any large deal means it’s quite possible for the UK to refuse it in any future Brexit deal too.
Barriers to trade coming down is always something to celebrate and it reminds us that our largest trading partner - the EU - is out there looking to liberalise trade. It tells us also that there's appetite among our allies like Japan to have new trade deals too. We can use this in future talks.
There’s the willpower to have deals, the wherewithal to be flexible and the ability to have bespoke agreements. The UK should be confident walking into the Brexit negotiations and beyond.