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UK-Japan trade deal provides continuity for businesses but lacks ambition, Lords Committee report finds

Friday 20 November 2020

Today the House of Lords International Agreements Sub-Committee have published a new report, 'Scrutiny of international agreements: UK-Japan Comprehensive Economic Partnership Agreement', providing a first analysis of the recently agreed UK-Japan trade agreement (CEPA).

In its report, the Committee finds that the CEPA “is a respectable continuity-plus agreement” that “provides valuable continuity for businesses consumers and other stakeholders”, but that the CEPA falls short of the Government’s presentation of the deal.

The committee also point out that certain parts of the UK-Japan agreement seem to be only “a potential victory for the Government”, such as the possible new protections for UK Geographical Indications (GIs), as the added value is unclear, and the Japanese approval process may take longer than anticipated.

Whist retaining tariff reductions at the same pace as in the EU-Japan agreement ensures that UK exporters aren’t at a disadvantage versus EU exporters, the CEPA does put UK exporters behind in terms of access to tariff rate quotas, as the UK will only have second-order access to the preferential rate after EU exporters. This could compromise a small but important proportion of agri-food exports.

The Committee finds CEPA contains welcome provisions on rules of origin and cumulation, which will help to protect existing supply chains and manufacturing. But to be most valuable to key areas, such as car manufacturing, the UK and EU also need to agree similar provisions, and this has yet to happen.

The Committee also finds it a missed opportunity not using the talks to demonstrate the UK’s international leadership in the areas of women’s economic empowerment on sustainable development. The Committee feel this might have been addressed further if there was more time for negotiation.

Other points made in the Committee report include:

  • The Government intends to use this deal as a stepping-stone to CPTPP accession, which would bring more certainty UK exporters seeking to access preferential tariff rates through TRQs. The Committee is not clear that CPTPP accession negotiations will succeed, or resolve the issues outstanding with CEPA
  • That new provisions supporting digital trade are welcome, but leave unanswered some stakeholders’ questions about whether or how they will affect the protection of personal data
  • The Committee feel the Government’s presentation of the deal has been misjudged by suggesting that CEPA achieves far more than it does, and as a result has risked undermining the importance of its actual successes

Commenting on the report, Committee Chair Lord Goldsmith said:

“CEPA is a respectable continuity-plus deal that provides many UK businesses exporting to Japan with the certainty they desperately need and avoids reverting to WTO terms for trade. But in some areas, it will require the UK to agree further provisions with the EU for it to be a success.

“We welcome parts of agreement that have gone further than the EU-Japan deal, such as on digital and data. However, because of the required pace of negotiations, it has not been possible to achieve some of the objectives of key stakeholders, such as the creative industries, which might have required primary legislation on either side. In seeking to present a rollover agreement as entirely fresh and new, the Government has raised unrealistic hopes in these areas, but we hope the Government can be more ambitious in this area in future talks.

“In trying to promote CEPA as a new deal, the Government has oversold many of its provisions. We hope that that does not undermine the important continuity for businesses and consumers that has actually been achieved.”

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