The Daily Telegraph - Business
This FTA is just the start of seeking out new opportunities across globe
The news that International Trade Secretary Liz Truss and Japan’s Foreign Minister Motegi Toshimitsu have agreed a historic freetrade agreement is welcome. The UK’s economic, strategic and historical ties with Japan are strong. The first Englishman in Japan, William Adams – an exceptionally well-known historical figure in Japan, where he is known as Anjin Miura – was the driving force of the first trade agreement between, between King James I and Tokugawa Ieyasu in 1613.
Japan becomes the first country the UK government has reached a new trade agreement with, yet this is only the start. There is much work to do to take forward other negotiations.
Japan is a country I have experience of doing business over several years. Indeed, earlier this month, my company Doddle, the e-commerce solutions provider, announced a new partnership with Japan’s largest carrier, Yamato.
Of course, at this time Japan, which boasts the world’s third-largest economy, should have been basking in the glory of a successful Olympic Games. The pandemic, however, led to the postponement of the Games till next year. Despite this, business cannot and should not be postponed. In fact, it’s more important than ever that we look for new economic, trading and investment opportunities.
There are three main reasons why I see the UK-Japan FTA as important. First, it is a reflection of the broad lens the UK has to adopt post-Brexit, looking at far-flung international markets. The agreement is expected to increase trade flows between the two countries by over £15bn.
The Covid crisis has preoccupied everyone, but it’s worth reminding ourselves that when the transition period finishes at the end of the year, a new arrangement between the UK and EU will come into force. Clearly, continental Europe will remain an important market due to its proximity. Yet, many services, especially techbased, do not rely on geography and the UK needs to look at a set of other trading relationships. It is estimated that over the next two decades, 90pc of global growth will come from outside Europe.
The US remains our largest trading partner and other territories like Asia, Africa and Australasia are set to play an important role. Asia, fuelled by the giant economies of China and India, now represents nearly half the world’s GDP and most of global growth. At Doddle, we started a partnership with Australia Post last year, and in the US, we have recently entered into a new partnership with the US Postal Service.
The second reason the UK-Japan FTA is welcome is that it should provide encouragement for the UK’s exporters. Our formal exit from the EU in January seems like a long time ago, but clearly UK companies need to explore export markets beyond continental Europe. Already over 230,000 British businesses export, representing around 10pc of all companies. When businesses export, they grow, on average, 20pc more than businesses that don’t export. If you can sell your goods and services beyond your domestic market, why wouldn’t you look to do that?
While I am optimistic about the opportunities for UK businesses trading overseas, I am not naive about the challenges. Over the past 40 years, I have experience of building businesses all over the world. In fact, after I established Travelex, the foreign exchange company, in 1976, our first overseas forays were to the Netherlands and Belgium a few years later. We then expanded into other international markets, but it was not until 2003 that we entered the Japanese market. In that year, we took over the old Thomas Cook business and grew it to become the largest retail foreign exchange business in the country. Of course, it takes time to establish yourself, and build the trust and relationships that so much of business is reliant upon.
In the future, we will need large British corporates like BP, Vodafone and Unilever to continue to operate internationally and strengthen their trade. We will also need new buccaneering entrepreneurs to set up businesses which can grow through overseas ventures and exports. Last year, well over 600,000 businesses were created in the UK, to create employment, wealth and trade.
The third significance of this FTA is that it is a reminder of the importance of trade. This is even more pronounced at this time when the pandemic has buffeted the global economy. The IMF predicts that there will be negative growth of 4.9pc this year and this is coupled with a risk that governments are turning inwards and clinging to protectionism. This is the wrong response.
Trade is one of the engines of global growth, and we are in desperate need of a renewed commitment to it. The business community must show its ingenuity and drive to identify new opportunities and pursue them. Politicians can help by accelerating their international negotiations. We need both trade deals, delivered by the government, as well as business deals.
Despite all the difficulties and uncertainty, compounded and magnified by Covid-19, I believe there are great opportunities for highquality businesses. UK plc needs to continue to look for trading and other opportunities. And the Government can help by making progress with its tapestry of new trade agreements.