Deal or no deal
The new trade accord with Japan gives cause for optimism about Britain post-brexit
Japanese courts will have the right to supervise British legal decisions. We will have to run any tweaks to our industrial strategy past a couple of officials in Tokyo to make sure they are OK with them. We will have to promise to turn every office worker into a salaryman or sararīman to make sure we don’t undercut their social model and, of course, we should chip in a few billion a year for access to one of the biggest single markets in the world. Still, for tariff and quota-free access to the world’s third-largest economy, we would always have to make some concessions on sovereignty. Anything else would be cherry picking.
Except, hold on. It turns out that the free trade deal done yesterday between the UK and Japan does not include any of those provisions. In truth, the deal illustrates two points that are both vitally important at this stage of our fraught and difficult negotiations with Brussels. It is not very hard to cut and paste existing trade agreements, with a few minor changes. And most of the demands the EU is making for access to its market are simply ridiculous. Grown-up nations don’t behave like that – and the Japanese have just shown it.
It remains to be seen how significant the deal with Japan turns out to be. It is a major economy, but far from our largest trade partner.
Total trade between Britain and Japan comes to just under £30bn and we run a significant deficit on that.
The deal has been dressed up with lots of spin about how much trade can be increased. But Japan remains stuck in never-ending recession, and whisky and Barbour jackets aside, its consumers are not very interested in foreign stuff.
There may not even be a huge demand for our cheese, despite the efforts Liz Truss, the Trade Secretary, went to secure access for Wensleydale (although that may have been trolling – for some reason cheese makes hardcore Remainers very, very upset).
In reality, the significance of the deal is not whether it dramatically boosts trade with Japan. That is probably not going to happen. It is that it proves two significant points. The first is that adapting existing trade deals once our transitional arrangement with the EU expires at the end of the year is hardly a huge task. The EU already had a trade deal with Japan agreed last year. The UK was until very recently part of the EU, and has already incorporated all its rules into domestic laws.
For both of those reasons, it is not hard just to take the existing framework and replicate it for a deal to cover trade between the two nations after we have left. A few minor changes have been made to reflect our main strengths: clauses on food and drink and intellectual property rights have been beefed up. Otherwise, it was very simple.
If we can do that with Japan, we can do the same thing with dozens of other countries around the world. Very quickly, we can replicate the EU’S network of deals, and then move on to working with countries the negotiators in Brussels have never managed to reach an agreement with (Australia, for example, or the United States). Japan only accounts for 2pc of our exports. It is never going to replace the 43pc that go to the EU. But around the world, we should be able to replicate the range of deals we had as a member of the EU. Even though we have nothing like the same colour, or probably the same expertise, as the Brussels trade negotiators, it is not that
‘Most of the demands that the EU is making for access to its market are simply ridiculous’
hard – and not nearly as difficult as some experts have tried to argue over the last couple of years.
Next, it illustrates how extraordinary the EU’S demands have become. Japan is not asking to supervise our industrial strategy. It doesn’t require any supervision of our labour laws or our welfare system. Its judges don’t need the power to over-rule ours. Nor do we require any oversight of their social or economic model. Companies and customers just trade with each other free of most tariffs and quotas. That is how trade agreements work everywhere else. Just not with Europe. Sure, the EU might argue that because we are geographically so close, it has to make sure that competition remains fair.
And it may decide that it doesn’t want its industries undercut by more competitive British rivals (although in truth, there are not a huge number of those). But it is odd, to put it mildly, that the Japanese don’t make any of those demands of us, or we of them.
Although both Britain and Japan are developed economies, they are very different. But that doesn’t stop them reaching a trade deal. It is the EU that has become impossible to deal with.
It is hardly in their own interests. To take just one example, from next year we can, if we want to, impose tariffs on imports of European cars, while Japanese ones have no duties.
Likewise, the EU will be able to impose duties on food from the UK, while it can be sold tariff-free on the other side of the world. Everyone loses all round.
At this moment, it looks inevitable that we won’t reach a free trade agreement with the EU. That is a shame. It would have been hugely beneficial for both sides. But that is not the UK’S fault. As the deal done yesterday with Japan demonstrates, we have no difficulty reaching a normal trade agreement with other major developed countries. It is that the EU doesn’t know what that looks like – at least as far as Britain is concerned.