CBI responds to the Department for International Trade inquiry into the UK’s future trading relationship with Japan

The CBI has responded to Secretary of State for the Department for International Trade, Liz Truss’ call for inputs on the UK’s future trading relationship with Japan. The inquiry examines where the UK should focus its energy when looking to build on the EU-Japan Economic Partnership Agreement, of which the UK is currently a beneficiary, following the EPA’s ratification this February.

Why is Japan important?

Japan is one of the UK’s largest inward investors. Nowhere is this more apparent than in the north east of England, where Japan is the second largest nation investor, behind the U.S., with investments made by Japanese car manufacturers positioning car marques as the largest private employers in the region.

UK exports to Japan are growing by around 8% year-on-year and Japanese investment into the UK is gradually diversifying away from the north east and into a wider range of sectors and areas. Japanese firms have begun to identify Leeds in Yorkshire as a centre of excellence for computer software and programming, for example.

The UK and Japan enjoy a special and highly functional economic relationship, which has significant scope to grow irrespective of the UK’s position within the European Union.

How should the UK structure its economic relationship with Japan?

UK business strongly welcomed the EPA and would see any gap between the EPA and a new

UK-Japan deal, either in substance or in timing of application, as a step backwards in the trade and investment relationship. The future deal should maintain the same access as the UK now enjoys under the EPA in critical areas like cumulation, and look to go further and faster in reducing tariff and non-tariff barriers. As a G7 economy, the UK is strong and reliable across many asset classes and sectors. The UK government should stress to Japan that the UK remains open to trade and investment and demonstrate this with actions.

Where is the opportunity for UK plc in Japan?

The UK economy boasts unrivalled complementarity with that of Japan and expertise in skills and technologies that Japan needs to acquire, such as dealing with the challenges of an ageing population and digitalising its service sector.

UK companies have a wealth of experience that Japanese companies would like to acquire, not only in terms of conducting R&D and developing standards and best practice in the service sector, but also with regard to holding major international events and developing international brand identity.

British business and CBI members were at the fore as Japan hosted the 2019 Rugby World Cup and are equally deeply involved as Japan prepares to host the 2020 Olympics. Three out of the ‘Big Four’ professional services firms have global headquarters in London, and UK professional services firms have unrivalled experience in supporting major international events.

What has the CBI advised?

• Government should move quickly to negotiate a new agreement with Japan, bearing in mind the very short timescales determined by Brexit and the risks of any gaps in trade continuity
• Government should use a future UK-Japan trade deal to focus on the obstacles to business which remain despite the EPA
• The future deal should maintain the same access as the UK now enjoys under the EPA in critical areas like cumulation, and look to go further and faster in reducing tariff and non-tariff barriers
• A future deal should address market access barriers inhibiting the growth of UK service providers in Japan including obstacles to mobility and to the development of a more inclusive labour market.