LONDON – Auto tariffs are expected to come up as a top agenda item in Japan-U.K. trade talks that are expected to start as early as this spring after the latter’s exit from the European Union.
Tokyo and London are hoping to put the envisaged trade deal into force in January 2021 after reaching an agreement, signing it and securing legislative approval by the end of this year.
Prime Minister Shinzo Abe “has been clear that he would like to do a deal” with the U.K., an official in the British prime minister’s office told media organizations, including Jiji Press, early this month. “The feeling is shared,” the official added.
After its withdrawal from the EU, the U.K. will enter a transition period through the end of this year to alleviate the impact of Brexit on its economy and society.
Because of that, the economic partnership agreement between Japan and the EU that went into force last February will remain in effect in the U.K. for a while. But Tokyo and London will need a new trade deal after the transition period is over.
Although the schedule is tight, the Japanese and British governments hope to hammer out a more ambitious trade agreement than the Japan-EU EPA.
The British government plans to hold post-Brexit trade talks preferentially with the EU, Japan, the United States, Australia and New Zealand.
In the absence of major pending issues between Tokyo and London, British Prime Minister Boris Johnson “wants to strike Britain’s first post-Brexit trade deal with Japan,” according to The Sun, a British tabloid.
Johnson apparently aims to use a trade deal with Japan as a springboard for negotiations with the EU.
In talks with London, Tokyo is expected to request that automotive tariffs be scrapped immediately. Under the Japan-EU EPA, auto tariffs are set to be eliminated after eight years.
The U.K., for its part, wants protection for its auto industry, which creates some 820,000 domestic jobs and produces the biggest export product for the country.
Japanese automakers will likely hold the key to Japan-U.K. trade negotiations at a time when Nissan Motor Co., Toyota Motor Corp. and Honda Motor Co. together account for about a half of British auto production.
Other major topics of discussion between the two countries are expected to include rules to resolve investment disputes.
The Japan-EU EPA does not include a Tokyo-proposed investor-state dispute settlement, or ISDS, mechanism to allow companies to sue the governments of foreign countries if they are treated unfairly there, due to opposition from the EU side.
London, however, may accept the introduction of the mechanism, which is included in the Trans-Pacific Partnership multilateral free trade agreement, as the U.K. is eager to join the TPP.