London – Japan and the U.K. agreed in principle Friday on a post-Brexit free trade deal, ministers of the two countries said, paving the way for business relationships to continue smoothly even after the end of London’s transition period out of the European Union in December.
Foreign Minister Toshimitsu Motegi and British International Trade Secretary Liz Truss reached the accord when they met via videoconference.
The two sides have been negotiating a deal since June as Britain will no longer be part of the existing Japan-EU free trade agreement when its period for transitioning out of the bloc ends in December. Both sides are seeking to implement a new deal next January.
The two ministers had reached a substantial agreement on most areas on Aug. 7 following talks in London.
But they missed their initial goal of agreeing in principle by the end of August due to differences over how much Japan would cut tariffs on its cheese and farm imports from Britain, according to negotiation sources.
The broad agreement is expected to allow Tokyo to avert a situation in which the U.K. would raise its tariffs on imported Japanese vehicles following its exit from the European Union, and largely replicate the existing Japan-EU agreement that came into force in February 2019.
Under that agreement, the EU will phase out 10 percent tariffs on Japanese auto imports by 2026, while Japan will reduce a 29.8 percent tariff on hard cheeses in stages to zero by 2035.
Britain’s Department for International Trade said the deal will increase its trade with Japan by some £15.2 billion (¥2.07 trillion).
The U.K. said its newly agreed trade deal with Japan, its first since leaving the European Union earlier this year, meant 99 percent of the country’s exports to Japan would be tariff-free.
Digital and data provisions in the agreement went “far beyond” those in the EU’s trade deal with Japan, helping British fintech firms operating in the Asian country, it said.
Britain left the EU in January but agreed a standstill transition until the end of the year, and is racing to strike both replica and new trade agreements before that date.
“This is a historic moment for the U.K. and Japan as our first major post-Brexit trade deal,” said Truss.
“The agreement we have negotiated — in record time and in challenging circumstances — goes far beyond the existing EU deal, as it secures new wins for British businesses in our great manufacturing, food and drink, and tech industries.”
The deal was an “important step” towards joining the Trans-Pacific Partnership, she added.
Britain is locked in increasingly fractious talks with the EU over its future trading relationship, with Brussels on Thursday threatening legal action over contentious Brexit legislation that would violate the binding divorce treaty agreed last year.