The International Trade Committee has today published its report
on the UK-Japan Comprehensive Economic Partnership Agreement.
This is the first report of the Committee on a new post-Brexit UK
trade agreement.
Committee’s overall assessment
The Committee welcomes the signing of the Agreement and
congratulates the Department for International Trade on its work
to achieve this. The Committee says that the Agreement has
generally been welcomed as it brings much needed continuity and
certainty to UK businesses involved in trade with Japan.
The Committee notes that the Government has been keen to present
the Agreement as much more than a simple “roll-over” of the
EU-Japan trade agreement, which applies to the UK until the end
of 2020. The MPs say that, while the differences between the
UK-Japan and EU-Japan deals “may not be as extensive as claimed”,
there are “notable exceptions, particularly the provisions on
digital and data, and financial services.”
The Committee also observes that the future of UK-Japan trade and
investment will be significantly influenced by whether or not the
UK and EU succeed in concluding a trade agreement, and the terms
of any such agreement.
The Committee recommends that the Agreement be debated in the
House of Commons Chamber, given that it is the UK’s first new
trade deal.
Rules of Origin
Under a trade agreement, in order to avoid tariffs that would
otherwise apply, goods must comply with “Rules of Origin”, which
stipulate how much of a good must be sourced in the exporting
country. The UK-Japan Agreement’s Rules of Origin will allow UK
exports to Japan to include content from the EU.
The Agreement also potentially provides for Rules of Origin that
allow Japanese content in UK exports to the EU, and UK content in
EU exports to Japan. However, achieving this will require the
EU’s agreement – and the Committee heard that this is unlikely.
Tariff Rate Quotas
Tariff Rate Quotas (TRQs) allow for certain goods to be imported
at a reduced rate of duty, up to a specified quantity limit.
Under the EU-Japan Agreement, the EU has access to 25 such quotas
in respect of sensitive agricultural / food products. Under the
UK-Japan Agreement, the UK will retain access to 10 of those 25
EU TRQs in relation to any surplus quota volume left unused by
the EU in any given year.
The TRQ scheme will be operated on a deferred-duty basis, with
Japanese importers being able to import UK goods without paying
duty in the first instance and duty being levied retrospectively
on the basis of the amount of “headroom” in the quota that
remains at the end of the year. The Committees notes that there
would seem to be a risk that Japanese importers may prefer to buy
from EU suppliers rather than UK ones, because of uncertainty
over whether UK goods will qualify for the preferential duty
under this quota.
Geographical Indications
A Geographical Indication is a name or sign that indicates a
specific characteristic of a good that is linked to its
geographical origin, and which can be subject to legal protection
(so that, for example, a product called “Scotch Whisky” must be
from Scotland).
The Government states that the protected Geographical Indications
provisions under the UK-Japan Agreement are “significantly
better” than the equivalent provisions under the EU-Japan
Agreement. However, there has been some dispute as to how far
this is actually the case.
The Committee notes that communication by the Government on these
provisions has not been sufficiently clear – with the impression
sometimes being given that the Agreement automatically and
immediately provides protection to additional UK Geographical
Indications, when it does not do so.
Committee scrutiny of future deals
The Committee comments on the scrutiny process, and states that
it would welcome the opportunity to review the arrangements that
have been in place for scrutiny of the Agreement with the
Secretary of State, and to consider any improvements that may be
necessary for the scrutiny of future agreements.
Commenting on the report, Committee chair said:
“This deal provides continuity and certainty to UK businesses
trading with Japan, which is welcome. But of course, this deal is
only one part of the picture – as my Committee notes, the future
of UK-Japan trade and investment will be significantly influenced
by whether any post-Brexit UK-EU trade agreement is reached.
“Given that the Government has stated that the UK-Japan Agreement
secures benefits for the UK above and beyond those conferred
under the EU-Japan Agreement, it is regrettable that it has not
provided any assessment of the value of those additional
benefits, although we appreciate this may have been difficult to
achieve.
“As the Government has said, the UK-Japan Agreement is the UK’s
first post-Brexit new trade deal. My Committee is of the view
that it is therefore critical that the House has the opportunity
to debate the deal – and I look forward to receiving confirmation
as soon as possible from the Government that this debate will
take place over the coming fortnight.”
