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The UK and Japan have a long and significant history as free-trading nations which have strong economic ties across both countries. In October 2020, the UK and Japan signed a historic deal that aims to further strengthen business partnerships between these two democratic nations.
On 31st December 2020, the United Kingdom-Japan Comprehensive Economic Partnership Agreement (CEPA) came into effect, as the UKs first major trade deal with the UK operating as an independent trading nation, following withdrawal from the EU in January 2020. Prior to this, trade between the UK and Japan generated 29.5bn in 2019. This deal, as the first of its kind, is predicted to accelerate trade with Japan by around £15.3bn. The trade deal is an important step towards the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which was formally commenced by the UK on 2nd June 2021, and is aimed to accelerate trade from the Asia-Pacific region to the UK. Additionally, CEPA creates an annual dialogue between Her Majesty’s Treasury, UK financial regulating bodies and the Japanese Financial Services Agency (FSA), with the aim to further improve and streamline regulatory processing from Japan to the UK.
This deal will allow for improved market access for Japanese companies to enter the UK market across several industries, including agriculture, manufacturing, tech & digital, financial services, small and medium enterprises (SMEs), investment, services and creative services. Specifically, it promotes tech & digital industry advantages including the free flow of data whilst still maintaining high standards of personal data protection across both parties. It also strongly benefits industries such as automotive and manufacturing, through supporting Japanese automotive companies such as Nissan and Hitachi through reduced tariffs on machinery exported to the UK. It also provides improved regulatory procedures and facilitation of IP in the UK market. In 2020 the UK imported £458m in automotive parts, accessories and components, in addition to £120m in automotive engines. The deal is estimated to progressively remove duties on automotive parts from Japan, in addition to the reduction in WTO tariffs, ultimately enabling an accelerated automotive manufacturing trade between Japan and the UK.
