The U.K. and Japan announced on Friday that they had reached agreement on a trade deal, boosting Britain’s hopes of being able to strike similar agreements with other major economies once it has cut its ties with the European Union’s single market.
– Britain’s first bilateral trade deal after Brexit mirrors the trade agreement reached a few months ago by the EU with Japan. According to UK officials, it will increase trade between the two countries by £15 billion a year, over an unspecified period of time.
– That would amount to a nearly 50% increase in trade, from a current £29 billion (in 2018). But according to trade experts, the increase would have been larger if the UK had chosen to stay in the single market and benefited from the EU-Japan deal.
– Japan is a minor trade partner for the UK, coming in 11th place behind Switzerland. The volume of trade between the EU and the UK is nearly 20 times larger than that between the UK and Japan.
– Friday’s agreement marks a small improvement over the EU-UK deal with slightly more favorable conditions for the exchange of data and financial services. It allows the UK not to lose the Japanese market and to keep benefiting from the progress made by the EU on the matter.
– U.K. tariffs will decrease on automobile and railway parts, which will allow Japanese car makers to keep building cars in the U.K.
– British cheese and tea will benefit from lower tariffs in Japan if the U.K. claims quotas left unused by the European Union in any given year.
The outlook: The deal is a morale boost for the UK government and its trade negotiators, more than a defining moment for the country’s economy. Meanwhile the big whale of trade deals – to be concluded with the U.S. – risks being bogged down in the controversy stemming from the UK’s decision to row back on last year’s signed agreement with the EU on Northern Ireland.
This article was originally posted on MarketWatch.