Chapter 1: Introduction
1.The International Agreements Sub-Committee was established in April 2020 as a sub-committee of the European Union Committee. Its responsibility is to consider “matters relating to the negotiation and conclusion of international agreements”. This includes, but is not limited to, all treaties laid under the Constitutional Reform and Governance Act 2010 (CRAG) and those trade agreements the Government is negotiating post-Brexit.1
2.The Comprehensive Economic Partnership Agreement between the UK and Japan (CEPA) was laid before Parliament on 23 October 2020.2 The CRAG scrutiny period is scheduled to end on 8 December. CEPA was published along with a range of explanatory documents, including a Parliamentary Report, an Explanatory Memorandum, and an Impact Assessment.3 This report on CEPA and its accompanying documents was considered by the International Agreements Sub-Committee on 18 November.
Background
The underlying EU agreement and UK-Japan negotiations
3.As an EU Member State, the UK was party to the EU-Japan Economic Partnership Agreement (JEEPA), which entered into force on 1 February 2019, and has continued to be part of this agreement during the Brexit transition period.4 CEPA seeks to maintain the effects of JEEPA in a bilateral context from 1 January 2021 and to “go beyond” JEEPA in some areas.
4.Negotiations between the UK and Japan were launched on 9 June 2020 by the Secretary of State for International Trade, Rt Hon Liz Truss MP, and the Japanese Foreign Affairs Minister Toshimitsu Motegi. Agreement in principle was reached on 11 September, and CEPA was signed on 23 October.
UK-Japan trade
5.Japan is the UK’s fourth-largest non-EU export market, accounting for over 2% of the UK’s total exports in 2018. Because JEEPA only came into force relatively recently, more up-to-date figures reflecting trade under that agreement are not available. On 2018 figures, total trade between the two countries was worth over £29.5bn, and the UK is Japan’s 13th-largest export market and accounted for approximately 2% of its total exports. Of the UK’s exports to Japan, 49% were goods, of which turbojets, machinery and engines were the top exports between 2016–18. Just over half of the UK’s exports to Japan were in services, with financial services being the top export, followed by other professional services, including auditing, accounting and legal services.5
Future negotiations to join the Comprehensive and Progressive Trans-Pacific Partnership
6.The Government has stated that its negotiations with Japan—as well as its ongoing bilateral negotiations with Australia and New Zealand—are intended to act as a stepping-stone to the UK acceding to the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP).6
7.The CPTPP is a trade agreement between 11 countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. When it is ratified in all member countries (ratification is pending in Brunei, Chile, Malaysia, and Peru), the CPTPP will cover 13.5% of global GDP and 495 million consumers.7 It is based on the Trans-Pacific Partnership (TPP), which was negotiated by the current 11 members and the United States, until the withdrawal of the US in 2017. The CPTPP largely copies the TPP, but some provisions on intellectual property and investment protection advocated by the US were removed.
8.CEPA is accompanied by a side letter on CPTPP accession, in which Japan expresses its “firm determination to support the early accession of the United Kingdom to the CPTPP”.8 The UK’s aspiration to join the CPTPP has particular relevance to CEPA’s arrangements for tariff rate quotas, which we consider in detail in Chapter 2.
This report
9.We launched our inquiry into the CEPA negotiations on 25 June, taking oral and written evidence about the UK’s objectives, the progress of negotiations, and the final deal. We are grateful to all those who gave evidence, and they are listed in Appendix 2.
10.This report considers first the key chapters where CEPA varies more than minimally from JEEPA: on tariffs, rules of origin and cumulation, trade in services, digital trade, and intellectual property. It then sets out those chapters that are identical, or nearly identical, to JEEPA, before moving on to consider practical matters, including the Government’s presentation of CEPA and ways of working with Parliament. It is intended to both inform Parliament’s consideration of the deal and its implementation and contribute to public debate about the UK’s trade-deal making.
11.Given the short timeframe for scrutinising the agreement, we are limited to focusing on the key elements, though we received valuable evidence from stakeholders from a wide range of sectors and backgrounds, including submissions about how Japan needs to improve its domestic regulation regarding animal welfare,9 and submissions about children’s rights.10 It has not been possible to cover these issues in detail, but we note them here as they have been brought to our attention.
12.One key question for our inquiry was how to evaluate the success of trade negotiations. Prior to negotiations, the Government published its “strategic approach”, including “outline” negotiating objectives, drawing on a 2019 Call for Input. Stakeholders have raised with us the question of whether those objectives were the right ones, and we believe that Parliament has a duty not only to compare the final agreement with the Government’s published objectives but also to ask whether the deal is objectively good for the UK and achieves useful outcomes, whether or not publicly stated as Government objectives.
13.We draw special attention to the UK-Japan Comprehensive Economic Partnership Agreement on the grounds that:
- It is politically important and gives rise to issues of public policy that the House may wish to debate prior to ratification.
1 The main EU Select Committee will, however, take responsibility for scrutinising any UK-EU free trade agreement under CRAG.
2 Agreement, done at Tokyo on 23 October 2020, between the United Kingdom of Great Britain and Northern Ireland and Japan for a Comprehensive Economic Partnership, CP 311, 2020: https://www.gov.uk/government/publications/ukjapan-agreement-for-a-comprehensive-economic-partnership-cs-japan-no12020 [accessed 3 November 2020]
3 Department for International Trade, UK/Japan: Agreement for a Comprehensive Economic Partnership (23 October 2020): https://www.gov.uk/government/publications/ukjapan-agreement-for-a-comprehensive-economic-partnership-cs-japan-no12020 [accessed 11 November 2020]
4 European Commission, EU-Japan Economic Partnership Agreement: texts of the agreement (December 2017): http://trade.ec.europa.eu/doclib/press/index.cfm?id=1684 [accessed 11 November 2020]
5 Department for International Trade, UK-Japan Free Trade Agreement: The UK’s Strategic Approach (13 May 2020), p 13: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/885176/UK_Japan_trade_agreement_negotiations_approach.pdf [accessed 10 November 2020]
6 For example, in her Written Ministerial Statement about the opening of negotiations with Japan, the Secretary of State called them “a logical first step to joining” the CPTPP (13 May 2020, HCWS231).
7 Government of Canada, What is the CPTPP?: https://www.international.gc.ca/trade-commerce/trade-agreements-accords-commerciaux/agr-acc/cptpp-ptpgp/index.aspx?lang=eng [accessed 11 November 2020]
8 Department for International Trade, The UK’s trade relationship with Japan: parliamentary report (23 October 2020), pp 36–7: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/929175/UK-Future-Trading-Relationship-with-Japan-accessible.pdf [accessed 11 November 2020]
9 The British Veterinary Association expressed concerns that Japan failed to meet UK standards in animal welfare, noting that the Animal Protection Index gave Japan an E rating for animal welfare in comparison to a rating of B for the UK (JTN00014). Cruelty Free International also raised concerns regarding animal testing in the Japanese cosmetics industry for products deemed to be quasi-drugs (JTN0008).