• Accessibility
• Email alerts
• RSS feeds
• Contact us

Scrutiny of international agreements: UK-Japan Comprehensive Economic Partnership Agreement Contents

---

Chapter 2: Trade in goods (CEPA Chapter 2)

14.The Government’s published objectives in this area included “broad liberalisation of tariffs”, “taking into account UK product sensitivities”, and securing “comprehensive access for UK industrial and agricultural goods” through lowering tariffs.11

Tariff reductions

15.For the most part, CEPA replicates JEEPA’s provisions for trade in goods. JEEPA achieved a high level of liberalisation, with the EU agreeing to eliminate 99% of tariff lines, and Japan agreeing to eliminate 97% of tariff lines and making significant concessions in the form of Tariff Rate Quotas (TRQs), which are considered in the next section. Through JEEPA, tariffs on industrial goods will in due course be fully eliminated on both sides, with staging, or phased reductions, for sensitive products (chiefly automotive vehicles in the EU, and wood and leather products in Japan).12 Tariff preferences in CEPA will be “almost identical”, with 94% of Japanese tariff lines and 99% of UK tariff lines fully liberalised in the long term.13

16.The Department for International Trade (DIT) has stated that the UK gained “strong tariff reductions for UK pork and beef exports”, and a range of other agricultural projects, in CEPA.14 In fact CEPA does not deliver new reductions, but retains those negotiated under JEEPA. In general, further tariff liberalisation beyond JEEPA has not been achieved on either side. For example, GR Japan pointed us to Japan being “unable to secure better elimination of tariffs on imported autos” than in JEEPA.15 Nevertheless, for a small number of goods, additional tariff reductions will be brought forward. Two UK tariff lines covering electrical control units frequently used in cars will be eliminated at entry into force, instead of 2024 in JEEPA, and CEPA reflects the UK’s elimination of tariffs on 21 industrial goods tariff lines in its Global Tariff schedule, including goods such as speed indicators for land vehicles.16 Japanese tariffs on nine tariff lines covering certain leathers and hides will be eliminated in 2026, instead of 2028 under JEEPA.17

17.Aside from these small changes, CEPA’s tariff reductions will keep pace with JEEPA’s staging, which witnesses raised as important during negotiations and have since welcomed. During negotiations, the National Farmers’ Union (NFU) told us of the risk that, if CEPA and JEEPA involved “tariffs cut over a different timescale or to different levels”, UK businesses might be “at a competitive disadvantage compared to equivalent EU businesses”. They noted that “market share is hard won”, and that any EU “preferential access over and above the UK” would allow EU exporters to “establish themselves earlier, leaving less room in the market for UK imports”.18

18.We welcome CEPA’s tariff reductions keeping pace with EU-Japan reductions, protecting UK competitiveness in the Japanese market. However, the Government’s presentation of tariff liberalisation on products like UK pork and beef exports as though they were new to CEPA is just the first instance of what will be a theme of this report: the Government presenting as a new gain the retention of EU-negotiated provisions. Except for a faster tariff reduction for leather and hide goods in the Japanese tariff schedule, the UK does not seem to have secured significant improvements in this area.

Tariff rate quotas

19.TRQs are a set amount of imports on which reduced, or zero, tariffs will be paid. Imports above the quota will be subject to the normal rate.19 TRQs can exist in both WTO schedules and free trade agreements. As mentioned above, in JEEPA Japan agreed a slightly lower level of tariff liberalisation than the EU, but made significant concessions in the form of 25 TRQs for EU exports to Japan.

20.TRQs reflect only a very small percentage of UK agri-food exports to Japan, but this issue is nevertheless important, as the provisions contained in CEPA contain uncertainties for UK exporters. Under CEPA, 10 TRQs will remain available to UK exporters,20 but they will only be able to use left-over quota unused by EU exporters. NFU raised concern that, as exports to Japan from both the UK and EU rose in the future, the EU might exhaust the TRQs, leaving no preferential rate access for UK exporters,21 which, as the FDF noted, “create[d] significant uncertainty” and “risk[ed] undermining UK trade in these products”.22

21.In his evidence, the Chief Negotiator, Mr Graham Zebedee, told us that there was currently headroom in the EU quotas, adding that there was “no reason to think” that would change, “according to what the Japanese tell us”. We note, however, that JEEPA is relatively new, so TRQ uptake is likely to be low at the moment. DIT’s modelling suggests that the headroom available now may be lost by 2024.23 UK exporters will also experience some uncertainty about what access they have to the TRQ in-year, as although they will not be required to pay the full tariff up-front, “[s]hould it subsequently transpire that there was not enough space in the quota to be covered by a low rate import certificate, they would have to pay the out of quota rate”.24 Nevertheless, Japanese importers may have to provide a guarantee to the Japanese customs authority through its Before Permit scheme.25

22.One positive change was the simplification of paperwork requirements for UK exporters using TRQs. UK exporters will no longer need to file a marketing plan, but will “only require documentation such as Rules of Origin certificates”.26

23.The UK’s second-order TRQ access is presented as an interim measure until the UK joins the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), which has its own TRQs. Japan has expressed support for the UK’s quick accession to the CPTPP and use of those TRQs in a side letter to CEPA.27 Mr Zebedee told the Committee that joining the CPTPP should be straightforward, in the light of the political weight that Japan has given its position of chair of the CPTPP next year.28 However, it is unclear whether, or when, the UK will in fact accede to the CPTPP.

24.The arrangements in CEPA for the UK’s continued access to some tariff rate quotas are sub-optimal. It is better to have access to these TRQs than not, but uncertainty around how much of the TRQ will be left for UK exporters is likely to disincentivise their use. EU exporters are likely to use the TRQs more as they become more familiar with them, potentially limiting UK exporters’ opportunities. Further, as it will not be clear at the time of ordering goods whether they will in fact benefit from the lower tariff, we have been told that this will make British goods less attractive vis-à-vis EU goods. The streamlining of the process that the UK and Japan have agreed, with less paperwork required for UK exporters to use the TRQ, is welcome in principle but unlikely to mitigate this uncertainty.

25.The TRQ for malt (a key ingredient in the manufacture of whisky and beer) became a specific area of focus, as the UK lost access to the EU TRQ for malt. Instead it has signed a specific side-letter with Japan on market access, which will continue under an autonomous TRQ set out by the Japanese government. The Maltsters’ Association of Great Britain (MAGB) highlighted that Japan was “the single largest export destination for UK malt with up to 90,000 tonnes exported annually”,29 and the Grain and Feed Trade Association echoed the importance of maintaining grain trade flows, including malt.30

26.The Government has said that, in CEPA, the UK gained “more generous market access for malt producers”.31 However, as MAGB has noted, CEPA only “offers the same benefits as the existing system”, with the new side-letter on malt offering “reassur[ance]”, but not “chang[ing] anything”.32 Japan remains free to modify its quota in the future.

27.As Japan’s autonomous TRQ for malt has always been available to UK exporters, we fail to see how CEPA has secured “more generous market access”, as the Government claims. Nonetheless, we welcome the assurance provided to UK exporters by the side-letter on malt.

---

• A-Z index
• Glossary
• Contact us
• Freedom of Information
• Jobs
• Using this website
• Copyright