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

Chapter 7: Chapters with no or few changes

77.Although negotiations with Japan were launched as if they were wholly new, in practice the lack of time meant that there was always going to be substantial replication of the underlying EU agreement, JEEPA. As we have noted elsewhere, there is benefit in such continuity, which has given stakeholders greater certainty about the trading relationship.

78.The following chapters in CEPA mirror the corresponding chapters in JEEPA, often with changes only made to replace the EU as a party with the UK. Important though these chapters are, they show no improvement over JEEPA:

79.We discuss the final three of these (CEPA Chapters 22–24) in Chapter 10, as they relate to the operation of CEPA once in force. The other 15 rolled over chapters featured heavily in the Government’s overview of its objectives, covering at least a third of the text.107 In addition to rolling over these chapters, CEPA incorporates the provisions of the separate EU-Japan Mutual Recognition Agreement108 in a Protocol, eliminating the need for a further UK-Japan agreement.

80.It appears that the Government felt that JEEPA adequately achieved its goals in areas such as competition policy, technical barriers to trade, and trade remedies, where it has rolled over JEEPA’s provisions almost entirely. We do not underestimate the value of this continuity, but we note that it does not represent any material advance to what has been agreed in JEEPA.

81.The remainder of this chapter highlights those minor changes to rolled over chapters that in our view merit attention.

Sanitary and phytosanitary measures (CEPA Chapter 6)

82.The chapter covering sanitary and phytosanitary standards (SPS) shows how a small textual change may limit CEPA’s scope, compared with JEEPA. Article 6.16 excludes Chapter 6 entirely from CEPA’s dispute settlement mechanism. The equivalent article in JEEPA’s SPS chapter excludes only certain portions of the chapter (risk assessment and some provisions around equivalence and import procedures).

83.The Department was unwilling to tell us how this change came about.109 Rather, the Government simply notes that WTO dispute settlement procedures will apply and that “both parties want to take all possible steps to ensure that any differences are resolved in an amicable and expedient way through regular conversations and technical consultations, as provided for within the SPS Chapter”.110

84.The Government’s objectives included “uphold[ing] the UK’s high levels of public, animal, and plant health including food safety” and “securing commitments to improve the timeliness and transparency of Japanese approval processes for UK goods”.111

85.We have concerns about the exclusion of the entire chapter on sanitary and phytosanitary measures (Chapter 6) from CEPA’s dispute mechanism. We urge the Government to explain the possible consequences of this change.

Subsidies (CEPA Chapter 12)

86.The provisions relating to subsidies (often referred to as state aid) were covered by the press in advance of the publication of CEPA, suggesting that they committed the UK to “tougher restrictions in state aid than the ones it is currently offering the EU in the Brexit talks”.112 In reality, CEPA largely replicates the restrictions on subsidies contained in JEEPA, and there is no evidence to suggest that they have undermined negotiations with the EU.113

87.Under CEPA, subsidies may be granted where necessary to achieve public policy objectives, with various exemptions, such as for audio-visual services or subsidies “granted temporarily to respond to a national or global economic emergency” (Article 12.3(6)). Each party commits, “in principle”, not to grant subsidies where they have, or could have, a significant negative effect on bilateral trade or investment, and to notify the other every two years of details of any specific subsidy it has granted or maintained, but notifications do not have to be made public. Other than Article 12.6(5), which relates to a regime of “sympathetic consideration”, the remainder of the provisions would be subject to CEPA’s dispute settlement regime and would therefore be subject to consultation, mediation and arbitration.

88.CEPA has largely replicated the EU-Japan provisions for subsidies, or state aid. Insofar as CEPA might serve as a model for other UK bilateral agreements, the absence of any practical enforcement mechanism and of an ability for companies to launch a complaint in the other party’s jurisdiction means that the agreement adds only modestly to the WTO subsidy control provisions.114

Trade and sustainable development (CEPA Chapter 16)

89.Some witnesses highlighted the importance of including objectives related to sustainability and climate policy, particularly when they can be tied to strengths in UK industry. For example, Cornwall Council told us that the objectives related to the services sector could include services in renewable energy and sustainable practices.115 Sustainable development was not mentioned specifically in the Government’s outline objectives, but was referred to in its lengthy response to the Call for Input, which noted that “for the environment, climate, labour, and human rights, the key message” of the consultation was to “maintain the provisions already set” in JEEPA.

90.This is largely achieved by rolling over JEEPA’s sustainable development chapter. CEPA Chapter 16 thus covers international commitments on labour standards (Article 16.3), the environment (Article 16.4), and biological diversity (Article 16.5), as well as sustainable management of natural resources (Articles 16.7 and 16.8). There are also some changes, with CEPA offering “greater flexibility” so that the Joint Dialogue with Civil Society need not be convened within one year of entry into force (as with JEEPA), but within two years (Article 16.16).116 JEEPA’s explicit review article (Article 16.19) is removed, which the Government says was done “because there are equivalent functions” elsewhere in CEPA.117

91.We welcome the rolling over of the EU-Japan chapter on trade and sustainable development, maintaining bilaterally commitments to international agreements on labour, the environment and biodiversity, and the importance of sustainable management of natural resources. The small changes introduced in CEPA, however, seem to require less swift action to work on these issues. We urge the Government to maintain its focus in this area, through this and other agreements.

Small and medium-sized enterprises (CEPA Chapter 20)

92.The Government’s objectives noted that it would “seek a dedicated SME chapter, and SME-friendly provisions throughout”, which would involve “knocking down trade barriers”.118

93.CEPA’s SMEs Chapter (Chapter 20) replicates JEEPA’s, except for an additional provision (Article 20.2) to strengthen bilateral cooperation and involve the private sector in this. The text provides some illustrative examples of potential cooperation activities, but is not prescriptive. The Government notes that this “may bring some economic benefits, for example by further reducing trade barriers for SMEs, but the magnitude of these benefits will depend on the specific cooperation activities that are undertaken”.119

94.The SMEs chapter of CEPA, while welcome, does not in and of itself offer significant benefits to UK SMEs. Like SMEs chapters in many trade deals, including the EU-Japan agreement, it simply offers facilitation. Advantages for SMEs are more likely to emerge from work done by the two parties, and others, to encourage the utilisation of the agreement by such businesses. This should be the subject of regular review by the Government.

107 Strategic approach, pp 9–12

108 Agreement on mutual recognition between the European Community and Japan, OJ L 284, 29 October 2001

109 Q 41 (Graham Zebedee)

110 Parliamentary report, para 86; Mr Zebedee told us that WTO dispute settlement mechanisms were used more commonly than those in trade agreements, in any event (Q 41).

111 Strategic approach, p 9

112 Alan Beattie, Jim Pickard and Peter Foster, ‘Japan trade deal commits UK to stricter state aid curbs than in EU talks’, Financial Times (13 September 2020): https://www.ft.com/content/edb7d155-56b4-4065-9f83-31b2247fa178 [accessed 11 November 2020]

113 George Peretz QC has argued that, while the provisions go further than the initial offer on state aid that the UK made to the EU, such provisions would not satisfy the EU in any event since “the subsidies prohibited under the chapter do not include the vast majority of harmful subsidies (including hand-outs or tax-breaks to favoured but solvent businesses)”, and there is no requirement for an independent subsidy regulator, nor a mechanism for third parties to enforce prohibitions in the courts. (George Peretz QC, ‘Subsidy provisions in the UK/Japan Comprehensive Economic Partnership Agreement: what are they, and what do they mean for the UK/EU negotiations?’, UK State Aid Law Association (24 October 2020): https://uksala.org/subsidy-provisions-in-the-uk-japan-comprehensive-economic-partnership-agreement-what-are-they-and-what-do-they-mean-for-the-uk-eu-negotiations/ [accessed 11 November 2020])

114 We consider CEPA’s overarching dispute mechanism in Chapter 10.

115 Written evidence from Cornwall Council (JTN0021)

116 A similar extension is arranged in CEPA for the adoption of the rules of procedure and terms of reference for the parties’ respective Panels of Experts involved in the resolution of disagreements about the interpretation of the chapter (Article 16.18), which now must take place within two years, rather than one.

117 Parliamentary report, paras 162–3

118 Strategic approach, p 6

119 Parliamentary report, para 173; see also Impact assessment, p 7.



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