What the EU-Japan trade deal means for the UK’s negotiations

Vicky Ford
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The EU is clearly accelerating its own trade activities (Source: Getty)

An EU-Japan trade deal has been agreed, which aims to link up over a third of the world’s exports of goods.

Clearly the European Commission has reacted to the election of Donald Trump and the British referendum by accelerating its own trade activities.

Draft trade agreements which had been stuck in the bottom drawer have been dusted down for fresh discussion and negotiations with new potential partners were kickstarted.

Read more: We have four post-Brexit trading options

What does this mean for the UK officials keen to start our own EU-UK trade negotiations? One British MEP WhatsApped me from Strasbourg saying: “Europe can’t possibly give us a worse deal than they gave Japan”.

That might seem surprising, given the headlines explaining how the Japan deal brings big tariff cuts, cooperation on standards and regulation and opening up of public procurement markets, all of which are priorities for the UK.

However, the details show that, just like the recent EU-Canada deal, this agreement falls far short of the level of market access currently experienced by those trading between the UK and the rest of the EU.

For a start, there’s the issue of product standards, which can often be significant obstacles to trade. In the EU, this is mitigated by common standards and mutual recognition principles. For example, once a British made vehicle passes safety and emissions tests in the UK, the same vehicle type does not need to be retested before it is sold across the continent.

To address differences between automotive standards, Japan has now agreed to align its standards with those of the global UN body (UN-ECE), as the EU does. While this will bring greater convergence on vehicle safety standards, UN-ECE does not cover substantial areas of vehicle emissions regulation. Adopting the Japan approach for EU-UK trade would leave British manufacturers exposed to the significant risk of future trade barriers if emissions standards diverge.

Furthermore, the connected cars of the future will increasingly be data driven, no longer just physical “goods” but also affected by agreements on services. Services are, of course, another crucial issue for the UK – and one not covered by the Japan deal.

In all negotiations, it is important to watch what the other side is thinking. A new publication by the European Parliament’s Policy Department looks at possible future relationships between the UK and EU for services. The report recommends finding a “mechanism” to ensure and monitor common standards as a condition for far-reaching rights to market access. If such a mechanism can be agreed, it could lead to a deeper and more stable trade agreement than either the Japan or Canada model.

Service providers are less likely to engage in cross border trade if they cannot judicially enforce claims. Enforcement mechanisms for both primary and secondary law will be an important part of the negotiations, since agreeing to a more robust legal enforcement could result in greater market access.

The UK has made it clear that being forced to continue to comply with direct judgements from the European Court of Justice will not be acceptable. However, an approach like the Efta Court used by Norway and Iceland has not been ruled out. I was interested to hear Sir William Cash MP, a leading eurosceptic, proposing a solution based on this model in the House of Commons last week.

A bespoke trade agreement has many mutual benefits to both UK and EU countries, but a final deal is unlikely to be agreed in the two year period allocated for the Brexit negotiations, especially given the clunky process of agreeing a mandate with all 27 member states. Transitional arrangements will be needed.

However, already leading minds in Europe and Britain are focused and discussing options. Many in Europe want to help find constructive solutions. We should seek to agree key principles as soon as possible and not waste this opportunity.

Read more: Trump confirms he's coming to London and expects quick UK trade deal

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