Brexit Setback: Plummet in Exports to Japan Following Post-EU Trade Pact
In what was hailed as a momentous stride for Britain post-Brexit, the initial major free trade agreement inked by the nation has now been labeled a disappointment, with recent statistics unveiling a decline in exports since its implementation.
Back in October 2020, Liz Truss, then the trade secretary, enthusiastically signed a “historic” deal with Japan, deeming it a pivotal juncture for Britain’s future. Projections boasted of a multibillion-pound boost to trade, aiding the UK in its recovery from the pandemic.
Contrary to expectations, data compiled by the Department for International Trade reveals a dip in exports to Japan, dwindling from £12.3bn to £11.9bn in the period up to June 2022. Goods exports witnessed a 4.9% descent to £6.1bn, while services suffered a 2% decline, settling at £5.8bn.
This regression poses a considerable setback for Brexit proponents who envisioned compensatory gains in global trade with non-EU nations. The recently criticized Australia deal further adds to the skepticism, with former environment secretary George Eustice dubbing it as “not a very good deal for the UK.”
Labour’s shadow secretary for international trade, Nick Thomas-Symonds, asserts, “Falling trade with Japan is irrefutable evidence that ministers are not delivering for UK exporters. The Conservatives have no trade policy worthy of the name, and ministers are failing to stand up for UK interests in negotiations. This is making the huge economic damage they have caused even worse.”
These disheartening figures coincide with predictions of Britain’s economic struggles in comparison to other global counterparts. The Organisation for Economic Co-operation and Development anticipates that, excluding Russia, Britain will be the weakest performer among major economies in the coming year.
Simultaneously, Chancellor Rishi Sunak faces internal pressure within Whitehall and among MPs regarding his current Brexit plans. Recent denials aside, rumors persist that he might lean towards a softer, “Swiss-style” Brexit, fostering a closer relationship with the EU.
Complicating matters further is the “Brexit freedoms” bill, burdening civil servants with its implications. Calls to reconsider plans that would automatically discard EU-derived laws by the year’s end highlight the strain this bill puts on officials.
Mike Clancy, general secretary of the Prospect union, warns that the bill “could leave the UK a more dangerous and less fair place.” Concerns arise among safety-critical industries, fearing the removal of vital safeguards in the pursuit of cutting red tape.
The performance of the Japan deal adds weight to the skepticism surrounding the promise of a “Brexit dividend.” Initial estimations suggested a potential £15bn boost to trade between the UK and Japan. However, the first year since the agreement’s initiation witnessed a 5% decrease in total trade, settling at £23.7bn.
Minako Morita-Jaeger, a senior research fellow, contends that the UK-Japan trade agreement was oversold and lacks significant economic advantages over the preceding EU deal. Early trade data, according to Morita-Jaeger, paints an uninspiring picture, with Japanese businesses considering expanding operations in the EU due to difficulties in navigating the UK-EU trade framework.
The scrutiny intensifies as the UK grapples with a total trade and goods deficit of £23.7bn in July to September 2022, as reported by the Office for National Statistics. Economic experts now concede that Brexit’s impact on international trade is substantial, with increased customs checks and bureaucracy hampering businesses exporting to Europe.
The Office for Budget Responsibility’s report anticipates a 15% long-term reduction in UK trading intensity due to Brexit, acknowledging a significant adverse impact on UK trade.
In the face of these challenges, whispers of a Swiss-style relationship with the EU gain traction. However, Prime Minister Rishi Sunak insists that the UK won’t pursue any post-Brexit relationship relying on alignment with EU laws.
The Japanese Embassy in London maintains that the deal “provides stability for Japanese and British companies.” The Department for International Trade spokesperson contends that global trade has been significantly impacted by Covid-19, and while short-term fluctuations occur, the UK-Japan CEPA could potentially boost trade by nearly £16bn and increase UK wages by £800m by 2035 compared to not having a deal.