The UK has a long-standing trading and investment relationship with Japan, dating back to the early 1980’s. The automotive sector plays a large role in these historic bilateral ties, with many Japanese automotive investors choosing to base some of their European manufacturing operations in the UK.
In turn, Japanese automotive investors have contributed significantly to the UK automotive market, UK employment, regional prosperity (particularly in the North East of England), extensive automotive supply chains, and the UK economy more broadly.
In 2019, more than 143,000 vehicles registered in the UK were imported from Japan, worth almost £1.5 billion. In total, 33,500 UK-built cars were exported to Japan in 2019, worth more than £1 billion. The trading relationship in parts and components is also significant, with Japan enjoying a substantial trade surplus in bilateral exchanges of engines, parts and components. While the UK imports £458 million worth of parts, accessories and components and £120 million worth of engines, exports of UK automotive parts, accessories and components to Japan represent £65 million and exports of engines are valued at £16 million.
As a key trading partner, the automotive industry welcomes the ambitions of the UK government to secure a free trade agreement with Japan in a timely manner in parallel, and at pace with, EU negotiations.
UK automotive has the following priorities for the UK – Japan trade agreement
Timing – The UK should aim to secure a trade deal with Japan before the end of the transition period, with negotiations progressing in parallel to negotiations with the EU.
Tariffs – Duties should be progressively removed on all automotive products and any scenario where WTO tariffs would apply should be avoided. The existing tariff phase-out schedule should continue.
Regulatory barriers – The UK must prioritise maintaining key elements of the existing automotive annex in the EU-Japan EPA and possibly upgrading it where appropriate.
Rules of Origin – The UK should maintain existing EPA rules of origin for key inputs of production to provide business continuity.
Trade facilitation – UK and Japanese mutual recognition of Authorised Economic Operators (AEO’s) must be guaranteed.
Investment – A future UK-Japan trade agreement should include investment protection clauses to help strengthen investor confidence.
Labour mobility – Automotive would welcome measures to further facilitate movement of personnel, professionals and business visitors.
Digital trade – Equivalent recognition of data protection systems and bilateral free flow of data should be maintained, while more ambitious commitments should be achieved on e-commerce and digital trade.
SMMT AND JAMA JOINT POSITION PAPER
SMMT and its Japanese equivalent JAMA are in agreement also that the conclusion of a new Japan-UK FTA in parallel to negotiations with the EU – and its immediate implementation after the end of the current Brexit transition period – would greatly benefit economic prosperity both in the UK and Japan.
The two automotive industries have had a deep and mutually beneficial trade, technology and investment relationship for decades, thanks to continuous support from both governments, with a trading relationship now worth more than £3 billion in bilateral exchanges of automotive products.
SMMT and JAMA are keen, therefore, to ensure business continuity in bilateral trade relations through continued progressive liberalisation of tariffs after the end of the transition period and by maintaining the key elements of the EPA’s automotive annex as well as the basic conditions of the existing EPA’s rules of origin.