The UK’s new trade deal with Japan commits it to tougher restrictions on state aid than the ones it is currently offering the EU in the Brexit talks, potentially undermining its negotiating position with Brussels.
In the bilateral UK-Japan agreement announced in principle on Friday, London and Tokyo have agreed to replicate the restrictions on subsidies in the EU-Japan deal that went into effect last year. That agreement prohibits the governments from indefinitely guaranteeing the debts of struggling companies or providing an open-ended bailout without a clear restructuring plan in place.
By contrast, the UK has repeatedly told the EU that it must have total freedom over state aid after the end of the Brexit transition period with complete autonomy over future subsidy decisions, subject to WTO rules.
The so-called level-playing-field issues have become the main sticking point in the EU-UK negotiations, with London resisting Brussels’s demands for it to remain within the tough EU state aid regime.
Britain’s proposal to the EU would merely require each side to notify the other of subsidies rather than restricting them. Its offer replicates the EU’s commitments in earlier bilateral trade deals, such as the one with Canada that went into force in 2017.
A government spokesman said: “The UK offer to the EU is based on the arrangements agreed between Canada and the EU.
The idea that we’ve given too much away is rubbish as far as I’m concerned
However, the contradiction between the two positions has created consternation within the UK government.
A person familiar with internal Whitehall deliberations said that the UK’s chief Brexit negotiator David Frost had raised concerns that Liz Truss, international trade secretary, had given more away to Japan on level playing field issues than was being offered to Brussels.
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