08 August 2022

The UK-Japan Comprehensive Economic Partnership Agreement: Lessons for the UK’s future trade agreements

Evaluating the UK-Japan Comprehensive Economic Partnership Agreement (CEPA) is important ..it will become a benchmark for the UK’s future Free Trade Agreement (FTA); CEPA failed to make any significant advances in areas, such as investment, the movement of natural persons, and audio-visual services.

• The developments with regard to e-commerce provisions are a highlight of CEPA. The provisions go further than the e-commerce provisions in JEEPA as well as beyond the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in some areas. However, such changes in approach are also likely to have broader social implications.
• For the UK’s future FTAs, it is important that the government establishes clearer policy positions, including with regard to regulatory alignment with the EU, on a number of issues and their treatment under FTAs.
• Deep FTAs are comprehensive and mostly concern non-tariff issues that affect multiple stakeholders. Substantive and inclusive policy discussions within the UK are key to developing meaningful, deep FTAs or joining CPTPP in the future.

Introduction

As a signatory of the EU-Japan Economic Partnership Agreement (JEEPA) that entered into force in February 2019, the UK will enjoy its benefits only until the end of the transition period on 31^st December 2020. To avoid falling into trade on WTO terms at the end of the transition period, the UK and Japanese governments have negotiated the UK-Japan Comprehensive Economic Partnership Agreement (CEPA) based on JEEPA. They aimed to create an ambitious and high standard bespoke trade deal.[1]

After an unprecedentedly short negotiating period of about four months over the summer, the UK and Japan signed the Agreement on 23^rd October 2020. After ratifications by the UK Parliament and the Diet of Japan, CEPA is expected to enter into force on 1^st January 2021 without disruption.[i]

Evaluating CEPA is important as the UK Government has presented it as the first Free Trade Agreement (FTA) for the UK as an independent trading nation. CEPA thus sets a benchmark for the UK’s future FTAs and post-Brexit trade policy. This paper aims to identify substantive and institutional lessons from CEPA for the UK’s future trade agreements. To begin, this paper provides an overview of UK and Japan trade and investment relations and reviews the economic rationale behind the trade deal. We then analyse the major developments as well as shortcomings of CEPA in relation to JEEPA in order to examine its potential economic and social implications. Overall, the analysis shows that CEPA largely replicated JEEPA, hence de facto in most areas does not go much further than being a continuity agreement.^[2] We shed light on market access in goods and services and the provisions regarding regulatory cooperation, with regard to digital trade / e-commerce and investment. Lastly, we summarise what can be learnt from CEPA for the UK’s future FTA negotiations...

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