The UK and Japan reached a “substantial agreement” on a proposed post-Brexit free trade deal in hopes of finalising a deal by the end of August.
Britain’s international trade secretary Lizz Truss, who met with Japan’s foreign minister Toshimitsu Motegi in London, said that the negotiations were “positive and productive.”
While the specifics of the deal have not been revealed, the draft is thought to offer the UK tariff-free exports on products such as luxury leather goods as well as a “consensus” on extending Japan’s current trade standards with the EU in digital and financial services.
Since leaving the EU on 31 January, the UK has been negotiating its own trade agreements with global economic powerhouses, including the United States.
Clinching a deal with Japan is very important for the UK, as the country is a major investor in British industries, particularly manufacturing and consumer electronics.
If agreed, it will be the largest deal for the UK yet as Boris Johnson’s government prepares for the end of the Brexit transition period on 31 December.
The total value of UK-Japan bilateral trade in 2019 was £31.6bn ($42bn), a post-Brexit deal could help increase the UK's trade with Japan by about £15bn a year.
If there is no agreement by the end of the Brexit transition period, the UK-Japanese trade will default to World Trade Organisation rules — which could result in significant tariffs on imports and exports and other trade obstacles.
Japan is the UK’s fourth largest trade partner outside of the EU with 9,500 UK-based businesses exporting goods to the country in 2019.
Britain is also negotiating several other bilateral trade deals and is prioritising talks with the EU, Australia, New Zealand, US as well as Japan.