Comprehensive Economic Partnership (EUC Report)

Lord Bilimoria Excerpts

Thursday 26th November 2020 Grand Committee

[Lord Bilimoria (CB) [V]]

My Lords, the total trade in goods and services between the UK and Japan was almost £32 billion last year. Japan is the world’s third largest economy and the UK is the fifth or sixth largest, at any time, and a major importer and exporter of goods. The UK is currently Japan’s 12th largest trading partner, accounting for 2.1% of all Japanese trade.

The deal has further economic significance because it lays the foundation for the UK’s future accession to the CPTPP, as many noble Lords have mentioned. Given that Japan is the second largest investor in the north-east of England, the UK could have used the agreement to incorporate commitments to boost and diversify Japanese investment across the country. The next step must be for the Department for International Trade to monitor implementation and launch a targeted campaign to ensure that businesses of all sizes take advantage of the deal. Does the Minister agree? As president of the CBI, I say that we stand ready to work with the Government to promote the deal to businesses in all regions and nations of the UK.

The additional benefits that the deal provides are perhaps not as significant as they might have been had the deal been negotiated over a longer period of time. As has been said, the pressure to secure a deal before the end of 2020 meant that both sides had to be realistic about their ambitions in what was really about four months of negotiations. The strategy was always to secure continuity as a baseline and avoid defaulting on WTO terms. In that regard, the DIT has achieved its aim and deserves full credit.

The Government see the agreement as a platform for the UK’s accession to the CPTPP and their hope was that by joining the CPTPP—whose signatories, let us remind ourselves, make up around 13.5% of global GDP—UK businesses will have improved access to the fast-growth Asia-Pacific region and the ASEAN trading bloc, while increasing the resilience and diversity of UK supply chains in this area.

The deal has huge economic significance. If you compare the UK-Japan CEPA with the EU-Japan JEEPA, the agreement has, broadly, secured continuity of the existing agreements with the EU, with some additional provisions that address business asks. The key areas where it goes further include e-commerce, rules of origin, IP and financial services. UK business sees this Japan CEPA as an opportunity to increase market access in services, reducing obstacles to mobility and leading to the development of a more inclusive labour market. This is particularly important for financial services, which of course are the UK’s biggest export to Japan, accounting for 28% of all UK exports.

The main gain for business in this area is that CEPA contains some new mode 4 provisions, which broaden the scope for obtaining business visas for intra-transferees. UK business also saw this agreement as an opportunity to tailor provisions to address UK-specific concerns and data standard protection, bearing in mind the slightly different approaches to data taken between JEEPA and the CPTPP. Improving intellectual property rules will tackle the counterfeiting of UK products and allow free bilateral data flows to take advantage of the UK Japanese partnerships in R&D innovation and technologies. In these areas, UK businesses will benefit from commitments such as prohibition of data localisation for stricter regulations on IP infringement.

I congratulate the noble and learned Lord, Lord Goldsmith, and his committee on this report. It mentions that the SMEs chapter of CEPA, while welcome, does not in itself offer significant benefit to UK SMEs. Unlike SME chapters in many other trade deals, including the EU-Japan agreement, it simply offers facilitation. As I have said, this is where the Government need to work to encourage businesses to take advantage of FTAs. As president of the CBI, I can say that it stands by to help do this.

The CEPA does not offer a comprehensive stand-alone investment chapter, which would have been of benefit to the UK once it is no longer a member of the EU. The UK-Japan agreement is also important because it sets a baseline for the EU and US agreements.

The noble Lord, Lord Darroch, whom we welcome—particularly as a fellow Chelsea supporter—and the noble Lord, Lord Kerr, in their excellent speeches, stated the importance of the EU, as did the noble Lord, Lord Hain. It accounts for 47% of our trade. If we look at it in perspective, Japan is much smaller. America is our biggest trading partner with 15%, Germany is number 2 with 9% and Holland number 3 with 7%. The whole of the Commonwealth accounts for 10%. This rollover is very important. We nearly did not roll over the Canada deal. It has been rolled over now, but the main point is that the Canada deal rollover is the basis for building on a super-duper bespoke deal for the UK and Canada going forward. Let us hope that we get an EU deal now that can be the basis on which we can build for the future.