Comprehensive Economic Partnership (EUC Report)

Lord Hain Excerpts

Thursday 26th November 2020 Grand Committee

[Lord Hain (Lab)]

My Lords, I look forward very much to the maiden speech of the noble Lord, Lord Darroch, with whom I worked very productively when I was Europe Minister and who has the great virtue of being a Chelsea fan.

The EU-Japan agreement, from which the UK, as an EU member, has benefited, entered into force on 1 February 2019 and is the world’s largest bilateral trade deal, creating an open trading zone covering nearly one-third of global GDP. In his evidence to the International Agreements Sub-Committee, the Minister, the noble Lord Grimstone, confirmed that this new agreement with Japan is a “continuity” agreement. His departmental colleague confirmed that

“in almost all respects the tariff liberalisation is the same as it is in the EU agreement”.

It is therefore surprising, perhaps, as the noble Lord, Lord Oates, pointed out, that the Secretary of State, Liz Truss, called the agreement a

“ground-breaking, British-shaped deal”,

which she said went far beyond the existing EU-Japan trade deal. On 19 November, when questioned by the shadow Secretary of State, Emily Thornberry, she was unable to explain how this was the case, and has failed to produce any economic modelling to prove otherwise.

A government impact assessment in October found that the £15.66 billion projected boost to bilateral trade claimed by the Government was, in fact, a comparison with no trade deal with Japan, rather than with the existing EU-Japan deal. It also showed that of these benefits, 83% would go to Japanese exporters and only 17% to the UK’s. Officials confirmed that the deal was expected to add a mere 0.07% to UK gross domestic product, and this was again as compared with no deal with Japan, rather than with the status quo EU-Japan deal.

The UK had sought access to tariff-rate quotas for value-added agri-food exports such as cheese. As the Japanese had promised their farmers that there would be no such new quotas, Britain failed to secure these, and instead has to use any quota left over by the EU in only 10 out of 25 such products covered by the EU-Japan agreement. Moreover, the UK Trade Policy Observatory found that all the tariff “wins” claimed by the Secretary of State are for goods that the UK does not actually export to Japan. The 10 products concerned include obscure items such as birds’ eggs, raw hides, fur skins, and ultra-strong spirits of at least 90% alcohol. The gain to British exporters was therefore found to be “zero”.

The trade observatory study also concluded that:

“In services and investment liberalisation, it is clear that Japan’s commitments to the EU and the UK are almost identical”.


Foreign direct investment is therefore one notably important area missing from the deal. The UK is Japan’s second-largest destination for FDI, totalling £131 billion in 2019. Japanese investment supports over 100,000 jobs in the UK in sectors such as manufacturing and scientific research. However, as Mr Motegi, the Japanese Foreign Minister said, at the signing of the deal:

“It is of paramount importance that the supply chain between the UK and the EU is maintained even after the UK’s withdrawal.”


He therefore had “high hopes” of a deal between London and Brussels—as I trust that we all do.

As the Financial Times pointed out on 13 September, the UK-Japan deal commits the UK to tougher restrictions on state aid than those that it has said it would accept in the context of a trade deal with the EU. Why, then, do the UK Government continue to regard state aid as a make or break issue for the crucial trade talks now taking place with Brussels?

The UK has said that this deal will be a stepping stone to the UK’s membership of the Trans-Pacific Partnership, but trade deals with countries on the other side of the world cannot replace those with the EU, the biggest and richest market on our doorstep, worth 47% of the UK’s trade in 2019.

The Government have sought to overplay the significance of the UK-Japan trade deal as cover for the chaos looming if the UK fails to secure an EU trade deal. As the Guardian business leader said on 13 September:

“A Japan trade deal is little consolation if Britain is locked out of the EU.”