Experts have warned that a new EU-Japan trade deal could pose a post-Brexit threat to British industry in the wake of Nissan’s decision to backtrack on expanding its Sunderland plant.
The world’s biggest free trade deal came into force on 1 February and there are fears that Japan will stop using the UK as a manufacturing base, especially with a 0% tariff on car imports built into the EU-Japan agreement.
Meredith Crowley, a trade specialist economist at Cambridge University, said: “The risk is that the free trade agreement between the EU and Japan plus the uncertainty about the relationship between the UK and the EU will mean that the Japanese will ship things to the European and cut Britain out of the loop.”
Business groups estimate that the potential benefit of the EU-Japan deal to the UK would be £3bn a year if Britain stayed in the EU. “It could be a huge lost opportunity, which is why manufacturers are so keen to avoid a cliff-edge Brexit,” said Seamus Nevin, the chief economist at the UK manufacturers’ body, the EEF.
Other experts believe the EU-Japan deal will make it harder for the UK to attract inward investment. The gradual tapering of car tariffs from 10% to zero within seven years would make it easier to produce in Japan and then export to the EU, said David Bailey, the professor of industrial strategy at Aston business school.
If no deal is reached, it could stymie one of the British industry’s fastest growth areas. British car exports to Japan increased by 26% during 2018, according to the Society of Motor Manufacturers and Traders.
“The likes of Jaguar Land Rover will be putting cars on ships to Japan and South Korea not knowing whether they’ll be able to sell them,” Bailey said.
The Department for International Trade said its priority was to ensure there was no disruption to UK-Japanese trade after Brexit, but that it would then seek to go further than the deal signed by Brussels. Britain has also signalled that it would like to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which includes 11 nations including Japan, South Korea, Chile, Australia and New Zealand.
Nigel Driffield, professor of international business at Warwick business school, said: “It is not a question of what’s here already, it’s a question of what is not going to come here. In the next 12 to 18 months, all three Japanese car makers in the UK – Nissan, Honda and Toyota – will decide where they are going to make their new models in 2023-24.”
Driffield said it was a myth that Britain could negotiate better bilateral deals on its own. “That’s why there is no downside to staying in the customs’ union,” he said.