Brexit threat to free trade agreements

The EU and Japan’s new free trade agreement came into force at the start of February, reducing duty on most goods to Japan, however, in the event of a no-deal Brexit, the UK will be automatically excluded from this agreement and other EU FTA’s.

In the event of a “No deal” Brexit, the UK would be automatically excluded from the Japan deal as well as other EU FTAs, such as those with Canada and South Korea.EU-Japan_EPA_Signing_(9)

If the UK foes finally exit the EU with a deal, the expectation is that the UK would remain part of EU FTAs for the period of the transition period, in the hope that the UK will be able to negotiate its own deals with those and other governments by the time it leaves the EU.

Quoted in Drapers Record, Paul Alger, director of international business at UK Fashion and Textile Association (UKFT) shared industry concerns about a no-deal Brexit. “The UK would not get duty relief, therefore there would be 12% trade tariffs. The Japanese will quickly pick up that they could get 12% more for their money from other EU manufacturers.”

In a ‘no-deal’ situation the UK will be at a 100% disadvantage to EU competitors

For leather and shoes, the existing quota system that has significantly hampered EU exports will be abolished immediately.

Tariffs on shoes will go down from 30% to 21% at entry into force, with the rest of the duties being eliminated over 10 years.

Tariffs on EU exports of leather products, such as handbags, will go down to zero over 10 years, as will those on products that are traditionally highly protected by Japan, such as sports shoes and ski boots.

“The issue is how long it is going to take to get a free trade agreement again if there is a no deal. The British government is saying it will move heaven and earth to create similar deals, but this agreement took seven years to negotiate.”

“The market is so tough for British businesses that anything that stands in the way of British exporters trading to one of their biggest countries is a big deal.”

Japan is the third-largest export market for UK fashion after the EU and US, the UKFT reports. Official statistics suggest that more than £73m of clothing was exported to Japan in 2017. However, UKFT believes this to be a conservative figure, as does not include licensed product, which is a significant part of the market there.

Exclusion from the agreement, in the wake of a no-deal would leave UK exports subject to high tariffs, which make product less appealing, and mean that EU manufacturers would benefit from a competitive advantage.