UK-Japan trade talks sour after letter from Hunt and Fox

UK-Japan trade talks sour after letter from Hunt and Fox

Tokyo baffled at UK foreign and trade ministers’ tactics on eve of meeting

The UK’s latest attempt to persuade Japan to agree a quick post-Brexit trade deal has backfired after officials in Tokyo reacted with dismay at British tactics.

Theresa May’s government is already battling to mend relations with China, after Beijing cancelled a key trade meeting with chancellor Philip Hammond in protest at a UK pledge to send an aircraft carrier to the Pacific.

Relations with Japan have soured as a result of a letter from the UK foreign secretary, Jeremy Hunt and international trade secretary Liam Fox which told their Japanese counterparts that “time is of the essence” and said flexibility would be required on both sides.

Although UK officials insisted that the letter, sent on February 8, had been couched in standard diplomatic language, Japanese officials believe that it reflected an increasingly high-handed approach from the British side. In response, officials in Tokyo briefly considered cancelling a round of trade talks this week.

In one section, the letter said that “we are committed to [speed and flexibility] and hope that Japan is too” — a line which, according to people close to Japanese trade officials, was read in Tokyo as an accusation of foot-dragging. People familiar with the situation said that Japan was finalising an appropriate response a week after Mr Hunt and Mr Fox’s letter had landed.

Although Japanese businesses, particularly in the automotive and financial services sectors, have spent two years fretting over a hard Brexit or a no-deal scenario, the UK’s desperation to have trade deals in place before or shortly after its scheduled departure from the EU on March 29 is now becoming increasingly clear to the Japanese public.

Japan’s state broadcaster NHK devoted part of an extended show on the 40-day countdown to Brexit by showing a bewildered panel of presenters a “Brexit survival pack” of dried foods and other provisions.

Australia provided a measure of relief for the UK when Simon Birmingham, trade minister, told the Financial times that Canberra was willing to sign a fast-tracked trade deal with London in the event of a no-deal Brexit, adding that “I would absolutely hope that we would conclude negotiations this year.” But Mr Birmingham poured cold water on Britain’s ambition to join the Trans-Pacific Partnership regional bloc.

Japanese officials familiar with Tokyo’s bilateral talks with the UK said that there had been growing frustration with the British side.

Although Japan acknowledges that progress has naturally slowed while their UK counterparts have been pulled into preparations for a no-deal Brexit, officials say there have been several occasions when British negotiators have come to the table without the necessary specialists to take negotiations forward.

Historically cordial ties between the UK and Japan mean that Japan’s prime minister, Shinzo Abe, has publicly expressed support for Theresa May’s exit deal with Brussels.

On a personal level, Mrs May has seen Mr Abe as her closest counterpart in the G7. But people familiar with Japan’s negotiating position said there had not yet been any political pressure to soften its stance.

The UK wants a deal to put in place of the EU-Japan trade agreement, which came into force on February 1. It has already given up doing this by March 29.

Japan has agreed to extend existing trade terms for the duration of Britain’s planned transition period with the EU. But in case of a no-deal Brexit, the EU-Japan agreement would no longer apply to the UK.

Despite 18 months of talks, Japan and the UK have failed to make significant breakthroughs on a new trade deal.

The differences of position, which the Hunt/Fox letter acknowledges as “challenging issues”, centre around Japan’s refusal to accept a simple “cut and paste” of the terms of the EU-Japan agreement ratified last year.

Instead, its officials have been told to negotiate as they would any other trade accord, and to seek better terms from the UK than Japan won through its long haggle with the much larger EU.

The UK Department for International Trade said: “We are continuing discussions with Japan on opportunities for a strong future trading relationship. The prime ministers of Japan and the UK have already agreed to secure an ambitious agreement as soon as possible, building on the deal already agreed between Japan and the EU.”

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