(Bloomberg) -- The U.K. secured a free-trade agreement with Japan, its first major post-Brexit accord and a boost to Prime Minister Boris Johnson as negotiations deteriorate with the EU.
The deal, which is expected to boost Britain’s GDP by 0.07% compared to 2018 levels over the next 15 years, was agreed in principle by International Trade Secretary Liz Truss and Japanese Foreign Minister Toshimitsu Motegi on Friday, the British government said in a statement.
Striking an accord with the world’s third-largest economy has been a priority for Johnson, who is eager to demonstrate the ability to sign trade deals as an independent country -- a key plank of the Brexit campaign he led. The U.K. benefited from the EU-Japan free trade agreement and needed a deal to avoid tariffs on commerce with Japan at the end of the year.
Its timing is also useful to Johnson. Trade talks with the EU, Britain’s largest trading partner, have deteriorated sharply this week amid a U.K. plan to break international law over the Brexit divorce treaty. That move has soured negotiations and increased the prospect of no trade deal being reached by Dec. 31, when Britain exits post-Brexit transition arrangements.
The U.K. said 99% of exports to Japan will be tariff-free under the deal, which will add 15.2 billion pounds to annual trade with the Asian nation. It marks an “important step” toward joining the Comprehensive and Progressive (NYSE:PGR) Agreement for Trans-Pacific Partnership, the government said.
Truss said the accord with Japan, negotiated in “record time and in challenging circumstances,” goes further than the deal it has with the EU, citing data flows and better market access for financial services.
“It secures new wins for British businesses in our great manufacturing, food and drink, and tech industries,” she said in the statement. “This is a historic moment for the U.K.”
Motegi said the agreement would allow British and Japanese companies to maintain business continuity after Brexit and provide greater opportunities for investment.
“It was a very difficult negotiation but we were able to come to an agreement in principle in three months, an exceptional pace,” he said. “By agreeing on higher level, more progressive rules than the Japan EU trade deal on issues such as electronic commerce, we hope that trade and investment between Japan and the U.K. will increase further.”
©2020 Bloomberg L.P.