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The first major free trade deal signed by Britain since Brexit has been branded a failure as new figures show exports have plummeted since it came into force.
Liz Truss signed the “historic” deal with Japan as trade secretary in October 2020, describing it as a “landmark moment for Britain”. It was claimed it would boost trade by billions of pounds and help the UK recover from the pandemic.
However, figures compiled by the Department for International Trade show that exports to Japan have fallen from £12.3bn to £11.9bn by June 2022. Exports of goods fell by 4.9% to £6.1bn and services by 2% to £5.8bn.
The reduction is a significant setback for Brexit supporters who claimed that global trade with non-EU countries would help offset any losses from leaving the single market.
A similar deal with Australia was criticized earlier this month by former environment secretary George Eustice, who said it was “not really a very good deal for the UK”.
Nick Thomas-Symonds, Labour’s shadow secretary for international trade, said: “The fact that trade with Japan is falling is irrefutable evidence that ministers are not delivering for UK exporters.
“The Conservatives have no trade policy worthy of the name and ministers are failing to support UK interests in the negotiations.
“This is exacerbating the huge economic damage they have already done.”
The new figures follow evidence that Britain’s economy is set to struggle compared with its international peers.
Apart from Russia, it will be the worst performer among the world’s major economies next year, according to the Organization for Economic Co-operation and Development.
He also comes under pressure from inside Whitehall and among his own MPs over his current Brexit plans, along with Rishi Sunak. He was forced to deny claims last week that he wanted to pursue a soft, “Swiss-style” Brexit that would bring Britain closer to the EU.
However, he is now facing calls from officials to drop plans that would automatically tear up EU-derived laws by the end of next year.
This the observer It has been said that the “Brexit Freedoms” Bill is burdening civil servants so much that even working weekends does not give them enough time to examine all the implications of the plan.
Officials are having to comb through existing laws because of a “sunset clause” in the retained EU law bill, under which any law not “reviewed or repealed” by the end of 2023 will be removed.
Mike Clancy, general secretary of the Prospect union, said the bill “could leave the UK a more dangerous and less fair place”.
“Potential members in safety-critical industries are concerned that this bill could eliminate important safety in the name of cutting red tape,” he said. “It also puts huge pressure on the departmental workload. It seems that the Prime Minister may be forced to plow through the bill to appease his party hardliners. We must not end up in a situation where the rights of people at work are used as red meat to please a small cabal of MPs.
The performance of the Japan deal puts further pressure on the government’s claims that Britain can secure a “Brexit dividend”.
Officials at the Department for International Trade said the UK-Japan Comprehensive Economic Partnership Agreement (CEPA) in 2020 offered significant benefits over the previous EU arrangement.
It claimed that trade between the UK and Japan could increase by an estimated 15bn. But in its first year after it came into force on 1 January 2021, total trade between the countries was £23.7bn, down from £24.9bn in 2020, a drop of around 5%. The most recent figures show a slight recovery in total trade between the two countries.
Minako Morita-Jaeger, senior research fellow in international trade at Sussex University Business School and policy research fellow at the UK Trade Policy Observatory, said the government had “oversold” the UK-Japan trade deal and that it did not deliver significant economic benefits. than previous EU deals. She said preliminary trade data did not look encouraging.
A comparative analysis of UK-Japan trade figures for 2020 and 2021 by Morita-Jagger and a colleague states: “In all but one case, Japanese exports and imports of goods and services to the UK performed worse than equivalent flows with the EU or the rest of the world. “
Morita-Jagger said Japanese businesses had used the UK as a gateway to Europe since the 1980s.
She said the research showed that companies were having difficulties navigating the UK-EU trade structure and were considering expanding their business operations, including headquarters and manufacturing in the EU. While the UK said the deal with Japan offered the right benefits, the Japanese ministry said. The affairs document suggests it has largely rolled over previous EU agreements.
Ministers now face growing scrutiny over free trade deals around the world, with a total trade and goods deficit of £23.7bn in July to September 2022, according to figures published by the Office for National Statistics.
Economic experts now acknowledge that Brexit will have an adverse impact on international trade as businesses struggle with the customs checks and bureaucracy involved in exporting to Europe.
An Office for Budget Responsibility report published this month predicts UK trading intensity will be 15% lower in the long term.
It says: “Recent evidence suggests that Brexit has had a significant adverse impact on UK trade.”
It was reported last week that senior government figures are considering a Swiss-style relationship with the EU, with fewer trade barriers. Prime Minister Rishi Sunak said the UK would not pursue any post-Brexit relationship that “relies on alignment with EU laws”.
The Japanese embassy in London said the deal “provides stability for Japanese and British companies to continue their business and trade activities with each other after Brexit”.
A spokesperson for the Department for International Trade said: “Global trade has been significantly affected by Covid-19, and while a variety of factors may cause trade flows to fluctuate in the short term, our analysis shows that the UK-Japan CEPA could increase trade by approx. . £16bn and an £800m rise in UK wages by 2035, compared to no deal.
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