UK Japan trade talks stall

The UK and Japan made little progress on a new trade deal according to The Financial Times to ensure UK-Japanese trade relations are preserved after Brexit. hanse data show that while UK-Japanese trade is lacklustre, the UK is a key destination for Japan’s most dynamic exports. The prospect of a no trade deal with Japan now risks undermining that advantage.

The UK represented in 2017 just 1.1 percent of Japan’s total imports compared with 1.3 percent in 2007. This compares to Japan’s imports from the EU that represented 10.5 percent and 11.6 percent in 2007 and 2017, respectively. The US maintained an usual large share in Japan’s imports with 11.0 percent in 2017 compared with the US’s share in EU imports of 6.2 percent. China dominates Japan’s imports with a share of 24.5 percent in 2017 up from 20.6 percent in 2007. 

In Japan’s exports, the UK made 2.0 percent of Japan’s total exports in 2017. The US and China also dominate Japan’s exports representing 19.4 and 19.0 percent of Japan’s total exports in 2017, respectively compared with a share for the EU of 11.1 percent.

Figure 1. UK's share in Japan's fastest growing imports
 

The UK has lost market share in Japan’s most dynamic import sectors including (HS 2002 at chapter level out of 99 chapters) 85 electrical machinery, 30 pharmaceutical products, 87 vehicles, 90 optical instruments, 39 plastics, 02 meat, 84 nuclear reactors, 16 meat preparations, 29 organic chemicals, 94 furniture. Those chapters increased their share in Japan’s total imports from 34.5 percent in 2007 to 43.0 percent in 2017. The UK saw its share in these chapters decline from 2.3 percent in 2007 to 1.8 percent in 2017 amid strong losses in pharmaceuticals and vehicles (Figure 1).The 10 chapters represented 72 percent of Japan’s imports from the UK. Japan’s fastest growing imports are dominated by China and the US with a share of 34.7 percent and 13.9 percent, respectively.

The UK gained market share in Japan’s most dynamic export sectors including 90 optical instruments, 99 commodities not else specified, 71 natural and cultured pearls, 39 plastics, 33 essential oils and resinoids, 27 mineral fuels, 30 pharmaceutical products, 48 paper and paperboard, 88 aircraft, 34 soap, Those chapters increased their share in Japan’s total exports from 16.6 percent in 2007 to 23.7 percent in 2017. The UK saw its share in these chapters increase from 2.3 percent in 2007 to 2.5 percent in 2017 amid strong gains in pharmaceuticals products (Figure 2).The 10 chapters represented 30.4 percent of Japan’s exports to the UK. Japan’s fastest growing exports are dominated by China with a share of 20.7 percent. The EU lost market share in Japan’s fastest growing exports from 13,4 percent in 2007 to 10.1 percent in 2017.

Figure 2. UK share in Japan's fastest growing exports
 

UK-Japanese trade relations are mixed and the UK is on average only a small trading partner for Japan. However, the fact that the UK increased its share in Japan’s most dynamic exports is indicative of the UK offering attractive trade relations for Japan. It is not clear if outside the EU the UK will be able to maintain this standing. The risk of a no-deal Brexit and no replacement trade agreement with Japan may jeopardise the UK’s key trading partner advantage.

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