Brexit, an EU-Japan free trade agreement and business

The need to enhance predictability

Brexit, with all its different scenarios, has introduced a major factor of uncertainty for Japanese business. The demand of Shinzō Abe, the Japanese Prime Minister,
towards his UK counterpart to “enhance predictability” has yet to be answered.

With the UK Government sending on 29 March its letter under Article 50 of the EU Treaty notifying the European Council of its intention to withdraw from the EU, the initiative within the Brexit negotiations shifts to Brussels and the EU institutions.

At the same time, an emerging EU-Japan Free Trade Agreement (FTA) that the negotiating parties have committed in February 2017 to finalise as soon as possible represents a much needed positive context for the next chapter of relations between Japan and the EU.

The sending of the Article 50 letter means that by 29 March 2019, the UK should no longer be a member of the EU. It is what the Conservative UK government is looking to achieve. Two things are up for discussion:
• The agreement on withdrawal to deal with past and current assets and liabilities
It is likely that the exit agreement will be reached, though not without difficulty in view of the UK’s needs to honour its fiscal and budgetary commitments.
• The shape of the future trading relationship
It is highly unlikely that a final comprehensive trading relationship will be negotiated before 29 March 2019, leaving two scenarios of a transitional EU-UK FTA or a cliff edge of immediate application of WTO rules.

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