Premium British brands are concerned that a no-deal Brexit could threaten a new free trade agreement with Japan, putting them at a disadvantage against their European Union competitors.
The EU and Japan’s Economic Partnership Agreement (EPA) came into force on 1 February. The new free trade agreement will reduce duty on most goods to Japan. The UK, as a member of the EU, is part of this trade agreement, however, in the event of a no-deal Brexit, the UK will be automatically excluded.
Paul Alger, director of international business at UK Fashion and Textile Association (UKFT), which campaigned for the free trade agreement, said there would be “deep repercussions” for the industry if it collapsed: “The UK would not get duty relief, therefore there would be 12% trade tariffs. The Japanese will quickly pick up that they could get 12% more for their money from other EU manufacturers.
“The issue is how long it is going to take to get a free trade agreement again if there is a no deal. The British government is saying it will move heaven and earth to create similar deals, but this agreement took seven years to negotiate.
“The market is so tough for British businesses that anything that stands in the way of British exporters trading to one of their biggest countries is a big deal.”
Japan is the third-largest export market for UK fashion after the EU and US, the UKFT reports. Official statistics suggest that more than £73m of clothing was exported to Japan in 2017. However, UKFT believes this to be a conservative figure, as does not include licensed product, which is a significant part of the market there.
Rob Huson, founder and director of outerwear brand London Tradition, told Drapers: “We’re very concerned because we have a close and direct relationship with Japan. We’ve been waiting awfully long for this trade agreement and were absolutely delighted when it was finally ratified.
“A no-deal Brexit would be a disaster because we would have to pay tariffs. We will 100% be at a disadvantage to EU competitors.”
Richard Edgecliffe-Johnson, chairman and owner of bespoke shoe maker Foster & Son, told Drapers: “If the import duties go up or there are delays in moving goods, then that would be quite a significant consideration to us. If this doesn’t go through and we finish up with new tariffs or high tariffs, then that would place us at a disadvantage against our other EU competitors.”
William Church, joint managing director of Joseph Cheaney & Sons, said Japan was the biggest export market for its footwear: “If we are excluded from the agreement, it would be extremely disappointing because UK goods will be subject to high tariffs, which makes us less appealing. Other EU manufacturers would benefit if we are excluded. Additionally, the UK alone might not be seen as appealing in isolation than as part of the EU.”
Tom Glover, managing director or knitwear and outerwear brand Peregrine Clothing, agreed: “Paying a 12% tariff on products into Japan would be a huge problem and disadvantage for us. The Japanese have always liked UK brands, but I’m sure if we become 12% more expensive than our competitors in the EU, it will make a difference.”
The European Union-Japan Economic Partnership Agreement
In 2013 European Union governments instructed the European Commission to start negotiations with Japan.
The negotiations were finalised on 8 December 2017.
The European parliament gave its consent in December 2018.
The EU and Japan’s Economic Partnership Agreement (EPA) came into force on 1 February 2019.
If a no-deal Brexit is announced on 29 March, the UK will be automatically excluded from the EPA.