Japan and Britain are battling over their new bilateral trade agreement, with London seeking zero tariffs on malt grains and other farm products and Tokyo opposing such preferential treatment.
The negotiations are in their final stage. An agreement needs to be reached as early as this summer, because the post-Brexit transition period is to end in December.
One of the focal points is Britain's demand regarding agricultural products.
An economic partnership agreement that was signed between Japan and the European Union is currently applied to bilateral trade between Japan and Britain. Japan has set tariff-free and low-tax import quotas for some agricultural products from the EU, such as malt and butter, and Britain wants Japan to set new quotas for the country after Brexit.
"Britain wants to extract favorable conditions from Japan and realize a post-Brexit achievement," a Japanese government official said. Japan, however, is reluctant to accept the demand, as it set preferential quotas for the EU, including Britain.
The United States is another reason why Japan cannot accept Britain's demands in this regard. Washington broke away from the Trans-Pacific Partnership (TPP) and signed a bilateral agreement with Japan, a case similar to Britain, which left the EU.
In its negotiations with the United States, Japan refused to set a preferential quota on agricultural products for that country, on the grounds that the TPP had included a preferential quota for the United States. If it accepts the British demand, Japan "could face additional U.S. demands," a ruling party lawmaker lobbying for farm organizations was quoted as saying.
A new tariff-free quota for agricultural products from Britain would not pose a major problem because most of Britain's imports are industrial goods such as electric machinery. However, concessions with Britain could trigger the United States -- a big trading partner -- to push for the further opening of Japan's market.
Japan has taken the offensive by calling on Britain to gradually reduce tariffs on Japanese automobiles, in line with the Japan-EU economic agreement, and to immediately abolish tariffs on related auto parts. However, no progress has been made.
One area where the two sides are in accord is the establishment of rules for electronic commerce. British Secretary of State for International Trade Elizabeth Truss said, "Both sides are committed to an ambitious timeline to secure a deal that goes even further than the existing agreement especially in digital and data."
Japan-U.K. talks are based on an agreement between Japan and the United States. The negotiations in this field go further than those for the TPP, as both governments are banned from demanding that companies operating in their country hand over encryption keys, which are used to guard new technologies, on personal computers or the algorithms for such technologies as artificial intelligence.
With the spread of the digital economy that connects the world via the internet, rules that allow businesses to freely exchange information beyond national borders are indispensable for their corporate activities. However, the gap has widened between such countries as Japan and the United States, which aim for a "free flow of information," and China, which prioritizes state control of information.
Japan hopes to draw Britain into the free camp through the current negotiations.
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