GR Japan – Written Evidence (JTN0028)

 

Introduction

 

  1. As the UK and EU commence their eighth round of trade talks this week, it seems increasingly possible that the UK could end the transition period without a UK-EU deal in place.  In this context, the agreement of new trading terms with non-EU partners takes on added political and economic significance. 

 

  1. One of the most straightforward deals to negotiate should be the UK-Japan FTA, given that a deal would be based closely on the existing EU-Japan Economic Partnership Agreement (EPA).  Although the two countries could have chosen to roll over the existing agreement, Japan was keen to negotiate additional provisions, building on the EPA framework. 

 

  1. Japanese Minister of Foreign Affairs, Toshimitsu Motegi, stated at a press conference on 1 September that he wants negotiators of the UK-Japan Free Trade Agreement (FTA) to conclude the talks before the election of Japan’s next prime minister, which will take place on 16 September.  This briefing examines whether or not this date is now a hard deadline.  It also looks at the impact of Prime Minister Shinzo Abe’s recent resignation and at the procedures required to get the deal passed by the Japanese Diet and entered into force by 31 December 2020, so as to avoid the need for the two countries to trade on WTO terms.

 

Why 16 September?

 

  1. Japan has set two previous deadlines for conclusion of the talks – 30 July and 31 August, but both were missed, so how credible is the new deadline?

 

  1. The National Diet will hold a special session to choose a new prime minister – in practice certain to be the new president of the ruling Liberal Democratic Party (LDP) – on 16 September, following the election of a new LDP president on 14 September. 

 

  1. In theory, a new prime minister could change Japan’s policy direction, directly impacting the FTA negotiations.  However, with current Chief Cabinet Secretary Yoshihide Suga almost certain to succeed Abe, this seems very unlikely.  Chief Cabinet Secretary Suga has been fully supportive of Prime Minister’s Abe’s international trade policy and has been at Abe’s right hand as leader of the Cabinet Office and official government spokesman for nearly eight years with barely a hint in that time of any significant policy differences between the two.  Nevertheless, negotiations between Japan and the UK could be affected as new Cabinet ministers will be appointed and as a new administration finds its feet. It is possible that even Mr. Motegi himself will have a new job on 16 September, so the safest option would indeed be to complete negotiations before the new prime minister is elected.

 

What would need to happen in Japan to ratify a trade deal?

 

  1. It cannot be said, however, that 16 September is a hard deadline.  Last year, negotiations for the US-Japan Trade Agreement on Goods (TAG) were concluded on 23 September, but the necessary processes were still cleared in time for the treaty to enter into force as planned on 1 January 2020.

 

  1. The Annex below provides a detailed timeline of the process the TAG underwent in Japan – and reflects the process a UK-Japan FTA would need to pass through. 

 

  1. After conclusion of negotiations, the draft UK-Japan agreement would have to be scrutinised by Japan’s Cabinet Legislation Bureau, the government body which undertakes formal examination of all draft legislation and treaties brought before the Cabinet.  (Under Article 73 of the Japanese Constitution, the Cabinet has the authority to conclude treaties, subject to the approval of the Diet.)  This process of examination (“legal scrubbing”) typically takes two or three weeks.  The Bureau would then pass the text to one of the regular twice-weekly Cabinet meetings for approval.  It is at this stage that the treaty would be signed by both parties.   

 

  1.                     After signature, the treaty will in practice have to undergo two further rounds of scrutiny – first to obtain political buy-in from the LDP and the LDP-Komeito coalition, and then parliamentary scrutiny in the upper and lower houses of the Diet. 

 

  1.                     The LDP’s Policy Research Council has a de facto veto over all LDP policies.  In the case of an free trade agreement, the Ministry of Foreign Affairs would therefore present the treaty to the Foreign Affairs Division of the Policy Research Council and also to a special group in the LDP dedicated to the scrutiny of treaties, called the “Headquarters for the TPP, Japan-EU EPA and the Japan-US TAG”.  Together, these processes serve to give the agreement the LDP’s “political blessing”.

 

  1.                     To obtain the approval of the Diet, a draft treaty will be examined by standing committees in the House of Representatives (the lower house) and the House of Councillors (the upper house) of the Diet.  The House of Representatives Committee on Foreign Affairs will examine the text for the lower house before it is put to a plenary vote, then the House of Councillors Committee on Foreign Affairs and Defence will do the same for the upper house before it is put to another plenary vote.  The TAG took almost four weeks (24 October–19 November) to pass through the lower house and a further two weeks (20 November–4 December) to pass through the upper house. 

 

Impact of a possible snap election

 

  1.                     Timing is very tight for a deal to move through the Diet in time for the 31 December deadline, but the experience of the TAG last year shows that it is still possible, even if the 16 September deadline is missed by as much as a week. 

 

  1.                     Another factor that could further increase the challenge of getting a deal through in time is the possibility of the new prime minister calling a snap election.  This could be called at the prime minister’s discretion at any time from 16 September onwards, and would mean the immediate dissolution of the Diet, likely hindering scrutiny for several more weeks.  The most likely date for an election, if one is called, is 25 October.  In that scenario, the earliest the Diet could reopen would be early November.  Formal proceedings and policy speeches dominate the first few weeks of a Diet session, which would see bill readings begin only in late November. 

 

  1.                     The dates for an Extraordinary Diet session this year will be set by the new government, in discussion with the opposition, and are not yet known.  However, Extraordinary sessions of the Diet usually close in early December.  This would make the timing very tight to get through all of the necessary processes by the end of the year.

 

  1.                     An experienced former senior trade negotiator at the Ministry of Economy, Trade and Industry (METI) advised, however, that, should this scenario come to pass, a case would likely be made to speed the process through the Diet due to the importance of the FTA for Japanese businesses and investors in the UK. 

 

  1.                     Although the 16 September deadline is not therefore a hard deadline as such, time is still limited due to the need for various political and legal processes on the Japanese side.  The passage of the TAG in 2019 had little room for manoeuvre, for example, despite starting on 23 September.  Furthermore, various uncertainties on the Japanese side means the process of the agreement through the Diet could be less predictable than in more stable political times. 

 

8 September 2020


Example: Timeline for ratification of 2019 US-Japan Trade Agreement on Goods

 

Cabinet Legislation Bureau scrutiny, Cabinet approval and LDP “sign-off”:

 

and Lighthizer signed the TAG at the White House; this coincided with Japanese Cabinet approval of the treaty;

 

Scrutiny by the House of Representatives:

 

 

Scrutiny in the House of Councillors:

 

 

Entry into force