Address from Consul General Takaoka: Fifth Cross Party Group on Japan - Online (17th September 2020)
2020/9/23
Convener Dean Lockhart MSP, Deputy Convener – Jamie Halcro Johnston MSP and Deputy Convener – Maureen Watt MSP, members of the cross party group on Japan, Mr Doug Cook OBE of the Asia Scotland Institute, ladies and gentlemen.
I am very happy to address this meeting once again. I must thank the Convener for not just calling the meeting after eight months of hiatus for obvious reasons, but also in displaying the brilliant political instinct to choose the right moment to do so, again not just for the fact that in principle agreement of the Japan-UK Comprehensive Economic Partnership Agreement was achieved only six days ago, but also because new Japanese Prime Minister Mr. Yoshihide Suga was elected by the Diet only yesterday.
I am also glad to welcome Mr. Doug Cook in his new capacity as the Secretary of this group. Although I have not met him in person, online I am already familiar with his effective leadership in bringing structure to any events. Therefore, together with Ms Lesley-Anne Campbell, I know we are in the safe hands.
Before dwelling on the new horizon opened by this new Agreement, let me briefly mention two of the most important legacies of our former Prime Minister Abe during his total period of eight years in office in foreign policy areas, legacies which will be succeeded and built on by Prime Minister Suga as he made clear in his inaugural address.
The first legacy is in the area of security. By clarifying the interpretation of the Japanese constitution, it was made clear that the Self Defense Force could and should engage in support activities with allies and like-minded countries when Japan’s security or international peace is threatened. This will strengthen Japan-US Alliance and lead to further cooperation with countries like the UK.
In this context, I appreciate the announced plan of the Scottish-built aircraft carrier, Queen Elizabeth to visit Japan next year for a joint exercise with Japan and the US. This will send a strong signal around the world about the UK’s interest in maintaining peace and stability in the Far East and preserving freedom of navigation in the South China Sea, which is the route of one third of global trade.
The second legacy is the main point of our discussion, the promotion of free trade.
Despite the challenging international situations surrounding this subject, Japan had made great contributions to sustaining and even promoting an international regime in this area with the cooperation with like-minded countries to support rule –based and transparent business activities.
This includes the Japan-EU Economic Partnership Agreement, which entered into force in February last year and was one of the topics of this group’s past meetings.
Another milestone agreement is CPTPP, Comprehensive and Progressive Agreement for Trans-Pacific Partnership, commonly known as TPP11, effectively TPP12 minus the United States but include several Commonwealth members.
Let me cite my personal yet quite interesting calculations. The total GDP of TPP11 is about 13% of global total GDP, with Japan occupying about half since Japan is the third largest economy in the world. If the UK, the sixth economy in the world joins, TPP11+UK should account for more than 16%, which is more than 2/3, in other words almost the same size of the EU total without the UK. TPP eleven is growing faster than the EU. And if the US changes its mind, the original TPP 12 with the US will be by far the largest trade alliance in the world.
Against this background, the Japan-UK Comprehensive Economic Partnership Agreement was agreed in principle. While it has almost became cliché to criticize bureaucracies all around the world for failing to provide anything in time amid the spread of the virus, it is truly remarkable for the officials both in Japan and the UK to negotiate tirelessly online so as to reach in principle agreement virtually in three months.
Let me start my explanation about the agreement’s significant implications for future Japan-Scotland economic relations by apologizing that I have not prepared handouts yet for this meeting due to time constraints. But we will provide you in due course in coordination with your Secretariat reflecting upon our discussion today.
So, please forgive me for taking time to read the list of increased geographical indications (GIs), which I will provide later. This list includes the following Scottish products to be officially recognized in the Japanese market; Arbroath smokies, Ayrshire New Potatoes/ Ayrshire Earlies, Bonchester cheese, native Shetland wool, Orkney beef, Orkney lamb, Orkney Scottish island cheddar, Scotch beef, Scotch lamb, Scottish salmon, Shetland lamb, Stornoway black pudding, Teviotdale cheese and traditional Ayrshire Dunlop cheese.
In fact, under the Japan-EU Agreement, just seven UK geographical indications were recognized. That number went up to 70 under the Japan-UK agreement.
As this significant increase of numbers shows, the Japan-UK agreement is more than a replacement of Japan-EU Agreement. I am not going to give any comment about the B word, but certainly Brexit has produced opportunities as well as challenges to promote our bilateral economic ties.
Another important area which went beyond the Japan-EU Agreement is digital and data. New benefit of the Japan-UK agreement includes, free flow of data across our borders, a ban on data localization which means UK companies do not need to set up additional mandatory servers in Japan, a ban on requesting cryptographic information and algorism. In fact, we believe that we have set up a high-level, progressive precedent in this area for the promotion of cutting-edge digital industry. This will be of particular interest for Scotland’s growing FinTech sector with more opportunities for them in Japan.
For giant Japanese producers like Nissan and Hitachi in the UK, the import of automobile parts and railroad vehicles from Japan is made easy, boosting their factories competitiveness vis-à-vis their continental rivals. This is good for the UK economy when you consider the fact that about 50% of the cars manufactured in the UK is by those Japanese companies and more than 70% of them are currently exported out of the UK. To complete the circle, we must expect that the deal will be done to avoid a 10% tariff in the case of automobiles between the UK and the EU. In turn, this will encourage further FDI from Japan.
To conclude, when this agreement is implemented in full, 99% of goods will be traded tariff-free between the two countries. It is estimated that it will help increase UK trade with Japan by an estimated £15.2 billion. That’s why we have already received a series of positive comments not just from the Scottish Government and the Scottish Chamber of Commerce, but also from the Federation of Small Businesses, TechUK, The Scottish Salmon Company, Walkers Shortbread, Harris Tweet Hebrides and The International Trade, Food and Drink Federation.
And it goes beyond that, there should be a virtuous cycle of further investment and increased collaboration in R&D and innovation. Moreover, the prospect of UK joining TPP 11 has advanced significantly as UK has already secured full access to about 50% of total TPP11 market. And Japan will welcome the UK with open arms.
Thank you very much for listening.
I am very happy to address this meeting once again. I must thank the Convener for not just calling the meeting after eight months of hiatus for obvious reasons, but also in displaying the brilliant political instinct to choose the right moment to do so, again not just for the fact that in principle agreement of the Japan-UK Comprehensive Economic Partnership Agreement was achieved only six days ago, but also because new Japanese Prime Minister Mr. Yoshihide Suga was elected by the Diet only yesterday.
I am also glad to welcome Mr. Doug Cook in his new capacity as the Secretary of this group. Although I have not met him in person, online I am already familiar with his effective leadership in bringing structure to any events. Therefore, together with Ms Lesley-Anne Campbell, I know we are in the safe hands.
Before dwelling on the new horizon opened by this new Agreement, let me briefly mention two of the most important legacies of our former Prime Minister Abe during his total period of eight years in office in foreign policy areas, legacies which will be succeeded and built on by Prime Minister Suga as he made clear in his inaugural address.
The first legacy is in the area of security. By clarifying the interpretation of the Japanese constitution, it was made clear that the Self Defense Force could and should engage in support activities with allies and like-minded countries when Japan’s security or international peace is threatened. This will strengthen Japan-US Alliance and lead to further cooperation with countries like the UK.
In this context, I appreciate the announced plan of the Scottish-built aircraft carrier, Queen Elizabeth to visit Japan next year for a joint exercise with Japan and the US. This will send a strong signal around the world about the UK’s interest in maintaining peace and stability in the Far East and preserving freedom of navigation in the South China Sea, which is the route of one third of global trade.
The second legacy is the main point of our discussion, the promotion of free trade.
Despite the challenging international situations surrounding this subject, Japan had made great contributions to sustaining and even promoting an international regime in this area with the cooperation with like-minded countries to support rule –based and transparent business activities.
This includes the Japan-EU Economic Partnership Agreement, which entered into force in February last year and was one of the topics of this group’s past meetings.
Another milestone agreement is CPTPP, Comprehensive and Progressive Agreement for Trans-Pacific Partnership, commonly known as TPP11, effectively TPP12 minus the United States but include several Commonwealth members.
Let me cite my personal yet quite interesting calculations. The total GDP of TPP11 is about 13% of global total GDP, with Japan occupying about half since Japan is the third largest economy in the world. If the UK, the sixth economy in the world joins, TPP11+UK should account for more than 16%, which is more than 2/3, in other words almost the same size of the EU total without the UK. TPP eleven is growing faster than the EU. And if the US changes its mind, the original TPP 12 with the US will be by far the largest trade alliance in the world.
Against this background, the Japan-UK Comprehensive Economic Partnership Agreement was agreed in principle. While it has almost became cliché to criticize bureaucracies all around the world for failing to provide anything in time amid the spread of the virus, it is truly remarkable for the officials both in Japan and the UK to negotiate tirelessly online so as to reach in principle agreement virtually in three months.
Let me start my explanation about the agreement’s significant implications for future Japan-Scotland economic relations by apologizing that I have not prepared handouts yet for this meeting due to time constraints. But we will provide you in due course in coordination with your Secretariat reflecting upon our discussion today.
So, please forgive me for taking time to read the list of increased geographical indications (GIs), which I will provide later. This list includes the following Scottish products to be officially recognized in the Japanese market; Arbroath smokies, Ayrshire New Potatoes/ Ayrshire Earlies, Bonchester cheese, native Shetland wool, Orkney beef, Orkney lamb, Orkney Scottish island cheddar, Scotch beef, Scotch lamb, Scottish salmon, Shetland lamb, Stornoway black pudding, Teviotdale cheese and traditional Ayrshire Dunlop cheese.
In fact, under the Japan-EU Agreement, just seven UK geographical indications were recognized. That number went up to 70 under the Japan-UK agreement.
As this significant increase of numbers shows, the Japan-UK agreement is more than a replacement of Japan-EU Agreement. I am not going to give any comment about the B word, but certainly Brexit has produced opportunities as well as challenges to promote our bilateral economic ties.
Another important area which went beyond the Japan-EU Agreement is digital and data. New benefit of the Japan-UK agreement includes, free flow of data across our borders, a ban on data localization which means UK companies do not need to set up additional mandatory servers in Japan, a ban on requesting cryptographic information and algorism. In fact, we believe that we have set up a high-level, progressive precedent in this area for the promotion of cutting-edge digital industry. This will be of particular interest for Scotland’s growing FinTech sector with more opportunities for them in Japan.
For giant Japanese producers like Nissan and Hitachi in the UK, the import of automobile parts and railroad vehicles from Japan is made easy, boosting their factories competitiveness vis-à-vis their continental rivals. This is good for the UK economy when you consider the fact that about 50% of the cars manufactured in the UK is by those Japanese companies and more than 70% of them are currently exported out of the UK. To complete the circle, we must expect that the deal will be done to avoid a 10% tariff in the case of automobiles between the UK and the EU. In turn, this will encourage further FDI from Japan.
To conclude, when this agreement is implemented in full, 99% of goods will be traded tariff-free between the two countries. It is estimated that it will help increase UK trade with Japan by an estimated £15.2 billion. That’s why we have already received a series of positive comments not just from the Scottish Government and the Scottish Chamber of Commerce, but also from the Federation of Small Businesses, TechUK, The Scottish Salmon Company, Walkers Shortbread, Harris Tweet Hebrides and The International Trade, Food and Drink Federation.
And it goes beyond that, there should be a virtuous cycle of further investment and increased collaboration in R&D and innovation. Moreover, the prospect of UK joining TPP 11 has advanced significantly as UK has already secured full access to about 50% of total TPP11 market. And Japan will welcome the UK with open arms.
Thank you very much for listening.