The Labour party has challenged Liz Truss, trade secretary, to explain why her recent trade deal with Tokyo appears to massively benefit Japanese exporters when compared with much lower increased UK exports to Japan.
Emily Thornberry, shadow trade secretary, said a government impact assessment last week found that of the £15.66bn projected boost to bilateral trade — compared with no trade deal — 83 per cent would go to Japanese exporters.
Ms Truss called the accord, which she signed this week in Tokyo, a “groundbreaking, British-shaped deal”. She said it went far beyond the existing EU-Japan trade deal.
That deal will no longer apply to the UK from January 1, so Ms Truss’s success in replicating most of the EU deal — and adding new features such as a chapter on digital trade — was seen in London as a great success.
But critics have said it will boost UK gross domestic product by just 0.07 per cent, a fraction of the trade that could be lost with the EU when new trade barriers are erected on January 1 when Britain leaves the customs union and single market.
Ms Thornberry has written to Ms Truss to seek an explanation of why the deal appears even more weighted towards Japanese exporters than it was when the government produced an initial “scoping study” in May.
“For every extra million pounds in exports that British businesses are projected to gain from this agreement, Japanese businesses will gain £5m, and that gap in the projected benefits has increased by a quarter from May’s scoping study to last week’s impact assessment,” she said in the letter.
Ms Truss’s team argues that Japanese manufacturing was always going to benefit from a trade deal, while the British government’s own models underestimated the benefits to the UK’s strong services sector.
“Our trade economic modelling leaves a lot to be desired,” said one aide to Ms Truss, adding that Professor Tony Venables of the University of Oxford would update the model “to reflect the modern economy”.
“We don’t think our current modelling — which is itself based on methodology from 2011 — properly reflects the benefits of digital and data, tech and services, all of which are areas of the Japan deal where we’ve gone well beyond the EU deal,” the aide said.
Ms Truss, said the Japan accord was a “great deal” and could unlock the possibility of Britain joining a wider pan-Pacific trade partnership.
Meanwhile, Ms Truss’s Department for International Trade was under fire on Wednesday after wrongly claiming that soy sauce used by cooks in Channel 4’s The Great British Bake Off would be cheaper “thanks to our trade deal with Japan”.
Ms Truss was urged to retract the claim — made on her department’s official Twitter feed — after trade experts pointed out that soy sauce was currently imported tariff-free under the terms of the EU-Japan trade deal.
The DIT clarified the tweet, saying it was referring to the prospect of a 6 per cent tariff on soy sauce if Britain had traded with Japan under World Trade Organization rules after it left the EU deal on January 1.
Andrew Adonis, a Labour peer, said: “This tweet is a disgrace and should be deleted, not “corrected”.” He added: “It is false and the government should not be making false statements.”
Ms Truss has so far failed to produce economic modelling to show how the UK-Japan deal is superior to the EU-Japan deal that it replaces.