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Impact of UK – Japan Comprehensive Economic Partnership Agreement (CEPA): Options for UK and Japan

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  • Khan, Muhammad Omer
  • Khan, Muhammad Aamir

Abstract

The policy of trade liberalization has been implemented by number of countries in form of various agreements. It is accepted that implementation of free trade policy consequently raises the economic growth in the engaging countries. UK has already implemented 38 trade agreements with 97 countries. The paper reveals that UK-Japan CEPA operates (with similar tariff rates as of EU-Japan EPA) to replace EU-Japan EPA after Brexit. It intends to tailor mesmerizing growth in Britain’s economy which would be impossible during EU-Japan EPA. This research concentrates on effects of UK – Japan CEPA; and scenario of bilateral 5% trade facilitation with FTA using CGE model. The potential trade facilitation scenario aids to reduce the trade cost established by NTBs. In GTAP model, the constrains and barriers are determined by ad-valorem equivalents (AVEs) and added into GTAP by AMS tools, which works to enhance the trade facilitation. The shock pretending 5% trade facilitation works in reducing the trade cost and constrains by the specific amount calculated as of AVEs. The outcome of UK-Japan CEPA and UK-Japan FTA with trade facilitation would have significant and luminous impact on both economies however, there exist disparity across some of the variables. The real GDP for both countries have a higher expectancy by implementation of UK- Japan CEPA + trade facilitation (UK grows by $1411M while Japan elevates by $924.5M). Similarly, the term of trade is also higher to ToT from UK – Japan CEPA. However, the real returns from factors reduced for both countries (in total) by UK – Japan CEPA + trade facilitation. Briefly, the fact behind the decrease is the excessive presence of factors like land and natural resources. The results reveals that if both countries step forwards to extend CEPA towards trade facilitation agreement then it would result in win–win scenario for both. Keeping the same tariff concession as proposed would result in a very luminous bright outcome.

Suggested Citation

  • Khan, Muhammad Omer & Khan, Muhammad Aamir, 2022. "Impact of UK – Japan Comprehensive Economic Partnership Agreement (CEPA): Options for UK and Japan," Conference papers 333446, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:333446
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