Thursday

21st Jun 2018

EU and Japan agree on free trade

  • Toyota car factory - EU carmakers had wanted a seven-year transition period (Photo: Toyota UK)

EU and Japanese officials have reached a political agreement on a trade deal to be endorsed by leaders at a summit on Thursday (6 July).

"We ironed out the few remaining differences in the EU-Japan trade negotiations … We’ve reached political agreement,” the EU's trade Commissioner Cecilia Malmstroem said on Twitter on Wednesday.

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  • Malmstroem and Kishida painting the eyes of two Japanese dolls to mark the deal (Photo: European Commission)

"We now recommend to leaders to confirm this at summit,” she added after meeting with Japanese foreign Minister Fumio Kishida in Brussels.

Officials managed to hammer out the last outstanding issues regarding dairy products and the car industry.

"We agreed on almost everything that is important for either side," an EU official said.

Japan’s prime minister Shinzo Abe and EU leaders are to endorse the trade and strategic partnership on Thursday.

The agreement comes ahead of the G20 meeting in Germany, with both the EU and Japan wanting to prove that despite US president Donald Trump’s "America first" policy, multilateralism is alive and well.

EU officials said the agreement "sends a powerful signal against protectionism".

Two in one

Two deals were agreed in principle by EU and Japanese officials.

EU officials said they were an "upgrading" EU-Japan relations, and proof that both were committed to liberal values, free and fair trade and multilateralism.

One is a strategic partnership that gives a framework for Japanese-European cooperation and sets out agreements, for example, on cyber crime, disaster management, and deepening cooperation on climate and energy.

The other, the "economic partnership agreement" is a free trade agreement that will cover 99 percent of bilateral trade, cutting tariffs.

One previous stumbling block, the export of diary products to Japan has also been overcome. EU officials said it would not be fully liberalised, but reached a “very satisfactory” result for European exporters.

EU officials said the agriculture and food sector would be the big winner in the agreement, saying the Japanese market was “conducive" to European producers.

There will be almost duty-free access for almost all food products to the Japanese market, but some quotas will remain on primary products.

Car sector

The other issue was the car industry. Import duties on passenger cars from Japan will be phased out in a transition period, while most tariffs on car parts will be eliminated swiftly.

EU officials said European carmakers will not be disappointed by the transition period on importing Japanese cars. Carmakers had wanted a seven-year transition period.

There is one outstanding issue in the trade deal that negotiators hope to close in the next months so that the ratification process in the European Parliament (EP) and member states can start.

That is the investment court system: the EU has proposed a reformed regime and Japan does not have fixed model, but they are not yet ready to move towards the EU demand.

Once that is resolved, the agreement will be voted on by the EP and ratified by member states and some regional parliaments.

The free trade deal with Canada hit an unexpected stumbling bloc last year in the Belgian region of Wallonia, which refused to ratify the agreement until its concerns were dealt with.

“I will not prejudge what the Wallon government's position will be,” an EU official said, refusing to speculate on what happens if the Belgian region opposed the deal.

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