Japan and the European Union formally agreed a free-trade deal accounting for 30 percent of world’s GDP. Against the background of an increase in global protectionism triggered by U.S. President Donald Trump, the Economic Partnership Agreement (“EPA”) is particularly important since it reflects determination to remain committed to a liberal, free-trading, rules-based world. European Council President Donald Tusk said, “We are sending a clear message that we stand together against protectionism. The relationship between the EU and Japan has never been stronger. Geographically we are far apart, but politically and economically we could be hardly any closer.” Prime-minister Shinzo Abe commented, “Right now, concerns are rising over protectionism all around the world. We are sending out a message emphasizing the importance of a trade system based on free and fair rules.”
The EPA was signed together with the EU-Japan strategic partnership agreement (SPA) at the EU-Japan Summit on 17 July 2018. The SPA promotes political and sectoral cooperation and joint actions in the following areas: cybercrime, disaster management, energy security, climate change and ageing population. It will serve as a framework for strengthened bilateral cooperation and cooperation in international and regional organisations and fora. It is expected to promote peace, stability and prosperity globally, as well as an open international system.
The EPA will create a free trade bloc accounting for 30 percent of the world’s GDP. It will remove the vast majority of the €1 billion of duties paid annually by EU companies exporting to Japan. According to the Japan’s Foreign Ministry, tariffs on about 99 percent of Japan’s exported goods to the EU will be eliminated. In addition, the EPA will remove a number of long-standing non-tariff barriers. The EPA will also open up the Japanese market of 127 million consumers to key EU agricultural products and increase EU export opportunities in many other sectors. For instance, the EPA will eliminate duties on many cheeses such as Gouda and Cheddar as well as on wine exports; remove tariffs on industrial products in sectors such as cosmetics, chemicals, textiles and clothing; commit Japan to international car standards; open services markets; and guarantee EU companies access to the large procurement markets.
The EU's most sensitive sector in the negotiations was passenger cars. The final negotiations resulted in a phasing out of the 10% tariff on cars manufactured in the EU over 7 years. Tariffs on Korean cars will be phased out in a transition period of 3 to 5 years. In exchange Japan eliminated a large number of non-tariff measures on cars and signed up to all UNECE regulations.
In line with the EU trade policy integrating principles of sustainable development, the EPA includes a comprehensive chapter on trade and sustainable development. In addition, it explicitly recognizes the importance of achieving the ultimate objective of the United Nations Framework Convention on Climate Change as well as the role of trade to that end, reaffirmed their commitments to effectively implement the UNFCCC and the Paris Agreement (as the first EU’s FTA). In particular, the EU and Japan committed themselves to promote the positive contribution of trade to the transition to low greenhouse gas emissions and climate-resilient development, and to work together to take actions to address climate change.
It is worth mentioning that the EPA will not have immediate effect, since it includes various transition clauses of up to 15 years to allow sectors in both countries time to adjust to the new outside competition.
Both the EPA and SPA were ratified by the Japan's National Diet on 29 November and on 8 December; and approved by the European Parliament on 12 December 2018. The remaining formalities are expected to be done in time for the agreement to become effective as soon as 1 February 2019.
President of the European Commission Jean-Claude Juncker said: "Almost five centuries after Europeans established the first trade ties with Japan, the entry into force of the EU-Japan Economic Partnership Agreement will bring our trade, political and strategic relationship to a whole new level. I praise the European Parliament for today's vote that reinforces Europe's unequivocal message: together with close partners and friends like Japan we will continue to defend open, win-win and rules-based trade. And more than words or intentions, this agreement will deliver significant and tangible benefits for companies and citizens in Europe and Japan."