Brussels Seeks to Launch Japan Trade Talks

25 July 2012

The European Commission has requested approval from the bloc's 27 member states to start negotiations with Japan for a free trade deal, as part of a broader effort to boost growth and jobs in the struggling eurozone.

"Let's be clear: We need these jobs, and we need this growth in the current economic climate," said EU Trade Commissioner Karel de Gucht in presenting the proposal. "If growth in the next 20 years is likely to come from Asia, then overlooking Japan would be a serious mistake in our trade strategy."

The EU trade chief said that such a deal could increase the bloc's GDP by one percentage point and create up to 400,000 additional jobs across the EU's 27 member states.

The proposal comes after a year of discussions between EU and Japanese officials over what such a deal might involve, with the two sides concluding their "scoping exercise" this past May. The discussions have already led the two sides to agree on certain ‘roadmaps' during the proposed negotiations for the removal of non-tariff barriers, as well as the opening of public procurement for Tokyo's railways and urban transport market.

The member states' decision is expected as early as this autumn, and trade talks will begin only if there is unanimous approval.

Trade as a recovery strategy

Brussels has increasingly been exploring the possibility of clinching bilateral trade deals as a way to prop up economic recovery in the eurozone, particularly given the continued impasse in the WTO's Doha round of trade talks.

The EU is in the final stages of ratifying a free trade agreement with Colombia and Peru, and is negotiating trade deals with various countries and regional groupings, such as India, ASEAN, Canada, and Mercosur. In addition, EU and US officials have been jointly reviewing the possibility of launching negotiations for a comprehensive trade and investment pact, with a working group set to provide recommendations to Brussels and Washington leaders later this year. (See Bridges Weekly, 27 June 2012)

Should the EU conclude all of its ongoing and proposed trade negotiations, the result could increase the bloc's GDP by two percent in the long term, or €250 billion - the equivalent of adding on an economy the size of Austria or Denmark. This could also lead to the creation of more than 2 million jobs, the European Commission says.

Of these gains, one-third would come from deals with the ASEAN countries, Canada, India, and Mercosur, according to EU estimates. The remaining two-thirds would come from establishing deals with Japan and the US.

Mixed response from industry

The prospect of a Brussels-Tokyo pact has already been met with some opposition within the EU, most notably from the struggling automobile industry, which has cited concerns over the impact such a deal might have on its export competitiveness. Opponents have pointed to the rapid increase in car imports from South Korea following the EU's FTA with that country as a reason not to pursue a similar pact with Japan.

In response, de Gucht acknowledged carmakers' concern about the potential asymmetry of the Japan deal and promised - with specific reference to the automobile sector - that the Commission will only liberalise tariffs if Tokyo dismantles non-tariff barriers inhibiting Europe's market access to Japan.

"I have made it very clear to my colleagues today that after one year of starting the negotiations, we will take stock on the progress Japan has made on dismantling the non-tariff barriers as set out in the roadmap we have agreed together," he said. "If the implementation has not been satisfactory, I will stop the negotiations."

However, the proposed deal has been welcomed in other sectors, with the EU agri-food and drink, pharmaceuticals, chemicals, and information and communication technology industries among those backing the plan.

Agri-food and drink industry groups FoodDrinkEurope, Copa-Cogeca, and the European Liaison Committee for Agricultural and Agri-food Trade highlighted in a joint statement the growth opportunities that liberalising trade with Japan could bring.

"A comprehensive FTA with Japan is an optimal solution to bring the existing and extensive bilateral cooperation with Japan to its full potential," they said.

ICTSD reporting; "Brussels Calls for EU-Japan Free Trade Negotiations," 18 July 2012, AFP; "Brussels to push for Japan trade deal," FINANCIAL TIMES, 17 July 2012.

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