EU, Japan Set to Announce Political Deal in Trade Talks

6 July 2017

Leaders from the EU and Japan are meeting on Thursday in Brussels, Belgium, where they are expected to announce a political agreement on a future trade deal, following several weeks of round-the-clock negotiations to bring the talks to this advanced stage.

EU Council President Donald Tusk confirmed the summit plans on Tuesday 4 July, issuing a brief statement on social media site Twitter that announced both the date and affirmed that an “ambitious free and fair trade deal [is] in the making.”

A follow-up announcement confirmed that the two sides are also slated to reach a “strategic partnership agreement” on Thursday, which is another ongoing initiative aimed at facilitating collaboration on environmental issues, along with security, climate change, and other select priorities.

The EU Council President will be joined by European Commission President Jean-Claude Juncker and Japanese Prime Minister Shinzo Abe on Thursday, with other topics on the docket including a discussion on their continued support for the UN’s Paris Agreement on climate change.

A political agreement on trade would confirm the framework and many of the components of the future accord, while leaving final technical details remaining – including potentially some of the more sensitive issues. Those final details could take some months to hammer out.

However, officials from both sides have touted the value of sending a strong signal of cooperation and shared interests given the current geopolitical context, particularly amid high-profile debates on the definition of protectionism and how to tackle it, along with defining what constitutes free and fair trade and investment.

“This has an enormous economic importance, but it is also a way to bring us closer,” EU Trade Commissioner Cecilia Malmström told reporters over the weekend.

The talks, underway since 2013, would cover a market with a total population of over 630 million, connecting two of the world’s largest traders and biggest economies. According to the European Commission, the final deal would slash up to €1 billion in import tariffs that their exporters face, along with having the potential to significantly increase the bloc’s agricultural exports to the Asian economy.

Other potential benefits include protecting hundreds of geographical indications, tackling non-tariff measures to facilitate trade, and taking steps to support smaller businesses aiming to engage more in trade.

The two sides also wish to increase investment flows between their respective economies, though how to deal with the thorny topic of investor protections and related dispute settlement has been repeatedly flagged as a challenging area. (See Bridges Weekly, 29 June 2017)

The EU-Japan summit comes immediately before the G20 leaders’ meeting in Hamburg, Germany, which will be held from 7-8 July. The G20 gathering, hosted under the German presidency, is slated to see leaders engage in a high-profile debate on how to address trade, open markets, and climate change in their final communiqué – particularly in light of the differences that have emerged between the new US leadership and many other advanced and emerging economies on the subject. (See Bridges Weekly, 22 June 2017)

“It is important for us to wave the flag of free trade in response to global moves towards protectionism by quickly concluding the free trade agreement with Europe,” said Japanese Prime Minister Shinzo Abe earlier this week, according to comments reported by Reuters.

Final countdown: ministers confirm deal

Over the past week, high-level officials from both sides have ramped up their political engagement in an effort to iron out any remaining differences that could otherwise prevent reaching an accord.

EU Trade Commissioner Cecilia Malmström and EU Agriculture Commissioner Phil Hogan met with their Japanese counterparts, Foreign Affairs Minister Fumio Kishida and Agriculture Minister Yuji Yamamoto, in Tokyo this past weekend, following meetings between their top negotiators.

Malmström explained that despite much progress that was made during the discussions in Tokyo, some of the remaining difficulties at this stage continue to include increased market access for agricultural goods and car parts, which have long been sensitive areas for both economic giants.

“We are almost there. We have sufficient convergence so that our officials can discuss in the coming days to iron out the remaining details,” Malmström told reporters afterward.

Japan’s Ministry of Foreign Affairs, for its part, called the ministerial-level negotiations “constructive,” and noted that these talks were “based on the recognition that the framework agreement is within reach.” At the same time, the statement also affirmed that “important issues” remained unresolved at that stage.

Kishida and Malmström met on Wednesday 5 July in Brussels with the goal of making further progress on these issues before leaders arrived for Thursday’s summit. They later announced that they had reached a ministerial-level deal to forward to their leaders.

Other trade deals in the offing

The EU and Japan are also pursuing a series of trade deals on other fronts, with some of these initiatives also setting targets for a 2017 conclusion.

Japan is a member of trade negotiating groups like the Regional Comprehensive Economic Partnership (RCEP) and the Trans-Pacific Partnership (TPP) in its revised iteration, the TPP-11, among various others. While RCEP participants are pushing for a “swift conclusion,” the next steps for the TPP-11 remain unclear, with options expected to be reviewed during this year’s summit of Asia-Pacific Economic Cooperation (APEC) leaders. (See Bridges Weekly, 13 April 2017 and 24 May 2017)

The European Union, for its part, is aiming to clinch a trade deal with Mercosur countries Argentina, Brazil, Paraguay, and Uruguay this year, with a new round of talks underway this week. The 28-nation bloc is also in talks with Mexico to upgrade their decades-old trade accord, which officials also say could come together before 2017 draws to a close. (See Bridges Weekly, 11 May 2017)

How both sides will approach trade ties with another major partner, the United States, remains unclear under the new leadership in Washington, though bilateral meetings have been held among top officials in recent weeks on that subject. (See Bridges Weekly, 29 June 2017)

ICTSD reporting; “Japan, EU narrow differences over free trade agreement,” DEUTSCHE WELLE, 29 June 2017; “Abe expected to agree EU-Japan trade deal on Thursday – EU,” REUTERS, 4 July 2017; “Japan-EU EPA to hinge on leaders’ talks,” THE YOMIURI SHIMBUN, 2 July 2017.

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