Malmström: EU-Japan Trade Talks Near End Stage, Though Obstacles Remain

8 December 2016

EU Trade Commissioner Cecilia Malmström affirmed this week that the 28-member bloc is “very close” to finalising talks for a bilateral free trade agreement with Japan, following nearly four years of negotiations to date.

Speaking to the Financial Times, Malmström maintained that a conclusion to negotiations in the coming months is still feasible, potentially this year or early next. Officials had earlier suggested that they hoped to reach an “agreement in principle” by the end of 2016. (See Bridges Weekly, 4 May 2016 and 2 June 2016)

A statement issued by Japan’s Ministry of Affairs late last month similarly suggested that the two sides are working to conclude an “agreement in principle” in the near term, potentially by year’s end. Along with a free trade agreement – referred to by Japan as an economic partnership agreement – both trading partners are working to ink a Strategic Partnership Agreement covering areas such as climate and environment cooperation, development, and security.

The planned agreement would potentially cut tariffs, lower regulatory and non-tariff barriers, improve services and public procurement market access, and strengthen the rules in place to promote trade and investment between Japan and the EU. The Asian economy is the EU’s second largest trading partner in the region.

The 17th and most recent round of negotiations was held in Brussels at the end of September, led by Deputy Director-General Mauro Petriccione of the Directorate-General for Trade from the EU delegation and Ambassador Koji Haneda on the Japanese side as the chief negotiators.

Deliberations covered trade in goods, including market access and trade remedies; trade in services; investment; intellectual property rights; competition policy; rules of origin; non-tariff measures and technical barriers to trade; government procurement; and dispute settlement, as well as sustainable development.

Issues remaining

As the talks continue, EU negotiators must assuage concerns surrounding the public sentiment regarding trade, as manifested earlier this autumn during the complicated signing of the Comprehensive Economic and Trade Agreement (CETA) with Canada, where a single Belgian region was able to considerably delay the process. (See Bridges Weekly, 20 October 2016)

Similar debates have arisen around the globe, including in the US over the merits of the Trans-Pacific Partnership (TPP) Agreement, which drew significant attention during the presidential election campaign earlier this year.

The proposed EU-Japan agreement would be considerably larger than CETA, where Japan’s economy is three times bigger than Canada’s. When combined with the EU, the pact will comprise over a third of the world’s GDP.

As talks pick up again in Tokyo this month, there are a number of additional issues still to be resolved on the negotiating table, including disagreements over Japanese auto industry regulations and the volume of European exports of agricultural goods to Japan.

The prospective EU-Japan deal would also include a mechanism for resolving investor-state disputes, though how similar it would be to the investor court system included under CETA remains to be seen. A report by the European Commission on the latest negotiating round refers to proposals from both sides, noting that “a substantial convergence of approaches remains to be achieved.”

The investor-state provisions were a major area of debate over the EU-Canada deal, specifically regarding questions such as whether the right to regulate in the public interest was sufficiently protected, among others. 

Meanwhile, whether the final EU-Japan deal will be considered a “mixed agreement,” encompassing some areas falling under the EU’s exclusive competence and others under member state competence, is not yet clear. That classification regarding the deal’s subject matter will determine whether it will require approval of EU member state legislatures – and in some cases their regional bodies – as well as the European Parliament and Council.

One development that could help clarify the EU’s role in this matter would be an upcoming ruling from the European Court of Justice, set to take place in the new year. This would clarify whether a free trade agreement with Singapore, for which negotiations concluded in 2014, can be signed and ratified under the competence of EU institutions, or whether some areas fall under the competence of EU member states.

 “We need to make sure that we have a decision-making procedure that is functional and that’s why we hope very much that the court will clarify this so that we can act accordingly,” said Malmström.

ICTSD reporting; “Brussels ‘close’ to free trade deal with Japan,” FINANCIAL TIMES, 5 December 2016; “Globalisation by stealth: the quiet success of EU-Japan trade talks,” FINANCIAL TIMES, 29 November 2016.

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