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Japan and the European Union, Pushing Forward Free Trade

Japan and the European Union, Pushing Forward Free Trade

After concluding negotiations in December 2017, European and Japanese officials announced the world’s largest free trade agreement (FTA), which would remove almost 99% of the tariffs between the European Union (EU) and Japan. On July 17th, 2018, at the EU-Japan summit in Tokyo, the two parties signed the Economic Partnership Agreement (EPA), bringing it closer to implementation. The EPA has been praised by the EU trade chief Cecilia Malmstrom as “the biggest trade agreement we have ever negotiated for the European Union”.

The EU-Japan EPA will remove trade barriers and improve market access by removing numerous Japanese duties, including current duties of 30% on EU cheese and 15% on wine, while Japanese companies will be able to avoid the 10% EU tariffs on cars. The EU will therefore be able to expand its export of foods and services, potentially by one-third according to Cecilia Malmstrom. At the same time, the removal of tariffs on cars and car parts will give Japanese carmakers the opportunity to increase their share of the EU market. Geographical Indications will be given a special status on the Japanese market, which will ensure the protection of more than 200 European agricultural products. Seven of the Geographical Indications on the list are of Romanian origin, all of them in the wine category.

The EU-Japan EPA will remove trade barriers and improve market access by removing numerous Japanese duties, including current duties of 30% on EU cheese and 15% on wine, while Japanese companies will be able to avoid the 10% EU tariffs on cars.

Aside from its major economic significance for the EU and Japan, this FTA carries great political implications for the bilateral relations between the two parties and also for the future of trade agreements across the globe. Coming at a time marked by the threat of trade wars, it sends a signal that the EU and Japan are committed to free trade. At their summit on July 17th, Brussels and Tokyo have also signed a Strategic Partnership Agreement and a data sharing agreement, which creates the largest area of safe data flows in the world.

As member of the EU, Romania can benefit from this new FTA provided that Romanian companies take advantage of it and expand their exports to Japan. Recently, the Romanian Institute for the Study of the Asia-Pacific (RISAP) organized the conference “Romania and the Japan-EU Economic Partnership Agreement” focused on the significance of the EPA for Romania. The conference had a panel of four speakers: His Excellency Mr. Kisaburo Ishii, Ambassador of Japan to Romania, Mr. Ioan Mircea Pașcu, Vice President of the European Parliament, Ms. Gabriela Drăgan, General Director of the European Institute of Romania and Mr. Keisuke Mizuno, General Director of JETRO Bucharest.

H.E. Ambassador Kisaburo Ishii talked about the benefits that the EPA brings to both the EU and Japan and emphasized the strategic and economic importance of this deal. Both strong democracies and prosperous liberal economies, the EU and Japan have a lot in common, and together they can send a message against protectionism and anti-globalism. The Ambassador also mentioned Prime Minister Shinzo Abe’s interest in improving cooperation with Romania, especially given the new context of a free trade agreement.

Mr. Ioan Mircea Pașcu, Vice President of the European Parliament, described the relationship between the EU and Japan as one between two soft powers that share many similarities and common interests. He explained that their power rests on the prosperity and development brought by free trade. Calling Japan a natural partner for the EU, Mr. Pașcu concluded that the EU and Japan can work together in overcoming challenges such as nuclear disarmament, East Asia security, the South China Sea situation, terrorism and so on.

As mentioned by Mr. Keisuke Mizuno, the General Director of JETRO Bucharest, the EPA will have a positive impact on the evolution of Japanese investment in Romania, particularly in the automotive and IT sectors.

Ms. Gabriela Drăgan, General Director of the European Institute of Romania, reinforced the idea that the Japan-EU EPA is a sign that the global market remains open despite the current protectionist tendencies of the United States. The EPA is bound to create a huge economic zone for the two parties and expand trade. She also mentioned the significance of removing non-tariff barriers by improving the access of EU companies on the Japanese market and abiding by the same international standards.

As mentioned by Mr. Keisuke Mizuno, the General Director of JETRO Bucharest, the EPA will have a positive impact on the evolution of Japanese investment in Romania, particularly in the automotive and IT sectors. Romania and Central and Eastern Europe have become more attractive for Japanese companies over the past years. Responding to a question, Mr. Mizuno described the interest of some Japanese companies to change their logistic arrangements, in order to take advantage of the EPA.

Mr. Ion Vișoiu, representing the Ministry of Foreign Affairs of Romania, was also present at the conference and praised the free trade agreement between the EU and Japan. He stressed the importance of the EPA as a tool for Romania’s goal of improving bilateral trade with Japan. He added that Romania is looking to diversify its exporting markets and that Japanese companies are expanding in Romania.

On a general note, the EPA has been welcomed by the EU and Japan as an economic achievement and an incentive to expand trade relations and multi-level cooperation. EU countries now have better access to a huge market and it is in Romania’s best interest to capitalize on this opportunity.

The signing of the agreement will be followed by the ratification process by the EU Parliament and the Japanese Diet, and it is expected that the EPA will enter into force in 2019. There is a high priority for this to happen before the end of March 2019, allowing the UK to be included in the agreement before leaving the EU, so that it will apply to the UK for a two year transition period. European officials have been trying to speed up the process of translating the deal into all the EU languages and make it possible for the agreement to be implemented by early next year.

 
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