EU and Japan Announce Launch of Free Trade Agreement talks (3/29)     Print

By Dan Mahoney, European Affairs Editorial Assistant

The first round of talks on the EU-Japan free trade agreement has been scheduled for 15-19 April in Brussels. The initial framework was agreed last year.

A joint statement this week by Commission President Barroso, European Council President Van Rompuy, and Japanese Prime Minister Abe, expressed the hope that the FTA “should be deep and comprehensive, addressing all issues of shared interest in order to stimulate economic growth both in Japan and in the EU and to contribute thereby to the development of the world economy.”

The leaders also noted that the agreement will also seek to cover “political, global, and sectoral cooperation.” EU trade commissioner de Gucht added that this announcement marked an “historical juncture” and that he hoped negotiations could make great strides in the next year.

As the first and fourth largest world economies by nominal GDP, the EU and Japan, respectively, both stand to gain from a free trade agreement. The EU estimates that a free-trade agreement with Japan could add 420,000 jobs in Europe. The negotiations have been supported by most European business sectors, as well as most EU member states, particularly Britain.

In a sustained bid to build economic growth and jobs, Europe is currently pursuing multiple free-trade agreements. Besides Japan, the EU is seeking free-trade agreements with India, Canada, and Thailand, as well as the recently announced Transatlantic Trade and Investment Partnership with the U.S. The European Commission has recently released a memo detailing the status of its current FTA negotiations.

The most vocal opponents of a deal with Japan are European automakers. The European Automobile Manufacturers’ Association, ACEA, in a press release, called for the “real and effective elimination” of non-tariff barriers, such as burdensome safety regulations. For example, Japan offers tax breaks to companies that produce light, sub-compact cars. However, the Japanese have different regulations on the size and weight of sub-compact cars that most small European cars do not meet. As a result, ACEA argues, current European sub-compacts, manufactured primarily in France and Italy, would be more expensive than Japanese sub-compact cars, unless European automobile manufacturers made costly design changes to benefits from the tax breaks.

There is also concern that even with a free trade agreement, European car manufacturers will be unlikely to deeply penetrate the Japanese market because of the entrenched dominance of Toyota and other Japanese manufacturers. Moreover, manufacturers worry that Japanese exports into the EU would continue to grow, as was the case with Korean auto exports following the EU-South Korea free-trade agreement. In the first year of the agreement, South Korean auto exports to the EU rose 40% while EU auto exports to South Korea rose only 13%.

Last year, the French and Italian governments expressed similar concerns, arguing that increased competition would hurt their already-struggling car manufacturing industries. In response, a “safe-guard clause” has been agreed to and stipulates that the EU will suspend free-trade negotiations if, after one year, it is not satisfied with Tokyo’s proposals to reduce its perceived regulatory burdens on European goods.