EU FTA quest to test political will

by Shinya Ajima

Kyodo News

Japan goes into semiannual regulatory reform talks with the European Union this week, with some participants expecting to make headway on bilateral free trade.

But others believe hurdles remain, saying the form of economic partnership the 27-member European economic bloc wants, based on wide-ranging standardization, does not necessarily match what Tokyo seeks, which is a conventional free-trade agreement centered on tariff cuts.

Through the Japan-EU Regulatory Reform Dialogue, launched in 1994, both sides have exchanged lists of proposals for regulatory reform and reviewed the proposals in a series of high-level meetings, which in many cases have revealed serious gaps between their positions.

The lackluster results, however, may become a thing of the past as the government under Prime Minister Yukio Hatoyama has never hidden its strong desire to launch free-trade talks with the EU.

Tokyo’s urgency comes as a result of the signing last year by the EU and South Korea of their FTA, which, if enforced, would gradually eliminate EU tariffs on imports from South Korea.

Japanese businesses have expressed concerns that Japanese products, especially cars and home appliances such as flat-panel televisions, could lose their competitive edge against South Korean products in the European market.

The shock helped prompt the government to set up a new committee for ministers to discuss national strategies for trade liberalization talks. The panel is intended to “feed political will” and soften the country’s rigid stance in the talks, a Japanese official said.

Foreign Minister Katsuya Okada, who heads the committee, has shown persistence in concluding an economic partnership agreement with the EU. This involves cooperation in such areas as investments, government procurements and movement of people in addition to market access for goods and services, and is also part of Japan’s strategy to strike an FTA.

Japan has concluded EPAs with Chile, Mexico and the 10-member Association of Southeast Asian Nations and held talks with some others.

But dialogue with the European Union on an FTA is still in the early stages. A Japanese private-sector group led by the Japan Business Federation (Nippon Keisanren) is studying the feasibility of a Japan-EU EPA. The group is discussing it with its European counterpart, which refers to the accord likely to emerge as an economic integration agreement.

Yorizumi Watanabe, a professor of international political economy at Keio University and also a member of the Japanese study group, said an EIA does not involve tariff cuts, an important factor for Japan, and there is almost no chance for the early conclusion of a Japan-EU EPA.

European industries are pressing EU officials not to conclude any accord with Japan that would entail cuts in tariffs, especially those on cars and home appliances, Watanabe said.

Japan has already abolished its tariffs on all auto and appliance imports in a sign of its confidence in the competitiveness of its own products.

“There would be no merit for the EU in concluding an EPA with Japan” that would result in the influx of high-quality Japanese products and trigger woes among domestic producers, Watanabe said.

The European Union acknowledges its interest is not in tariff cuts. “EU interest . . . is mainly (in lowering) nontariff” barriers in Japan, said Nikolaos Zaimis, trade section chief at the EU delegation in Japan.

Any successful result from the dialogue could amount to a good “starting point” for likely Japan-EU free-trade talks, Zaimis also said.

The Japan-EU regulatory reform dialogue will be held Thursday in Tokyo, and this time it will revolve around EU proposals, including requests for greater access by EU firms to public procurements in Japan and the lifting of the continued Japanese ban on EU beef imports over fears about mad cow disease.

The dialogue, which also covers regulation on financial services and safety standards for such products as automobiles and medical devices, is not focused on tariff issues.

Junichi Sugawara, an analyst at Mizuho Research Institute, said the European Union is using the regulatory talks to seek to apply in Japan the various regulations and standards that its member countries accept.

Accepting the EU’s wish and sharing common standards could benefit Japan, Sugawara said. “With its own high-level environment and energy-efficient technologies, Japan could possibly make its standards the global standard.”

But he also said, “It is better to use tariff cuts as a condition for Japan to accept the EU standards.”

Whether to accept the EU standards is high on the agenda of Japan’s new ministerial panel for free-trade tactics.

But a senior foreign affairs official involved in the panel said those standards are under the jurisdictions of different ministries, and consolidating their opinions is not easy.

Some panel members “only say no to everything,” said the official. The roads to an upgraded Japan-EU relationship seems long and winding. Japan’s “political will” is being tested.