EU greenlights talks on huge free-trade deal with Japan


European Union trade ministers agreed Thursday to launch negotiations on a mega-size free-trade deal with Japan despite bitter opposition from Europe’s struggling carmakers.

“This is the first big step towards liberalizing trade between two of the world’s largest economies,” said Britain’s trade and investment minister, Stephen Green, adding it would bring “major economic benefits” to Europe.

But Europe’s association of carmakers lost no time in slamming the ministers’ decision to give the EU executive, the European Commission, a green light to open talks on a free-trade accord that could take several years to accomplish.

“This deal is a one-way street as far as the automobile industry is concerned,” said Ivan Hodac, head of the European Automobile Manufacturers’ Association (ACEA), which includes the likes of BMW, FIAT, Porsche, Peugeot Citroen and Volvo.

“There is no justification for exposing the automobile, a major pillar of the EU economy, to an unbalanced FTA.”

The EU, which together with Japan accounts for more than a third of global output, is looking to accelerate trade deals worldwide to give its struggling economies a shot in the arm.

EU Trade Commissioner Karel De Gucht has said an FTA with Japan could increase the EU’s gross domestic product by almost 1 percentage point, boost EU exports to Japan by one third and add 400,000 extra jobs across the 27-nation bloc.

But car and car parts manufacturers are fearful that the removal of tariffs would lead to a rise in Japanese car imports, pointing to a previous trade deal with South Korea that bumped up sales of that country’s vehicles in Europe.

Quoting a study, the ACEA said EU car exports would increase by a mere 7,800 units by 2020, compared with extra Japanese exports of 443,000 units.

Other European manufacturers meanwhile have complained of failing to gain a footing in Japan, which has a reputation for being a closed market defended by walls of nontariff barriers.

But EU sources say Japan is ready to open up its market, recently having finally agreed to grant liquor licences for EU firms.

As for the car industry, its troubles, they say, are due to the economic crisis and to overcapacity, not to competition from elsewhere.

De Gucht argued that many European industries favor a deal tying the globe’s largest market to the world’s third-biggest economy.

Among sectors he cited were agricultural food, drinks, chemicals, information and communications technology, services, and pharmaceuticals.

Britain is also supportive, eyeing up to ?33 billion ($43 billion) a year in extra GDP and an extra ?43 billion a year in additional export opportunities.

De Gucht has pledged to ensure Japan dismantles its nontariff barriers as set out in a road map agreed upon by both sides this year.

“If the implementation has not been satisfactory, I will stop the negotiations,” he said.

He said he had also made it clear to Tokyo that Europe would not reduce tariffs before Japan delivered on regulatory barriers.

Struggling to boost growth and create jobs, the EU is looking at concluding a series of trade deals worldwide, in particular with emerging economies.

Should the EU conclude all the FTAs currently being negotiated, it would boost the EU’s GDP by more than 2 percent, or ?250 billion, officials estimate.

That would be the equivalent of economies the size of members such as Austria or Denmark.