On March 25 this year, Japan and the European Union announced the launch of negotiations toward an EU-Japan Free Trade Agreement. Business organizations on both sides, not least the European Business Council in Japan (EBC), raised a cheer, relieved that at last work could begin on unlocking the true potential of the EU-Japan relationship.
That potential has been estimated by the European commissioner for trade, Karel De Gucht, to be equivalent to a boost to Europe’s economy of up to 0.8 percent of GDP, an increase in EU exports to Japan of over 32 percent and in Japanese exports to the EU of over 23 percent, and the creation of 400,000 additional jobs in the EU alone. As he has said, “We need these jobs, and we need this growth in the current economic climate.”
No one should underestimate the work involved in forging a free trade agreement that delivers such benefits and meets the expectations of both sides. For more than 40 years, the EBC has been documenting examples of obstacles frustrating EU trade and investment in Japan and we have made countless recommendations for their removal. We want to see mutual recognition of standards and market authorizations to the extent possible and/or adoption of international standards; the elimination of tariff and non-tariff barriers as well as unnecessary bureaucracy; fair competition and equal treatment of all companies, domestic and foreign, including in services; improved conditions for foreign direct investment, including in the banking and asset management sectors; and incentives for investment in research and development that properly recognize and reward innovation, providing opportunities also to small and medium-size enterprises (SMEs). So from the EBC perspective alone, the to-do list is long.
Taking this into account, the EU and Japan are aiming for a comprehensive agreement in goods, services and investment that eliminates tariffs and non-tariff barriers and covers other trade-related areas, such as public procurement, regulatory issues, competition and sustainable development. With negotiations having started in April, it is likely that striking a final deal will take time. Yet the motivation to crack on is clear: EU trade ministers are ready to suspend negotiations if progress against pre-agreed milestones is deemed unsatisfactory and any such delay would represent a loss of the much needed economic benefits that an agreement could bring.
What’s more, while the EU and Japan are still seated round the negotiating table, other agreements are already, quite literally, delivering the goods. The FTA between the EU and South Korea has been provisionally in force since July 2011 and, as a result, exports on both sides have increased. The EU also has agreements with Mexico, Chile and South Africa, and its negotiations with Singapore and Canada have reached an advanced stage. It has even announced the start of talks with the U.S. that could ultimately deliver the biggest bilateral deal ever negotiated. Japan, too, has many economic partnerships in place, including with India, Malaysia, Vietnam, Singapore, Mexico and Chile. The reasons for such deals are obvious with multilateral negotiations, kicked off in Doha some 12 years ago, still showing no sign of reaching a satisfactory conclusion. Maintaining the status quo is in no one’s best interest. It is vital that Japan, the EU, its Member States and others do their utmost to support the WTO in reaching a new deal that meets the needs of all its members. But until this happens, countries seeking to extend the advantages of open, fair and rule-based trade must take the initiative. The EU and Japan, significant trading partners, together accounting for about one-third of world GDP, with similar profiles of economic development and commitment to public welfare and the environment, are well placed to take the lead.
Assuming both sides remain focused and motivated, we in the EBC are optimistic that a free trade agreement can be achieved that is sufficiently balanced, comprehensive and ambitious to strengthen the EU and Japan economically and to position them at the forefront of developments in global rules and standards. We are therefore calling on the EU and Japanese authorities to ensure their negotiations are swiftly and successfully concluded. We will do all we can to support this, for the sake of our companies, our customers and our economies. And we trust others will do the same.
So on May 9, as we celebrate Europe Day, the anniversary of the first steps taken toward the foundation of what is now the European Union, we in the EBC look forward to the sealing of an agreement that will unite the EU and Japan in a further effort toward stability and prosperity for all.
Now that really would be something to celebrate.