An economic partnership deal between Japan and the European Union — over which leaders on both sides reached a broad agreement last week — should serve to emphasize the value of free and open trade at a time when it's been challenged by the protectionist policies of U.S. President Donald Trump, who pulled the U.S. pulled out of the Trans-Pacific Partnership pact among 12 Pacific-rim economies. The Japan-EU agreement should add momentum for reviving the TPP pact among its remaining 11 members, including Japan.
An FTA is aimed to promote mutual trade by reducing or eliminating barriers to trade such as tariffs, benefit consumers on both sides by lowering import prices, and enhance the competitiveness of industries that stand to gain from greater exports and create more jobs. There will, of course, be sectors that face tougher competition with increased imports. The years set aside for phasing out the tariffs should be effectively used to turn those sectors — most often the agriculture in the case of FTAs involving Japan — resilient toward the onslaught of cheaper imports. Such efforts will be essential to show that free trade works, instead of wreaking havoc to domestic jobs as claimed by people like Trump.
The 12-nation TPP was to create a free trade area covering nearly 40 percent of the world's gross domestic product. The Japan-EU partnership agreement, which both sides seek to seal by the end of the year and implement in the early part of 2019, will still cover nearly 30 percent of the world's economy. Efforts must continue to resolve remaining issues before a final deal is reached, such as a mechanism to settle disputes between businesses and governments of their investment destination. The broad agreement should also help accelerate the efforts afoot to save the TPP among the 11 signatories other than the U.S. — Japan will host a meeting of chief negotiators of the 11 countries in Hakone, Kanagawa Prefecture, this week.