BRUSSELS – Japan and the European Union sealed a broad agreement Thursday on free trade in a deal they hailed as a sign of their joint efforts to promote an open economy.
After four years of talks, Prime Minister Shinzo Abe, European Council President Donald Tusk and European Commission President Jean-Claude Juncker announced a deal in Brussels that will form a market of nearly 640 million people and account for nearly one-third of the global economy.
“Amid moves of protectionism, we could demonstrate our commitment to raising the banner of free trade. It’s an outcome to be proud of,” Abe said at a joint news conference with Tusk and Juncker.
Referring to the agreement, Tusk said, “Although some are saying that the time of isolationism and disintegration is coming again, we are demonstrating that this is not the case.”
Juncker said the deal “sets the standards for others, and it shows that closing ourselves off from the world is not good for business, nor for the global economy, nor for workers. As far as we are concerned, there is no protection in protectionism.”
The broad agreement on the eve of the Group of 20 summit in Hamburg, Germany, was achieved after the two sides resolved thorny issues at a meeting the previous day on tariffs on sensitive products such as Japanese automobiles and European wine and cheese.
Juncker said they will aim to reach a final agreement and put the pact into force in early 2019.
Both Japan and the European Union are concerned about Trump’s “America First” approach to trade, as seen in the country’s withdrawal from the Trans-Pacific Partnership free trade pact and recent suggestion of punitive tariffs on steel imports from Europe, Japan and other countries. Japan is a member of the TPP accord.
The European Union has also seen talks stalled on a free trade initiative with the United States, called the Trans-Atlantic Trade and Investment Partnership, after Trump came to power.
For Japan, the deal will be its biggest trade treaty unless the TPP takes effect with the participation of the United States. The new pact will represent a crucial part of Abe’s growth strategy to tap into growing overseas markets to offset a drop in domestic demand in the long term amid the country’s declining population.
And, in the wake of Britain’s decision to leave the bloc, the pact will also show skeptics in the European Union the benefits of staying in the grouping with access to inner and outer markets,, analysts said.
The Japan-EU deal is expected to spur trade and investment by removing or lowering tariffs on a broad range of products, including farm and industrial products, while it is also to set common trade rules.
Japanese automobile and electronics manufacturers are expected to regain competitiveness in the European market in competition with rivals from South Korea, which has already signed a free trade pact with the bloc, while European farmers are seeking to tap deeper into the Japanese market for wine, cheese and meat.
Local dairy producers have been wary about the influx of competitive European products and the government is expected to compile measures to mitigate the negative impact on them from the pact.
Negotiations for the Japan-EU pact were launched in 2013 but discord over whether and when to eliminate tariffs on Japanese automobiles and European agricultural products, such as cheese and wine, have slowed progress.
Foreign Minister Fumio Kishida and EU Trade Commissioner Cecilia Malmstrom endorsed the FTA on Thursday.
Among key areas the two sides settled on, Japan will set up a low-tariff quota on European cheese that will be eliminated over 15 years, a source close to the matter said. The two sides will also scrap their tariffs on wine as soon as the pact comes into force, while duties on European chocolates and pasta will be scrapped in 10 years, the source said.
The bloc will ease regulations on wine such as on sugar content and bottle size and also agreed to immediate cuts on tariffs on Japanese sake and green tea.
In the automobiles sector, the two sides have agreed to phase out tariffs on Japanese automobiles after seven years and on Japanese TVs after five years. The bloc will also immediately get rid of tariffs on Japanese electronics, the source said.