Japan and EU hail creation of a ‘gigantic economic zone’ as trade talks conclude

14:09 | 13/12/2017 Cooperation

Japan and the European Union have concluded negotiations on a giant free trade deal that they said was reached while “fighting the temptation of protectionism” — a message apparently directed at U.S. President Donald Trump.

A worker holds a blue lobster at an international market near Paris. Japan and the EU have agreed on a free trade deal that eliminates tariffs on 82 percent of farm and fishery imports from the bloc - Photo: Reuters

The deal, which the EU called its biggest ever, must be signed and ratified by both sides. The broad outlines of the deal were agreed to in July. Once completed, it will forge an economic zone of 600 million people worth 30 percent of global GDP.

After the announcement was made late Friday, Prime Minister Shinzo Abe hailed the imminent birth of what he called a “gigantic economic zone” as he confirmed that the negotiations had been concluded.

“Japan and the EU will join hands and build an economic zone based on free and fair rules,” Abe told reporters in Tokyo Friday.

Abe and European Commission chief Jean-Claude Juncker said earlier that the agreement, which was four years in the making, had “strategic importance” beyond its economic value.

“It sends a clear signal to the world that the EU and Japan are committed to keeping the world economy working on the basis of free, open and fair markets with clear and transparent rules fully respecting and enhancing our values, fighting the temptation of protectionism,” the pair said in a statement released in Brussels.

Through the deal, the EU hopes to get better access to one of the world’s richest markets, while Japan hopes to jump-start an economy that has struggled to find solid growth for more than a decade.

Japan is also hoping to seize an opportunity to offset the failure of the 12-nation Trans-Pacific Partnership, a massive free trade deal that was torpedoed by Trump in January.

The deal will open up the EU market to Japanese cars and auto parts and the Japanese market to European dairy and agricultural products.

Japan will eliminate tariffs on 94 percent of all imports from the bloc, including 82 percent on farm and fishery products. The reduction will likely result in lower prices for European cheese, pork and wine in Japan — although domestic farmers are wary of being flooded by competitive products.

In return, the EU will abolish tariffs on 99 percent of imports from Japan. The EU will eliminate tariffs on Japanese autos in the eighth year after the pact is implemented and abolish taxes on sake and green tea. Japan’s exports will likely get a boost in a market comprising over 500 million people.

The two sides were aiming to finalize the specifics in the hope of signing the deal next summer and putting it into effect in 2019, negotiation sources said.

EU officials insist the deal will be a major boon to European farmers who would gain access to a huge market that appreciates European products.

Hailing the opportunity at a news conference, EU Trade Commissioner Cecilia Malmstroem said, “This is actually the biggest trade deal we have ever negotiated from the European Union”.

The BusinessEurope lobby hailed the agreement as “very good news” for both companies and citizens on both sides and predicted it will lead to “global standards” in new business areas.

“The agreement should remove long standing tariff and nontariff barriers to trade,” BusinessEurope’s director-general Markus Beyrer said in a statement. “It should generate new business opportunities and closer economic ties between two like-minded economies and is of high strategic importance.”

But anti-trade activists who say such deals favor multinational firms at the expense of democracy and the environment might influence events when the deal comes up for ratification in the bloc’s more than 30 regional and national parliaments.

Last year, the EU’s CETA trade deal with Canada nearly sank on such concerns when the small Belgian region of Wallonia threatened to veto it, before eventually relenting.

In reaching the deal, the sides have decided not to include a system to settle investment disputes and will continue negotiations over the issue, a senior Japanese official said.

Theo Japantimes