EU, Japan agree to outline of landmark trade deal

A special G-20 train arriving at a station in Kornwestheim, southern Germany, on Wednesday to pick up more activists heading to Hamburg to protest at the G-20 summit.
A special G-20 train arriving at a station in Kornwestheim, southern Germany, on Wednesday to pick up more activists heading to Hamburg to protest at the G-20 summit.PHOTO: AGENCE FRANCE-PRESSE

BRUSSELS • Japanese Prime Minister Shinzo Abe and top European Union officials agreed yesterday to the broad outline of a landmark trade deal, presented as a direct challenge to the protectionism championed by US President Donald Trump.

The breakthrough capped four years of talks and came on the eve of a G-20 meeting in Germany at which Mr Trump is expected to defend his "America First" stance on world trade.

"Today, we agreed in principle on an Economic Partnership Agreement (with Japan), the impact of which goes far beyond our shores," European Commission chief Jean-Claude Juncker said at a press conference with Mr Abe and EU President Donald Tusk in Brussels.

The EU and Japanese economies combined account for more than a quarter of global output, making the deal one of the biggest trade pacts ever.

"We were able to demonstrate a strong political will so that the EU and Japan take the lead on free trade," Mr Abe said just hours before he was due to meet Mr Trump at the G-20 meeting in Hamburg.

With the deal, the EU is seeking 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 after the failure of the 12-nation Trans-Pacific Partnership, torpedoed in January by Mr Trump.

  • WINNERS

    Japanese Prime Minister Shinzo Abe: The expected deal bolsters his free-trade credentials.

    German Chancellor Angela Merkel: The deal represents a political triumph for her ahead of the G-20 summit.

    The European Union: The deal underlines the determination in European capitals, from Helsinki to Lisbon, to prevent Britain's planned exit from the EU from undermining the bloc's global footprint.

    Japanese carmakers: The EU agreed to phase out its 10 per cent import duty on cars from Japan. Japan's carmakers have been seeking a level playing field in Europe, together with counterparts from South Korea.

    European producers and exporters of meat and dairy as well as wines and other speciality foods.

    LOSERS

    Japan's cheesemakers: They will face competition after the Japanese government offered expanded access for European farm goods, including cheese. The EU is the world's largest cheese exporter.

    American, European and Korean carmakers will face greater competition from their Japanese counterparts.

    BLOOMBERG, REUTERS

The "political agreement" on the EU-Japan trade deal covers some of the accord's toughest aspects but leaves aside details that could prove difficult. At the heart of the deal is an agreement for the EU to open its market to the world-leading Japanese auto industry, with Tokyo in turn scrapping barriers to EU farming products, especially dairy.

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

Left untouched for now is the issue of controversial investment courts, which have stoked opposition to trade deals in the EU nations, including Germany and France.

"After hard negotiations, the EU and Japan are sending a very positive signal to the world," said Mr Markus Beyrer, director-general of BusinessEurope, a Brussels-based lobby.

"We are asking the G-20 to take action against protectionism, and this is a concrete example of how this could be done," he added.

But anti-free-trade activists criticised the mooted deal, calling it a dangerous sop to multinationals. "This trade deal, and others like it, smack of corporate protectionism at the expense of democracy and the environment," said Greenpeace trade campaigner Kees Kodde.

Last year, the EU's giant Comprehensive Economic and Trade Agreement with Canada nearly sank on such concerns when the small Belgian region of Wallonia threatened to veto it, before eventually relenting.

Most opposition is centred on the investment courts, a controversial measure designed to resolve commercial disputes. They have come under fierce opposition in Europe, and the EU is trying - so far unsuccessfully - to persuade partners to adopt a new system staffed by public officials.

Divisions within the EU over the issue could prove significant when the EU-Japan deal faces ratification in the bloc's more than 30 regional and national Parliaments. EU officials said they hoped to implement the deal in January 2019.

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on July 07, 2017, with the headline 'EU, Japan agree to outline of landmark trade deal'. Print Edition | Subscribe