EU and Japan seal world’s largest free trade deal

12 December 2017

The European Union (EU) and Japan have concluded negotiations on a free trade deal to create the world’s largest open economic area, signalling their rejection of the protectionist stance of US president Donald Trump.

The two parties, who agreed in principle the outlines of the deal in July, said negotiators had now finished a legal text that would open up trade for economies generating about 30% of global GDP.

In a joint statement, Japanese prime minister Shinzo Abe and European Commission president Jean-Claude Juncker said the deal had “considerable economic value” and “strategic importance”.

“With the finalisation of the negotiations, the path is now clear to complete the internal procedures leading to the signature, ratification and full implementation of the agreement,” they said.

They added that the deal demonstrated their commitment to “keeping the world economy working on the basis of free open and fair markets with clear and transparent rules”.

The deal, the Economic Partnership Agreement, combining the 28-nation bloc and world’s third largest economy, will remove EU tariffs of 10% on Japanese cars and the 3% rate typically applied to parts.

For the EU, it will scrap Japanese duties of 30% on EU cheese and 15% on wines, as well as allowing it to increase its beef and pork exports and gain access to large public tenders in Japan.

Cecilia Malmstrom, EU trade chief, said amid widening protectionist movements the deal demonstrates to the world the flag of free trade would keep waving. 

“This is biggest trade agreement we have ever negotiated for the EU. It sends a powerful message in defence of open trade based on global rules,” she said.

In the past five months negotiators worked on stabilising tariffs in services, regulatory cooperation and the means to protect food and drink categories, including only naming sparkling wines from a specific Italian region prosecco.

However, Malmstrom said that discussions are set to continue on the contentious issue of investor protection.

Japan has been reluctant to adopt the investment court system the EU has devised in answer to criticism of traditional dispute settlement arrangements intended to protect investors.

Campaigners argue the system, known as ISDS, hands companies the power to undermine social and economic rules. Brussels responded by devising an alternative system of investment courts but has so far not convinced Tokyo to back it. 

Malmstrom said negotiations would continue separately on this issue outside the scope of the main deal, helping smooth the path towards ratification. 

“This needs further discussion at the beginning of next year but the rest of the agreement is there,” she said. 

The absence of investor protection from the deal means that the EU can ratify the agreement through the European Parliament and Council of Brussels, rather than through lengthy national ratification procedures. 

She added that the EU is also hoping to seal free trade agreements with Mexico and the Mercosur bloc of Argentina, Brazil, Paraguay and Uruguay.

“The fact that we managed to finalise this today when we and Japan go to Buenos Aires, sends a powerful signal that we can make good trade agreements that are win-win,” she said.

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