SHARE >>>  
/// NEWS
FTA talks with Japan

Commission Proposes FTA Talks with Japan

21 July 2012

On 18 July, the European Commission agreed to ask Member States for the green light to open free trade negotiations with Japan. At a press conference announcing the decision, Trade Commissioner Karel de Gucht said that Japan was the EU’s second biggest trading partner in Asia and together both partners accounted for more than a third of world GDP. Opening up the Japanese market even further could increase the EU's GDP by almost one percent and boost EU exports to Japan by one third. De Gucht added that 400,000 additional jobs in Europe could be expected as a result of an FTA with Japan.

The Commissioner admitted there had been lobbying for (agri-food and drink, pharma, chemicals, ICT, express deliveries and services industry) and against (cars) the FTA. (The car sector is still reeling from the increase in exports from South Korea following the last year’s FTA with that country). As a result of these concerns, the Commission would monitor carefully Japan’s fulfilment of the commitments agreed under a roadmap following a year-long scoping exercise. Japan would have to tackle its regulatory and non-tariff barriers. If Japan did not deliver then de Gucht warned he would halt the negotiations. The Commission would now submit negotiating directives to the Council for approval.

The Commission move follows from the EU-Japan Summit of May 2011 when both sides agreed to start preparations for both an FTA and a political framework agreement. After a year of intensive discussions both sides agreed specific 'roadmaps' for the removal of non-tariff barriers as well as on the opening up of public procurement for Japan's railways and urban transport market.

According to DG Trade, there are enormous potential trade opportunities for European business in Japan. In 2011 the decline over the past five years in EU exports to Japan had made a substantial recovery. EU exports had reached a value of €49 billion, making Japan the EU's sixth largest source of imports into the EU after the USA, Switzerland, China, Russia and Turkey. EU exports to Japan are mainly in the sectors of machinery and transport equipment, chemical products and agricultural products.

Japan is the sixth largest source of imports into the EU after China, the USA, Russia, Switzerland and Norway. In 2011 EU imports from Japan accounted for €67.5 billion. Imports from Japan are mainly in the sectors of machinery and transport equipment and chemical products. In 2010, EU imports and exports of commercial services from and to Japan were €12.7 and €17.2 billion.

The trend in flows of FDI was quite dynamic between 2006 and 2009, with a substantial rebalancing of investment flows, from a balance of €-17.8 billion in 2006 (the EU invested €16.2 billion and Japan disinvested €1.6 billion) to a positive balance of €1.1 billion in 2009 (the EU disinvested €23 million and Japan disinvested €1.15 billion).

Japan is a major investor in the EU. In 2010 the EU inward DFI stock had reached a value of €129.1 billion. Japan's inward FDI has increased markedly since the mid-1990s, but remains very low in comparison with other OECD countries.

After a decade of stagnation in the nineties, the Japanese economy is steadily growing at a slow average rate of growth. This process was only temporarily interrupted by the financial crises but now faces the further challenge of reconstruction and recovery following the devastating earthquake and tsunami which struck Eastern Japan on 11 March 2011. In addition, Japan still faces a number of problems to achieve sustained growth, notably entrenched deflation and shortfall of demand. The large government budget deficit is the highest in the OECD area.

The trade relationship between Europe and Japan has traditionally been characterized by strong trade surpluses in favour of Japan. Trade figures have become much more balanced recently coinciding with slower growth in Japan. Both partners have created a number of informal "dialogues" in several areas but the relationship has lacked any real dynamism.

In a statement, Japan's ambassador to the EU, Kojiro Shiojiri, said that ' just like the EU, Japan faces an urgent need to achieve economic growth while also addressing the public debt issue. As two of the leading economies in the world, stymied growth of the Japanese and EU economies will have grave impact beyond our borders, and for that very reason it is imperative that we continue to make an arduous effort to rejuvenate our economy and boost economic growth. Such economic growth cannot be achieved without the expansion of trade.' Tha ambassador added that the decision by the Cabinet on 10 July to adopt a policy on regulatory and institutional reform was an important demonstration of Japan's willingness to tackle the challenging task of reform.