'leading the world'

Trade deal takes flight

The massive JEFTA agreement between the EU and Japan that impacts 630 million people and will save the EU-based companies over $1 billion annually goes into effect on February 1.

The agreement between Japan and the European Union - dubbed the world’s largest trade deal - is set to go into effect February 1 after receiving its final EU approvals in December.

The pact will cover 630 million people and combine economies representing about a third of global GDP. And it’s estimated that EU companies exporting to Japan will save more than $1.15 billion annually.

Trade deal
Trade deal

“There are rising concerns about protectionism, but I want Japan and the EU to lead the world by bearing the flag of free trade,” Japanese Prime Minister Shinzo Abe said at a news conference after the signing ceremony.

The deal is intended, in part, to make it easier for Japan to export cars into EU states. The EU currently imposes a 10% tariff on Japanese cars but under the agreement, it will lower that number to zero over an eight-year span. Although cars and auto components account for about a fifth of Japan's exports to Europe, Japanese carmakers' share of the European market is only about 10%, much lower than in the U.S. or Asia.

For its part the EU wins big on agriculture imports. About 85 percent of EU farm products will be eligible for export to Japan tariff free, though many will be subject to a transition period. The agreement allows customs duties on beef to be progressively reduced. A huge win for EU cattle farmers.

Jean-Claude Juncker (Courtesy EU Commission)
Jean-Claude Juncker (Courtesy EU Commission)

"The document we signed today is much more than a trade agreement. It is of course a tool that will create opportunities for our companies, our workers and our citizens and that will boost the European and Japanese economies,’’ said European Commission chief Jean-Claude Juncker.

The EU recently published a timetable for the agreement that covers the transition period. The rules of origin cover imports and exports on both sides.

EU Trade Commissioner Cecilia Malmstroem called the agreement ‘’good news for the EU and all supporters of an open and fair international trading system.’’

''This will bring clear benefits to our companies, farmers, service providers and others. Those benefits also go hand in hand with a commitment on both sides to uphold the highest standards for our workers, consumers and the environment,'' she said.

Trade deal
Trade deal

The pact will also,

  • Ensure the protection in Japan of more than 200 Geographical Indications (GIs), high-quality European traditional food specialties, and the protection of a selection of Japanese GIs in the EU.
  • Remove tariffs on industrial products in sectors where the EU is very competitive, such as cosmetics, chemicals, textiles and clothing;
  • Open services markets, in particular for financial services, e-commerce, telecommunications and transport;
  • Guarantee EU companies access to the large procurement markets of 54 large Japanese cities; remove obstacles to procurement in the economically important railway sector.