EU and Japan to start FTA talks

Category: WTO Sub-category: Trade Agreements
Document type: news

1-Jun-2011 | 13:55 hrs IST | Edited by: Tanusree Pal

In the 20th bilateral summit at Brussels, the European Union (EU) and Japan made commitments to launch "pre-negotiations" in view of signing a free trade agreement (FTA). They agreed to intensify meetings at technical level to define the scope of negotiations on a possible FTA. Japan agreed to negotiate all the issues which have poisoned bilateral trade relations for a long time, including non-tariff barriers, foreign investment and public procurement.

The scoping exercise will be starting soon which represent a pre-condition of negotiating a comprehensive FTA. At the end of the scoping exercise, expected to continue for 6-9 months, the formal negotiations will start.

Following the EU-South Korea agreement in December 2010 and devastating earthquake & tsunami in March 2011 which shattered the exports and plunged the Asian economy into recession, the FTA with EU is relevant for Japan. South Korea's lead has put pressure on the Japanese authorities to close the gap with their increasingly challenging competitors from Seoul. Also, by striking the FTA, Japan will get easier access to Europe's huge internal market and will help Japan to come out from the economic crisis due to huge reconstruction bills following the earthquake.

For European industry, the Japanese market is a coveted target and opening it up would obviously be a major success for EU firms as they find difficulty of breaking into the Japanese market and stand to gain from easier access.

But they failed to set a precise timeline and maintained opposing views on the automotive sector and other sensitive areas.

Japan Economy
Japan imposes low duties on imported goods, but it still has a much closed market due to a number of legal barriers. Also, the foreign investment is strongly limited. In 2010, Japan was the EU's 6th most important trading partner.

EU and Japan Bilateral Trade:
The EU exports of goods to Japan fell slightly in value from €45 billion in 2000 to €44 billion in 2010. The EU imports from Japan also decreased from €92 billion in 2000 to €65 billion in 2010. In 2010, Japan accounted for 3% of EU exports, decreased from 5.4% in 2000 and 4% of EU imports, decreased from 9.3% in 2000.

EU Japan Trade, Japan EU Trade
Source: Eurostat

Disinvestment in Japan by EU
EU investment in Japan declined steadily from €5.6 billion in 2007 to €4.1 billion in 2010. Also, the Japanese investment in the EU27 decreased significantly from €19.1 billion in 2007 to €1.5 billion in 2010.

EU Japan FDI, Japan EU FDI
Source: Eurostat



External Link:
Free Trade Area
- A free trade area (FTA) is a trade bloc whose member countries have signed a free trade agreement (FTA), which eliminates tariffs, import quotas, and preferences on most (if not all) goods and services traded between them. It can be considered the second stage of economic integration.