Is the EU about to outclass America on free trade?

 
Guy Bentley
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Japanese Prime Minister Shinzo Abe has concluded meetings with the most powerful players in the European Union at the 22nd EU-Japan summit.

The occasion marked the culmination of a nine-day European tour by the Japanese PM, who visited six EU member states.

Front and centre of the summit were the ongoing negotiations for an EU-Japan free trade agreement.

Launched in April last year, the talks could yield one of the biggest free trade deals ever seen, with Japan ranking as the EU’s second largest Asian trading partner after China, buying close to €70bn (£57.5bn) worth of European goods last year.

Originally there was little hope for a speedy or even successful agreement, so much so that the EU reserved the right to suspend negotiations after one year if Japan did not live up to its commitments to remove non-tariff barriers. Negotiations so far have not been speedy but have certainly defied the pessimists who expected an intransigent Japan.

Talks have now reached a point where Abe was able to tell a press conference today "we confirmed the importance of an early conclusion and 2015 is the target date for a basic agreement."

"An ambitious free trade agreement will unleash the full potential of the trade and economic relationship between the EU and Japan, the world's first and fourth economies," EU Commission President Barroso added.

This is particularly welcome as scepticism of Japan's willingness to engage in free trade had grown after US President Barack Obama's failure to secure a free trade agreement with Asia's third largest economy.

Should the deal go-ahead, it could boost Europe’s economy by as much as 0.6 to 0.8 per cent of GDP, with EU exports to Japan predicted to jump by 32.7 per cent. Meanwhile, Japanese exports to the EU could increase by a hansome 23.5 per cent.

The agreement would include the elimination of non-tariff barriers and the further opening of the Japanese public procurement market. The negotiations are based on the outcome of a joint scoping exercise, which the EU and Japan completed in 2012.

Japan's non-tariff barriers were of particular concern to the EU from the first stage of the negotiations. The proposed deal had been criticised by EU car manufacturers, who feared the 10 per cent tariff reduction on Japanese cars would not be matched by Japanese action on non-tariff restrictions to free trade.

But perhaps the EU's progress relative to the US should not come as a surprise, since the EU has form over the past few years on successful trade negotiations.

In 2011, the EU secured its first free trade agreement with South Korea, the first such agreement the bloc had signed with an Asian nation, which included the much protested 10 per cent tariff reduction on South Korean cars.