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Japan, EU to seal free trade deal to promote open economy

  • July 6, 2017
  • , Kyodo News , 3:14 p.m.
  • English Press
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BRUSSELS — Japan and the European Union will seal a broad agreement Thursday on a free trade deal that they call a sign of their efforts to promote an open economy.

 

After four years of talks, Prime Minister Shinzo Abe, European Council President Donald Tusk and European Commission President Jean-Claude Junker are set to reach a deal in Brussels, which will form a market of nearly 640 million people and account for nearly a third of the global economy.

 

It comes on the eve of the Group of 20 summit in Hamburg, Germany, as Japan and the 28-member bloc will look to stress the need to push ahead with free trade at the meeting at a time when U.S. President Donald Trump is stepping back from pursuing multilateral free trade frameworks.

 

The broad agreement was achieved after the two sides resolved thorny issues at a meeting the previous day on tariffs on sensitive products such as Japanese automobiles and European wine and cheese. They will seek to reach a final agreement by the end of this year.

 

Both Japan and the European Union are concerned about Trump’s “America First” approach to trade, as seen in the country’s withdrawal from the Trans-Pacific Partnership free trade pact and recent suggestion of punitive tariffs on steel imports from Europe, Japan and other countries. Japan is a member of the TPP accord.

 

The European Union has also seen talks stalled on a free trade initiative with the United States, called Transatlantic Trade and Investment Partnership after Trump came to power.

 

For Japan, the deal will be its biggest trade treaty unless the TPP including the United States takes effect. The new pact will represent a crucial part of Prime Minister Shinzo Abe’s growth strategy to tap into growing overseas markets to offset a drop in domestic demand in the long term amid the country’s declining population.

 

The pact will also show skeptics in the European Union the benefits of staying in the bloc with access to inner and outer markets, in the wake of Britain’s decision to leave the bloc, analysts said.

 

The Japan-EU deal is expected to spur trade and investment by removing or lowering tariffs on a broad range of products, including farm and industrial products, while it is also to set common trade rules.

 

Japanese automobile and electronics manufacturers are expected to regain competitiveness in the European market in competition with rivals from South Korea, which has already signed a free trade pact with the bloc, while European farmers are seeking to tap deeper into the Japanese market for wine, cheese and meat.

 

Local dairy producers have been wary about the influx of competitive European products and the Japanese government is expected to compile measures to mitigate the negative impact on them from the trade pact.

 

The negotiations for the Japan-EU pact was launched in 2013 but discord over whether and when to eliminate tariffs on Japanese automobiles and European agricultural products such as cheese and wine have slowed progress.

 

Japanese Foreign Minister Fumio Kishida and EU Trade Commissioner Cecilia Malmstrom said Wednesday following their meeting that their leaders will give the final endorsement of the broad free trade agreement on Thursday.

 

Among key areas the two sides reached agreement on, Japan will set up a low-tariff quota on European cheese that will be eliminated over 15 years, a source close to the matter said.

 

The two sides will also scrap their tariffs on wine as soon as the pact comes into force, while duties on European chocolates and pasta would be scrapped in 10 years, the source said.

 

The bloc will ease regulations on wine such as on sugar content and bottle size and also agreed to immediate cuts on tariffs on Japanese sake and green tea.

 

In the automobiles sector, the two sides have agreed to phase out tariffs on Japanese automobiles after seven years and on Japanese TVs after five years. The bloc will also immediately get rid of tariffs on Japanese electronics, the source said.

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