The conclusion of talks on a bilateral economic partnership agreement between Japan and the European Union has created a breakthrough in cutting off a wave of protectionism spreading across Europe and the U.S. Once the Trans-Pacific Partnership free trade pact, which was newly sealed by the countries barring the U.S., comes into force, industrial products and farm produce will be imported and exported inexpensively. This is also expected to breathe life into personal spending. Japan and Europe want to spread these benefits, which multilateral trade partnerships will bring, to the rest of the world in an effort to contain the “America First” initiative advocated by the U.S. government led by President Donald Trump.
“(The Japan-EU EPA) will become a new engine of the Abenomics,” Prime Minister Shinzo Abe said after he confirmed with President Jean-Claude Juncker of the European Commission that the deal is sealed.
Japan and the EU hastened efforts to clinch a deal even by putting off addressing the issue of a trade conflict resolution mechanism, over which they have been at odds. This is precisely because they seek the early realization of the lowering or elimination of tariffs, which is expected to produce clear-cut results, and stress the benefits of a trade policy.
Japan and the EU also want to ensure their EPA will be endorsed for effectuation before the European Parliament will hold an election in the mid-2019.
Since the beginning of bilateral talks with the EU, Abe has identified the Japan-EU EPA as a deal to “demonstrate a strong political will, which flies a banner of free trade high, amid growing protectionism.”
The inauguration of the Trump administration in January and the ensuing withdrawal of the U.S. from the TPP rocked a global free trade mechanism. But the realization of a mega FTA between Japan and the EU, which share innovative values, such as a market economy and democracy, significantly helped reverse such pro-protectionism move.
In November, talks on the new TPP were finalized by the 11 members. The EU also aims to conclude a free trade agreement with the Common Market of the South (Mercosur), a tariff alliance between Brazil, Argentine and two other South American nations, within the year. If realized, a mega-FTA “bridge” will be built not only between Japan and the EU but also across the Pacific and the Atlantic Ocean.
Countries that will join the mega FTAs will have a competitive edge not only in tariff liberalization but also in creating international rules in non-tariff fields involving e-commerce and intellectual property. In the U.S., which is unable to access these benefits, opposition has already emerged, quietly pressuring President Trump, who is against the idea of “joining a multilateral trade mechanism as the U.S. will be forced to be bound by other countries,” to change his mind.