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EU, Japan Agree New Trade Deal

by Ulrika Lomas, Tax-news.com, Brussels Friday, July 7, 2017

The EU and Japan have announced an agreement in principle on an Economic Partnership Agreement (EPA), which would boosting trade by cutting tariffs.

The agreement in principle was announced at the EU-Japan summit on July 6. The negotiations were launched in 2013, and there have been 18 rounds of talks.

The EU expects the agreement to increase the value of its exports to Japan by as much as EUR20bn (USD22.8bn). EU firms currently export over EUR58bn in goods and EUR28bn in services to Japan every year.

According to the European Commission, tariffs on more than 90 percent of the EU's exports to Japan will be eliminated upon the EPA's entry into force. Once the agreement is fully implemented, Japan will have scrapped customs duties on 97 percent of goods imported from the EU (in tariff lines), with the remaining tariffs subject to partial liberalization through tariff rate quotas or tariff reductions.

The EU expects these measures to save its exporters around EUR1bn in customs duties a year.

Japan is the EU's fourth biggest market for agricultural exports. Over time, around 85 percent of EU agri-food products (in tariff lines) will enter Japan duty-free. The Commission said that the agreement will scrap duties on many cheeses (currently subject to tax at 29.8 percent), as well as on wine exports, which currently face average tariffs of 15 percent. In addition, it will allow the EU to substantially increase its beef exports to Japan, while there will be duty-free trade in processed meat and greatly reduced tariffs for fresh meats.

Tariffs on EU industrial products will be fully abolished.

The agreement will guarantee EU companies access to the large procurement markets in 48 major Japanese cities, and remove obstacles to procurement in the national railway sector. It will also protect economic sectors that are sensitive for the EU, such as the automotive sector, for which there will be transition periods prior to the fuller opening of procurement markets.

In a joint statement, the EU's Council and Commission presidents, Donald Tusk and Jean-Claude Juncker, together with Japanese Prime Minister Shinzo Abe, said: "The highly ambitious and comprehensive Economic Partnership Agreement will consolidate our solid and evolving trade and economic partnership and pave the way for the future."

"It will bring our two economies closer by addressing issues related to market access for goods, services and investment, procurement including railways, as well as those related to non-tariff measures and the protection of geographical indications as well as intellectual property rights."

Both sides have asked their respective negotiating teams to swiftly finalize the agreement. The EU said that the agreement in principle covers most aspects of the EPA. Technical details need to be "ironed out" in certain chapters, and there are chapters (including investment protection) which are outside the scope of the agreement in principle.

The aim is to conclude a final text of the EPA by the end of the year. The EU hopes that the EPA can enter into force in early 2019.

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