ENTRY INTO FORCE OF EU-JAPAN ECONOMIC PARTNERSHIP AGREEMENT

The EU-Japan Economic Agreement became effective as of 1st February 2019. It removes the vast majority of the €1 billion of duties paid annually by EU companies exporting to Japan, as well as a number of long-standing regulatory barriers, for example on car exports. It also opens up the Japanese market of 127 million consumers to key EU agricultural products and increases EU export opportunities in many other sectors. In addition, the agreement will strengthen cooperation between Europe and Japan in a range of areas, reaffirm their shared commitment to sustainable development, and include for the first time a specific commitment to the Paris climate agreement.

Key parts of the Economic Partnership Agreement

The agreement does, in particular:

• eliminate duties on many cheeses such as Gouda and Cheddar as well as on wine exports;
• allow the EU to substantially increase its beef exports, and open additional opportunities for export of pork products;
• ensure the protection in Japan of more than 200 Geographical Indications (GIs), high-quality European traditional food specialties, and the protection of a selection of Japanese GIs in the EU;
• remove tariffs on industrial products in sectors where the EU is very competitive, such as cosmetics, chemicals, textiles and clothing;
• commit Japan to international car standards, with the result that EU exports of cars to Japan is made significantly easier;
• open services markets, in particular for financial services, e-commerce, telecommunications and transport;
• guarantee EU companies access to the large procurement markets of 54 large Japanese cities; remove obstacles to procurement in the economically important railway sector

The agreement includes a comprehensive chapter on trade and sustainable development; sets very high standards of labor, safety, environmental and consumer protection; strengthens EU and Japan's commitments on sustainable development and climate change and fully safeguards public services. It also includes a chapter on small and medium enterprises (SMEs) which is particularly relevant since 78% of current exporters to Japan are smaller businesses.

Concerning data protection, the EU and Japan concluded the negotiations on reciprocal adequacy , which complements the Economic Partnership Agreement. The objective is to recognise each other's data protection systems as 'equivalent', which will allow data to flow safely between the EU and Japan, creating the world's largest area of safe data flows.

A Strategic Partnership Agreement to work even more closely

Japan and the EU share a strong commitment to democracy, the protection of human rights, free and open trade, multilateralism and a rules-based order. Japan is a long-standing Strategic Partner for the EU and an important ally on the international scene. 

The Strategic Partnership Agreement will lead to further deepening of EU-Japan relations, strengthened foreign and security policy dialogue, and engagement across a wide range of global, regional and bilateral thematic issues. The Agreement re-affirms the shared values and common principles that form the basis of the EU-Japan partnership, including human rights, democracy, multilateralism and the rule of law. 

The Strategic Partnership Agreement will boost dialogue and cooperation between the European Union and Japan on topics of mutual interest such as foreign and security policy, connectivity, climate change, environment, energy, cyber issues, employment and social affairs, as well as people-to-people exchanges.

The entry into force of the Strategic Partnership Agreement requires also the ratification by EU Member States, but a large part of the Agreement can be applied on a provisional basis already in early 2019.

Economic Impact of the EU-Japan Economic Partnership Agreement

• The agreement provides a positive overall outcome both for the EU and for Japan.
• Japanese multinationals employ about 625,000 people in Europe. In addition, Japan is an important strategic partner for the EU and a key ally in the Asia-Pacific region.
• The EU has a bilateral deficit in goods and surplus in services (an overall positive trade balance) however Japanese companies have a strong presence in the EU and serve the market through mode 3, multinational presence, in services especially.
• The majority of EU exports are in industrial goods although agri-food products already represent 10 percent of EU exports and thanks to the agreement there is further potential for expansion.
• Japan is currently exporting industrial goods (transport equipment and machineries and appliances in particular) to the EU and the reduction in trade barriers foreseen in the agreement will potentially yield an increase in this trade.
• The agreement has achieved a high degree of trade liberalisation.
• The EU has liberalised 99% of tariff lines and 100% of imports and Japan 97% of tariff lines and 99% of imports. However, on the 3% of tariff lines not fully liberalised, Japan has given significant concessions in terms of tariff rate quotas and/or tariff reductions.  Furthermore, the lower figure is also largely compensated by the significant effort made by Japan in addressing a large number of Non-Tariff Measures.
• Finally, this agreement has also the potential to benefit SMEs given the strong presence of these companies among EU exporters to Japan. For these smaller companies, the SME chapter commits each Party to transparency regarding access to its own market through the sharing of information.
• The reduction of tariffs and non-tariff measures foreseen in the agreement are expected to add 33 billion euro to the EU GDP by 2035 when the agreement is expected to be fully implemented. This corresponds to around 0.14% of additional GDP and is accompanied by an increase of about 13 billion euro of EU exports to Japan.
• For the EU, this agreement provides a positive overall outcome and leads to considerable gains in sectors that are not always the ones that benefit the most from EU trade policy, e.g. agriculture, beverage, textile, apparel and leather products.
• No EU sector is foreseen to experience noticeable losses, including the motor vehicle sector which is expected to see its exports to Japan increase thanks to the reductions in non-tariff measures achieved by the agreement. For Japan the main gains are in manufacturing industrial goods.