6min read
PREVIOUS ARTICLE Stocks to watch NEXT ARTICLE Aust shares close higher on banks, miners

Going against the current of protectionism sweeping through international negotiations at present, the EU and Japan have signed a deal to remove several barriers of trade between the two entities.

The bill, signed this week in Tokyo, is the largest of its kind ever negotiated by the EU. It looks to eliminate numerous trade tariffs on various exports, allowing Japanese cars to face as easy an entry into the EU as French foodstuffs will face coming into Japan.

After confirming the agreement, European Council President Donald Tusk used the opportunity to welcome it as a “clear message that we stand together against protectionism”. This trade deal comes at the same time as trade stand-offs between Japan’s neighbors in China and the US, as well as between the US and the EU.

European Commission President Jean-Claude Juncker said that all of those who put their names on the agreement are doing so to make “a statement about free and fair trade”, appearing united in the face of rival moves to invoke trade tariffs and providing stability instead of stoking tensions over exporting and importing goods freely and consistently.

With continuing threats of trade wars and back-and-forth disputes with China, US President Donald Trump appears to be sending the EU into action to secure free trade agreements and shore up pacts with other allies to maximize trading potential for the European bloc.

Japan’s Prime Minister Shinzo Abe declared this agreement to be a marker for displaying to Japan’s world partners that there is an “unshaken political will of Japan and the EU to lead the world as champions of free trade”, particularly when so much is up in the air with regards to current trade movements globally. The agreement should help assuage businesses of reliable output for years to come.

The free trade zone should cover a significant portion of the world’s GDP, coming in at nearly a third of the total figure. This agreement will therefore allow for the removal of nearly all tariffs on EU goods imported by Japan, which will significantly include dairy and cheese. It will, however, look to completely exempt Japan’s vital rice-growing industry.

On the other side of the table, the EU will be scrapping some 99% of current tariffs applied to Japanese goods. This will apply immediately to car parts and extend to fully manufactured cars when the agreement enters its eighth year. 

Although the agreement is still waiting on ratification by lawmakers on both sides, there should not be any significant disruption, and it should face little delay in becoming official next year.

From an EU perspective, the move comes as the need deepens to shore up long-term pacts with strong allies, especially in the wake of current Brexit negotiations and protectionist measures issued from the US, which may not stop any time soon.

President Trump recently labeled the EU, alongside Russia and China, as a “foe” of the US, saying on record that the EU “has really taken advantaged of us on trade”.

As a clear counter to this escalating rhetoric, Tusk called the Japan-EU deal “a light in the increasing darkness of international politics”.