Federalism

The EU-Japan Free Trade Agreement

The EU-Japan Free Trade Agreement

By the Honorable Gene Ward, HI (HD-17) 

and Ginny Park, International Relations Policy Analyst

Free trade frameworks are increasing around the world. Japan’s Prime Minister Shinzo Abe embraced the trend earlier this month by announcing his country’s plans to join the Trans Pacific Partnership (TPP) negotiations. On March 25 Abe, European Council President Herman Van Rompuy and European Commission President Jose Manuel Barroso spoke by telephone to launch negotiations for a free trade agreement (FTA) between Japan and the European Union (EU). This signals significant movement in light of Japan’s history of vigorously protecting domestic products through tariffs and non-tariff barriers.

The EU-Japan FTA encompasses a large economic area. Japan is the EU’s seventh largest trading partner, and the EU is Japan’s third largest trading partner with both regions combined accounting for more than one third of world gross domestic product. Lowering barriers to trade would benefit both economies, with some predicting an increase of 32.7 percent in EU exports to Japan and a 23.5 percent increase in Japan’s exports to the EU.

In order to conclude FTA negotiations successfully, Japan and the EU have a number of sensitive issues to resolve. Domestically, Abe faces challenges from the opposition Democratic Party of Japan, which is generally anti-free market. Within Abe’s Liberal Democratic Party, the agricultural sector opposes the negotiations insisting on protections for rice, wheat, sugar, dairy and beef. The EU wants to safeguard industries such as automobile manufacturing should Japan fail to remove non-tariff barriers. EU Trade Commissioner Karel De Gucht has said that after a year of FTA negotiations, the EU will review Japan’s progress and make a decision on whether or not to continue the negotiation process.

The announcement of the proposed EU-Japan FTA should spur the US to accelerate its own negotiations with the EU on the Transatlantic Trade and Investment Partnership (TTIP) or resign itself to the possibility of losing precious European market share to Japan. Just two years ago our desultory ratification of the US-Korea FTA contrasted with the EU’s rapid negotiation/ratification process on the EU-Korea FTA gave the EU a head start of several months to secure Korean market share.

America cannot afford to ignore the 95 percent of the world’s consumers who live outside the US. Every state stands to benefit from the jobs and revenues created by increased international trade.

 


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