On 17 July 2018, the European Union and Japan signed an Economic Partnership Agreement (EPA), the largest trade agreement ever negotiated by the EU, which will create an open trade zone for more than 600 million people. The agreement entered into force on Friday 1 February 2019. About the agreement:ec.europa.eu/trade/policy/in-focus/eu-japan-economic-partnership-agreement/ The provisions of this agreement relating to geographical indications protect many French products, including champagne and Roquefort. Analysis of the new strategic, economic and digital agreements between the EU and Japan. Japan and the European Union (EU) started the new year with triple success. In addition to the entry into force of the world`s largest free trade agreement, the Economic Partnership Agreement (EPA) between the EU and Japan, on 1 September. February also saw the creation of the “world`s largest area for data flow security” and the partial implementation of the EU-Japan Strategic Partnership Agreement (SPA). The three agreements, strategic, economic and digital, are at the heart of what could be the most important bilateral relationship when it comes to protecting and promoting free trade, multilateralism and the rules-based order. So the general message is that the EU is moving forward with historic agreements like the one with Japan, but at the same time it is becoming more inward-looking and protectionist. Thus, while the EU-Japan EPA certainly contributes to reaffirming the EU as an active player in the world of international trade capable of concluding important trade agreements, other measures continue to undermine the EU`s credibility as a defender of the liberal international economic order. A number of informal bilateral dialogues and other specific initiatives have been set up to support EU-Japan trade relations: Figure 3 shows how real income (i.e. real GDP per capita) of different countries and regions is affected by the EU-Japan EPA. It shows three scenarios: S1 reflects the state of the world as of January 1, 2018; S2 changes the starting point by assuming that a hard Brexit has taken place and that the UK is no longer part of the EU; and S3 does not assume a Brexit, but allows the full implementation of the CP-TPP agreement.
There are a number of important findings. First, the EU-Japan EPA increases real income in Japan and the EU, regardless of the scenario. Second, the quantitative effects are relatively small. Over the long term, real per capita income is expected to increase by about 0.3 per cent. This is a permanent income gain, but it is clear that other trade agreements such as the TTIP for the EU or the full TPP (i.e. including the US) would have increased revenues further. Third, the deal hurts foreigners, especially in Asia, but the impact is small and most likely statistically indistinguishable from scratch. Less than a decade ago, Japan and the European Union were considered protectionists, and the likelihood of them signing a comprehensive free trade agreement seemed slim. But here we are, along with Japan and the EU, that have ratified the world`s largest free trade agreement and surpass both the agreement between the United States, Mexico and Canada and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in terms of gross domestic product (GDP).
The EU-Japan EPA not only links two economies worth almost USD 25 trillion; it sets the standards for 21st century trade agreements. While the agreement is an achievement to be celebrated, there are some sobering facts that call for further action should not be feared. First, the agreement covers a very large share of global GDP, but it will very soon be overtaken by even larger regional trade agreements. Second, the parties must continue to work on innovative rules for global governance. This applies in particular to the areas of investment and data flows. Agricultural and food trade statistics:ec.europa.eu/info/sites/info/files/food-farming-fisheries/farming/documents/agrifood-japan_en.pdf It also contains obligations to respect multilateral agreements and ratify International Labour Organisation (ILO) conventions. Learn about the current eu-Japan trade relations The EU and Japan meet regularly to discuss issues and best practices in the implementation of the agreement. The EU and Japan have concluded an Economic Partnership Agreement (EPA), which entered into force on 1 February 2019.
With a more general Strategic Partnership Agreement, which has been provisionally applied since the same date, it has become the cornerstone of a strengthened relationship between the EU and Japan. However, the EPO text does not contain any language guaranteeing the free flow of data, allegedly because EU members could not agree on a common position. This could put EU companies at a disadvantage, as the recent CP-TPP agreement between Japan, Canada and many other members in the Asia-Pacific region contains such provisions. In addition, adequacy decisions are unilateral and can be revoked in the very short term: there is no real legal certainty. The final piece of the puzzle is the EU-Japan Strategic Partnership Agreement (SPA). Although the SPA will only enter into force after all EU Member States have ratified or approved the agreement, parts of the agreement have been provisionally applied since 1 February. The SPA is based on common values and principles such as democracy, the rule of law and human rights. The peculiarity of the agreement is the fact that it is legally binding and separates it from the sea of rhetorical “strategic partnerships” that the EU has with other important countries. The SPA will set up a joint EU-Japan committee to coordinate the implementation of the partnership and resolve disputes. Exports to Japan and imports from Japan increased between 2009 and 2019. During the period 2009-2019, EU exports to Japan peaked in 2019 (€61 billion) and their lowest level in 2009 (€32 billion). EU imports from Japan were highest in 2019 (€63 billion) and lowest in 2013 (€49 billion).
The conclusion is therefore that the EU-Japan EPA does not materially harm foreigners, but benefits insiders. From this perspective, it is more likely to provide incentives for new free trade agreements, such as deepening Asian integration through RCEP and concluding free trade agreements between ASEAN countries and the EU. In short, it revives the liberal global trading system rather than undermines it. However, as always, there is room for improvement. This applies in particular to the areas of investment protection and data flows. Undeniably, the agreement was reached under considerable political pressure due to the end of the TPP process by the US and the impasse between the EU and the US on TTIP. The EU-Japan Economic Partnership Agreement will have a significant impact on bilateral relations and the international liberal economic order. Free trade agreements such as the EU-Japan EPA are often criticised for their potential trade diversion effects that harm trading partners. This is a serious argument that goes back to Jacob Viner`s 1952 book The Customs Union Issue. However, as we have seen in the introduction, it is precisely the risk of trade diversion that creates a juggernaut effect: other countries are encouraged to enter into free trade agreements; The narrower the global network of bilateral trade agreements, the closer the world is to multilateral free trade. European Commission (2018), “The Economic Impact of the ECONOMIC Partnership Agreement (EPA)” between the EU and Japan. The EU is stepping up military cooperation between member states and could even build a European army, while Prime Minister Shinzo Abe`s Japan has announced its policy of “proactive contribution to peace”.
Thus, the EU-Japan SPA fits in perfectly and allows both sides to find new ways to promote peace and security. The EU and Japan have already cooperated on anti-piracy measures near the Horn of Africa or on the provision of assistance to Niger and Mali. The SPA will allow the two powers to expand this cooperation at a time when the global security environment has become unstable. In order to strengthen their long-term relations, the EU and Japan should now seek to intensify and diversify the people-to-people relations that ultimately form the basis for strong relations. The people-to-people relationship between the EU and Japan is unfortunately not as deep as the current economic or political relations. .