Japan and EU sign ‘biggest’ trade deal as Donald Trump puts up barriers

EU Council President Donald Tusk and Commission head Jean-Claude Juncker in Japan after talks in Beijing, where they urged global trade cooperation and warned against trade wars

PUBLISHED : Tuesday, 17 July, 2018, 12:45pm
UPDATED : Tuesday, 17 July, 2018, 8:55pm

The European Union and Japan on Tuesday signed the single market’s biggest trade deal ever and present a united front as Washington upends the international trade order.

The signing in Tokyo for the deal, largely reached late last year, was ceremonial.

It was delayed from earlier this month because Japanese Prime Minister Shinzo Abe cancelled going to Brussels over a disaster in southwestern Japan, caused by extremely heavy rainfall. More than 200 people died from flooding and landslides.

European Commission President Jean-Claude Juncker and European Council President Donald Tusk attended the signing ceremony at Abe’s office in Tokyo.

Both sides also signed a strategic partnership agreement, a framework aimed at strengthening bilateral cooperation on a broad range of bilateral and multilateral issues, including security, cybercrime and climate change.

“While protectionism is spreading in the world, Japan and the European Union will take the lead as flag bearers for free trade,” Abe said in comments echoed by Tusk.

“We are sending a clear message that we stand together against protectionism,” Tusk said.

Tusk and Juncker landed in Japan late Monday after talks in Beijing, where they urged global trade cooperation and warned against trade wars.

“It is the common duty of Europe and China, but also America and Russia, not to destroy (the global trade order) but to improve it, not to start trade wars which turned into hot conflicts so often in our history,” Tusk said in Beijing.

“There is still time to prevent conflict and chaos.”

The “landmark” EU-Japan deal creates a massive economic zone and stands in stark contrast to US President Donald Trump’s “America First” protectionism.

The deal, agreed last December, is “the biggest ever negotiated by the European Union,” according to Commission spokesman Margaritis Schinas.

“This agreement will create an open trade zone covering nearly a third of the world’s GDP,” he said.

The EU – the world’s biggest single market with 28 countries and 500 million people – is trying to boost alliances in the face of Trump’s protectionist administration.

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The EU-Japan deal will send a “strong signal to the world” against US protectionism, EU Trade Commissioner Cecilia Malmstrom said recently.

Trump’s administration has angered traditional allies like the EU and Japan by imposing trade tariffs, while rattling international markets by threatening a trade war with China.

On Sunday, the US president fuelled rising rancour by labelling the EU, along with Russia and China, “a foe” of the United States, and repeating his assertion that the EU has “really taken advantage of us on trade.”

The EU officials and Japan will also look to present a united front against US tariffs on steel and aluminium, which Tokyo has called “deplorable”.

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Prices of European wine and pork will fall for Japanese consumers. Japanese machinery parts, tea and fish will get cheaper for Europe.

The deal eliminates about 99 per cent of the tariffs on Japanese goods to the EU, but remaining at around 94 per cent for European imports into Japan for now and rising to 99 per cent over the years.

The difference is due to exceptions such as rice, a product that’s culturally and politically sensitive and has been protected for decades in Japan.

The major step toward liberalising trade was discussed in talks since 2013 but is striking in the timing of the signing, as China and the US are embroiled in trade conflicts.

The US is proposing 10 per cent tariffs on a US$200 billion list of Chinese goods. That follows an earlier move by Washington to impose 25 per cent tariffs on US$34 billion of Chinese goods.

Beijing has responded by imposing identical penalties on a similar amount of American imports.

Besides the latest deal with the EU, Japan is working on other trade agreements, including a far-reaching trans-Pacific deal. The partnership includes Australia, Mexico, Vietnam and other nations, although the US has withdrawn.

Japan praised the deal with the EU as coming from Abe’s “Abenomics” policies, designed to wrest the economy out of stagnation despite a shrinking population and cautious spending. Japan’s growth continues to be heavily dependent on exports.

By strengthening ties with the EU, Japan hopes to vitalise mutual direct investment, fight other global trends toward protectionism and enhance the stature of Japanese brands, the foreign ministry said in a statement.

The EU said the trade liberalisation will lead to the region’s export growth in chemicals, clothing, cosmetics and beer to Japan, leading to job security for Europe. Japanese will get cheaper wine, pork and cheese, such as Parmesan, Gouda and cheddar, as well as chocolate and biscuits.

Japanese consumers have historically coveted European products, and a drop in prices is likely to boost spending.

Associated Press, Agence France-Presse, Kyodo