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Trade

EU and Japan will establish world’s biggest free-trade zone in 2019, in rebuke to ‘tariff man’ in Washington

  • Japan had been part of the Trans-Pacific Partnership that Donald Trump rejected on his first day in office, turning Tokyo’s focus to other partners
  • The EU has also looked elsewhere after negotiations with the US stalled in 2016. It concluded an updated trade deal with Mexico earlier this year
PUBLISHED : Thursday, 13 December, 2018, 11:16am
UPDATED : Thursday, 13 December, 2018, 9:05pm

The European Union and Japan will launch the world’s largest free-trade zone early next year after their economic partnership cleared a final hurdle on Wednesday.

Some 70 per cent of European Parliament lawmakers backed the agreement that binds two economies accounting for about one-third of global gross domestic product and signals their rejection of protectionism.

Although they have agreed to start separate trade talks with the US, both face trade tensions with Washington and their steel and aluminium producers remain subject to US tariffs imposed by US President Donald Trump.

EU Trade Commissioner Cecilia Malmstrom said the deal would bring clear benefits to EU companies and farmers. Japan’s parliament approved it on Saturday.

“If all goes well, it should be able to enter force on February 1,” she said. “The agreement is not only sending a signal to the world. It is also extremely advanced when it comes to opening markets.”

Japan had been part of the 12-nation Trans-Pacific Partnership (TPP) that Trump rejected on his first day in office, turning Tokyo’s focus to other potential partners.

We are not tariff men, but the people of fair trade
Bernd Lange, European Parliament’s trade committee

The EU has also looked elsewhere after TTIP (Transatlantic Trade and Investment Partnership) negotiations with the US stalled in 2016. It concluded an updated trade deal with Mexico earlier this year.

“Everyone knows there is a tariff man on the other side of the Atlantic. Our answer is clear. We are not tariff men, but the people of fair trade,” said Bernd Lange, who heads the European Parliament’s trade committee.

The EU-Japan agreement will remove EU tariffs of 10 per cent on Japanese cars and 3 per cent for most car parts. It will scrap Japanese duties of some 30 per cent on EU cheese and 15 per cent on wines as well as open access to public tenders in Japan.

It will also open up services markets, such as financial services, telecoms, e-commerce and transport.

The flagship deal comes after widespread anti-globalisation protests threatened the earlier EU-Canada Comprehensive Economic and Trade Agreement (CETA) which a region of Belgium objected to in 2016. It finally entered force in 2017.

Critics say the EU-Japan agreement will give too much power to multinationals and could undermine environmental and labour standards.

Both Brussels and Tokyo want it in place before Britain leaves the EU at the end of March.

Japan, whose many car makers serve the EU market from British bases, had wanted it to then apply to a Brexit transition period until the end of 2020, although that period is uncertain due to political turmoil in Britain.