Japan: EU-Japan ''agreement in principle'' for economic and partnership agreement
On
July 6 2017 the European Union and Japan announced having reached an ''agreement
in principle'' on a future economic and partnership agreement. The final
agreement, which both parties aim to conclude before the end of 2017, is
expected to boost EU-Japan trade by cutting red tape and scrapping duties.
Trade relationship
Japan is the European Union''s second largest trading
partner in Asia (after China), and sixth largest trading partner overall. In
2016 EU exports to Japan amounted to approximately €58 billion in goods and €28
billion in services. Trade flows between the European Union and Japan consist
mainly of motor vehicles, machinery, medical instruments, pharmaceuticals and
chemicals. Before the agreement in principle, the European Union and Japan had
concluded:a mutual recognition agreement for conformity assessment procedures in the
fields of telecommunications terminal equipment and radio equipment, electrical
products, laboratory practices for chemicals and manufacturing practices for
pharmaceutical products;an agreement on cooperation on anti-competitive activities
aimed at allowing the effective enforcement of their respective competition
rules through promoting cooperation and coordination between their competition
authorities;an agreement on cooperation and mutual administrative
assistance to improve cooperation between their customs authorities with a view
to facilitating trade flow and increasing the efficiency of customs controls;
anda science and technology agreement aimed at encouraging, developing and
facilitating cooperative activities in science and technology between the
European Union and Japan.
Economic
and partnership agreement
In the words of the EU commissioner for trade, "the scale of [the economic
and partnership agreement] ambition, and the combined economic size [of both
parties], would make it one of the biggest the world has ever seen". In
the same vein as other agreements concluded recently by the European Union, the
economic and partnership agreement is intended to go beyond traditional trade
issues and cover fields as diverse as corporate governance, competition,
sustainable development, data protection and cooperation on agriculture,
forestry, fisheries and food. It should also boost EU-Japan trade in goods and
services through a number of concessions.
Elimination of customs duties
Japan will eliminate tariffs
on 97% of its imports from the European Union once the economic and partnership
agreement is fully implemented (in tariff lines), with the remaining tariff
lines being subject to partial liberalisation through tariff quotas or tariff reductions
(eg, for certain agricultural products such as soft cheese, whey and potato
starch). Japan''s elimination of customs duties is expected to primarily benefit
EU exports in the fields of agriculture and food products, electrical
machinery, pharmaceuticals, medical devices, motor vehicles, transport
equipment, textiles and clothing, and forestry products. The European Union
will eliminate tariffs on almost 100% of its imports from Japan once the
economic and partnership agreement is fully implemented. The disparity in terms
of levels of liberalisation between the European Union and Japan is justified
by Japan''s commitments to eliminate non-tariff barriers on imports from the
European Union, notably through total alignment with international standards in
the automobile sector.
Elimination of non-tariff barriers
The negotiations focused on eliminating the main non-tariff barriers identified
by both EU and Japanese traders. Examples of non-tariff barriers that should be
eliminated currently include those applicable to:motor vehicles – through the
recognition of the same international standards on product safety and
environmental protection, which means that vehicles should be subject to the
same requirements in the European Union and Japan and should not require
testing or certification on export;food additives – through the adoption of
similar guidelines concerning the transparency and standard processing times
for approval processes; andpharmaceutical products – through the expansion of
the coverage of the mutual recognition agreement for conformity assessment
procedures.
The economic
and partnership agreement should include provisions aimed at liberalising trade
in services, particularly:postal and courier services (eg, by aligning rules on
border procedures, licences and the independence of regulators);telecoms
services (eg, by enabling any supplier from one party to access and use
telecoms services in the territory of the other party, as well as laying down
the ground rules concerning the conditions under which suppliers from one party
are allowed to provide their services in the territory of the other party);international
maritime transport services (eg, by providing for obligations to maintain
non-discriminatory access to transport and auxiliary services, as well as
access to ports and port services); andfinancial services (eg, by strengthening
regulatory cooperation through regular information exchange and consultation on
forthcoming regulatory initiatives, and by committing to relying on each
other''s regulatory and supervisory framework where possible).
The economic
and partnership agreement should build on the existing mutual obligations based
on the World Trade Organisation Government Procurement Agreement and add a new
set of disciplines concerning, for example:the electronic publication of
notices through a single point of access;the fair treatment of EU construction
businesses under the Japanese construction business evaluation system;the
recognition of test reports; andthe possibility of using environmental
standards as a selection criteria.In terms of market access, EU companies will
also be able to participate on an equal footing with Japanese companies in bids
for procurement tenders in the so-called ''Japanese core cities'' (48 cities of
around 300,000 to 500,000 inhabitants).
Agreement in principle
The agreement in principle does not mean that the
negotiating process is completely finalised. Some of the agreement''s chapters
still require fine-tuning and some issues are still open and remain to be
settled before the actual finalisation of the negotiations (eg, on investment
or regulatory cooperation). Although the agreement in principle should provide
a clear idea of the type of concessions that both the European Union and Japan
are willing to make, traders cannot yet rely on its provisions and should
therefore wait for the publication of the economic and partnership agreement.
Once the European Union and Japan reach a final agreement (which they aim to do
before the end of 2017), and depending on what it actually covers, the European
Commission will decide whether to propose the economic and partnership
agreement as an EU-only agreement (ie, one that covers only policy areas that
the European Union is responsible for) or a mixed agreement (ie, one that
covers areas that both the European Union and its member states are responsible
for). An EU-only agreement would need to be approved by:the governments of the
member states; andthe European Parliament.Conversely, a mixed agreement would
need to be approved by:the governments of the members states;the European
Parliament; andthe national – and possibly regional – parliaments.In that
regard, it is important to bear in mind the EU courts'' recent clarification as
to what constitutes an EU-only agreement as opposed to a mixed agreement,(1) as well
as the potential difficulties associated with the approval of mixed agreements
by national and regional parliaments (eg, in the framework of the EU-Canada
Comprehensive Economic and Trade Agreement). Further, the United Kingdom will
formally be a party to the economic and partnership agreement (provided that it
is concluded before the end of the Article 50 Treaty on the Functioning of the
European Union procedure). However, this will likely no longer be the case once
the United Kingdom leaves the European Union. Informed sources have indicated
that the economic and partnership agreement is unlikely to include specific
provisions regarding how to address the United Kingdom''s departure from the
European Union (and consequent withdrawal from the economic and partnership
agreement) (for further details please see "Brexit – United Kingdom''s access to European Union''s preferential trade
partners").
Prepare
and take action
EU businesses importing from and exporting to Japan (and vice versa) should
prepare for the entry into force of the economic and partnership agreement.
This requires assessing the exact effect of the agreement on their operations
(on the basis of the provisions of the agreement in principle) and identifying
potential opportunities and challenges. In addition, UK-based businesses and
Japanese businesses trading primarily with the United Kingdom should also
identify the potential consequences of the United Kingdom''s likely withdrawal
from the economic and partnership agreement on its departure from the European
Union, and consider mitigating actions to remove or reduce any associated
disruption.
Source: Japan News, Japan
Tuesday, 29 August 2017