On July 17, local time, Japan and the European Union signed the Economic Partnership Agreement in Tokyo. The two sides will cancel almost all tariffs. The agreement covers 28 countries in the EU and the third largest single economy in the world - Japan.
According to the European Commission, the trade agreement between the EU and Japan is 'a landmark' and is the EU's largest bilateral trade agreement negotiated in history. The EU will cancel 10% import tariffs on Japanese cars within 8 years, and 3% tariff on most auto parts.
At present, the Japan-Europe Economic Partnership Agreement is awaiting approval by the European Parliament and the Japanese Parliament, and will enter into force in 2019. Both Japan and the EU hope to complete the review process of the agreement by March 2019 and officially enter into force. Before exiting the European Union. The signing of the agreement is in stark contrast to the recent escalation of trade protectionism by President Trump.
The world's largest bilateral trade zone was born
The Japan-EU Free Trade Agreement, known as 'car for cheese,' has been negotiating since 2013, and much of the agreement has been agreed at the end of 2017.
EU officials said that Japan and the EU account for about one-third of global GDP, and their trade relations still have room for growth. They expect that in the long run, the agreement will increase the EU economy by 0.8% and Japan by 0.3%.Japan’s Kyodo News quoted Japanese officials as saying that this is the largest free trade agreement to date in terms of the size of the participating economies.
According to the agreement, the EU will cancel the tariff of 99% of goods imported from Japan; Japan will cancel 94% of the tariffs on imports from the EU, and this proportion will also rise to 99% in the next few years. It is reported that the two sides are currently exempt from tax. There is a difference in the proportion of goods, mainly due to the 'special goods' like rice, which has been politically and economically imported in Japan.
Both parties have stated that they will benefit from this agreement. After the agreement comes into effect, Japanese autos and European agricultural products will become the main winners. The EU will gradually waive 10% of the tariffs on Japanese cars within eight years after the agreement takes effect. In contrast, the United States has May impose a 25% tariff on Japanese and German cars.
The main purpose of the trade agreement between Japan and the EU is to increase automobile exports. For Europe, this agreement will cancel most of the tariffs paid by European exporters of 1 billion euros per year, and gradually expand European countries' goods and services to Japan. Exports (last year reached 58 billion euros and 28 billion euros respectively). Japan is the third largest single economy after the United States and China, but it is only the EU's seventh largest export market. In 2017, the EU exported goods to Japan. For 58 billion euros, the total service is 28 billion euros. After the agreement comes into effect, the export of both sides will become easier.
Japanese car is expected to be another city in Europe
According to the agreement, the EU will reduce the current 10% tariff on automobiles to zero within eight years. Although automobiles and auto parts account for about one-fifth of Japan’s exports to Europe, the share of Japanese cars in the European market is only about 10%. , far below the share in the US or Asia. The agreement will help Japanese automakers to further expand their presence in Europe. The beneficiaries are expected to include Toyota, Nissan, Honda, Suzuki, Mazda and other car companies, Denso, Aisin Seiki, JTEK and other parts suppliers are also expected to benefit from the elimination of parts tariffs.
In Europe, Japanese automakers have lagged behind European competitors, and the agreement is expected to boost sales of Japanese automakers in Europe, which currently has a lower share of the EU market.
According to data from the European Automobile Manufacturers Association, in the first half of this year, Toyota Group's share in the EU market was 4.7%, Nissan was 3.3%, and Honda was 0.9%. Currently, all three automakers have factories in Europe.
European automotive industry analysts pointed out that although the agreement will bring a bigger market to Japanese automakers, they are also facing increasing competitive pressure. With France, the Netherlands and other countries announced the timetable for the suspension of traditional fuel vehicles. European automakers are aggressively developing electric vehicles. If Japanese manufacturers cannot respond to the rapidly changing European market, they may not get much benefit even if tariffs are gradually eliminated.European automotive industry hopes to inject new vitality
From the perspective of the EU, although Japan is the fourth largest economy in the world, second only to the EU, the US and China, it is only the seventh largest export market in Europe. The new agreement will gradually expand the European countries to Japan’s commodities and Exports to services have become easier. The European Commission believes that by reducing tariffs on cars and parts between the EU and Japan, production and employment in Japanese factories within the EU may increase. Currently, Japanese automakers have 16 R&D within the EU. The center and 14 factories directly employ 34,000 people and support another 127,000 jobs.
In fact, when the European and European sides began to negotiate on the FTA, the European Automobile Manufacturers Association (ACEA) was on the verge of a rival to the Japan-European Free Trade Agreement. European automakers worried that the Japanese car would flood into Europe. However, European car companies do not have the same access conditions in Japan, because the Japanese auto market is one of the world's 'most closed' markets. With the deepening of negotiations between the two sides and the recent rise of global trade protectionism, the European Automobile Manufacturers Association gradually Changed attitude.
However, the European Automobile Manufacturers Association advocates that abolishing tariffs should set a long transition period and effectively solve the problem of non-tariff trade barriers faced by European auto exports to Japan. It can be seen that the EU has listened to the organization’s request to cancel the tariff schedule. It reflects the status of the car as an important sensitive product, setting an eight-year transition period.
In addition, the European Automobile Manufacturers Association also recognizes the progress made by the Japanese authorities in coordinating their vehicle standards with UN international regulations, allowing EU-approved vehicles to be sold directly in Japan without further costly modifications. Commitment will continue to apply to future regulations.
Marcus Schulman, director of the Chamber of Commerce of the German Chamber of Commerce and Industry, said: 'The free trade agreement will inject new vitality into the business relationship between the two sides. ' According to the Japan Chamber of Commerce and Industry of the German Chamber of Commerce and Industry, there are currently about 12,000 German companies. Japan conducts business. 'In the next few years, this number will continue to maintain double-digit growth.'British auto industry sensation 'pressure mountain big'
With the EU and Japan officially signing the FTA, it has become the UK's 'regressive' UK, and it feels that the country's auto industry is 'pressureful.' If the UK hopes to continue to attract car companies to invest in the UK, retain Nissan and Honda, etc. Car companies in the UK thousands of jobs, then it faces tremendous pressure to copy the EU-Japan trade agreement.
Earlier, British Prime Minister Theresa May worried that the Brexit will create trade barriers, Japanese companies may withdraw from the UK. Japanese ambassador to the United Kingdom Okada Kei also warned: 'If you face tariffs in the UK, continue to operate Difficulties, companies will leave the UK. '
Industry experts believe that the British government may even have to make extra concessions in the negotiations of other free trade agreements due to some potential damage caused by the UK's withdrawal from the EU.Former EU trade official Mushan Haoshi warned that the UK may have to make more concessions if the UK wants to retain investment from Japanese companies because the EU and Japan will integrate more than the EU and the UK. He also said: 'At In this case, we can easily assume that Japanese investment currently flowing to the UK will flow to other EU markets or be replaced by Turkey.
Ross Denton, a partner at Baker & McKenzie International, agrees, 'The UK will face tremendous pressure to replicate the EU-Japan agreement as part of its new bilateral trade agreement. But another expert said that the withdrawal of the UK from the EU may hinder the operation of multinational companies in the EU. The University of Sussex economist Peter Holmes told the Japan Times: 'I think Japan And other countries that have free trade with the EU are likely to seek further UK concessions. ' He added: 'If the agreement they get from the UK is worse than before, they might say, 'We want other trades The aspect is compensated, otherwise we will withdraw the investment from the UK' .
Japan’s chief negotiator warned earlier this year that Japan would have been “closely” concerned about the impact of Britain’s exit from the EU on the UK’s auto manufacturing industry. Japan’s trade representative Suzuki said: “Japan is closely watching the Brexit and the UK and the EU. The future relationship, because many car manufacturers serve the European market from a UK base and rely on free and frictionless trade between the UK and the European continent.'
US trade protectionism is frustrated on both sides
As Trump distances the United States from long-term allies such as the European Union, NATO and Canada, the Japan-Europe trade agreement also marks a shift in global relations.
The EU economic circles have issued statements recently, welcoming the free trade agreement signed between the EU and Japan, and believe that the signing of this agreement sends a clear signal against US trade protectionism.
Japanese Prime Minister Shinzo Abe said that people are increasingly worried about protectionism, and Japan and the EU will hold high the banner of free trade and promote free trade to develop better around the world. EU Council President Donald Tusk said that the EU and Japan opposes trade protectionism and will continue to cooperate in the future to promote free trade. This is in stark contrast to the escalating trade conflict between the United States and some of its trading partners.
According to the agreement, the EU will cancel the 10% import tariff imposed on Japanese cars within 8 years of the agreement's entry into force. In contrast, the US tariff on Japanese cars is 2.5%, and Japan's tariffs on European and American cars have already fallen to zero. The entry into force of the Japan-Europe EPA will break the trade barrier between the two sides, which will increase the competitive pressure of US companies in the European and Japanese markets, especially in the automotive industry. After the agreement is signed, the European market will be opened for Japanese cars, changing their long-term Dependence on the US market. Europe has always been the main exporter of American cars. The reduction of Japanese auto tariffs will hit the market share of American cars in Europe. In 2016, US auto exports amounted to 53.8 billion U.S. dollars, of which more than 20% were sold. To Europe. In addition to facing the EU's 10% tariff, the US imported cars will be more difficult in the fierce competition in the Japanese market.