EU concern at ‘disguised’ US, Japan protectionist agendas

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The use of national security issues as a pretext for protecting companies and markets from EU competition is a source of “increasing concern” in the EU, the Commission declared in an annual report on US trade barriers. In a visit to Tokyo, the EU’s trade chief also raised the issue of steep barriers to trade and investment as a key concern in EU-Japan relations.

“Restrictions to trade and investment cannot be justified on national security grounds if they are, in reality, essentially protectionist in nature and serve other purposes,” insisted the Commission in a report on US Trade Barriers published on 18 April, adding that it had “long expressed concern about excessive use” of security grounds “which could be interpreted as a disguised form of protectionism”. 

The EU-US trading relationship accounts for roughly 37% of world trade and two-way investment between the two economies is worth around €1.89 trillion. However, the Commission complains that European companies continue to face “steep regulatory barriers” when exporting to the US. 

Of particular concern is the US “Container Security Initiative”, launched in 2002 to counter potential terrorist threats to the international maritime trade system. The Commission notes that “the CSI screening and related additional US customs routines are causing significant additional costs and delays to shipments of EU machinery and electrical equipment to the US”. “This burden is so severe that a number of small European engineering companies have decided not to export to the US any longer,” it said. 

It further adds that US demands for 100% of US-bound containers to be scanned by European port authorities within the next five years “would lead to major trade disruptions,” “require major re-structuring of EU ports and place a very heavy financial burden on EU business” despite the fact that “no real benefit is proven when it comes to improving security”. 

The report also underlines difficulties in accessing the US public procurement market caused by restrictions under the so-called ‘Buy America’ Act. Opening up public procurement markets in third countries is one of the key goals of EU Trade Commissioner Peter Mandelson’s revitalised trade strategy, presented in October 2006

The issues raised in the report will be tabled at the next meeting of the Transatlantic Economic Council (TEC) on 13 May. The TEC was set up in April 2007 as an initiative to iron out the differences in European and American laws in areas such as financial market regulation and intellectual property law to harmonise standards in important industries (EURACTIV 7/05/07). 

In the meantime, the EU’s Trade Commissioner Peter Mandelson is in Japan from 21-23 April, where he has also hit out at the “hostile investment climate that characterises the Japanese economy” and which is keeping productive EU investment out. Japan “remains the most closed investment market in the developed world,” he pointed out, highlighting the “globalisation paradox” that the country represents. 

He suggested that Japan was exploiting the openness of other economies while keeping its own shut. “In 2006, for every dollar Japan invested in the UK and the Netherlands alone, European companies were able to invest a net total of only three cents in Japan,” he noted, stressing the need to “re-balance” the EU-Japan investment relationship.

According to the Financial Times, Mandelson’s stern remarks follow Tokyo’s recent refusal of a proposal by a UK fund (The Children’s Investment Fund) to raise its stake in the Japanese electric power wholesaler J-Power to 20% – a move rejected on national security grounds. “The risk for Japan is that overseas it is interpreted negatively as another signal that Japan doesn’t welcome foreign investment,” warned Mandelson.

The commissioner intends to address these issues, including the lack of transparency in the Japanese investment system and restrictions on FDI in sectors such as agriculture, electricity, health care, fisheries, forestry and maritime transport, at a bilateral summit between the EU and Japan on 23 April.

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