The European Commission is looking at removing trade barriers with Japan after signing a milestone free trade agreement with South Korea earlier this month, according to a draft EU trade strategy seen by EURACTIV, scheduled to be published next week..
"Japan is no longer perceived in Europe as an economic threat, but as an opportunity," reads the document, which Trade Commissioner Karel De Gucht will present next week when he outlines the EU's trade priorities for the years to come.
This represents a drastic about-turn from the long-standing approach held by the EU, dominated by many trade disputes with Tokyo.
"Japan continues to be a country where, for specific structural features of the Japanese society and economy, doing business or investing is often particularly difficult. Like with the USA, a potential for trade disputes has existed in the past," underlines the Commission's official webpage dedicated to relations with Tokyo.
The new trade strategy takes the opposite view. The document does not go as far as mentioning the idea of negotiating a free trade deal with Japan, which many EU countries would oppose, but clearly states that the Commission "will seek to deepen our trade and investment relations with the Far East".
To many observers, this seems a logical consequence of the free trade deal (FTA) signed with South Korea, which is a direct competitor of Japan in exporting to the EU. Such a deal with Seoul is clearly damaging Tokyo, and Europe cannot afford to worsen relations with its Asian partner on a number of crucial global issues.
Although clearly opening to Japan, the Commission paper recalls that "regulatory obstacles to trade in goods, services and investment remain high and are perceived as being as insurmountable as ever". Therefore, it links further steps to "Japan's capacity to demonstrate that these barriers can be removed".
A wide range of EU goods are not in line with Japanese rules and standards, which often genuinely diverge from the EU's, but in many cases are used as non-tariff barriers to protect local industries.
A liberal approach?
De Gucht's strategy is also characterised by a distinct liberalist approach, where trade is considered unilaterally beneficial to economic growth, consumer benefits and labour. Further opening up the EU market is therefore the logical consequence of such an approach.
The text underlines trade-related gains for EU consumers, ranging from "a wide variety of goods and services" to "lower prices", but falls short of highlighting that unfair competition from third countries has damaged some top quality EU products, resulting in a loss of quality for EU consumers.
As for the labour impact, the document stresses that "more than 36 million jobs in Europe depend, directly or indirectly, on our ability to trade with the rest of the world".
It goes on to say that "trade openness continues to enhance welfare levels and boosts employment and wages in developed economies, including in the EU," in spite of the serious decline in jobs and working conditions experienced in Europe in recent years, also as a consequence of higher competition with countries with much lower social standards.
Indeed, the Commission itself had to set up the so-called European Globalisation Adjustment Fund (EGF) to help retrain those who are losing their jobs in Europe as a consequence of increased trade with countries with low social standards, critics argue.
De Gucht's document recognises the need to strengthen the EGF but does not propose any other relevant measure to support the victims of deepening globalisation.
De Gucht's trade strategy is one of the items on the Commission agenda for next Wednesday (27 October). The same day, the EU executive is also set to adopt Industry Commissioner Antonio Tajani's plan for the future of the EU industrial policy.
While De Gucht's paper is all centred on the importance of services for the EU economy, Tajani's document will instead focus on the key role played by the EU manufacturing industry for European development.
The word 'manufacturing' does not even appear in De Gucht's strategy except when it says that "an effective global manufacturing supply chain cannot exist without the vital support of transport, telecoms, financial, business and professional services".
Pakistan case as a rule-setter?
In recent weeks, De Gucht has come under fire for a controversial proposal to transform aid policy to flood-hit Pakistan into a trade opportunity. He was forced to review the proposal on several occasions due to tough opposition, even within the Commission itself.
His strategy seems to suggest that the Pakistan proposal could become normal business.
"In 2011, the Commission intends to adopt a Communication on trade and development. This will reflect in a broad sense on how our trade policy can best serve developing countries," reads the draft document.
"One example concerns how trade can help respond in a timely but temporary manner to the humanitarian impact of natural disasters, such as the earthquake in Haiti or the recent floods in Pakistan," the paper makes clear.