EU-Korea deal pushes Japan to negotiate

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Japanese business has been hit hard by the Free Trade Agreement (FTA) between the EU and Korea, galvanising political will in Tokyo to push quickly for its own FTA, negotiators on both sides have told EURACTIV.

The European Union and Japan made commitments in May this year to launch "pre-negotiations" but failed to set a precise timeline and maintained opposing views on the automotive sector and other sensitive areas.

However, crucial ‘scoping exercises’ being conducted by the European Commission are due to conclude shortly and are likely to give the green light to full negotiations, according to socialist MEP Vital Moreira.

The Portuguese, who chairs the parliament’s committee on international trade, said that he had led a delegation to Japan this month where he had noticed a marked change in atmosphere from a similar mission he conducted at the beginning of the year.

Japanese business is applying pressure for a deal on government

There was more political determination to drive for a deal and Japanese business is organising itself into industry sectors in order to apply itself to the issue, Moreira told a symposium on prospects for a trade deal held at the Centre in Brussels yesterday (18 October).

He added that on the crucial deal-blocking issue of non-trade barriers (NTBs) – local rules and standards that hinder trade – the Japanese now recognise that these are a serious issue for the Europeans, and must be negotiated.

Moreira said that previously the Japanese simply refused to accept that NTBs were part of the equation.

“The Korean FTA has been a watershed in terms of reaction from the Japanese,” he said, “industry has been galvanised and is now piling pressure on the Japanese government.”

Arnaud Brunet, Sony’s director of European external relations, told the symposium: “The Korean deal has been a kind of electro-shock for Japanese companies, coming especially as it did at a time [following the tsunami] which was extremely difficult for the country.”

Japanese EU ambassador – do not lose this window of opportunity

Kojiro Shiojiro, the Japanese ambassador to the EU, confirmed the impact of the Korean deal in a separate interview with EURACTIV.

He told yesterday's meeting: “Japan and Europe should not miss this chance to negotiate a deal. This is a good chance, but I do not know how long this political window of opportunity will last, that is why we want to finalise the scoping exercises quickly and conclude a deal as soon as possible.”

Bruno Julien-Malvy, an official working on the Japan desk at the European Commission’s DG Trade, said that the scoping exercises were underway and added that the Commission was also currently undertaking an impact assessment exercise to determine what the trade effects of a deal would be.

“For the Japanese negotiating a deal is more complicated than it is for the Europeans, because we already have concluded many of these deals, and they are not such a new thing for us,” said Socialist MEP Vital Moreira, the chairman of parliament’s international trade committee.

“The Japanese prime minister has a difficult task ahead of him, but I think they have decided to deliver on a trade deal, what remains to be seen is whether they can leverage the right political clout to carry this out domestically,” Moreira added.

“We are one of the crucial industries who do not see a benefit from such a deal, so we want to see strict conditions applied to any NTBs,” said Erik Bergelin, the director of trade and economics at the European Automobile Manufacturers’ Association (ACEA).

He added: “We want to see a firm commitment to see NTBs dealt with before the scoping exercises come down in favour of negotiating, and we also want a clear impact assessment carried out on both sides so it is clear who will be the winners and losers of such a deal, because choices always have to be made.”

“The Korean FTA has had a critical impact on industries such as ours,” according to Arnaud Brunet, Sony’s director of European external relations.

“We know that most of our competition within Europe comes from Korea and we want the same rules to apply to those companies as to ours,” Brunet concluded.

EU-Japan trade relations are characterised by a structural deficit for the EU, with European countries importing much more than they export.

During the global economic crisis, EU imports declined significantly, from €76 billion in 2008 to less than €57 billion in 2009. They rebounded in 2010, reaching almost €65 billion but remained much lower than in 2000.

EU exports to Japan have remained stable over the decade at around €45 billion. As a consequence, the bloc's trade deficit with Japan has shrunk from almost €50 billion in 2000 to €21 billion in 2010, according to Eurostat, the EU's statistical office.

The idea of negotiating a free-trade deal with Japan follows decreasing trade exchanges between the two parties. It is also part of a wider EU strategy of sealing bilateral deals after the repeated failures of multilateral trade negotiations.

In line with this new approach, in October 2010 the EU signed a key free-trade agreement with South Korea, the first such deal with an Asian country, and the most far-reaching trade deal the EU has ever signed.

This has increased pressure on the Japanese to negotiate a similar agreement, given that Korea is a direct competitor of Japan in many areas.

  • Early 2012: 'Scoping exercises' expected to be completed by Japan and EU

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