Published: Wed, July 18, 2018
Markets | By Noel Gibbs

European Union signs 'historic' trade deal with Japan

European Union signs 'historic' trade deal with Japan

"We are sending a strong signal to the world that two of its biggest economies still believe in open trade, opposing both unilateralism and protectionism", said EUCommissioner for Trade Cecilia Malmström.

Both sides also signed a strategic partnership agreement, a framework aimed at strengthening bilateral cooperation on a broad range of bilateral and multilateral issues, including security, cybercrime and climate change.

Commenting on the deal, Ross Denton, of the global law firm Baker McKenzie, said that both Japan and the European Union had compromised to produce a significant new partnership.

The pact will create a free trade zone accounting for roughly 30 percent of the world's gross domestic product and about 600 million people in 29 countries.

"There are rising concerns about protectionism, but I want Japan and the European Union to lead the world by bearing the flag of free trade", Japanese Prime Minister Shinzo Abe said after signing the deal in Tokyo.

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At a EU-Japan summit Tuesday in Tokyo, the envoys were clear that the agreement was meant to send a message about the value of trade and cooperation.

"This is an act of enormous strategic importance for the rules-based worldwide order, at a time when some are questioning this order", Tusk said.

Following a number of years of preparations, and with the negotiations finalised in December 2017, the agreements were officially signed at the 25th EU-Japan summit held in Tokyo earlier today (Tuesday, July 17). Following the signing ceremony, they will seek parliamentary ratification. But they will bring Japanese consumers lower prices for European wines, pork, handbags and pharmaceuticals.

President Juncker added that there would be an immediate tariff elimination of up to 4% on over 90% of Japanese vehicle part and of all tariffs on cars within the next seven years.

The pact - which both Japan and the European Union aim to have come into force by early next year - will abolish or reduce tariffs on industrial products and agricultural items between the two sides and sets rules on investment, which is expected to help enhance opportunities for further two-way trade and investment.

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The regional bloc will immediately eliminate tariffs on Japanese sake, green tea and soy sauce, while wine will also be reciprocally traded without tariffs right after the pact comes into force.

It was delayed from earlier this month because Japanese Prime Minister Shinzo Abe cancelled going to Brussels over a disaster in southwestern Japan, caused by extremely heavy rainfall.

"Politically, it's a light in the increasing darkness of global politics", European Council President Tusk said of the deal, according to The Guardian.

In a pointed message, Mr Tusk said: "The real risks to our economy, jobs and prosperity are political uncertainty, tariff war, unpredictability, irresponsibility and aggressive rhetoric".

Japanese consumers have historically coveted European products, and a drop in prices is likely to boost spending.

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