EU-Japan Economic Partnership Agreement

Due to the Economic Partnership Agreement (EPA) between the EU and Japan the largest free trade area of the world is formed. Here you can find the major information on the agreement.

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Background

Japan is the sixth most important trading partner of the EU worldwide and Germany's second most important trading partner in Asia. Nevertheless, EU firms have to deal with trade barriers when exporting to Japan making it hard for them to compete. High tariffs for certain products like wine (15 percent), chocolate (up to 30 percent), cheese (up to 40 percent) or shoes and leather goods as well as complex certification procedures are but two examples. Current EU exporters have to pay import levies amounting to on average 350 million euros a year.

The European market is also of high importance to Japanese firms. The EU is Japan's third most important trading partner. However, Japanese firms too face trade barriers and restrictions when exporting to the EU, especially within the automotive, agricultural and forestry sectors.

To promote the trade in goods and services and to find new opportunities for investments, negotiations about an Economic Partnership Agreement (EPA) were launched in 2013 and mostly completed in 2017. On July 17, 2018 the agreement was signed following the resolution by the European Council and has been provisionally applied since then. The European Parliament still has to ratify the agreement which is expected to come into effect completely in 2019.

Major Goals

The main goal of the free trade agreement is to remove trade barriers and boost the trade in goods and services as well as to create new opportunities for investments. Nearly 74,000 EU firms are exporting to Japan. 78 percent of them are small and medium-sized companies. In the EU, especially sectors like medical devices, agricultural products and food, motor vehicles and transport could benefit from the agreement. After entering into force, 90 percent of tariffs for EU exports will be eliminated immediately. Nearly all custom duties (97 percent) are expected to be removed in the end.

From the perspective of German business, major goals are the liberalisation of trade in goods, services and investments, the improvement of framework conditions of, for instance, economic competition or  intellectual property protection, the reduction of non-tariff barriers (especially for motor vehicles) and better access to public tenders.

In addition, the market for Japanese products is expanding. For Japanese exporters, custom duties for industrial products will be removed completely. Agriculture and forestry as well as fishery will benefit from the immediate elimination of tariffs as well. The same applies to producers of alcoholic beverages.

Trade in Goods

One key issue of the agreement is the reduction of tariff barriers such as custom duties. Concerning the trade in goods, the EU and Japan agreed on the immediate termination of third country duties on one hand, and on extensive plans to eliminate tariffs on the other. This will allow EU exporters to save around 1 billion euro in custom duties per year. In the EU, the following sectors will especially benefit from the abolishment of tariff barriers: agriculture and food (in particular the export of pork, beef, wine and cheese), industrial products (such as chemicals, plastics, cosmetics, clothing, leather and shoes), fisheries and forestry. Japanese exporters, notably the automotive industry, also profit from the elimination or rather the reduction of tariffs.

Decisive results were achieved also with regard to non-tariff barriers. This is particularly true for motor vehicles. Furthermore, certifications of European products like medical devices, “quasi drugs” and cosmetics were simplified. Japanese textile labels were conformed to the international system. Beer from Europe may now be listed under this name in Japan. European restrictions on import of Japanese wine are also eliminated.

In addition, the EU and Japan committed to base their standards and technical regulations on international standards to the extent possible.

Trade in Services

The EU exports some 28 billion euro of services to Japan each year. After the free trade agreement ha entered into force, the Japanese market will  widely open to European service providers. New regulations were especially introduced for postal and courier services, telecommunications, new financial services astemporary movement of company personnel. Latter is the most advanced provisions on movement of people for business purposes that the EU has negotiated so far. Furthermore, European service providers will be able to participate in more bids for procurement tenders in Japan.

Further Regulations

Another important part of the agreement includes the protection of Geographical Indications (GIs). Japan recognises more than 200 European agriculturale products. The same applies to Japanese food and beverages.

Additionally, high standards are set for the protection of workers and the environment. Both sides are committed to adhering to the core labour standards of the International Labour Organisation (ILO) and international environmental agreements such as the UN Framework Convention on Climate Change and the Paris climate agreement. Moreover, the conservation and sustainable management of natural resources are guaranteed.

For the first time an EU trade agreement will include a chapter on corporate governance. The EU and Japan commit themselves, among others, to transparency and disclosure of information on publicly listed companies, accountability of the management towards shareholders and effective and fair exercise of shareholders' rights.