The world trade order faces enormous challenges. In reaction to American tariffs on aluminum and steel imports, the European Union has imposed countermeasures worth €2.8 billion ($3.3 billion) on Washington, and Beijing has declared retaliatory duties of €43 billion. Now, if the Trump administration opts to charge import duties on European cars, it would incur sizable economic losses on both sides, not to mention strain the transatlantic relationship even further and escalate the trade conflict.
In the EU, we now have to try to avoid confrontation while doggedly advocating for free trade and our trade relations with strategic partners. The Japan-EU Free Trade Agreement, or JEFTA, represents a chance to create the largest free trade area on the planet and send a strong anti-protectionist message.
In the past few months, we’ve made considerable progress towards our goal of deepening our partnership with Japan. If the JEFTA accord is signed this Friday, the European Parliament could approve it in the second half of the year, and the agreement could come into force this legislative session.
Emerging free-trade giant
It may come as a surprise that JEFTA has aroused little public interest, given it’s the most comprehensive trade partnership the EU has ever negotiated. Between them, the EU and Japan have a combined population of over 600 million and make up more than one-third of global GDP. This translates into considerable potential in terms of common trade.
The agreement provides for the abolition of tariffs on almost 99 percent of EU exports to Japan, and dismantles non-trade barriers on a grand scale. European exporters to the land of the rising sun could save around €1 billion. Deepening the EU-Japan partnership is also highly relevant for political reasons. At a time when protectionism is increasing worldwide and the US has sadly withdrawn from multilateral trade agreements, under JEFTA we can pursue a rules-based liberal world order while defining Europe’s leading role in setting terms for global trade.
Apart from JEFTA, the EU and Japan are currently negotiating a strategic partnership to deepen their political cooperation. This offers considerable opportunities in an increasingly uncertain international environment. Japan and the EU share a multitude of common interests and values, and face the same challenges internationally — from climate change to external security threats. Both sides are aware that they have to assume more responsibility amid geopolitical shifts in the world.
Japanese trade policy long focused on Asia and America rather than Europe, and in the last few decades, the EU also emphasized the transatlantic trade partnership. In this respect, the Trump administration’s decision to withdraw from global trade agreements alters the considerations of its two most important allies: Japan and the EU.
The transatlantic connection remains hugely important to us. But at the same time, the search continues for new ways to further our global aspirations and interests in a changing world.
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