JAPAN DEAL

Europe's Quiet Trade Pact with Tokyo

A man reads a special edition of the Sankei Shimbun newspaper outside a train station in Tokyo, Japan, June 24, 2016. The headline reads: "Britain, EU Leave". REUTERS/Thomas Peter FOR EDITORIAL USE ONLY. NO RESALES. NO ARCHIVES.
The headline reads: "Britain, E.U. Leave." Despite Brexit and TTIP woes, a Japan-E.U. trade deal is still chugging along.
  • Why it matters

    Why it matters

    A trade deal with Japan would give the European Union better access to the world’s third-largest economy.

  • Facts

    Facts

    • The E.U. and Japan plan to finalize a trade pact by end of the year.
    • Brussels wants European companies to have better access to public contracts in Japan, particularly in the areas of rail transport and services.
    • Japan doesn’t see eye-to-eye with the E.U. on country-of-origin labeling.
  • Audio

    Audio

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With public scrutiny laser-focused on the controversial U.S. and Canada trade pacts, the European Union hopes to quietly slip a trade deal with Japan, the world’s third-largest economy, under the radar.

“The timing is decisive because things aren’t going to get any easier,” Jyrki Katainen, the vice president of the European Commission, said during a trip to Tokyo this week.

Both Brussels and Tokyo feel a sense of urgency, as does the business community that is backing the deal.

Yoshimitsu Kobayashi, president of the Japanese association of chief executives Keizai Doyukai, pointed to the upcoming elections in France and Germany next year and expressed concern that “anti-E.U. parties are going strong.”

Left out in the cold by the U.S. presidential candidates, Japan is placing renewed emphasis on its trade ties with Europe.

“We have to end the negotiations successfully by the end of the year, because next year won’t be an easy time for the negotiations,” Mr. Kobayashi told Handelsblatt. “I think that Prime Minister [Shinzo] Abe also feels that need.”

The Japanese prime minister has already been bruised once by anti-trade sentiment this year. Mr. Abe invested massive political capital in convincing the agriculture, pharmaceutical and doctors lobbies to back the Trans-Pacific Partnership with the United States.

But the trade deal has become a hot button issue in the U.S. presidential election, with both Hillary Clinton and Donald Trump coming out against TPP in its current form. Left out in the cold by the U.S. presidential candidates, Japan is placing renewed emphasis on its trade ties with Europe.

Tokyo also wants to make sure that South Korea, which has signed a trade agreement with the European Union, doesn’t gain an advantage due to lower customs. Japan’s car, electronics and machine companies are all pushing for a similar deal with Brussels.

The European Union’s trade talks with Japan have been quiet compared to the fierce public outcry in Germany against the TTIP deal with the United States and CETA with Canada. But Brussels and Tokyo still have major differences to work out before a deal is finalized.

Brussels wants European companies to have better access to public contracts in Japan, particularly when it comes to rail transport and services. For Japan, one of the most controversial issues in the negotiations has been Brussels’ insistence on country-of-origin labels for food and beverages.

Japan passed a law on country-of-origin labels last year but still doesn’t see eye-to-eye with the European Union when it comes to the mutual recognition of labels. Until an agreement is reached, Japan can continue labeling fizzy wine as champagne, even though it doesn’t come from Champagne in France.

Despite the differences, Mr. Katainen said he remains optimistic. The two sides have reached agreements in several areas, he said, and there’s political will in both Japan and the European Union to finalize a deal.

The negotiations with Japan have progressed further “technically speaking” than the TTIP trade talks with the United States, he added.

“Our understanding is it is possible to conclude negotiations [with Japan] at the end of the year,” Mr. Katainen said.

 

Martin Kölling is a Handelsblatt correspondent based in Tokyo. To contact the author: koelling.martin@gmail.com

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