July 18, 2018
To counterweight the protectionist forces unbridled by US President Donald Trump both Japan and the European Union have signed a wide-ranging free trade deal that both sides hope will act The ambitious trade pact, which creates the world’s largest open economic area, comes amidst fears that a trade war between the United States and China will weaken the role of free trade in the global economic order.
Japan and the EU account for about a third of global GDP and their trade relationship has room to grow. The Japan-EU trade deal is also a sign of shifting global ties as Trump distances the US from long-time allies like the EU, Nato and Canada.
The United States this month imposed 25 per cent tariffs on $34 billion of Chinese goods to lower the US trade deficit, and China quickly retaliated with an increase in tariffs on US goods.
The EU and Japan remain open for cooperation and have sent clear message that they stand against protectionism. The deal removes EU tariffs of 10 per cent on Japanese cars and 3 per cent on most car parts. It would also scrap Japanese duties of some 30 per cent or more on EU cheese and 15 per cent on wines, and secure access to large public tenders in Japan.
Europe’s food sector is one of the biggest winners from the deal, which should allow it to capitalise on Japanese demand for high-quality cheese, chocolates, meats and pasta.
However, Japan’s dairy industry is expected to lose market share to European products once tariffs of up to 40 per cent on some cheese imports start coming down.
Both Japan and the EU are keen to show they remain committed to removing barriers they say hamper growth.