The European Union and Japan have agreed to a trade pact on Thursday, paving the way for trading in goods without tariff barriers between two of the world’s largest economic areas. The agreement between the two economies accounts for a third of global GDP.
The outline plan between the European Union and Japan was signed in Brussels after a meeting between Japanese Prime Minister Shinzo Abe and the European Commission President Jean-Claude Juncker, just ahead of the G20 summit occurring today in Hamburg.
Few specific details are known and a complete workable agreement may take some time. Some areas of negotiation are yet to be finished, but any further negotiation problems are being played down by both parties. It is hoped that the pact could go into effect early in 2019.
“I believe Japan and the EU are demonstrating our strong political will to fly the flag for free trade against a shift toward protectionism,” Japanese Prime Minister Shinzo Abe said at a joint news conference. “The ‘win-win’ deal was a strong message to the world,” he said.
The president of the European Council Donald Tusk said that the deal was not just about common trade interests, but reflected “the shared values that underpin our societies, by which I mean liberal democracy, human rights, and the rule of law.”
Tariffs on much of bilateral trade between the European Union and Japanese trade will be phased out over some years. The Japan Business Council in Europe, representing Japanese firms in the European Union, said it would create “mutual prosperity.” The Japan Automobile Manufacturers Association also welcomed it. EU tariffs of up to 10 percent on Japanese cars will be phased out over seven years. Most EU food exports will see tariffs end over time.
The European Union and Japan are also forging a parallel “”strategic partnership” on broader political issues such as security, crisis aid, and climate change. Both the European Union and Japan forecast that the trade deal will increase economic growth and employment in both Japan and Europe.
Japan has the world’s third-largest economy with a population of about 127 million and it is currently Europe’s seventh biggest export market. One of the most important trade categories for the EU is dairy goods and Japan’s appetite for milk and milk-based products has been growing steadily.
