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February 04 2019

The European Union and Japan have opened their markets to each other

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The European Union and Japan have opened their markets to each other

While Tokyo is trading with Moscow on the Kuril Islands, Japanese business began trading duty-free with Europeans in the largest free trade area on the planet.

Whether Prime Minister Shinzo Abe will be the Japanese politician who will solve the Kuril Islands problem with Russia is not known. But he has already become the leader who provided his country with free access to the European market: February 1 entered into force on the creation of the world's largest free trade zone. The European Union and Japan, which together provide about one-third of global GDP, signed it in July 2018.
The agreement, which was not agreed with Trump
From now on, Japanese companies can export their products to the (for the present) 28 EU countries, the most powerful economic union in the world, in which about 446 millions of consumers will be living after the UK release. For European exporters, in turn, the third largest economy of the planet with a population of about 127 million opens up in full.
To this end, Brussels and Tokyo have been going for six years. At the same time, the EU tried to create an even larger free trade zone with the United States - the Transatlantic Trade and Investment Partnership (TTIP), but nothing came of it. In turn, Japan entered into the Trans-Pacific Partnership (TPP), but the United States immediately withdrew from Donald Trump's White House.
Thus, neither the Europeans nor the Japanese could find a common language in this area with the current US president, who prefers protectionism and isolationism. But they agreed with each other. So the new free trade zone is also an unequivocal signal towards Washington. And at the same time Beijing. Brussels and Tokyo have demonstrated: they are for further liberalization of world trade on a mutually beneficial basis, according to clearly defined market rules and observing strict standards for the protection of the rights of employees and consumers. In addition, for the first time, the provisions of the Paris Climate Agreement are included in international trade agreements.
New opportunities for European farmers
European exporters will feel a specific benefit very soon: every year they will save on customs duties of the order of one billion euros, said European Commission President (EU government) Jean-Claude Juncker. Moreover, in the future, industrial products from the European Union can be sold in Japan without additional certification.
The new free trade zone promises significant benefits to European farmers. So, from now on, they can deliver meat, dairy products and wine to the Land of the Rising Sun free of charge. In particular, Tokyo abolished the 30-percent duty, which until now was imposed on Gouda cheese. EU Trade Commissioner Cecilia Malmström expects 180 percent growth in food supplies to Japan, which would mean an increase in export earnings of about 10 billion euros.
According to the Ministry of Economy of Germany, with 1 February, since the entry into force of the agreement, the duties on 91 percent of all deliveries from the EU to Japan have been canceled. After the expiration of various transition periods, customs barriers for 99 percent of European exports to Japan will disappear.
The Japanese auto industry has protected itself from the "Brekzita"
In turn, the EU on the same day ceased to impose duties on 75 percent of imports from Japan, in the future, this figure will also be brought to almost 100 percent. Thus, over the course of 7, the years will decrease and eventually the duties will disappear in the amount from 10 to 22 percent, which have so far been levied on the importation of Japanese cars into the EU.
This item was for Tokyo, given the size of the Japanese auto industry, particularly important. Until now, some large manufacturers have avoided these customs barriers, supplying passenger cars to the EU domestic market from their factories in the UK. From now on, after its exit from the EU, it will be possible to deliver cars directly from Japanese enterprises. So the looming "Brexit" clearly accelerated the conclusion of the agreement.
Both sides are also liberalizing access to services. In addition, Japanese companies will now be able to participate in the EU in tenders for government orders. Accordingly, European firms in Japan will receive similar rights.
Now in line - Singapore and Vietnam
The EU-Japan Agreement has criticized various anti-globalization organizations, environmentalists and consumer advocates. One of the main accusations: the new free trade zone serves mainly the interests of big business, large corporations.
Thus, the opponents of the agreement believe that the abolition of duties in the agricultural sector is beneficial to extremely large agro-industrial companies and will hit small farms both in Europe and in Japan. There were also concerns that the privatization of water supply enterprises would be allowed in the new free trade zone, however, the agreements reached do not apply to this area.
On the whole, the creation of the EU’s free trade zone - Japan was surprisingly silent, especially if we recall how powerful opposition was caused by the TTIP talks with the United States or the much smaller European Agreement with Canada (CETA). At that time, tens of thousands of demonstrators, mostly of left-wing political orientation, took to the streets of European cities.
The Federal Association of German Industry (BDI), the leading organization of German business, welcomed the entry into force of the agreement with Japan and called on the EU authorities to support similar agreements with Singapore and Vietnam. “In this way, the EU would widely open economic doors to the rapidly growing region of Southeast Asia and prove that it is able to effectively protect European investment abroad,” said BDI board member Stefan Mair.
The European Parliament will consider a ready trade agreement with Singapore on February 13.

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