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January 16 roundtable

Roundtable on EU-Japan trade relations

16 January 2020

On 16 January 2019, the EU-Asia Centre and EPC co-hosted a roundtable with leading Japanese and EU experts on international trade issues. The lively discussion covered the effects of the EU-Japan Economic Partnership Agreement (EPA), perspectives on the recent agreements involving China and the US, WTO reform and the prospects of reinvigorating multilateralism in the global trade liberalisation.


The discussion on Japan-EU Economic Partnership Agreement (EPA) highlighted benefits that the agreement had brought in terms of increase in trade of cars, wine and food products. Moreover, the agreement and the political momentum that had brought it about had aligned the partners closer than ever before. The lengthy negotiations had been challenging at times, but the result had been an exemplary win-win trade deal and spurred cooperation between the EU and Japan in other contexts too, such as G20. The partners had pushed through an agreement on the language for the WTO reform. Their cooperation had also helped the adoption of the Japanese proposal “Data Free Flow with Trust” to provide language and framework for the WTO discussions on the e-commerce discussion in Geneva.

 

The participants agreed that the EPA had proven one the most positive developments among the otherwise challenging years for global trade liberalization. Ultimately, it could serve as a model for the economic rules of 21st century due to its responsiveness to the changes in global trade. It was also agreed that the agreement had been remarkable well received by the public in both the EU and Japan, avoiding most of the criticism faced by other major trade deals, such as CETA. The EPA had been well received by the EU business community and was currently the most utilized trade agreement among the Japanese businesses.

 

The discussion on WTO reform and the crisis of multilateralism in trade liberalization found many points of agreement among the participants. The need to reform WTO has been clear to all members, but finding the common approach have proven challenging. The participants agreed that the reform WTO must have a more robust dispute resolution system (DRS). The problem with the current DRS was illustrated by the Japanese disappointment with the (non)resolution of its dispute with South Korea over the import bans of certain edibles. After four years the panel had ruled in favour of Japan, the appellate body had dismissed the ruling citing lack of legal analysis, but failed to provide any indication on whether South Korean practices where consistent with WTO rules. An issue that Japan and the EU saw eye to eye was the need to reinforce the ability to penalise the non-compliant members.

 

The participants agreed that inclusive multilateralism and WTO should be at the front and centre of the negotiations for global trade liberalisation – without compressive and inclusive agreements trade imbalances should be expected. It was agreed that the June ministerial conference had provided some positive signs of development and the global leadership finally shared a sense of urgency. However, in case of stalling negotiations on reform, expanding on the bilateral deals such as the EU-Japan EPA and the multilateral Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) could be a secondary way forward. CPTPP remains an agreement that is open to further members in the region as well as globally.

 

It was agreed that closer cooperation between the EU and Japan were partially due to the challenge posed by the tensions between China and the US. In the world with more emphasis on power politics, the EU and Japan benefit from the combining their strength for common goals. Also the US, the EU and Japan agreement on curbing industrial subsidies was welcomed as an encouraging development and as another possible benefit of the closer cooperation between the EU and Japan. The agreement of the three could bring on board many others, and eventually gain enough gravity to convince China to consider its position on subsidies.

 

The recently concluded US-China phase-one trade agreement was welcomed as a temporary bandage over the rift between the parties, but many underlying trade issues still remain that would need to be addressed. The trade disputes between the EU and the US and the Japan and the US were viewed as distractions from finding a common ground on working with China on issues of shared concern. The participants agreed that new ‘EU geopolitcal Commission’ approach was timely, but it would remain to be seen how it would rise up to the challenges. The upcoming EU-China summit in Leipzig could prove illustrative with expectations high for progress on the EU-China bilateral investment treaty.

 

The participants agreed that the Japan-US trade negotiations appeared to have gone smoothly than had been expected. It was discussed that the conclusion of CPTPP as well as the EU-Japan EPA could have increased the urgency for the US negotiators conclude their own trade deal – or leave many industries in the US at disadvantage. The deal covered many sectors in goods, while omitting others, leaving space for future negotiations.

 

Another area discussed was the remaining trade restrictions on Japanese food products put in place in the wake of the Fukushima incident. 34 countries have lifted the restrictions, but 24 countries still maintain them, including the EU. Juncker’s agreement from last year to ease the import restrictions was considered a positive opening. The participants found that restrictions were at places symbolic – with restrictions on products that there was no trade volume for. Due to the political and symbolic aspects of the restrictions, solution would not come from trade negotiations, but would require political leadership.

 

Finally, other challenges facing both the EU and Japan were discussed. It was agreed that more action should be taken to address climate change and that cooperation between the EU and Japan could bear benefits also on this front. Concerning the challenge posed by ageing demographics, it was positively remarked that serving the ageing population could in fact also spur business possibilities and growth in services industry.