Japan-EU Trade Agreement – 1/3 of Global GDP Included

The EU and Japan have been building up a formal set of economic cooperation agreements since 1987.  (Appendix 1). Today, the EU is the third largest trading partner of Japan, while Japan is the 7th largest trading partner of the EU. Both sides see significant economic potential for deeper cooperation, in terms of job creation and export revenue. However, absent free trade agreement (FTA), exporters still faced some substantial import duties and difficulties in compliance, particularly with standards. This prompted the establishment of JEEPA, the first FTA between the two parties. The commitment between the two to get this through is obvious. A large part of JEEPA negotiations was focused on regulatory issues or non-trade measures. Chapters are dedicated to addressing newer challenges of global trade like e-commerce, capital movements, intellectual property and corporate governance.

What to Expect? Benefits for Goods & Services Coming in EU-Japan

Broadly, we assess the usefulness of the Japan-EU Economic Partnership Agreement
(JEEPA) based on the breath and extent of tariff cuts, where we assume that better quality
trade agreements have steeper tariff cuts over shorter time periods.  Looking at the tariff schedules of the two parties, Japan appears to be more conservative in cutting tariffs.  Its tariff schedule has a longer phase out period of 20 years versus the EU’s, which 15 years. It also has more exclusions in its tariff schedule than the EU – various goods in 12 chapters are not covered, compared to 6 for the EU. Japan only agreed to eliminate tariffs for 62 chapters of goods upon entry into force (EIF) whereas the EU promised 67. Compared with the status quo, however, EU-Japan still provides some significant benefits for exporters in both markets.  Tariff rates on specific products of key interest can be high and any reductions are likely to result in new market access for both.