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EU and Japan Reach Free Trade Deal—What it Means for Apparel and Footwear

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Before long, Japan and the European Union will be trading goods almost entirely freely.

In what’s being seen as a challenge to a protectionist President Trump, the two nations announced an agreement on a deal that will create a trading bloc on par with NAFTA, and the EU is calling it “the most important bilateral trade agreement ever concluded by the EU.”

Exports to Japan from the EU could increase by as much as 20 billion euro ($22.8 billion), which could pose a direct hit to U.S. manufacturing.

“The EU-Japan trade agreement would not only boost the EU’s economy. It would also strengthen Europe’s leadership in shaping global rules according to our values,” the EU Commission said in FAQs on the trade deal. “Like us in Europe, the Japanese believe that the challenges our societies are facing today cannot be solved by protectionism or by turning our back on the world.”

The move on agreeing to the deal comes just one day ahead of a G20 Summit in Hamburg, Germany. In recent G20, and even G7, meetings trade has been a hot—and touchy—topic.

[Read more about what happened at a recent G7 Summit: Trump Agrees at G7 to Fight Trade Protectionism]

The deal, which is being called the EU-Japan Economic Partnership Agreement, will remove the “vast majority” of duties paid by EU companies, which, according to the European Commission, amount to as much at 1 billion euro ($1.14 billion) annually. The deal also sets what the Commission is calling “the highest standards of labor, safety, environmental and consumer protection.” It also focuses on sustainable development and includes a specific commitment to the Paris climate agreement.

What does the deal mean for apparel and footwear?

Under the in-process trade deal, tariffs on more than 90 percent of the EU’s exports to Japan will be eliminated when the deal enters into force. Once its fully implemented, Japan will have cut out customs duties on 97 percent of goods imported from the EU.

Tariffs on textiles and clothing will be “fully abolished,” and for leather and shoes, the existing quota system will be done away with once the agreement takes effect. Tariffs on shoes will come down from 30 percent to 21 percent right away and the rest of the duties will be eliminated over 10 years.

Tariffs on EU exports of leather products, like handbags, will be eliminated over 10 years as will gear like sports shoes and ski boots, which have traditionally been highly protected by Japan.

When it comes to labeling, things will continue to be easier to facilitate trade.

“In March 2015, Japan adopted the international textiles labeling system similar to the one used in the EU. Textiles labels therefore do no longer need to be changed on every single garment exported to Japan, as was the case before,” the European Commission noted.

What’s the timeline for this deal?

The EU-Japan trade deal still faces some negotiation before finalization, including settling differences on dispute resolution for investors. It then has to be ratified by Japan and all European regions or countries. The European Commission expects the whole process to be done by mid-2018, and the agreement should come into force early in 2019.

“Together, we are sending a strong message to the world that we stand for open and fair trade. As far as we are concerned, there is no protection in protectionism,” European Commission president Jean-Claude Juncker said. “Only by working together will we be able to set ambitious global standards. This will be the message that the EU and Japan will bring together to the G20 tomorrow.”

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