The European Union and Japan are closing in on a trade deal that has been likened to NAFTA in terms of heft—it will create an economic zone covering roughly 30 percent of global GDP.
On Friday the two parties reached an agreement on the final details of the EU-Japan Economic Partnership (EPA), and EU Trade Commissioner Cecilia Malmström and Japan’s Foreign Minister Taro Kono have now endorsed the deal.
In a joint statement, president of the European Commission Jean-Claude Juncker and Japanese prime minister Shinzō Abe said, “The finalization of the negotiations on the EU-Japan EPA demonstrates the powerful political will of Japan and the EU to continue to keep the flag of free trade waving high, and sends a strong message to the world.”
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The strategic play, which the EU said is the biggest bilateral trade agreement it’s ever negotiated, will remove the “vast majority” of the 1 billion euro ($1.18 billion) EU companies pay annually to export goods to Japan, and those exports to Japan from the EU could increase by as much as 20 billion euro ($23.6 billion). An increase like that could limit the amount of goods Japan takes in from the U.S.
As part of the deal, tariffs on textiles and clothing will be completely eliminated, and the quota system that had been hampering EU exports of leather and shoes will be abolished once the agreement enters into force. Tariffs on shoes will fall from 30 percent to 21 percent once the deal takes effect, and the remaining tariffs will fall away completely over 10 years. Tariffs on exports of leather products, like handbags, from the EU to Japan will be eliminated over 10 years, as will tariffs on once highly protected sectors in Japan—sports shoes and ski boots.
The deal, according to Juncker and Abe, “sends a clear signal to the world that the EU and Japan are committed to keeping the world economy working on the basis of free, open and fair markets with clear and transparent rules fully respecting and enhancing our values, fighting the temptation of protectionism.”
Both parties appear committed to finalizing the trade deal this year. From here, the agreement will go through legal verification, translation into the EU’s 23 official languages, plus Japanese, and then be submitted for approval by the European Parliament and the EU member states. The aim is to have the agreement enter into force before the current mandate of the European Commission ends in October 2019.