Series 16 - Back to Brexit Basics – EU/Japan Trade Deal

Jul 19, 2018

Last week, we looked at the trade war involving the US and other countries and what it is all about.  This week we delve into the trade deal that was recently agreed between the EU and Japan.

A deal is signed

After 18 negotiating rounds and several other meetings since talks were launched in 2013, the EU and Japan have agreed a trade deal, or an Economic Partnership Agreement as it is referred to.  Agreement was broadly reached in July 2017 but the past 12 months have been spent finalising the legal text of the agreement.  The agreement will cover over 600 million people and relates to trade in goods worth over €120 billion as well as services.

Both sides hope that this pact will open up large market opportunities for Japan and the EU as well as strengthening cooperation between the two jurisdictions in a range of areas including climate change and sustainable development, particularly in the area of labour standards.

President of the European Council, Donald Tusk said that the agreement was the “largest bilateral trade deal ever” and that “relations between the European Union and Japan have never been stronger”.  The deal will mean the removal of the vast majority of the €1 billion of duties paid on EU exports to Japan and will help many SMEs across the EU and Japan.

The European Commission have released a useful tool which allows you to check what your country and region export to Japan and have also provided an infographic for each EU country showing the kind of products that are exported.

For example, in the case of Ireland, 503 companies export horse feed, dental products, scaffolding, pharmaceuticals, dairy products and chemicals worth €2.5 billion to Japan and this supports over 7,600 jobs in Ireland.  The EU-Japan trade agreement will make it cheaper for these companies to trade with Japan.  The UK exports whiskey, tyres, paint, chemicals and aluminium among other products valued at €6.5 billion.

Other features of the deal include:

  • Over time 85 percent of EU agri-food products will be allowed to enter Japan free from customs duties

    • Tariffs on EU beef exports to Japan will be cut from 38.5 percent to 9 percent over 15 years

    • Tariffs on EU wine exports to Japan will be reduced from 15 percent to nil

    • Tariffs on EU cheese exports which were 29.8 percent will be reduced to nil

  • EU tariffs of 10 percent on Japanese cars and 3 percent tariffs on most car parts will also be removed

  • Import quotas will no longer apply to fish and tariffs will be abolished on both sides

  • In terms of services, the agreement says that it will be easier for EU firms to provide services (currently worth €28 billion) on the Japanese market

In summary, the big winners are Japanese car and auto-part makers and the EU’s food sector particularly in high end goods such as wine and cheese.  Japanese dairy companies may lose market share with the removal of significant tariffs on cheese on imports from the EU. 

Watch this short video released by the European Commission which explains how free trade agreements can help companies and communities.

Read all of our Brexit updates and Back to Brexit Basics on the dedicated Brexit section of our website.