A EU-Japan Free Trade Agreement – Toward More Solid Economic Relations

Summary:

Until the 1990s, economic ties between the European Union and Japan were marked largely by an atmosphere of trade tension. The main reason was the persistent trade surplus that Japan maintained. Over time, however, the improvement of the bilateral trade balance and the massive direct investment of Japan in the EU have alleviated these tensions.

More recently, there are growing signs that their economic ties are actually weakening. But since the EU and Japan share a common set of values (as shown in their commitment to democracy, free-market economic systems, respect for human rights, and the rule of law), it is imperative that they reinforce their ties of cooperation on a range of global issues as well as pursue progress in their own mutual relationship.

In this context, Japan and the EU made efforts to gauge the prospects for a bilateral free trade agreement (FTA). Nevertheless, many challenges remain: For Japan, EU tariff rates are the key matter of concern while the EU deems it problematic that Japan still maintains a number of non-tariff barriers (NTBs) to trade, and has insisted that negotiations on an FTA cannot even begin until Japan dismantles these barriers.

Even if further tariff reductions are not expected to have a major impact on the volume of trade between the two partners, a bilateral FTA could still benefit both Japanese and European economies through positive implications on productivity and innovation.

• Alternative Source 1