The European Union and Japan have concluded negotiations on a giant free trade deal that they said was reached while “fighting the temptation of protectionism”, a message apparently directed at U.S. President Donald Trump. The deal, which the EU called its biggest ever, must be signed and ratified by both sides.
The broad outlines of the deal were agreed to in July. Once completed, it will forge an economic zone of 600 million people worth 30% of global GDP.
After the announcement was made, Prime Minister Shinzo Abe hailed the imminent birth of what he called a “gigantic economic zone” as he confirmed that the negotiations had been concluded.
“Japan and the EU will join hands and build an economic zone based on free and fair rules,” Abe told reporters in Tokyo. Abe and European Commission chief Jean-Claude Juncker said earlier that the agreement, which was four years in the making, had “strategic importance” beyond its economic value.
“It 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,” the pair said in a statement released in Brussels.
Through the deal, the EU hopes to get better access to one of the world’s richest markets, while Japan hopes to jump-start an economy that has struggled to find solid growth for more than a decade.
Japan is also hoping to seize an opportunity to offset the failure of the 12-nation Trans-Pacific Partnership, a massive free trade deal that was torpedoed by Trump in January.
The deal will open up the EU market to Japanese cars and auto parts and the Japanese market to European dairy and agricultural products.
Japan will eliminate tariffs on 94% of all imports from the bloc, including 82% on farm and fishery products. The reduction will likely result in lower prices for European cheese, pork and wine in Japan — although domestic farmers are wary of being flooded by competitive products.
In return, the EU will abolish tariffs on 99% of imports from Japan. The EU will eliminate tariffs on Japanese autos in the eighth year after the pact is implemented and abolish taxes on sake and green tea. Japan’s exports will likely get a boost in a market comprising over 500 million people.
The two sides were aiming to finalize the specifics in the hope of signing the deal next summer and putting it into effect in 2019, negotiation sources said. EU officials insist the deal will be a major boon to European farmers who would gain access to a huge market that appreciates European products.
Hailing the opportunity at a news conference, EU Trade Commissioner Cecilia Malmstroem said, “This is actually the biggest trade deal we have ever negotiated from the European Union”.