E.U.-Japan free-trade deal expected to increase trade by 18 percent

While much of the world remains concerned about the long-term effects of the protectionist policies the United States has taken with China, Europe, Mexico and Canada, the European Union and Japan have taken steps to solidify their relationship with what is being called the E.U.’s largest bilateral trade agreement in its history.

According to an analysis released yesterday by market research firm Transport Intelligence (Ti), the total value of bilateral trade will reach €36 billion by 2035, or an increase of 18 percent over the next 17 years. During the same time period, E.U. exports to Japan are predicted to be 13.2 percent higher than they would have been without the trade deal, while for Japan’s exports to the E.U., would rise 23.5 percent, Ti said.

Under the Economic Partnership Agreement (EPA), as the deal is known, the E.U. has agreed to phase out its automotive sector tariffs over a number of years, while Japan said it will gradually remove its current tariffs on various agricultural products. EPA deal will mostly involve goods that are shipped by sea or land modes. However, some perishable or urgent, high-value goods that are normally sent by air may also be affected.

For instance, the E.U. has granted full liberalization of agricultural products, with some exceptions for rice. Japan, in turn, plans to ramp down tariffs and increase quotas for goods such as wine, dairy products, pork, beef, poultry and eggs, Ti said in its analysis. In addition, there will be a phasing-out of the E.U.’s 10 percent tariff on Japanese car imports over the next seven years, plus the elimination of most tariffs on car parts – many of which are often shipped by air during times of urgent need.

Two immediate beneficiaries may be Silk Way West Airways and Japan Airlines’ JAL Cargo subsidiary, which just signed a joint-venture agreement, enabling JAL Cargo to use Silk Way West’s airfreight capacity on flights between Azerbaijan and Japan.

The final goal of the deal, Ti added, will be the removal of tariffs on shipments of all industrial goods between Japan and the E.U. countries. The two entities will also fully align their international standards on product safety and environmental protection.

The EPA deal was signed last week, on July 17, but still has yet to be ratified by both parties. If passed, the terms would likely go into effect next year.