EU Reaches Agreement with Japan in a Significant Win for Free Trade

This brief outlines how shipping lines are playing a bigger role in market consolidation and what role private equity has assumed in facilitating deals.

In a second major win for the European Union, following the election of new French President Emmanuel Macron, the bloc has agreed a far-reaching trade arrangement with Japan.

As a result of the Japan-EU Economic Partnership Agreement (JEEPA), tariff barriers between Japan and the EU will be lifted on a number of goods and services. Japanese cars imported into the EU will see a gradual reduction of the current 10% tariff, whilst Japan is set to lift duties on European food imports, which average around 21%.

Following the Brexit referendum and the cancellation of the Trans-Pacific Partnership agreement, the signing of this deal is seen by many as a welcome shot in the arm for the principles of free trade. Earlier in the week, Japanese Prime Minister Shinzo Abe had stated: “It is important for us to wave the flag of free trade in response to global moves toward protectionism by quickly concluding the free trade agreement with Europe”.

For logistics firms, particularly those heavily involved in long-distance operations such as freight forwarders and express carriers, the deal is a welcome one. According to The Economist, JEEPA could raise European exports to Japan by 34%, with Japanese exports to the EU increasing by 29%. This may take some time to effect, however, with lengthy transition periods in place for key sectors; Japanese automotive exports will see EU tariffs reduced over a seven-year period, for example.

The President of the European Council, Donald Tusk, did not waste the opportunity to use the agreement to attack Brexit. In response to the oft-repeated argument that Britain would be better positioned to negotiate trade deals outside of the EU, he stated: “Today we have shown that this is not true, that the EU is more and more engaged globally.”

The two parties began talks on a trade deal in 2013, and it has not been a smooth ride. One issue that remains is a disagreement over arbitration in the event of trade disputes. Whilst the EU has proposed the implementation of investor courts, Japan has resisted this, preferring the standard investor-state dispute settlement system, which has been criticised for a lack of transparency. Moreover, there remains the ratification process, the stage which almost upended the EU’s recent trade deal with Canada.

Nonetheless, the accord will remove tariffs from 99% of all goods traded between the EU and Japan, according to the FT. JEEPA accounts for almost a third of global GDP, and 40% of world trade, and it will have a substantial impact, to say the least.

Source: Transport Intelligence, July 6, 2017

Author: Alex Le Roy


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