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International trade and the EU-Japan Economic Partnership Agreement

This event; jointly organised by Bruegel and the Graduate School of Economics, Kobe University, will discuss the EU-Japan trade deal and asses its imp


Maria Åsenius

Head of Cabinet to Cecilia Malmström, European Commissioner for Trade,

Hiroo Inoue

Director General, Brussels Office, Japan External Trade Organization,

Luis Portero

Policy Coordinator for trade relations with Japan, European Commission, DG TRADE,


On our Facebook page, you you will be able to find video versions of both sessions recorded via Facebook live - session 1; session 2; Q&A from session 2.


The event was kicked off with a presentation on a recent study by Bruegel scholars for the European Parliament’s International Trade committee on the impact of the EU-Japan Economic Partnership Agreement (EPA). After reviewing the provisions of the extensive agreement, the authors assessed the possible impact of it on the European Economy in general and on specific sectors in detail. While the EPA can be compared to the EU-Korea Free Trade Agreement (FTA) in terms of tariff reduction plans and the structure of the partner economy, the latest quantitative studies suggest that the EU-Japan EPA will have an even larger positive impact on GDP than the EU-Korea FTA had.

Participants at the first panel discussed further implications of the EU-Japan EPA and shared their view on the impact and importance of the agreement as a whole. In general, panelists agreed with the findings of the Bruegel study that the agreement will have positive overall effects on both economies. Differentiating between sectors, panelists explained how immediate gains from the reduction of tariffs might fall to specific sectors such as the agri-food industry (in particular the wine industry) and the service sector. Negative effects might fall on the EU automotive industry, which might produce less value added as a consequence of the deal. Due to the similar level of development between the partner economies, trade flows are expected to increase mostly within sectors. If experience from the EU-Korea FTA provides valid guidance, this can lead to substantial growth in some sectors.

But panelists quickly pointed to effects of the EPA that go beyond what can be captured by quantitative trade models. The long run benefits of the agreement will result to a large extent from the elimination and future prevention of non-tariff barriers to trade (NTBs). Provisions on regulatory cooperation establish cooperation between different government agencies to harmonize existing standards and set new common standards in Japan and the EU. Panel participants emphasized that it will take persistent efforts from the treaty partners to make this cooperation as successful as possible.

Beyond trade integration, the panel highlighted the importance of investment facilitation and the role the EPA plays in fostering innovation. Because the partner economies have specializations in similar sectors such as machinery or pharmaceuticals, regulatory cooperation is expected to improve cooperation along supply-chains and foster innovation. A further boost to innovation can be expected from the Japanese growth strategy “Society 5.0”, which focusses on industries such as healthcare and mobility where European and Japanese companies are already leading the field.

Finally, it was emphasized that the agreement is not only economically relevant but also a strong signal that the EU and Japan are promoting a rules-based trading system in a time of increased unilateral actions. As one panelist put it: with the EU-Japan EPA, two like-minded partners provide the world with a blueprint for economic cooperation in the 21st century.

The second panel took up where the former ended by discussing the state of world trade and the actors that shape its rules and realities. Maria Åsenius, head of commissioner Malmström’s cabinet, laid out what is at stake: the rules-based multilateral trading system is increasingly challenged as protectionism rises and unilateral measures are increasingly taken. Hence, the question is how the EU and Japan should proceed to preserve a global trading system based on fair rules.

For Ms Åsenius, the key is international dialogue and cooperation. Although the EU disapproves of the unilateral measures that the US is taking, it nevertheless shares the US concerns over forced technology transfers, state owned companies and subsidized loans. As it re-prioritizes the multilateral trading system, the EU wants to engage with Japan and the US, but also continue dialogue with China, to find common ground for a reform of WTO rules.

Tomatsu Nakamura, dean of the Graduate School of Economics at Kobe University, compared the current conflict between the US and China over current account imbalances with the US-Japan conflict in the 1980s, when the US incurred large current account deficits while Japan had current account surpluses. He argued that President Trump has wrong priorities because the current account deficit matters much less than innovation, where China had surpassed the US in terms of patents already a while ago.

André Sapir, senior fellow at Bruegel, took a step back to explore the history of Chinese WTO accession before giving his take on the likelihood of a successful WTO reform. As the original WTO member countries expected the Chinese economy to converge towards the western model, they put no further controls on China. Fifteen years later, this expectation has been disappointed. However, having made large concessions upon entry in the WTO, China will hardly be willing to make further concessions now. Concluding, Mr Sapir urged that the EU-US-Japan discussions should form a platform for dialogue with China and not try to impose conditions on China. The latter approach would certainly fail and do substantial harm to the WTO.

Concluding the discussion, panelists agreed that the EU-Japan EPA makes a mark for open, fair and rules-based trade. This impetus is now greatly needed on the global level too, where Japan and the EU have to engage the rest of the world to ensure the continuity of the multilateral trading system.

Event notes by Michael Baltensperger


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