Economy & Tech

New Japan-EU Deal: Let’s Show America the Merits of Free Trade

Published

6 years ago

July 30, 2018

Editorial Board, The Sankei Shimbun

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Editorial Board of The Sankei Shimbun

Prime Minister Shinzo Abe, President Donald Tusk of the European Council, and European Union Commission head Jean-Claude Juncker signed the EU-Japan Economic Partnership Agreement (EPA) on July 17, after finalizing negotiations in end-2017.

The move will create a huge economic zone that accounts for 30% of the world’s GDP early in 2019. It will become a cornerstone for Japan’s growth, along with the Trans-Pacific Partnership (TPP), for which Japan has already completed domestic procedures for ratification.

Upon signing the agreement, Prime Minister Abe said, “As concerns about protectionism rise globally, the partnership between Japan and Europe is a significant move that shows the importance of free trade to the world.”

The Trump administration has declared a trade war—not just against China, with whom they are locked in battle for economic and military hegemony, but also against Japan and European allies. Japan and Europe must lead the world on free trade by taking a firm stance against protectionism and producing results through this partnership.

The elimination of tariffs will boost exports to European countries for goods such as automobiles. The partnership will also bring benefits to Japanese consumers as imported European wine and cheeses become cheaper. Japan can further leverage the effects of the partnership by strengthening the competitiveness of its domestic agricultural sector.

The partnership covers a range of issues, including rules of e-commerce and intellectual property. Japan and Europe have also agreed to allow data obtained by companies operating in the partnership region to flow seamlessly back home. It is crucial for Japan and Europe to keep their regulations in step with each other in order to consolidate their position against China, where state control over digital information continues to tighten.

Meanwhile, the U.S. is considering raising tariffs on imported cars, with Japan and Europe in mind. It is hoped that the agreement’s timing would also encourage restraint on the part of the U.S.

The Japan-EU agreement further highlights the unavoidable consequences of the U.S. decision to withdraw from TPP, which killed expectations of increasing U.S. agricultural exports to Japan. U.S. exports, such as pork and wine, are now disadvantaged because of the lack of a trade deal, compared to exports from European partners.

The U.S. is expected to push for a reduction in the trade deficit through bilateral talks with Japan. However, Japan has no reason to accept conditions advantageous to the U.S. that go beyond the demands placed on Japan by the EPA or TPP.

It will be difficult to convince President Trump to change his mind, even if Japan and the EU appeal to him based on the principles and significance of free trade. The only hope of persuading him is to show the pragmatic advantages of multilateral cooperation and the disadvantages of being left out.

For this to happen, the harms of isolationism must be shown not only to the Trump administration, but to also to the U.S. Congress, individual state governments, and American agriculture and automobile industries.

Click here to read the original editorial in Japanese.