Overview

The European Union (the EU) and Japan are currently negotiating a Free Trade Agreement (FTA) which aims at liberalising trade in goods, services and investment between both partners by, inter alia, eliminating tariff and non-tariff barriers. Negotiations for this agreement were launched on 25 March 2013 and are expected to conclude in 2015.

The negotiations with Japan address a number of EU concerns, with a special focus on non-tariff barriers and the further opening of the Japanese public procurement market. To protect sensitive sectors the EU has foreseen the introduction of a safeguard clause in the text of the agreement.

More concretely, the negotiations cover: (i) market access issues, including tariffs, technical barriers to trade, access to public tenders, trade in services, rules on investment and sanitary and phytosanitary issues (SPS); (ii) regulatory cooperation and transparency; and (iii) trade rules, such as protection of intellectual property (including geographical indications or GIs), competition policy, sustainable development, resolution of disputes, rules of origin and facilitation of customs procedures. In addition, topics such as corporate governance and the business environment, electronic commerce, and animal welfare are also subject to negotiations.

This briefing summarises the state of play as well as the next steps of the ongoing EU-Japan FTA negotiations. It also provides background information on the origin of the talks and touches on the impact of such an agreement. Furthermore, the briefing covers some sensitive issues which have been raised by both sides during the negotiations.

Last round of FTA negotiations

The 9th round of EU-Japan FTA talks took place from 23 to 27 February 2015 in Brussels. It covered most of the areas to be included in the future agreement, namely tariffs, technical barriers to trade, access to public tenders, trade in services, rules on investment and SPS, regulatory cooperation, and transparency. A few other topics, such as intellectual property rights will be discussed during the inter-sessional phase at the end of March.

The objective of this round was to further consolidate the negotiating texts, which have already been tabled by both sides on a number of issues for bilateral discussion, and to advance the discussion on the list of non-tariff measures the EU would like Japan to abolish. The list, which was transmitted by the EU to Japan in December 2014, includes, among other areas, non-tariff barriers in the public procurement market.

In addition to railway procurement, agriculture, geographical indications and the automotive sector remain sensitive topics in the negotiations. Offers on services and public procurement are expected to be exchanged shortly.

The next round of negotiations will take place in Tokyo at the end of April 2015.

Background

At the EU-Japan Summit of May 2011, both partners decided to start preparations for both a FTA and a political framework agreement. In May 2012, after one year of intensive discussions, the European Commission (the Commission) agreed with Japan on a very ambitious agenda for negotiations covering all EU market access priorities. On 18 July 2012, the Commission asked EU Member States for their agreement to open negotiations for a FTA with Japan, which they gave on 29 November 2012. Following the adoption of the negotiating mandate by the European Council, the negotiations were officially launched on 25 March 2013.

The EU Member States inserted a review clause in the negotiating mandate, according to which the talks should continue only if one year after the beginning of the negotiations, Japan showed convincing evidence that it is committed to remove significant non-tariff trade barriers, in particular, with regard to its public procurement market (especially in the field of rail transport).

After assessing the progress achieved during the first year of talks, in June 2014 , the Commission and Member States decided that the negotiations should continue since Japan had implemented the commitments it made prior to the launch of negotiations. The successful completion of the review process opened the second phase of EU-Japan FTA talks.

On 4 December 2014, the Commission, together with the Japanese Ministry for Land, Infrastructure, Transport and Tourism, held in Tokyo the second meeting of the EU-Japan Industrial Dialogue on Railways. The Dialogue, which brings together representatives of the public and private sector of the respective parties, aims to promote mutually beneficial cooperation and information exchange between the participants, particularly in relation to safety standards. This should facilitate bilateral trade in the railway sector, including procurement and purchases by private operators. The first Dialogue on Railways took place in Brussels on 27 March 2014.

Impact of the EU-Japan FTA and sensitive issues

According to the Commission’s figures, a trade agreement between the EU and Japan is expected to boost Europe’s economy by 0.6 to 0.8% of its GDP and may create up to 400.000 jobs. It is expected that EU exports to Japan could increase by 32.7%, while Japanese exports to the EU would increase by 23.5 per cent.

EU aims to eliminate non-tariff barriers, such as complex regulations that make it difficult for companies to export their goods and services to Japan. EU exports to Japan mostly machinery, chemical products and agricultural products. Japanese non-tariff barriers are particularly significant in relation to imports of pharmaceuticals, processed food, office and IT equipment and cars.

From the Japanese side, tariff liberalisation on manufacturing export goods such as automotive, electronics or machinery is key. For instance, EU imposes a 14% duty on certain electronic products. Japanese industry wishes to achieve a level playing field in the EU to be able to compete with other EU trading partners, such as South Korea.

With regard to sensitive topics, the EU has reportedly offered to eliminate its auto parts tariffs immediately after the entry into force of the agreement in exchange for Japan reducing its duties on processed food. The EU currently imposes 10% in tariffs on Japanese exports of auto parts, while EU wine is charged with a 15% duty per litter.

On the other hand, the European Automobile Manufacturer’s Association is requesting for the removal of Japanese non-trade barriers that prevent EU car producers from entering the Japanese market before removing EU tariffs on car imports. EU car manufacturers are particularly wary following the opening up of the EU market by the EU-Korea FTA, since they claim that as a result of such an agreement imports of Korean cars increased by 41% in 2012 alone.

Next steps

The tenth round of negotiations will take place in Tokyo in April 2015.

EU leaders have set the ambitious goal of completing the talks by the end of 2015. Following completion of negotiations, and based on previous experience, the final adoption of the text of the agreement could take at least one year. Once negotiations are concluded, in addition to requiring the green light by the European Parliament and the Council, the EU-Japan FTA will require ratification by national parliaments in each of the 28 Member States of the EU before it enters into force.