As a result of the stalled World Trade Organisation Doha Round of trade negotiations, the European Union has been actively negotiating bilateral and plurilateral trade agreements. Since the entry into force of the EU-Korea free trade agreement (FTA) in 2011, the European Union has attempted to conclude its negotiations with Canada, India and Singapore, and is hoping to make progress with members of the Southern Common Market, the Eastern European countries and the African, Caribbean and Pacific states with which it is negotiating economic partnership agreements.
In the midst of the ongoing economic crisis, EU institutions are pushing for the initiation of negotiations with the United States and Japan – respectively, the European Union's first and sixth trading partners. At the last EU summit (October 18 to 19 2012), the European Council stated that concluding bilateral trade agreements could translate into an increase of 2% in EU gross domestic product (GDP) (over €250 billion) and 2 million new jobs. Two-thirds of these gains are expected to result from concluding FTAs with Japan and the United States.
The EU-Japan agenda ihas progressed further, but negotiations for the EU-US FTA are expected to be launched in 2013.
Japan is the European Union's second-biggest trading partner in Asia after China. Preparations for an FTA between the European Union and Japan began at the EU-Japan summit of May 2011. A year later, in July 2012, both partners successfully completed a scoping exercise on the breadth and depth of a possible FTA.
On October 25 2012 the European Parliament voted in support of the initiation of FTA negotiations with Japan. In 2011 the European Parliament highlighted that the Japanese trade surplus with the European Union was worth €18.5 billion, of which automotive products made up 30%. Although EU-Japan trade has been in decline since then, in 2011 the European Union imported €67.5 billion worth of goods from Japan and exported €49 billion there. As the European Union and Japan account for more than 20% of global trade, a trade agreement could boost EU exports to Japan by up to 71% and Japanese exports to the European Union by 61% if tariff and non-tariff barriers were to be removed. Parliament called the European Council to authorise the commission to start negotiations with Japan on the basis of the scoping exercises and clear and measurable targets. At the EU summit a week earlier, the council had called for an agreement on negotiating directives with Japan with a view to launching negotiations in the coming months.
Negotiations should initially focus on the removal tariff and non-tariff barriers. The European Union has repeatedly emphasised the need for Japan to ensure market access by removing less obvious, structural, non-tariff barriers to European trade and for EU negotiators to be alert to their actual elimination, rather than mere commitments to eliminate them. The European Parliament has even set as a condition to entering negotiations a binding review clause that requires an assessment, one year after the initiation of negotiations, of Japan's actual commitments in eliminating these barriers.
Given the resistance of some EU member states, including France, which is concerned about the effects of an FTA on trade in cars, EU Trade Commissioner Karel De Gucht has been clear that that the barriers subject to heightened scrutiny will be non-tariff barriers affecting the EU automotive sector, as well as those affecting public procurement for railways and urban transport.
In expressing its hopes for FTA negotiations at the last EU summit, the European Council made special mention of the "comprehensive transatlantic trade and investment agreement". A week later, the European Parliament gave the European Commission authority to open negotiations in the first half of 2013, but called for the protection of the European Union's economic interests, especially in the agriculture sector.
The European Union and the United States collectively account for about half of the world's economic output and one-third of world trade. In 2011 transatlantic trade in goods and services amounted to €700 billion. An agreement could increase production by €122 billion for the European Union and add half a point to the European Union's GDP.
As indicated in June 2012,(1) there has been much discussion regarding the probability of a EU-US FTA since the EU-US High-Level Working Group on Jobs and Growth was established in November 2011. The results of its final report are now eagerly awaited, and likely to come out in December 2012. It is expected that the recommendation will be to launch negotiations for a comprehensive agreement. Although agreement on certain issues will be challenging – for example, intellectual property, genetically modified foods and animals, certifications and trade of automobiles – it is understood that both sides see great potential for growth and will make every effort to overcome challenges, in a decisive step that moves on from the vast eradication of wealth experienced by both since 2007. On November 9 2012, after the re-election of President Obama, De Gucht stated that it was "time to act" on a EU-US FTA as there is "for the first time in years, a serious drive" towards reaching a deal. However, De Gucht signalled that "[a]s is often the case in trade policy, everyone seems to be in favour in general, but opposed to many of the specifics of such a deal", and that the negotiations would therefore be complex.
The European Council will further consider the initiation of EU-US FTA negotiations and the contribution that it can make to the growth agenda in February 2013 after the issuance of the final report of the EU-US High-Level Working Group.
For further information on this topic please contact Charles Julien or Jennifer Hawkins at King & Spalding LLP by telephone (+41 22 591 0804), fax (+41 22 591 0880) or email (email@example.com or firstname.lastname@example.org).
(1) For further details please see "EU-US trade talks: moving closer to the initiation of negotiations".
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