Japan FTA

It is reported that the European Commission has requested approval from its 27 members to commence negotiations with Japan for a Free Trade Agreement (FTA). The once all powerful bloc, which is now having to cope with many a crisis, has sought this agreement as part of a broader effort to boost growth and jobs in the bloc.

The bloc’s intentions have been stated in no uncertain terms when the EU trade Commissioner Karol de Gucht in presenting the proposal had said: “Let’s be clear. We need these jobs and we need this growth in the current economic climate. If growth in the next 20 years is likely to come from Asia, then overlooking Japan would be a serious mistake in our trade strategy.”

According to him, such an agreement could increase the bloc’s GDP by one percentage point and create up to 400,000 additional jobs among the 27 member states. Preliminary discussions between officials have been going on for the past one year and if member states unanimously decide on going ahead with this deal, trade talks are expected to commence very early.

The Japan Free Trade Agreement is not the only such deal that the EU has been working on. Like many other countries fed up with the impasse in the WTO Doha negotiations have turned to bilateral free trade agreements to boost trade, the EU also has been exploring such possibilities in order to boost economic recovery. A free trade agreement with Columbia and Peru is in the final stage of ratification, while talks are ongoing with India, Canada, ASEAN and Mercosur.

EU and US officials have also been reviewing the possibility of launching negotiations for a comprehensive trade and investment agreement with a working group ready to provide their recommendation to the political leaders shortly. Negotiations between the EU and US are expected to start in 2013.

 Areas which are expected to be covered include across the board tariff cuts for industrial and agricultural products, improved market access and a framework for better regulatory cooperation in the area of services, etc.

If all the ongoing and proposed trade negotiations are successfully concluded, the bloc’s GDP is expected to increase by two per cent or euro 250 billion which is said to be the equivalent of adding on an economy the size of Austria or Denmark and also lead to the creation of more than two million jobs according to the European Commission. According to EU estimates, one third of the gains would come from ASEAN, Canada, India and Mercosur, while two thirds would come from US and Japan

Many are the countries entering into FTAs since the failure of the Doha Round. Why do these countries look for such opportunities if the end result is a loss for themselves? It is obvious that the positive factors of such agreements outweigh the negative factors.

For example, automobile makers in the EU are concerned that the Korean FTA opened up competition for their automobiles and are concerned that the same thing might happen when an agreement is signed with Japan. But the EU Trade Commissioner insists that they will not open up unless Japan opens up sufficiently for their products and does away with non-tariff barriers.

 While the automobile sector is concerned about the negative effects, many others sectors such as food products, agriculture, etc., welcome such agreements as they are able to expand their market share.

We are among the few countries not pursuing such agreements vigorously. If many of the developed as well as developing countries are pursuing this line of liberalisation, there obviously is merit in this approach. Unless we also make moves in the same directions, even our existing markets could be threatened by competitors who would obtain preferential access to such markets.



(Manel de Silva holds an Honours Degree in Political Science from the University of Ceylon, Peradeniya and has engaged in professional training in Commercial Diplomacy at ITC and GATT. She has served as a trade diplomat in several Sri Lankan Missions overseas and was the first female Head of the Department of Commerce as Director General of Commerce.)