EU-Japan Economic Partnership Agreement

“Malta welcomed the entry into force last Friday of the EU-Japan Economic Partnership Agreement – an ambitious milestone for bilateral relations,” Malta’s nonresident ambassador to Japan, André Spiteri told this paper.

“This is a great opportunity for Malta to explore more trade opportunities with the world’s third largest economy. Malta stands to gain from such an agreement and government is committed to support enterprises that wish to explore the various benefits and opportunities of doing business with Japan.”

Anthony Micallef, president of the Malta-Japan Chamber of Commerce said that “around 1,300 jobs in Malts are supported by trade with Japan. The EPA is a state-of-the-art trade deal, with great benefits for the Maltese economy. MJCC is working on this effect especially now that many Japanese companies are being encouraged to open an office here in Malta − not only to do business here but also to have one foot in the EU for expanding their trade. We encourage local businesses to join forces to maximise trade flows”.

Japan is Malta’s sixth largest trade partner outside the EU with exports by 44 Maltese companies to Japan currently reaching €106m as against imports of €60m. The Maltese government has identified sectors, which thanks to the EPA, might attract future Japanese investment. These include precision engineering, pharmaceuticals, machinery and mechanical appliances, plastic and plastic products, chemicals, aircraft parts, software development, toys and games.

Hailing the EPA entry into force, Jean-Claude Juncker, President of the European Commission said that: “Europe and Japan are sending a message to the world about the future of open and fair trade. We are opening a new marketplace, home to 635 million people and almost a third of the world’s Gross Domestic Product, bringing the people of Europe and Japan closer together than ever before. It will give small businesses on both sides the chance to branch out to a completely new market.”

“More than anything, our agreement shows that trade is about more than quotas and tariffs or millions and billions. It is about values, principles and fairness. It makes sure that our principles in areas such as labour, safety, climate and consumer protection are the global gold-standard. This only happens when you work with the most natural of partners, separated by thousands of kilometres but united in friendship and values.”

Annual trade between the EU and Japan could increase by nearly €36bn once the EPA agreement is implemented in full since the pact is set to ultimately remove 97% of the tariffs applied by Japan to European goods and 99% of those applied by the EU. This will translate into an estimated saving of €1bn a year in duties paid by EU companies currently exporting to Japan.

EU’s exports to Japan currently amount to €58bn in goods and €28bn in services. The EPA is seen as a major boon to EU agricultural exports in particular cheese, pork and wines, while ensuring trade mark protection to over 200 high-quality Geograph- ical Indications products as well as to a selection of Japanese GIs. Other sectors expected to derive major benefits include financial services, e-commerce, telecommunications and transport. Moreover, the EPA gives EU companies access to the procurement markets of 54 large Japanese cities, while obstacles to procurement in Japan’s economically important railway sector at national level are also removed.

Japan’s main interest in a trade deal with Europe was reported to increase car exports, currently attracting a 10% EU tariff – to be lowered to zero over the next eight years. Although cars and their components account for about a fifth of Japan’s exports to Europe, Japanese carmakers’ share of the European market is only about 10% – much lower than in the US or Asia.

The EPA also reaffirms the shared commitment to sustainable development as well as a specific commitment to fully implement the Paris Agreement on Climate Change (2015). It reaffirms the shared values and common principles that form the basis of EU-Japan relations, including human rights, democracy and the rule of law. In addition the EU and Japan adopted decisions on 23 January to allow the free and safe flow of personal data between them, recognising each other’s data protection systems as “equivalent”, thus creating the world’s largest area of safe data flows.

The companion Strategic Partnership, to be applied on a provisional basis pending ratification by all member states, commits to security cooperation on issues like nuclear proliferation, regional security, international terrorism and organised crime, cyber-security and energy and climate security. It provides an overarching framework for enhanced political and sectoral cooperation and joint actions on issues of common interest, including on regional and global challenges.

To take stock of the initial months of implementation, the first EU-Japan committee meeting will be held in Brussels in April. On the parallel issue of investment protection, negotiations with Japan will continue on standards and on dispute resolution, with a meeting of chief negotiators scheduled for March. The firm commitment on both sides is to reach convergence in the investment protection negotiations as soon as possible, in light of their shared commitment to a stable and secure investment environment in Europe and Japan.