After 4 years, 18 intense and constructive negotiations, and several meetings at technical and political levels, the EU and Japan have reached a political agreement on the Japan-EU Economic Partnership Agreement (JEEPA) last week.
Though it was neither side’s first priority when negotiations first commenced, both parties seemed more eager with events such as American’s withdrawal from its role as world’s trade leader, the commencement of the Brexit talks, and the world leaders’ commitment to the Paris Agreement, unfolding. In fact, to highlight the political importance of this trade agreement, both parties noted that JEEPA is the first trade agreement to mention the Paris Climate Accord.
The JEEPA comes at an important time in international trade, with protectionism lurking over the world. A trade deal such as this one, which would cover more than a quarter of the global economy, however, seems to signify the opposition of such protectionism; a notion, which both parties seem to share. The Japanese Prime Minister Shinzo Abe, for instance, told reporters prior to reaching this political agreement, that “It’s extremely important for Japan and the EU to fly the flag of free trade amid protectionist moves by reaching a swift outline agreement”.
In a nutshell, Japan will be EU’s second biggest trading partner in Asian and its sixth most important trading partner worldwide with this trade agreement. While Japan and the EU already enjoy low average tariffs, both the agriculture and food products and the motor vehicle industry will see some significant changes. The EU, the world’s largest cheese exporter, predicts the trade deal would result in an additional 10 billion Euros in exports of processed foods, including meat and dairy products, to Japan. Similarly, tariffs on Japanese cars going into the EU, which are currently at 10%, will be lowered over a period of time once the agreement goes into effect.
Though agreement between the parties exists in most aspects, some topics need to still be finalized before it JEEPA may be concluded. One of these is, the method by which investment disputes may be resolved. The EU has tabled to Japan its reformed proposal on the Investment Court System (ICS), a system which is to replace its much-disputed predecessor the Investor to State Dispute Settlement System (ISDS), but has not found agreement from Japan on this new system. As Hosuk Lee-Makiyama, Director of the European Centre for International Political Economy (ECIPE), noted in a statement to The Economist, “Japanese are also wary of adopting a system that could become a template for future deals, in which state-appointed judges might rule on claims by Chinese or Korean companies against Japan’s government.
Based on the agreement in principle, negotiators from both sides will continue their work to resolve all the remaining technical issues and conclude a final text of the agreement by the end of the year. Then, the Commission will proceed to the legal verification and translation of the agreement into all EU official languages, and will consequently submit it for the approval of EU Member States and the European Parliament. Similarly, Japan will have to submit this agreement before their parliament for approval as well.