EU balks at action on Japan economic pact
Financial Times | April 28 2010
EU balks at action on Japan economic pact
By Mure Dickie in Tokyo
The European Union on Wednesday agreed to launch a "joint examination" of its trade and investment ties with Japan, but waved aside Tokyo’s call for preparations for an "economic integration agreement" that supporters say would benefit both sides by billions of euros a year.
Japanese officials say an integration agreement, or EIA, could both cut EU tariffs for products such as automobiles and TVs while also reducing the non-tariff barriers that Brussels blames for keeping European businesses out of key Japanese markets.
Such an agreement would combine both a traditional "free trade agreement" with regulatory harmonisation, market liberalisation and active co-operation on economic issues.
The push for an EIA is strongly supported both by the Keidanren, Japan’s most powerful business lobby, and by European businesses in Japan, although business associations in Europe and big automakers have lobbied against.
José Manuel Barroso, the European Commission president, made clear the EU expected progress on non-tariff barriers and regulatory harmonisation before it would start working on a deal.
"The goal here is not to buy time or to procrastinate, but frankly speaking …some of these issues cannot be addressed by an integration agreement or an economic partnership agreement," Mr Barroso told a press conference after a summit meeting with Yukio Hatoyama, Japan’s prime minister.
The "examination" will be a disappointment to EIA proponents, who say open-ended exchanges have in the past failed to achieve European hopes for easier access to Japanese markets.
The European Business Council in Japan had called the 2010 EU-Japan summit an "unmissable opportunity" to start work toward an EIA. "Nothing will change if we don’t have binding discussions," said Tommy Kullberg, chairman of the European Business Council in Japan, ahead of the meeting.
Mr Hatoyama said that Tokyo had been asking for a "joint study" on an EIA, but that he was hopeful the "examination" – which will lead to a report next year – would pave the way for formal negotiations.
The prime minister contrasted the willingness of his Democratic party-led government to address non-tariff barriers with the more conservative approach of the former ruling Liberal Democratic party that it ousted in last year’s historic general election .
"We are acting with strong determination to open up this country in such areas as construction, automobiles and medicine and government procurement," Mr Hatoyama said.
Japan’s Ministry of Economy, Trade and Industry said last week it was hopeful that promises to deal with three non-tariff barriers identified after last year’s summit with the EU would act as a "catalyst" for progress on an EIA.
But Hugh Richardson, EU ambassador to Japan, sharply dismissed the Japanese claim of progress on non-tariff issues of government procurement, construction materials and automobile technology regulation.
"Their idea of progress, for example in relation to government procurement, is to start organising a single point of information on government procurement – which is fine, but they haven’t actually bought anything yet," Mr Richardson said last week. "They are all about process and we are about substance."
A report prepared for the commission by the European think-tank Copenhagen Economics last year found that EU exports to Japan could increase by 23 per cent or €14bn if tariffs were abolished, while EU exports could increase by almost 50 per cent or €29bn if non-tariff barriers were reduced to their "fullest possible extent".
The combination of both elimination of tariffs and the reduction of non-tariff measures would increase "economic welfare" by €33bn a year in the EU and €18bn in Japan, the report found.
