logo logo

Export firms eagerly await EPA talks / Deal could even playing field with S. Korean automakers in EU, offset surging yen

The Yomiuri Shimbun | 1 December 2012

Export firms eagerly await EPA talks / Deal could even playing field with S. Korean automakers in EU, offset surging yen

News that Japan and the European Union have agreed to start negotiations for an economic partnership agreement was a breath of fresh air for Japanese export-related companies, as it is highly likely an EPA deal will give a boost to their businesses.

The EU agreed Thursday to launch talks to conclude an EPA with Japan. The negotiations are expected to start as early as next spring.

If realized, the EPA would be Japan’s first with advanced nations containing large markets.

According to observers, an EPA with the EU, which accounts for a quarter of the world’s gross domestic product, will likely bring significant benefits to Japanese companies.

"I want [Japan and the EU] to move toward early conclusions for the negotiations. The Japan Business Federation [Keidanren] will also back up governmental talks," Keidanren Chairman Hiromasa Yonekura said Thursday.

The EU is Japan’s fourth largest export destination after China, the United States and the Association of Southeast Asian nations. Currently, the EU imposes duties on products produced in Japan—10 percent for cars and 14 percent for flat-screen televisions.

If the EPA is concluded, Japan and the EU are expected to gradually lower tariffs and eventually remove them altogether.

In July last year, the EU and South Korea concluded a free trade agreement, and now EU tariffs on South Korean vehicles have been cut to 6.6 percent for compact cars and 4 percent for medium-sized and large cars.

According to the European Automobile Manufacturers’ Association, Hyundai Motor Co. saw an 11.6 percent increase in new vehicle registrations in European nations during the January-June period compared to the same period last year, while Kia Motors Co. saw registrations jump to 24.7 percent.

By contrast, Japanese automakers suffered across-the-board drops in new car registrations.

Mitsubishi Motors Corp. saw registrations fall by 32.4 percent, while Mazda Motor Corp. decreased by 12.6 percent and Honda Motor Co. by 11.1 percent.

Sluggish demand for Japanese cars is believed to be the result of severe competition under unfavorable conditions with South Korean carmakers.

Japanese automakers have also been affected by the surging yen and the weakened euro.

"The quality of [Japanese] cars is highly evaluated in Europe as well. When we can compete under the same conditions as South Korean carmakers after concluding an EPA, our business will develop favorably," an official at a major Japanese automaker said.

Japan will also participate in the negotiations for a regional comprehensive economic partnership (RCEP) for free trade with 16 Asia-Pacific nations. The RCEP negotiations will start next year.

If Japan participates in Trans-Pacific Partnership talks, which currently involve 11 nations including Australia and the United States, Japan could strengthen economic ties with about 80 percent of the countries it exports to.

However, Japan will have to address some issues before EPA negotiations can be concluded with the EU.

France, a major automaking nation, on Thursday released a statement saying Japan would have to inevitably meet some conditions, such as lifting nontariff barriers, to conclude a fair EPA with the EU.

The French government called on Japan to allow companies from other nations to compete in the government procurement market in fields such as railroads and public transportation.

If there is no progress within a year, the European Commission said it will suspend EPA negotiations.

The French government also called for the introduction of a safeguard clause in case imports of Japanese cars to EU nations grow rapidly, which could be detrimental to the European car industry.

 source: Daily Yomiuri