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News

EU-Japan trade deal on track to enter into force

19/12/2018 - François-Xavier Branthôme - Read in French
“…an open trading zone covering almost one-third of the world's total GDP”
 
The EU-Japan trade deal is set to enter into force on 1 February 2019 after receiving the backing of EU politicians, who voted to ratify the Economic Partnership Agreement (EPA) at a Strasbourg plenary session on 12 December. This follows the deal's approval by the Japanese national parliament last week (8 December).
"It will create an open trading zone covering 635 million people and almost one-third of the world's total Gross Domestic Product (GDP). The Strategic Partnership Agreement is the first ever bilateral framework agreement between the EU and Japan," said a statement by the Commission.
The EU currently exports EUR 58 million worth of goods to Japan each year. However, agri-food products face high trade barriers, such as nearly 40% customs tax on beef, up to 40% on cheese, up to 30% on chocolate and 15% on wine.
"Almost five centuries after Europeans established the first trade ties with Japan, the entry into force of the EU-Japan Economic Partnership Agreement will bring our trade, political and strategic relationship to a whole new level," said European Commission president Jean-Claude Juncker.
 
Several food industry trade associations welcomed the vote. Mella Frewen, director general of FoodDrinkEurope said it would create new export opportunities for European food and drink manufacturers, supporting jobs and growth. "Preferential market access conditions will enable European producers to better respond to Japanese demand for high-quality European food and drinks," she added.
Pekka Pesonen, Copa-Cogeca secretary-general, said the agreement was a great example of a global partnership that benefits both sides. "In these turbulent times, the EU needs to send a clear message to the world that its single market remains open to the global economy as long as the level playing field is secured."
The European Liaison Committee for Agricultural and Agri-Food Trade (CELCAA), which represents agri-food wholesalers and traders also welcomed the vote. Its secretary-general Pascale Rouhier said: "When implemented, the EPA will boost the competitiveness of the EU agri-food sector and commodities in the Japanese market while respecting the sensitivities of Japan’s agri-sector."
 
A few discordant voices?
The negotiations for the Japan-EU free trade deal started in March 2013 and wound up in December 2017. Public interest group Corporate Europe Observatory (CEO) said the deal is strongly biased towards the interests of big businesses. According to files obtained by CEO via freedom of information requests, members of the European Commission met with 190 corporate lobby groups and no trade unions between January 2014 and January 2017.
It also said that of those who had access to EU officials writing the trade deal, 89% were trade associations and only 4% were public interest groups such as NGOs, farmers' unions and consumer groups. The EU agri-food sector had the highest number of meetings with the Commission (47) than any other single sector industry.
 
Update on trade tariffs between EU and Japan, currently applicable and future evolution
CN 2002.90.100 (tomato paste): Gradual tariff reduction and full liberalization after five years; (see appendix with charts presenting the progressive decrease of tariffs over 5 years).
 
CN 2002.90.219 and 2002.90.229: Gradual tariff reduction and full liberalization after five years; (see charts in appendix).
 
CN 2002.90.210 and 2002.90.221: These are originating goods classified under the tariff lines marked “Xq2”, for which tariff-rate quotas are set by relevant Japanese cabinet orders, and are to be excluded from any tariff commitment under the Agreement; (see charts in appendix).
 
CN 210320.010 and 210320.090 (ketchup and other tomato sauces): Gradual tariff reduction and full liberalization after ten years; (see appendix with charts presenting the progressive decrease of tariffs over 10 years).
 
Some codes are not included in the list presented; tariffs on these products are at 0%. This is the notably the case for all products under code 2002.10 (canned tomatoes), which will benefit from an immediate and total liberalization of trade as soon as the agreement enters into force.
 
EU-Japan exchanges of tomato products 
Over the past three marketing years (2015/2016, 2016/2017 and 2017/2018), annual Japanese imports of pastes amounted to an average of 135 750 metric tonnes (mT), of which slightly more than 56 000 tonnes originated in a country of the EU (mainly Portugal (27 500 mT), Spain (16 500 mT) and Italy (11 100 mT), the rest coming from the US or China).
In 2017/2018, Japan imported slightly more than 149 000 metric tonnes (mT) of tomato pastes, of which close on 65 000 mT originated in countries of the EU. This last figure confirms the pattern that has seen a regular increase in the proportional weight of EU countries among Japan's suppliers of tomato products: in this sector alone, the EU's share has grown from 12% in the mid-90s to more than 41% over the past three marketing years.
At the same time, the proportion of European paste exports bought by Japan has also increased: from 1997/1998 to 2017/2018, the Japanese share of EU sales in this sector has grown from 1.2% to 4.6%.
 
The flow of canned tomatoes entering Japan has been increasingly dominated for many years by the Italian industry. Close on 97 000 mT of canned tomatoes have been imported each year by Japan over the past three marketing years: only 6 800 mT approximately originated in countries that do not belong to the EU (USA, Turkey), with the remaining 90 000 mT being almost exclusively Italian.
Over the past 20 years as a whole, the share of Japanese canned tomato supplies held by the EU has increased from approximately 71% in the mid-90s to more than 93% over the past three marketing years. The volumes exported by the industries of Spain, Portugal and Greece over this period are almost negligible. 
Over the same period of time, the share of total EU sales of canned tomatoes that can be attributed to Japanese purchases grew from approximately 5.6% to slightly more than 7%. Even if unclaimed shares of the Japanese market are minimal, the immediate and total suppression of taxes on imported canned tomatoes can only encourage the development of this category's trade flow.
 
Japan is not a major importer of sauces: the quantities involved have only amounted to slightly more than 6 400 mT of finished products on average over the past three marketing years. Of this total volume, only approximately 2 400 mT (38%) originated in countries of the EU – almost entirely in the Netherlands, with the remainder (approximately 4 000 mT) being mostly from the USA.
The development of the export trade flow for sauces from the EU to Japan is a relatively recent phenomenon. Although they were practically nonexistent twenty years ago, European sales of sauces to Japan, particularly from the Netherlands, started to emerge after 2005/2006. They rapidly took over a considerable share of the Japanese market (20% in 2006/2007) and have continued to progress almost regularly over the past twelve years.
Japan is not a strategic outlet for the European sauces sector. Despite the increase recorded since the 2006/2007 marketing year, the quantities involved still only account for approximately 1% of European outlets.
 
Since 1994/1995, Japanese expenditure on imports of tomato products has almost doubled (from USD 140 million to USD 270 million). Over the past three marketing years, the invoice for imports has amounted on average to slightly more than USD 254 million, of which a very large proportion (slightly more than USD 153 million or 60% of total Japanese expenditure) has been spent on processed products originating in Europe. Purchases of canned tomatoes are the biggest item of expenditure, with USD 82 million (54% of the total), ahead of pastes (USD 68 million, 44%) and sauces (USD 2.9 million, 2%).
 
Over the past 20 years, the share of European revenue stemming from exports of tomato products that can be attributed to Japanese expenditure has grown, from approximately 3% in 1997/1998 to more than 4.5% in 2017/2018.
 
Some complementary data
Further information is available on the dedicated EU website:
 
 
 
 
Source: foodnavigator.com, GTIS, other
 
 
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