Last reviewed 22 June 2015

Negotiations on an EU-Japan Free Trade Agreement (FTA) were officially launched back in March 2013. In this article, Eric Davies reports on the FTA following the most recent round of negotiations in May this year.

Negotiations on an EU-Japan Free Trade Agreement (FTA) were launched with the aim of concluding an ambitious and mutually beneficial agreement to boost economic growth in both the EU and Japan.

Shinzo Abe, Japan’s Prime Minister, has said that he wants to reach a deal by the end of this year. That target is considered achievable by the EU, providing a satisfactory agreement can be reached.

Action Plan

The relationship between the EU and Japan is currently based on the 2001 Action Plan for EU-Japan Cooperation.

The Action Plan set four main objectives, including strengthening economic and trade ties, particularly through removing barriers to trade and investment, and by developing an appropriate regulatory framework.

The other objectives concerned promoting peace and security, coping with global and social changes, and bringing people and cultures together.

Trade picture

Between them, the EU and Japan account for more than a third of the world's GDP and over a fifth of world trade.

Japan is the EU’s second biggest trading partner in Asia, after China. Motor vehicles and machinery are among the Union’s main exports to Japan, along with pharmaceuticals, optical and medical instruments, and electrical machinery.

Japan is a major investor in the EU, and Europe is a significant market for the Japanese, with Japan’s main exports to the EU being machinery, electrical machinery, motor vehicles, optical and medical instruments, and chemicals.

Although there has tended to be a big trade surplus in favour of Japan, trade has become more balanced in recent years.

Studies reportedly show that a Free Trade Agreement could deliver between 0.6% and 0.8% of GDP growth for the EU and potentially increase EU exports to Japan by some 32%. It is estimated that such growth could see as many as 420,000 jobs created in the EU.

Four priorities

Speaking in Tokyo at the end of May, after the tenth round of negotiations, EU Trade Commissioner Cecilia Malmström identified four priorities which must be addressed if a satisfactory agreement is to be achieved.

Tariffs are generally low at the moment, but are high on food, drink, and agricultural products. The EU wants tariffs to be eliminated on both sides, arguing that Europe could not accept an agreement inferior to those negotiated with Canada, Korea and other countries.

Investment must be boosted in both directions, to bring more of a balance than currently exists, where Japan invests more heavily in European countries than the EU does in Japan.

Public procurement opportunities in Japan must be opened to EU companies, with public contracts at all levels, from local to central government. (Commissioner Malmström cited an agreement to give non-discriminatory, transparent access to procurement by Japan's major railway companies as an example of what can be achieved.)

Agreement on making regulation more compatible is also seen as an essential element of an FTA. Removing unnecessary technical differences between the European and Japanese systems would make it much easier for companies — especially small ones — to do business. Again, progress has been made, with recent agreements on a common standard for passenger car noise, and on rules governing the inspection of manufacturing facilities for medical devices.

Further information

The European Commission's Directorate General for Trade provides a summary of EU-Japan trade relations, together with associated documents.

In addition to the FTA, the two parties are also negotiating a wider Framework Agreement, covering political dialogue and cooperation on regional and global challenges.

For a broader view of EU relations with Japan, see the European External Action Service pages on Japan.