'European Car Companies Could Lose Out From The EU-Japan Deal' - Economist

© AFP 2023 / TORU YAMANAKA The picture shows a general view of Tokyo
The picture shows a general view of Tokyo - Sputnik International
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The EU and Japan have closed a free trade deal as the US is teetering on the brink of a trade war with the bloc. The agreement will abolish tariffs on ninety four percent of all imports from the EU. The European bloc, in its turn, will remove tariffs on 99 percent of imports from Japan.

Sputnik discussed the importance of the EU-Japan deal with Zsolt Darvas — research fellow at Bruegel and Corvinus University of Budapest.

Sputnik: How significant is the signature of the deal, considering that its scope amounts to a quarter of the global economy?

Zsolt Darvas: This is a very important deal because the EU and Japan are among the biggest economies. These economies account for almost 30% of global output and establishing a free trade area between these two large economies is really, really significant, and I expect that it will boost trade, it will boost exports both from EU to Japan and Japan to EU and thereby create more jobs in both regions.

Sputnik: To what extent do you see this as ample compensation for US trade sanctions and trade policies?

Zsolt Darvas: No, I have to say it's not related at all, the EU-Japan trade negotiations started in 2013 almost five years ago, it's a bit accidental that it's ratified or signed just now, it takes a lot of time to negotiate trade deals, but certainly the fact that it's been signed just now after President Trump of the United States has imposed a number of tariffs and increased trade barriers is a very good signal. I believe it also sends a message to the world that the EU and Japan are for free and open trade.

READ MORE: EU-Japan Trade Deal May Impact UK's Post-Brexit Future — Scholar

Sputnik: Do you think this is obviously sending a signal to Trump, the EU and Japan will continue to try to find new trade partners and promote globalism in trade, do you think that he will have any reaction to this in terms of perhaps softening his position, or perhaps wanting to get on board with some of these new trade deals that are happening?

Zsolt Darvas: I would not expect that President Trump would change any of his policies because of the European Union and Japan trade deals. I have to say that the EU has various trade agreements with more than 100 countries of the world, so clearly EU is for free trade, the Japanese deal is just the biggest and most important one, but President Trump has his own ideas, his own agenda and I'm afraid he will not change his policies because of the EU trade policy.

Sputnik: Now the EU is also looking to negotiate with Mercosur to gain access to the Latin American market, it's also looking at expansion with China as far as trade, what other prospects do you see for the EU? And how do you see that really changing the face of business in the EU, the amount of trade?

Zsolt Darvas: The EU is indeed actively seeking trade agreements and various economic partnership agreements with many, many countries. It is different levels of partnership agreements, so the strongest one that they have just signed is with Japan on free trade and basically reducing tariffs to zero on many, many goods and to low value in a few areas, but the other part is the regulatory part, it's perhaps even more important, because, for example, if a Japanese company or a Chinese company wants to export a car to the European Union then that company has to comply with all the European Union regulations concerning safety, consumer protection and everything, so such deals are easy to sign with countries like Japan or Canada, which are very developed countries, and have already similar levels of regulatory standards as the European Union. However, it is certainly more difficult with Latin American countries or China. For China the major question is: is it a true market economy or dependent on the state? State owned enterprises enjoy an unfavorable advantage, so I would think a prospect for a China trade agreement is more remote, but for countries in Latin America I would see the prospect of a somewhat faster agreement a reality.

READ MORE: Brexit Matters: Japan Focuses on Trade Agreement With EU

Sputnik: If we talk about going back to this deal, the EU-Japan deal, are there any losers, perhaps, some industries that will actually be at a disadvantage following this deal?

Zsolt Darvas: There are always losers. In any trade deal, in my view, there are more winners than losers, but there are always losers. For example, in the car industry would imply much stronger competition from Japan. For example, they already have a large share of the Japanese cars on European streets, but certainly reducing those tariffs to zero will make Japanese cars more competitive and it could be that in some countries, in Italy or elsewhere, some carmakers would find this increased competition difficult and certainly they would lose out.

The views and opinions expressed by the contributors do not necessarily reflect those of Sputnik.

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