Zero Tariffs On Cars The World's Largest Free Trade Zone Is Coming Covering 30% Of Global GDP Japan Is A Big Winner
- Jul 19, 2018 -

Remember the photos of the leaders of the countries who "siege" Trump at the G7 summit? Since Trump announced the need to impose tariffs on his major trading partners, many traditional American allies have expressed their disappointment and regret.


As the biggest helper of Japan and Europe's economic renaissance after World War II, this move by the United States really made his younger brothers "sadly hurt." Therefore, many American allies began to take measures, in addition to taxing the United States. I have to "throw" the United States and "single" myself.

According to Wall Street Journal, Bloomberg and other media reports, on Tuesday, local time in Japan, the leaders of Japan and the EU signed the "Economic Partnership Agreement", the two sides will jointly create one of the world's largest free trade zones, This is in stark contrast to the escalating trade dispute between the United States and several of its trading partners in recent times.
The "Economic Partnership Agreement" began in 2013. After four years of negotiations, Japan and the EU reached an agreement on the text of the FTA in December last year. The agreement will come into effect after approval by the Japanese National Assembly and the European Parliament.

▲On July 17, Japanese Prime Minister Shinzo Abe signed an economic partnership agreement with European Council President Tusk and European Commission President Juncker
(Source: Oriental IC)
Covering 30% of the global economy + more than 600 million people
Daily Economic News (WeChat: nbdnews) The reporter noted that the trade agreement signed between the EU and Japan is the largest in the EU. The agreement will not only eliminate the European company's annual tariff of about 1.17 billion US dollars, but also eliminate it. Japan’s tariffs on the EU’s 28 member states are about $2.34 billion annually. The total trade in goods and services between the EU and Japan is about $100 billion.
European Council President Donald Tusk said in a press conference with Japanese Prime Minister Shinzo Abe and European Commission President Jean-Claude Juncker: "We have released a clear signal: we will jointly oppose (trade )protectionism."

▲ Image source: EU official website

The Wall Street Journal reported that the agreement between Japan and the European Union eliminated most of the bilateral tariffs, creating more favorable conditions for Japanese cars sold in the EU and European wines and dairy products sold in Japan. According to the EU, the "economic partnership agreement" reached by the two sides is the largest trade agreement negotiated by the EU in history.

According to statistics from the World Bank, the total GDP of the EU and Japan reached about 22.07 trillion US dollars in 2017, more than 19 trillion US dollars in the United States, accounting for about 30% of the global economic output, covering more than 600 million people.
Bloomberg reported that according to the agreement, the EU canceled about 99% of tariffs on Japanese goods, and Japan canceled about 94% of EU commodity tariffs, which will rise to 99% in the next few years. The reason for this difference is rice, which has cultural and political sensitivities in Japan and has been protected for decades.
Japan or become the biggest winner
As Japan lifts tariffs on cheese, wine and pork, it is expected that EU agricultural exports will be driven by the Economic Partnership Agreement. According to EU data, exports of processed foods may increase by 180%. The Thunen Institute of German agricultural think tanks said that pork and poultry exports from the EU to Japan are expected to increase significantly. The Economic Partnership Agreement will also open up the Japanese market, provide more EU-based services to Japan, and allow EU developers to access Japanese public infrastructure projects such as railways. The EU estimates that there are 600,000 jobs in Europe related to trade with Japan.
Japan expects the agreement to boost GDP growth by 1%, or 5 trillion yen, and increase about 290,000 jobs. The main purpose of the trade agreement between Japan and the EU is to increase automobile exports. According to the agreement, the EU will reduce the current 10% vehicle tariff to zero within eight years. Although cars and auto parts account for about one-fifth of Japan's exports to Europe, the share of Japanese cars in the European market is only about 10%, far below the share in the US or Asia. The US report said today that the agreement between the two sides is also expected to increase the EU's chemical exports to Japan by 22% and mechanical engineering exports by 16%. Japan's computer, power and automotive industries are expected to benefit from this agreement.

According to Reuters, the Japanese government predicted in December last year that once the agreement is fully implemented, Japan’s economic growth rate will increase by 1% in the next 10-20 years.

Affected by this news, Japanese auto stocks listed on the New York Stock Exchange rose against the market – Toyota closed up 1.5% and Honda closed up 1.68%. On the Tokyo Stock Exchange, as of Wednesday afternoon, Mazda rose 1.74%, Subaru rose 1.35%, and Nissan rose 0.34%.


▲ Image source: Yingwei Finance (investing)

In addition to this latest agreement with the European Union, Japan is also working on other trade agreements, including a far-reaching Trans-Pacific Agreement (TPP) involving Australia, Mexico, Vietnam and other countries, in early 2017. After the United States announced its withdrawal from the TPP, Japan began to play a leading role.

Japan’s NHK TV reported on July 18 that 11 countries that signed the Pacific Rim Partnership Agreement (TPP) held a meeting of chief negotiators in Kanagawa Prefecture, Japan on the 18th.

According to the report, the two-day meeting will be held in addition to confirming the preparations for the entry into force of the agreement. It is expected that the issue of pre-consultation with the countries and regions wishing to participate in the agreement will also be discussed. The Japanese representative, Mei Ben and Yi, said at the meeting that they expect the agreement to enter into force as soon as possible in 2019. He also said, "I hope that preparations will be effective from today."

The Japanese government hopes to strengthen cooperation with countries that value free trade by signing the Japan-Europe Economic Cooperation Agreement and promoting the early entry into force of the TPP before negotiating trade with each share of trade protectionism.
 The EU has reached a trade agreement with many countries
Daily Economic News (WeChat: nbdnews) The reporter noted that since Trump took office, the EU has launched a series of trade offensives and tried to balance Trang by accelerating ongoing negotiations and starting new negotiations. The US priority policy. Japan and Mexico were the primary goals of the EU before, because the EU not only cherishes the economic value of these two countries, but also hopes to pass a message by narrowing the distance with long-term US trading partners.
In addition, the Trump administration recently announced measures of 10% and 25% for imported aluminum and steel, respectively, and caused different levels of damage to the EU and Japan. Subsequently, the European Union imposed retaliatory tariffs on US products such as bourbon and Harley-Davidson motorcycles, and questioned the national security reasons for the US to impose metal tariffs on the WTO. At the same time, Japan also submitted documents to the WTO, retaining the right to take similar actions against the United States. The Trump administration’s move to impose tariffs on Japan’s main export product, the car, is also worrying the Japanese government.
The joint efforts of Japan and the EU also quickly paid off. As early as July last year, the EU and Japanese leaders reached an agreement and issued a strong signal to support global free trade. Last September, the EU and Canada had The milestone trade agreement came into effect; in April this year, Mexico and the European Union reached a principled agreement to “upgrade” nearly 20 years ago in the context of the US renegotiating the North American Free Trade Agreement and imposing high tariffs on imported steel and aluminum products. Signed the terms of the FTA, with a view to expanding trade in agriculture and other fields.
At the same time, the EU has also restarted negotiations with the largest trade group in Latin America, the Southern Common Market (MERCOSUR, including Argentina, Brazil, Paraguay and Uruguay), in an attempt to become the first external economy to enter this tightly protected market. Last month, the EU launched official talks with Australia and New Zealand, which is the latest in the EU's expansion of global trade links.
Relatively speaking, Japan has only turned to free trade in recent years. For many years, Japan has refused to open its domestic economy to foreign products. But under the guidance of Abe's economic strategy, Japan has also adopted a new strategy of allowing more imported products, forcing local companies to be more competitive on a global scale, while also opening up new markets overseas.
The EU and Japan also reached an agreement on data flow, acknowledging that the framework for transmission and privacy protection is equal. The EU said that the agreement will promote deeper economic integration without compromising personal data. The two sides also praised the agreement to create "the world's largest data security mobile field."

However, the reporter also noted that although the United States and the European Union are on the verge of tariffs, after the end of the G7 summit in late June, the United States has expressed its willingness to provide a zero-tariff solution to the EU auto industry. On July 5th, the US ambassador to Germany, Greiner, recently told German auto executives that if the EU completely abolished import tariffs on US cars, Trump would also implement "zero tariffs" on European imported cars.