Jun Arima, JETRO- Asia Business Week Dublin
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“The Business Benefits of the EU-Japan Economic Partnership Agreement" Jun Arima, Director General, JETRO – London, speaking on June 6 at the Fourth EU Asia Top Economist Round Table during Asia Business Week Dublin 2014
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Jun Arima, JETRO- Asia Business Week Dublin
- 1. ASIA BUSINESS WEEK DUBLIN Fourth EU Asia Top Economist Round Table 6 June 2014 Business Benefit of EU-Japan Economic PartnershipAgreement Jun Arima, Director General, JETRO London Kindly sponsored by:
- 2. June 2014 Jun ARIMA Director General, JETRO London Business Benefit of EU-Japan EPA
- 3. Japan-EU Position in the World Population(2012) Japan+EU=9.0% Trade(2012) Japan+EU=35.8% Source; World Bank, World Development Indicators, October 2013 Source; IMF, Direction of Trade Statistics, October 2013 Source; IMF, World Economics Outlook Database, October 2013 3 GDP(2012) Japan+EU=31.4% Japan EU Position in the World
- 4. Source: Ministry of Finance Japan 4 EU is marking Trade Surplus with Japan
- 5. 5 Japan’s Trade Balance with EU in Passenger Cars
- 6. 6 Share of European vehicles in Japan Share of Japanese vehicles in the EU (units) Source: JADA, JAIA *Preliminary figuresSource: JAMA Share of European/Japanese Vehicles in Japan/EU
- 7. 7 Most Japanese Vehicles in Europe are Locally Produced
- 8. EU : No.1 Investor to Japan 68 billion euro(2012) Japan: No.3 Investor to the EU 144 billion euro(2011) Source: BOJ(calculated in arbitrated foreign exchange rate by BOJ), Eurostat Survey of Overseas Business Activities as of 2011(FY) , METI 8 UK 140,705 Germany 59,304 Netherlands 58,227 Belgium 38,226 France 25,319 Italy 21,545 Spain 12,848 Total +465,000 Employment by Japanese Companies in Europe Investment/Job Contribution by Japanese Companies
- 9. 9 Global Partnership Shared Value - Democracy - Rule of law - Human rights - Market based economy - Sustainable development Common Challenges - Growth deceleration - Rise of emerging countries - Strains on financial markets - Fiscal constrains - Global warming Why EPA? - Common Values and Challenges -
- 10. 4th/144 in Market Size (WEF GCI 2013-2014) 10 Why EPA? - Huge Market of Japan - GDP Comparison Between Japan’s Region and Foreign Countries
- 11. 11 Robust Economic Recovery Annual Hike 57% Highest in 41 Years Real GDP Growth -3.0% (3Q12) +4.5%(1Q13) +3.5%(2Q13) +1.3%(3Q13) +0.3%(4Q13) +4.9% (1Q14) Private Consumption -1.9% (3Q12) +1.5% (4Q13) + 8.5% (1Q14) Gross Fixed Capital Formation -5.3%(3Q12) +7.3%(4Q13) +12.1%(1Q14) Corporate Performance +12% in Sales +50% in Profit (2013/2012) Year-on-Year Bonus -3.5% (2012) +3.5% (2013) Unemployment - 4.9% (Dec12) 3.6% (Mar14)
- 12. Investment* 120 BN yen 454 BN yen (Japan→Switzerland) 378%↑ Source: Bank of Japan 12 Why EPA? - Expansion of FDI - Japanese FDI to Switzerland Japanese Auto Production in Mexico Japan Mexico EPA (2005) +84% Japan- Swiss EPA (2009) (2008) (2012)
- 13. 13 Why EPA? - Economic Growth - Policy Options Baseline Values (billion €) Conservative A-symmetric Reduction of NTB Conservative Symmetric Reduction of NTB Ambitious A-symmetric Reduction of NTB Ambitious Symmetric Reduction of NTB GDP 17,643 +0.34% +0.75% +0.79% +1.88% Global Export (FOB) 5,334 +1.2% +2.7% +2.8% +6.7% Global Import (CIF) 5,611 +1.2% +2.8% +2.9% N/A Exports to Japan 68 +22.6% +23.7% +32.7% N/A Impact Assessment Report by European Commission (Aug 2012)
- 14. 14 Why EPA? - Japan as the Gateway to Asia Pacific Market - Source: METI 14 Increase FTA Share from 19% to 70% by 2018
- 15. ＴＴＩＰ Ｊａｐａｎ-ＥＵ・ ＥＰＡ ＴＰＰ 15 Forming Mega FTA Triangle Shared Value - Democracy - Rule of law - Human rights - Market economy High-level EPA/FTA among developed countries sharing common values => Rule making for global trade and investment
- 16. Elimination of high tariffs on industrial products ( e.g. automobiles: 10%, electronic devices: 14%) to improve competitive condition for Japanese products in the European market Regulatory issues facing Japanese companies in Europe Non-Tariff Measures(NTMs) on automobiles, chemicals, electronic devices, food safety, processed food, medical devices, pharmaceuticals etc Government procurement(e.g. railways) Elimination of tariffs on the main export products to Japan. Japan’s interest EU’s interest Japan-EU EPA/FTAEU-Japan EPA/FTA Negotiation Started in April 2013. Five rounds of negotiation to date EU will review the progress in May/June 2014 16
- 17. 17 Japan is addressing NTMs Automobile 35 out of 47 UNECE passenger vehicle regulation adopted. 8 regulations under adoption process. Zoning approval for automobile service shop more than doubled (14 in 2011FY to 32 in 2012FY) based on Technical Guideline Expanded exemption of Pyrotechnic Safety Devices (Feb 2012) Adopting GTR for high pressure gas tank by June 2014 Pharmaceutical/Medical Devices Amendment of Pharmaceutical Affairs Law (autumn 2013) to address authorization procedures, QMS, labelling requirement etc Revision of Minimum Requirement for Biological Products (Sept 2013) Amendment of Good Clinical Practice Ordinance (Dec 2012) Applying membership in Pharmaceutical Inspection Cooperation Scheme
- 18. 18 Japan is addressing NTMs Food Safety 37 out of 45 internationally used food additives designated. Remaining 8 in the process of designation Lifting import ban of cattle meat and offal in Feb 2013 (France, Netherlands) and Dec 2013 (Ireland) Amendment of Ministerial Ordinance on Organic Food (April 2013)
- 19. European Companies in Japanese Government Procurement
- 20. Let’s Strike a Deal in 2015 ! “We confirmed the importance of an early conclusion, and 2015 is the target date for a basic agreement" - Prime Minister Shinzo Abe @Brussels 7 May 2014 - 20 Source: Cabinet Office HP
- 21. 21 Industries Expect Early Conclusion
- 22. Thank you
Editor's Notes
- First, let’s look at our position in the world. Though our combined population is 9% of the world total, EU and Japan accounts for 36% of global trade and 31% of global GDP.
- In the past, Japan had a trade surplus with EU, from 2012, we are marking trade deficit.
- Let’s look at Japan’s trade balance with EU in passenger vehicles. Again, since 2012, we are marking trade deficit.
- The share of European vehicles in Japanese market is increasing to almost 5%. The share of Japanese vehicles in European market is almost stable at around 11-12%.
- You may argue that Japan’s cars have two times higher share in European market than European cars in Japanese market. In fact, almost 80% of Japanese vehicles sold in Europe are produced in Europe. The share of imported Japanese vehicles out of total Japanese car sold in Europe has dropped from 44% in 2002 to 23% in 2013.
- I would also highlight close mutual investment relation between EU and Japan. EU is the No.1 investor to Japan and Japan is the No.3 investor to the EU. I would also highlight huge contribution by Japanese companies to national wealth and job creation in Europe. Japan is contributing more than 460,000 jobs in Europe.
- Now, let me turn to the point why EU and Japan should have EPA. In particular, what is the benefit for the EU to have EPA with Japan. First and foremost, we are natural allies sharing common values and challenges.
- Having EPA with Japan can provide a multiple benefit to the EU and Ireland. Japan’s market size is enormous. Japan has the 4th ranking in market size. Each region has GDP equal to entire nation. For example, Kanto region, where Tokyo is located, has the same size of GDP with UK’s entire GDP.
- Abenomics is bearing fruit. Japanese economy is showing a robust recovery. Real GDP growth has turned to positive in the most recent five consecutive quarters. Consumption and capital investment also turned from negative to positive. Corporate performance has dramatically improved both in sales and profit. Bonus payment has also increased.
- EPA will also boost FDI. In the case of Swiss-Japan EPA, FDI from Japan to Switzerland quadrupled from 2008 to 2012. In the case of Mexico-Japan EPA, Japanese auto production in Mexico increased by 84% between 2005 and 2010. EU-Japan EPA will definitely induce more FDI from Japan to EU.
- EPA will have positive impact on economy as a whole. According to the Impact Assessment Report by the European Commission in August 2012, the positive impact on GDP ranges from +0.34% to +1.88% depending on the ambition in terms of tariff reduction and NTBs.
- Another big benefit of EU-Japan EPA is an access to huge Asia Pacific market. Japan is aiming at expansion of our FTA network from 19% to 70% by 2018. Japan is participating in the negotiation of four mega-FTAs including TPP and EU-Japan FTA/EPA. If all of them have been successfully completed, Japan will be a gateway to enormously wide Asia Pacific market.
- I would like to highlight crucial role of EU, US and Japan in this mega-FTA era. TPP, TTIP and EU-Japan FTA will form an important FTA triangle among three major democratic economics sharing common value of democracy, rule of law, human rights and market economy. High-level EPA/FTA among us will pave the way for rule making of global trade and investment. This will also address the challenges from emerging economies.
- Now, let me briefly touch upon the ongoing negotiation of EU-Japan EPA and TPP. Since the start of negotiation in April 2013, five rounds of negotiations have been conducted. Japan is primarily interested in elimination of high tariffs on industrial products such as automobile and electronic devices. Currently 65% of Japan’s export to EU is under tariff while 72% of EU’s export to Japan is enjoying no tariff. EU’s primary interest is non-tariff measures in such fields as automobiles, food safety, medical devices and pharmaceutical, and government procurement. EU will review the progress of negotiation in May/June 2014. The report has been submitted by the Commission. Though there could be some pressure within Europe to suspend the negotiation, it is my conviction that we will continue the negotiation and come to mutually palatable solution.
- Japan is faithfully addressing NTMs in accordance with the roadmap. For example, in the auto sector, 37 out of 47 UNECE passenger vehicles have been adopted. 8 remaining regulations are under adoption process. In the pharmaceutical/medical devices sector, Pharmaceutical Affairs Law was amended to address authorization procedures, QMS and labelling requirement. In the area of food safety, 37 out of 45 internationally used food additives have already been designated. The remaining 8 are in the process of designation. Import ban on cattle meat were lifted in 2013.
- Japan is faithfully addressing NTMs in accordance with the roadmap. For example, in the auto sector, 37 out of 47 UNECE passenger vehicles have been adopted. 8 remaining regulations are under adoption process. In the pharmaceutical/medical devices sector, Pharmaceutical Affairs Law was amended to address authorization procedures, QMS and labelling requirement. In the area of food safety, 37 out of 45 internationally used food additives have already been designated. The remaining 8 are in the process of designation. Import ban on cattle meat were lifted in 2013.
- Many European companies including Veolia, Siemens and GSK, are successfully winning bidding in government procurement. JETRO is publishing procurement information in English for not only central government and 47 Prefectures but also more than 1000 local municipalities.
- From the end of April to early May this year, Prime Minster Abe visited 6 European countries. In each country, he consistently stressed the need of basic agreement in 2015. In London, PM Abe and PM Cameron agreed on this point. In Germany, Chancellor Merkel said 2015 would be a good year for basic agreement. In Brussels, President Barrosso said the talk is unlikely to be suspended. All of these are very encouraging. We should maintain the momentum of the negotiation aiming at agreement in 2015.
- Due to obvious economic benefit of EPA, many European and Japanese industrial associations are issuing statement supporting early completion of negotiation.
- As in every FTA negotiation, we are facing protectionist pressures from some domestic industries. Protectionism may soothe a handful of protected sectors for a moment, but will culminate in the erosion of our economic dynamism and welfare. That is why we need to incessantly fight against protectionism incessantly inside and outside of our countries. Let’s strike a deal and prosper together.