I am happy to present my most recent article for the Baltic Transport Journal. Please be invited for a quick legal overview of the EU-Japan Economic Partnership Agreement.

1. 22 | Baltic Transport Journal | 5/2018
Up against trade barriers
by Gabrielė Vilemo Gotkovič
In 2013, the European Union and Japan started negotiations on an Economic Partnership Agreement (EPA).
Despite its name, the treaty is believed to create more than just new economic opportunities. Even before its
entry into force, it has sent a powerful political message to the troubled international community. It signals
that the world’s first and fifth largest economies, which account for nearly a third of the global GDP and
cover more than 600m people, are resisting protectionism by promoting rule-based international trade and
investment.Onceallnecessaryproceduresareironedout,theEPAisexpectedtoenterintoforceearlynextyear.
U
p to now, the EU has been export-
ing over €80b worth of goods
and services to Japan every
year. Thanks to the EPA, tariffs
on more than 90% of the EU’s exports to
Japan will be eliminated, at once or gradu-
ally, while the remaining tariff barriers will
be partially liberalised. As a result, it’s esti-
mated that the EU companies will save up to
€1.0b/year on customs duties compared to
what they are required to pay today, includ-
ing, for instance, €174m on leather and foot-
wear products, €134m on wine, and €50m on
The EU-Japan Economic Partnership Agreement
forestry products. According to European
Commission’s predictions, EU’s annual
exports to Japan are expected to increase
by 13.2%/€13.5b.
Goods
Japan is already the EU’s fourth biggest
market for agricultural exports, their annual
worth exceeding €5.7b. Following the EPA,
over time around 85% of EU agri-food prod-
ucts (in tariff lines) will be allowed to enter
Japan entirely duty-free, including those in
which the EU has a major exporting inter-
est. For example, the pork industry, the EU’s
main agricultural export to Japan, will ben-
efit from duty-free trade of processed pork
meat and almost duty-free trade of fresh
pork products. Tariffs on wine (around €1b
in exports) will be scrapped from today’s
15%, while those on beef will be cut from
38.5% to 9% over the next 15 years. Cheese
exports will benefit, too; high duties on many
hard cheeses, such as Gouda and Cheddar,
will be eliminated (currently they stand
at 29.8%), while a duty-free quota will be
established for fresh cheeses like Mozzarella.
Processed agricultural products – rang-
ing from pasta through chocolates, cocoa
powder, candies, confectionery and biscuits
to starch derivatives, prepared tomatoes,
and tomato sauce – will also benefit from
duty-free trade after a transition period.
The EPA recognises the special status and
offers protection on the Japanese market to
morethan200Europeanagriculturalproducts
fromaspecificgeographicalorigin,knownas
Geographical Indications (Roquefort, Aceto
Balsamico di Modena, Prosecco, Jambon
d’Ardenne, Tiroler Speck, Polska Wódka,
Queso Manchego, Lübecker Marzipan, and
#Inside
#EU#Japan#Economic Partnership
Agreement
#Goods#Services#Custom duties
#Non-tariff barriers#Data protection
#Brexit
Photo: Pixabay

2. 5/2018 | Baltic Transport Journal | 23
Economy
IrishWhiskeytonamejustafew).Theseprod-
ucts will be given the same level of protection
in Japan as they have in the EU today.
The EU is also very competitive in other
areas, such as chemicals, plastics, cosmetics,
as well as textiles and clothing. Tariffs on
these industrial goods are to be fully abol-
ishedaswell.Tariffsonshoeswillbecutfrom
30%to21%atentryintoforce,withtherestof
the duties being eliminated over the coming
decade. Tariffs on EU exports of leather
products, e.g. fashionable handbags, will
be eliminated over the same period of time.
Services
The EU exports some €28b worth of ser-
vices to Japan each year. The EPA contains a
number of provisions that apply horizontally
to all trade in services, such as a provision
to reaffirm the parties’ right to regulate. It
maintains the right of the EU Member States’
authorities to keep their services public and
it will not force governments to privatise or
deregulate any public service at the national
or local level. Likewise, the Member States’
authorities retain the right to bring back to
the public sector any privately provided ser-
vices. Europeans will continue to decide for
themselves how they want, for example, their
healthcare, education, and water to be deliv-
ered. The EPA provides special provisions
for postal and courier services, telecommu-
nications, international maritime transport
services, and financial services, too, and it
regulates temporary movement of company
personnel. These reservations put aside, the
EPA is believed to free up the movement of
services, making the Japanese market more
open to what the European service compa-
nies have in their offerings.
At the same time, the EPA will respect
each other’s sensitive areas by protecting
selected products, through different tools,
including longer transition periods; limi-
tations to tariff elimination and safeguard
clauses; by ensuring that public authorities
remain free to choose, organise, and run
public services as they wish; and preserving
the public authorities’ right to regulate for
legitimate public policy objectives.
Non-tariff barriers and data
protection
The EU-Japan negotiations have
addressed many non-tariff measures that
had constituted a concern for EU companies,
as some Japanese technical requirements
and certification procedures often make it
difficult to export European products to
Japan. Such barriers are mostly dominant
in industries dealing with motor vehicles,
medical devices, textiles labelling, ‘quasi-
drugs’, cosmetics, and beer. The EPA aims
at making the highly regulated Japanese
market much more accessible for European
products.
In order to eliminate non-tariff barri-
ers, both parties have agreed to enforce
and comply with international standards
to the greatest possible extent. This will
result, among others, in the harmoniza-
tion of major sanitary and phytosanitary
requirements, as well as in the elimination
of other technical barriers to trade. As such,
compliance will become easier to achieve.
In addition, the EU and Japan concluded
the negotiations on adequacy on 16 July 2018,
which will complement the EPA. The parties
agreed to recognise each other’s data protec-
tion systems as “equivalent”, which will allow
data to flow freely between the EU and Japan,
creating the world’s largest free flow data
area. The EPA provides for a review clause,
ensuring that within three years’ time from
entry into force both parties will reassess the
mutual data protection policy.
Brexit and the EPA
The European Commission also hopes
that the deal will become effective before the
UK leaves the EU in March 2019. If the deal
does enter into force before Brexit, it could
applyautomaticallytoBritainduringthepost-
Marchtransitionperiodofaroundtwoyears.
Otherwise,theBrexit-UKwillnotbenefitfrom
the EPA. It is worth noting that the first case
scenariowouldbuyJapansometimetoestab-
lish a separate trade deal with Britain. It is
questionable, though, whether the UK could
bargainforabetterdealthanEPAonitsown.
Standards and values
The EPA will further improve EU export-
ers’ and investors’ position on the Japanese
market. At the same time, the Agreement
ensures strong guarantees for the protec-
tion of EU standards and values. On an
international level, the EPA will strengthen
European leadership in setting a legal
framework for free global trade as well as
show that cooperation, not protectionism,
is the way forward to achieve worldwide
economic success.
Meanwhile, negotiations with Japan
continue on investment protection stand-
ards and investment protection dispute
resolution. Both parties are eager to settle
these talks in due time in order to create a
stable and secure investment environment
between the two economic powerhouses. ‚
Photo: Pexels
Photo: Pixabay