Published: Wed, July 18, 2018
Finance | By Claude Patterson

Japan, EU ink free trade deal amid worries about United States protectionism

Japan and the EU account for about a third of global GDP and their trade relationship has room to grow, according to EU officials, who expect the deal to boost the EU economy by 0.8 percent and Japan's by 0.3 percent over the long term.

President Trump called the European Union a trading "foe" last week, and on Tuesday European leaders replied by signing an economic partnership with Japan that will eliminate nearly all tariffs on bilateral goods.

"It is the common duty of Europe and China, but also America and Russian Federation, not to destroy (the global trade order) but to improve it, not to start trade wars which turned into hot conflicts so often in our history", Tusk said in Beijing.

"Today's signature of the EU-Japan Economic Partnership Agreement is a landmark moment for global trade", he said.

"Politically, it's a light in the increasing darkness of global politics", European Council President Tusk said of the deal, according to The Guardian.

Once in effect, . the deal will eliminate almost all of the tariffs levied on Japanese goods within the European market, . which means South Korean goods will no longer have the same price competitiveness within the market.

The deal, which is the largest-ever negotiated by the European Union, will unite about 600 million people across both markets.

Japan's Prime Minister Shinzo Abe had been scheduled to sign the deal in Brussels last week, but cancelled his trip after devastating floods that killed more than 220 people.

On Sunday, the USA president fuelled rising rancour by labelling the European Union, along with Russian Federation and China, "a foe" of the United States, and repeating his assertion that the European Union has "really taken advantage of us on trade".

Commenting on the deal, Ross Denton, of the global law firm Baker McKenzie, said that both Japan and the European Union had compromised to produce a significant new partnership.

The deal removes the 10% tariff the European Union levies on importing Japanese cars and the 3% tariff on most auto parts, Reuters reported.

The price of European wine and pork will fall for consumers in Japan. The difference reflects exceptions on such products as rice, which enjoys strong political protection from imports in Japan.

The major step toward liberalising trade was discussed in talks since 2013 but is striking in the timing of the signing, as China and the U.S. are embroiled in trade conflicts.

The US this month imposed 25 percent tariffs on $34bn of Chinese goods to lower the US trade deficit, and China quickly retaliated with an increase in tariffs on US goods.

Beijing has responded by imposing identical penalties on a similar amount of American imports. The partnership includes Australia, Mexico, Vietnam and other nations, although the USA has withdrawn.

Tusk also ensured the EU's and Japan's joint support of the Iran Nuclear Deal, which Trump pulled out from earlier this year.

The EU is seeking access to one of the world's richest markets, while Japan hopes to jump-start an economy that has struggled to find solid growth.

Europe's food sector is one of the biggest winners from the deal, which should allow it to capitalize on Japanese demand for high-quality cheese, chocolates, meats and pasta.

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