Japanese and EU negotiators meeting in Tokyo aim to reach a free-trade deal that would stand against a protectionist tide threatening the global economy and make the US think twice over pursuing inward-looking policies.
Japan and the EU have been negotiating since 2013 but talks have intensified since last week, with almost daily meetings to overcome key hurdles, including tariffs on Japanese automobiles and car parts and European wine, cheese, pasta and other foods.
A Japan-EU deal could leave US firms at a disadvantage, especially after President Donald Trump’s withdrawal of the US from the Trans-Pacific Partnership (TPP) earlier this year.
“There is an atmosphere among negotiators that Japan and the EU need to stop protectionism that is prevailing in the world,” said a source familiar with the issue who declined to be identified because talks are ongoing.
“The momentum is building for Japan and the EU to take leadership in promoting and executing free trade.”
In a sign of optimism, EU trade chief Cecilia Malmstrom said on Monday she could sign a provisional deal with Japan as early as next week.
Trump favors bilateral trade deals over multilateral accords and his decision to walk away from the TPP, left the other 11 members of the Pacific Rim trading bloc, including Japan, in limbo.
Although together Japan and the EU account for about a third of global gross domestic product (GDP), their trade relationship has a lot of room to grow — EU forecasts reckon by as much as a third.
Their bilateral trade totaled $144 billion last year, whereas Japan-China trade was $262 billion and Japan-US trade was $192 billion.
After unsuccessful attempts to conclude a deal with Tokyo during the past two years, there is a sense in the EU camp that people will start to lose faith if they cannot wrap it up this year, an EU official familiar with the talks said.
An agreement would put American companies at a disadvantage in Japan because they compete against European businesses in many of the same markets, said Junichi Sugawara, a senior research officer at Mizuho Research Institute.
It could even be used by Tokyo to convince Washington to rejoin the TPP, he said.
“The US side is likely to come at Japan with strong requests for better market access, but Japan can use a deal with the EU as leverage to lure the US back to TPP,” he said.

Source: Arab News