Tariffs on almost all exported gods were either reduced or completely eliminated in a new free trade deal that was signed between the European Union and Japan on Tuesday.
The deal encompasses almost 600 million people and about one third of the world’s economy. the deal also is a positive for the existing global trading system which is coming under increasing threat because of protectionism polices of various governments.
While the trade barriers for Japanese automakers and electronics firms exporting to the EU would be reduced, the trade deal would eliminate import tariffs on a number of European goods to Japan such as cheese and wine.
The reduction or complete elimination of the trade barriers arising out of import tariffs as inked in the new trade agreement is a complete opposite to the trade policy as adopted by United States President Donald Trump – who has bene on a spree of imposing trade tariffs on a wide range of goods imported into the country. he also has threatened whit more such action.
The agreement was hailed as the “largest bilateral trade deal ever” by Donald Tusk, president of the European Council.
“Relations between the European Union and Japan have never been stronger,” he said in a written statement. “Geographically, we are far apart. But politically and economically we could hardly be any closer.”
According to EU data, last year the total trade between the EU and Japan was about €129 billion ($152 billion) worth of goods.
The deal that was signed on Tuesday sends “a very strong signal to the US Administration that the EU and Japan, two major trade partners of the US, both see the benefits of removing barriers and reducing, not increasing tariffs,” said Baker McKenzie partner Ross Denton.
Europe was willing to lower some of its tariffs and cooperate with the United States, EU trade commissioner Cecilia Malmström said last month. However, the doors were closed down by the Trump administration and it subsequently imposed tariffs on steel and aluminum exported from the EU to the US. There can also be a new tariff on cars manufactured or assembled in the EU.
Right at the beginning of his presidency, Trump had also withdrawn the US from the Trans-Pacific Partnership which was another free trade agreement between multiple countries seeking to lower trade tariffs and trade barriers. The deal was to be struck between 12 countries including the US.
The average global tariffs are near record lows. According to the World Trade Organization, when EU products are imported into Japan, they attract a tariff of 1.6% on the average while an import tariff of 2.9% is imposed on Japanese products entering the EU.
Still, the European Union said the tariffs cost its companies up to €1 billion ($1.2 billion) per year.
Following the ratification by the parliaments of both the sides, the new trade agreement is expected to come into force from 2019.
(Adapted from Money.CNN.com)