EU okays free trade talks with Japan while protecting cars
(BRUSSELS) - European Union trade ministers agreed Thursday to launch negotiations on a mega-sized free trade deal with Japan while pledging to safeguard Europe's struggling carmakers.
"We now have a clear mandate, confirmed by all the member states," said Europe's Trade Commissioner Karel De Gucht after ministers gave the European Commission a green light to open talks on a free trade deal, or FTA, which could take several years to negotiate.
Britain's Trade Minister Stephen Green immediately welcomed "the first big step towards liberalising trade between two of the world's largest economies," which together account for more than a third of the globe's output.
But he cautioned that the EU was "starting out on a journey that will be long, tedious and painstaking."
It "could be three years, maybe more" before a deal and that "we could easily be talking about 10 years or more before we get full impact," he said.
But carmakers quickly slammed what the European Automobile Manufacturers' Association dubbed "a one-way street' for Japanese automakers.
France, whose flagship auto giant Peugeot Citroen is in trouble, said it agreed to the negotiations after winning assurances of a balanced deal.
Its trade minister, Nicole Bricq, said Italy, Romania, Spain and Slovakia had joined a call for a safeguard clause to protect sensitive European sectors, including automakers.
Britain's Green said the safeguards on the auto sector were "not expressed in specific numbers" or "constraints".
De Gucht said Europe in a "like for like" stance would not reduce tariffs before Japan delivered on regulatory barriers.
It was also ready to pull the plug on negotiations after a year if Japan failed to live up to commitments to remove non-tariff barriers.
"Europe is going into these talks with its eyes wide open," he said, while adding that he was confident that Tokyo was ready to open up its market, recently having finally agreed to grant liquor licences for EU firms.
"No other partner has ever gone as far as Japan before we sat down at the negotiating table," he said.
EU seeking shot in the arm with trade deals
The EU is looking to accelerate trade deals worldwide to give its struggling economies a shot in the arm.
On Thursday, it moved closer to a trade deal with Canada and another with Singapore that ministers said could pave the way to others in Southeast Asia.
De Gucht said an FTA with Japan could increase EU gross domestic product by almost one percentage point, boost EU exports to Japan by one third, and add 420,000 extra jobs across the bloc.
But car and car part manufacturers are fearful the removal of tariffs would lead to a rise in Japanese car imports, pointing to a previous trade deal with South Korea that bumped up sales of their vehicles in Europe.
"There is no justification for exposing the automobile industry, a major pillar of the EU economy, to an unbalanced FTA," said Ivan Hodac, head of the European Automobile Manufacturers' Association, ACEA, that includes the likes of BMW, Fiat, Porsche, Peugeot Citroen and Volvo.
Quoting a study, the ACEA said EU car exports would increase by a mere 7,800 units by 2020 compared with extra Japanese exports of 443,000 units, meaning the loss of 35,000 to 73,000 jobs.
But EU officials believe the car industry's troubles are due to the economic crisis and to over-capacity, not to competition from elsewhere.
Other European manufacturers meanwhile have complained of failing to find a footing in Japan, which has a reputation for being a closed market defended by walls of non-tariff barriers -- the EU listed 31 such barriers.
De Gucht argues that many European industries favour a deal tying the globe's largest market to the world's third-biggest economy.
Among sectors he cited were food, drinks, chemicals, information technology, telecommunications, services and pharmaceuticals.
Britain too has long been supportive, eyeing up to 33 billion euros ($43 billion) a year in extra GDP and an extra 43 billion euros a year in additional export opportunities."
Should the EU conclude all the FTAs currently being negotiated, it would boost EU GDP by more than two percent, or 250 billion euros, officials estimate.
That would be the equivalent of economies the size of members such as Austria or Denmark.