After five years of negotiations, the European Union(EU) and Japan have signed a wide-ranging trade agreement covering one-third of the global economy, which affects the markets of 600 million people, according to Time.

The European Commission said the agreement would remove the bulk of the €1 billion of annual duties paid by EU companies.

The deal, signed in mid-July, still needs to be ratified by the European Parliament and the National Diet of Japan but could go into effect in early 2019, according to a press release from the European Commission. The agreement will eliminate approximately 99% of the tariffs on Japanese goods sold to the EU.

Tim Seifert, Director of Communications at Hapag-Lloyd in Hamburg said, “So far, it is too early to predict any impact on our operations. However, as such agreements benefit free trade, we clearly see this as a positive signal.”

Brian Crossley, a director of Asia World Group Consultants, a Hong Kong-based freight advisory company, said that the deal will provide a boost for the Japan-EU trade lanes, which he expected to grow exponentially as tariffs are reduced.

“For many years we have seen minimal growth on the Japan- Europe trade lane as protectionism meant that many products were subject to high tariffs. As the tariffs are reduced, I expect to see more consumer demand, particularly for Japanese cars in Europe and luxury European consumer products in Japan.”

“This should be a good scenario for both the ocean and airfreight sectors,” added Crossley.

The EU currently exports over €58 billion in goods and €28 billion in services to Japan annually. In 2016, the value of exported goods and services from Japan to the EU reached €66.7 billion and €16 billion respectively, according to the European Commission.

EU Commissioner for Trade, Cecilia Mamström said in a press release, “Together with Japan, we are sending a strong signal to the world that two of its biggest economies still believe in open trade, opposing both unilateralism and protectionism. The economic benefits of this agreement are clear. By removing billions of euros of duties, simplifying customs procedures and tackling behind-the-border barriers to trade, it will offer opportunities for companies on both sides to boost their exports and expand their business.”

The agreement will also open services markets, primarily financial services, e-commerce, telecommunications and transport. It also includes an extensive plan for sustainable development, sets high standards of labour, safety, environmental and consumer protection, and strengthens the two nations’ commitment to climate change. Additionally, the EU and Japan negotiated data protection reciprocity. The two powers will recognise either party’s data protection systems as equivalent. This agreement will allow data between the two nations to flow safely, which will create the world’s largest area of secure data flows, according to the European Commission.

Source: Reuters
Source: New York Times and Reuters