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Hope for better ties

April 29, 2011

THE European Union’s outreach to Asia has traditionally had a strong China focus, with India getting a quick look-in at times. Since the March 11 earthquake and tsunami in Japan, however, relations with Tokyo are also on the front burner. EU policymakers are working hard to forge a strategy for upgrading relations with Japan — but after years of inertia, transforming lacklustre EU-Japan ties into a more exciting relationship is not proving easy.

In theory they are ‘strategic partners’, ready to work together to tackle bilateral and global challenges. In practice, the EU and Japan have struggled — largely unsuccessfully — to translate their shared concerns on climate change, nuclear proliferation, energy security and free trade into a close, operational and effective partnership.

This may be about to change. EU and Japanese leaders, meeting in Brussels at the end of May, are expected to open discussions on a Free Trade Agreement (FTA) to boost bilateral trade and investments. The pact could be a useful tool in helping rebuild the Japanese economy following the devastating earthquake and tsunami.

Equally importantly, it could give a new lease of life to stagnant EU-Japan ties. Since both sides are aiming high, any EU-Japan free trade agreement would also set a new standard of ambition for bilateral FTA deals as well as for trade liberalisation within the World Trade Organisation (WTO).

An EU decision on launching the FTA negotiations has been a long time coming. Japan started lobbying for such an agreement after Japanese car-makers expressed concerns that an EU-South Korean FTA — now finally approved by the European Parliament — would give their South Korean rivals a competitive edge on EU markets.

The Japanese daily Asahi Shimbun reported last November that Japanese manufacturers of home appliances, automobiles and other products would lose $3bn worth of exports to the EU because of the EU-South Korea FTA. Japanese industry says this is because Korean manufacturers will be free of the EU’s 10 per cent tariff on automobiles and 14 per cent tariff on TV sets.

Europeans have not been overly enthusiastic about free trade with Japan, fearing complaints from the EU car industry over two market-opening deals in quick succession. Japan’s economic difficulties in the wake of the recent tragedy, however, appear to have changed the minds of many EU leaders, including British Prime Minister David Cameron who has come out most vocally in favour of such a move.

An EU-Japan FTA would slash tariffs in bilateral trade, eliminate an array of regulatory and non-tariff barriers, ease stringent testing requirements for consumer goods as well as public procurement rules which restrict European businesses in Japan. EU trade in manufactured goods with Japan was worth 109bn euros in 2010, easily topping the 67bn euros in trade impacted by the new EU-South Korean FTA.

It is likely to be a tough sell, however. As the EU trade commissioner, Karel De Gucht, underlined recently, Japan must prove it is willing to open its markets to imports from the EU. “Starting negotiations without having a clear view of what the level of ambition is, if there is really a preparedness to do something about the non-tariff barriers I don’t know if it makes sense,” said De Gucht.

The EU has drawn up a list of 27 Japanese rules — from cumbersome liquor wholesale licence rules to slow-moving approvals of EU food additives — that it says hamper EU exports. Japan, meanwhile, is insistent that the FTA should tackle auto-related and other tariffs.

Any deal with Japan will have to win approval of all 27 EU governments, get the green light from the European Parliament, with policymakers also having to meet concerns of Europe’s car industry. As in the case of EU attempts to provide post-flood trade concessions to Pakistan, some critics are likely to argue that trade agreements should not be viewed in terms of humanitarian assistance.

While such arguments need to be considered, EU governments must push ahead with plans to open FTA talks with Japan.

Such a move would signal a new EU determination to forge stronger relations with Tokyo — and prove to the rest of Asia that Europe is not just focused on improving relations with China. However, work on trade must go hand in hand with stronger efforts by both Brussels and Tokyo to revitalise other aspects of their relationship.

The EU needs Japan’s experience and insight in its dealings with other Asian countries, including China. Japan, meanwhile, needs to broaden its partnership with Europe to include political and security issues, not just trade.

Europe and Japan share the common challenge of making their global presence felt despite being so-called ‘soft powers’.

Although the current focus is on China’s emergence as a global power, it is worth remembering that Japan continues to play a crucial international role, including as a key donor and economic partner for many Asian countries.

Herman Von Rompuy, the current president of the EU Council, is an avid enthusiast of haiku verse and all things Japanese. He is therefore in a privileged position in pushing EU-Japan relations in the right — upward — direction. It takes two sides to tango, however. As such, both the EU and Japan will have to make sure that the end-May summit marks an important step forward in bilateral relations and allows the EU and Japan to undertake joint initiatives and actions on the global stage.

The writer is Dawn’s correspondent in Brussels.