What is it, and why does it matter?

The EU and Japan are two economic giants, together accounting for one third of world GDP and more than a 30% of world trade. Studies show that the successful conclusion of an ambitious free trade agreement between EU and Japan could deliver a potential 32.7% increase in EU exports to Japan. Japanese exports to the EU could rise by as much as 23.5%. The Economic Partnership Agreement matters to both sides.

Milestones of the Economic Partnership Agreement negotiations  

Negotiations were officially launched on 25 March 2013 by the then Commission President Jose Manuel Barroso, Council President Herman Van Rompuy and Japanese Prime Minister Shinzo Abe.

On 6 July 2017, the European Union and Japan reached an agreement in principle on the main elements of an EU-Japan Economic Partnership Agreement and Strategic Partnership Agreement.　Building on this political agreement, Trade Commissioner Malmström and Japanese Foreign Minister Kono announced on 8 December 2017 the successful conclusion of the final discussions on the EU-Japan Economic Partnership Agreement. This was followed by the legal verification of the text (also known as "legal scrubbing"), the translation of the English text into the other 23 official languages of the EU, as well as into Japanese.

The Commission then submitted the agreement for the approval of the European Parliament and EU Member States, which led ultimately to the entry into force of the agreement on 1 February 2019.
At the same time, negotiations continue on investment protection standards and investment protection dispute resolution. The firm commitment on both sides is to reach convergence in the investment protection negotiations as soon as possible, in light of their shared commitment to a stable and secure investment environment in Europe and Japan.

This EPA is the most important bilateral trade agreement ever concluded by the EU. To Japan, our 7th biggest trade partner, we export around 10 million euros of goods and services per hour. And import almost as much. Meanwhile, nearly 5000 Japanese affiliates investing in the EU employ over half a million people. For the EU and its Member States, the Economic Partnership Agreement removes the vast majority of duties paid by EU companies, which sum up to €1 billion annually.

The main elements of the Economic Partnership Agreement

The Economic Partnership Agreement removes the vast majority of the €1 billion of duties paid annually by EU companies exporting to Japan, as well as a number of long-standing regulatory barriers. It also opens up the Japanese market of 127 million consumers to key EU agricultural exports and will increase EU export opportunities in a range of other sectors.

With regards to agricultural exports from the EU, the agreement in particular:

• scrapped duties on EU wine immediately (1 February 2019)
• progressively eliminates duties on many hard cheeses such as Gouda and Cheddar (which before the entry into force of the EPA were  set at 29.8%), while fresh cheeses such as Mozzarella benefit from a duty-free quota.
• progressively eliminates duties for processed agricultural products such as pasta, chocolates, cocoa powder, candies, confectionary, biscuits, starch derivatives, prepared tomatoes and tomato sauce.
• allows the EU to increase its beef exports to Japan substantially, while on pork there will be duty-free trade in processed meat and almost duty-free trade for fresh meat. 
• ensures the protection in Japan of more than 200 high-quality European agricultural products, so called Geographical Indications (GIs), and also ensures the protection of a selection of Japanese GIs in the EU.

The agreement also opens up services markets, in particular financial services, e-commerce, telecommunications and transport. It also…

• guarantees EU companies access to the large procurement markets of Japan in 48 large cities, and removes obstacles to procurement in the economically important railway sector at national level;
• Addresses specific sensitivities in the EU, for instance in the automotive sector, with transition periods before markets are opened.

The deal also includes a comprehensive chapter on trade and sustainable development; sets the highest standards of labor, food safety and environmental protection; strengthens EU and Japan's actions on sustainable development and climate change and fully safeguards public services.

The EU and Japan are both signatories to the WTO Agreement on Government Procurement and have rules aimed at ensuring public money is spent in a transparent, efficient and non-discriminatory way. Nevertheless, European companies currently face obstacles in winning public contracts in Japan.

Both the EU and Japan are committed to achieving increased liberalisation and expansion of world trade; the EPA negotiations have paved the way to removing remaining obstacles and to ensuring that EU and Japanese firms can bid for public tenders on equal terms.

Further market opening in public procurement would be good for both the EU and Japan. For public authorities with tight budgets, it can bring:

• better value for money
• more choice
• greater economic efficiency
• good governance.

For companies it could:

• increase demand for their products or services
• create opportunities for growth
• safeguard existing jobs
• create new jobs.

What are public procurement and concessions?

Public procurement refers to the process by which public authorities such as government departments or local authorities purchase work, goods or services from companies which they have selected for this purpose. Examples include building a state school, purchasing furniture for a public prosecutor's office or contracting cleaning services for a railway station.

A concession is a partnership between the public sector and a (usually) private company that has shown its added value in a specific area, for example developing infrastructure, and may take the form of a Public Private Partnership (PPP). While in a public contract a company is paid a fixed amount for completing the required work or providing a service, in a concession a company is remunerated mostly through being permitted to run and exploit the work or service and is exposed to a potential loss on its investment. Examples include road and rail transport, port and airport services, motorway maintenance and management, waste management, energy and heating services.

According to the European Investment Bank data, 1,780 Public Private Partnerships (PPP) projects reached financial close in the EU  between 1990-2018, for a total value of EUR 368.6 billion.

For further information on how public procurement is covered under the EU-Japan EPA, refer to the following documents:  DG TRADE, European Commission: http://trade.ec.europa.eu/doclib/docs/2017/july/tradoc_155719.pdf; 
EU- Japan Centre for Industrial Cooperation:  https://www.eubusinessinjapan.eu/issues/economic-partnership-agreement/epa-public-procurement

Public procurement-related policy developments in the EU

Key EU legislation on public procurement includes:
- a directive on public procurement (Directive 2014/24/EU)
- a directive on procurement by entities operating in the utilities sectors, eg water, energy, transport and postal services (Directive 2014/25/EU); and
- a directive on the award of concession contracts (Directive 2014/23/EU).

The 'utilities sectors' are covered by separate and more flexible rules, which apply not only to traditional public purchasers (the state, municipalities, regions, etc.), but also to public or private companies. Unlike the 'public procurement' Directive, the 'utilities sectors' Directive also applies to contracts awarded by public undertakings (on which public purchasers have a dominant influence), and to those awarded by private entities which have obtained the exclusive or special right to operate in one of the sectors concerned.

In addition to regulating public procurement within the EU market, the EU advocates for an ambitious opening of international public procurement markets outside the EU, and has committed itself to granting market access to its public procurement market for certain foreign goods, services and companies. The EU negotiates both bilateral/regional and plurilateral international agreements.

The EU is working to ensure equal access and reciprocity in public procurement in the international fora. The European Commission’s International Procurement Instrument (IPI) proposal – first put forward in 2012, revised in 2016 and currently in the legislative process – would provide a powerful tool to improve the conditions under which EU businesses can compete for public contracts in third countries and to give the EU more leverage when negotiating its access to foreign public procurement markets."

Promoting investment flows between the European and Japanese economies is increasingly at the forefront of the EU-Japan relationship and have been discussed in the EPA negotiations. More investment is of mutual interest. The EU benefits from an open Japanese economy with which European companies can trade smoothly and where they can easily establish branches or subsidiaries to develop their business activities. For Japan, Foreign Direct Investment (FDI) plays a crucial role in boosting its economy.

Investment protection provisions in the EPA will encourage investment by guaranteeing that governments will treat investment between the EU and Japan in line with some basic principles which prohibit:

• discrimination
• expropriation of foreign investments without compensation
• denial of justice to foreign investors in domestic courts
• abusive or arbitrary treatment of EU and Japanese investors in each other's territory.

What is covered?

Free movement of capital is at the heart of the European Single Market and is one of its 'four freedoms'. It enables integrated, open, competitive and efficient European financial markets and services - which bring many advantages to us all. For citizens it means the ability to do many operations abroad, such as opening bank accounts, buying shares in non-domestic companies, investing where the best return is, and purchasing real estate. For companies it principally means being able to invest in and own other European companies and take an active part in their management.

Foreign direct investment is a direct investment into production or business in a country by a company in another country. The EU has long been in the vanguard, promoting investment by European companies and investors into other Member States and third countries, and investment into the EU by third countries. This is in everyone's mutual interest and is all the more important now as the world emerges from the financial crisis and the economic downturn.

Investment-related policies

As investment is part of the EU’s common commercial policy the European Commission may legislate on investment. Its approach is outlined in its paper "Towards a comprehensive European international investment policy". The EU's investment policy is focused on providing EU investors and investments with market access, legal certainty and a stable, predictable, fair and properly regulated environment in which to conduct their business.

As well as ensuring that its markets are as open as possible to stable, secure and beneficial foreign investment, the EU also looks to promote these principles at a global level through international fora and multilateral agreements; bilateral investment dialogues and trade agreements; and through relations with third country investors, and, in particular, Sovereign Wealth Funds.

Useful links

Investment-related policies of the European Commission: DG Trade; DG Financial Stability, Financial Services and Capital Markets Union. Destination Europe: The EU Single Market: An attractive destination for Japanese FDI  (PDF)

The EU and Japan share a vision of agriculture aiming not only at feeding people but also at preserving the landscape, the environment and traditions. As such, the EU is actively engaging in meaningful exchanges with Japan bilaterally, in high-level meetings in Tokyo and Brussels, and multilaterally, in the WTO committee on Sanitary and Phytosanitary Measures, the World Organisation for Animal Health, CODEX Alimentarius Commission, Joint FAO/WHO Expert Committee on Food Additives, and agricultural negotiations within the WTO framework.

In addition to these fora, agriculture and food safety are an important part of the EU-Japan Economic Partnership Agreement (EPA) negotiations which were initiated in 2013 and concluded in December 2017.

Open trade is of utmost importance to the European agricultural sector since the farmers' and producers' livelihood depends on it. European producers are well recognised all over the world for their high quality food and beverages.

Japan is a major food importer and its food market is one of the biggest ones in the world. However, high entry barriers and high tariffs maintained on products of export interest to the EU limit the variety of products that EU producers can export to Japan. This results in a limited range of European food products on offer in Japan and also in high consumer prices.

Through the EPA negotiations with Japan, the EU has increased transparency and clear regulatory frameworks that will enable European companies to have easier access to the Japanese market and that the EU market share increases to its rightful level.

Japan itself has recently become more focused on improving the competitiveness of its agricultural sector and increasing its exports of agricultural and foodstuff products. As Japan begins to appreciate the possibilities for economic growth that trade opportunities offer also to the agricultural sector it will discover that gaining access to the markets of others is not a one way road. Instead of shielding the agricultural sector from trade opening, well designed agricultural policies need to be in place so that the agricultural sector can compete and reap the benefits of the trade opening on its own merits.

In case of the EU, the Common Agricultural Policy, CAP, and the major reforms undertaken since the 1980's have enabled the EU to participate in major trade negotiations and they continue to do so also today.

Approval of food additives

Food Safety was one of the major topics of the EPA negotiation between the EU and Japan. The Japanese list of food additives needs a major update and alignment with international standards. In December 2002, the Japanese government identified 46 priority food additives "whose safety is globally confirmed and which are widely used outside Japan". Although these substances had already been evaluated by the Joint WHO/FAO Expert Committee on Food Additives and are therefore approved and used in many countries including EU Member States and the US, the Japanese Government maintained that these substances should be evaluated individually on the basis of specific Japanese criteria. As for the additives of the EU's interest within the list of 46 priority additives, the approval process was completed. Positive developments took place also regarding approval of substances used in wine production. However, a significant number of other substances still need to be approved in Japan. Until this happens, many top quality and perfectly safe European food products cannot enter the Japanese market.

Trade in beef and beef products

Until recently, an issue of concern was related to European beef exports to Japan. EU beef was banned from the Japanese market for more than ten years. But starting from 2013, Japan has lifted its ban on imports of beef from France, the Netherlands, Ireland, Poland, Denmark, Sweden, Italy, and more recently from Austria. All this sends an encouraging signal to other EU Member States seeking to apply to export beef to Japan, and whose equally high sanitary status has already been internationally recognised by the World Organisation for Animal Health (OIE). This development shows that non-tariff barriers can be overcome on the Japanese market.

Information related to the accident at the Fukushima nuclear power station

EU Measures on import of food and feed originating in or consigned from Japan

The COMMISSION IMPLEMENTING REGULATION (EU) 2019/1787 imposes special conditions for the import of feed and food originating in or consigned from Japan following the accident at the Fukushima nuclear power station. The regulation, which has replaced the previous Implementing Regulation (EU) 2016/6, is available at the following link.
The following are excluded from the application of the COMMISSION IMPLEMENTING REGULATION (EU) 2019/1787:

(a) Products which have been harvested and/or processed before 11 March 2011;

(b) Personal consignments of feed and food of animal origin which are covered by Article 2 of Commission Regulation (EC) 206/2009（http://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:32009R0206&from=en. For more information see the following link.）

(c) Personal consignments of feed and food other than of animal origin which are non-commercial and destined to a natural person for personal consumption and use only. In case of doubt, the burden of proof lies with the recipient of the consignment. For more information see the following link.

For further enquiries, please contact delegation-japan@eeas.europa.eu or have a look at the frequently asked questions

External links:

DG AGRI website, About CAP 2014-2020 in detail , DG Health and Food Safety, Food safety site, European Food Safety Authority, Import Conditions to the EU

Several private and public-sector networks and initiatives bring together European and Japanese businesses in Japan. The EU-Japan Centre for Industrial Cooperation and the EU-Japan Business Round Table work with SMEs and large companies, the European Business Council brings together European companies in Japan to make policy recommendations. The EU's Executive Training Programme helps European businesses increase their knowledge of, and trade with, Japan.

EU-Japan Centre for Industrial Cooperation

The Centre promotes all forms of industrial, trade and investment cooperation between Japan and the EU, and aims to strengthen the technological capabilities and the competitiveness of the European and Japanese industrial systems. As a joint venture of Japan and the EU it has offices in Tokyo and Brussels and its services include access to training, including the Vulcanus in Europe and Vulcanus in Japan schemes for young engineers. It is also the contact point for Horizon 2020 in Japan, and offers various other information services. It organizes the annual Business Round Table (BRT).

EU-Japan Business Round Table (BRT)

The Business Round Table is made up of around 50 CEOs/senior executives from leading EU and Japanese firms who meet once a year to review all aspects of business cooperation and to make policy recommendations to the European Commission and Japanese government. It aims to contribute to the economic success of Japanese and European industry. It identifies mutually-beneficial initiatives and keeps track of progress achieved by the European and Japanese administrations. Its discussions cover various topics including the economy, the business environment and current issues.

European Business Council (EBC)

The European Business Council (EBC) is the trade policy arm of seventeen European National Chambers of Commerce and Business Associations in Japan and is registered as the EU Chamber of Commerce in Japan. It represents over 2,500 local European companies and individuals and works closely with the EU Delegation, the national European Embassies and business organisations to co-ordinate policy proposals. It makes suggestions to the Japanese government on how to create an open environment for trade and investment in Japan. The EBC, with its 26 industry committees, produces an annual report on the Japanese business environment, outlining the key issues of concern. Past issues of the report are available here.

EU Green Gateway to Japan Programme

Between 1994 and 2014 the EU Gateway to Japan programme has helped to boost trade and investment between Europe and Japan. A total of 12 missions shall be organised in the framework of the "EU Green Gateway to Japan" programme (2017-2020) which is focusing on promoting trade and investment of green technologies in the following 5 sectors: construction, environment, energy, medical devices and railway components, parts and services.
As of August 2019, nine missions have been organised. Two missions shall be organised in the construction and railways sectors in November 2019, and a third mission in the healthcare and medical devices sector shall be organised in March 2020.  

Further information on the EU Green Gateway Programme is available at the following websites: http://www.eu-gateway.eu and http://www.eu-gateway.jp

For inquiries, please send an email to: delegation-japan-gateway@eeas.europa.eu