Permanent Mission of the European Union to
the World Trade Organization (WTO)

EU Statement by Ambassador João Aguiar Machado at the Trade Policy Review of Japan, 6 July 2020

Geneva, 06/07/2020 - 00:00, UNIQUE ID: 200706_8
Local Statements

On behalf of the European Union, I would like to extend a very warm welcome to the Delegation of Japan, led by Deputy Director-General Mr Kenko Sone (Economic Affairs Bureau, Ministry of Foreign Affairs). I would also like to thank the WTO Secretariat and the Government of Japan for their comprehensive reports, which form the basis for our discussion today. Let me extend our appreciation to the Discussant, H.E. Ambassador Dagfinn Sørli (Norway), for the introduction to the main developments in Japan’s economy and its trade with the rest of the world since the country’s last Trade Policy Review. The EU appreciates the commitment of Japan to this important transparency exercise and for agreeing to hold the suspended TPR meeting due to the Covid19 crisis at the first opportunity.

Japan is a strategic partner of the EU. Bilateral relations have never been closer and are set to further intensify. Japan and the EU are like-minded global partners and maintain a close dialogue and cooperation in the United Nations, the WTO, the OECD and the G7/G20. We share fundamental common principles: the rule of law, democracy, the peaceful resolution of disputes, and a sense of justice in international affairs. In the current increasingly polarised geopolitical context, Japan and the EU’s partnership can contribute to preserving and defending effective multilateralism and the rules-based international order.

Two landmark bilateral agreements between the EU and Japan were signed in 2018: the Strategic Partnership Agreement (SPA) and the Economic Partnership Agreement (EPA). They have enhanced our strategic partnership further and set up an elaborate institutional structure for bilateral discussions, which allows for close coordination, exchange of information and joint actions.

Beyond these bilateral agreements, the EU and Japan engage in regular, broad and constructive consultations at various levels. EU and Japanese leaders meet regularly in the margins of G20, G7 and UNGA. Bilaterally, in addition to annual summits, there is a political dialogue at the level of political directors, and there are more than 30 different sectoral dialogues, ranging from fisheries over climate change to cyber security and space issues.

The EU and Japan also have common interests in the world trading system and, for both, the multilateral, rule-based trading system under the WTO has always been the most effective and legitimate means to manage and expand trade relations between countries. We trust that commitment to this system will remain the guiding principle of Japan’s action on the international trade scene.

The EU is determined to achieve, through appropriate reforms and together with the whole WTO Membership, the restoration of properly functioning dispute settlement in the WTO. In the meantime, the EU and – as things stand – 21 other WTO Members are in the Multi-party interim appeal arbitration arrangement, known as the ‘MPIA’. This purely stopgap arrangement is open to all WTO Members while the WTO Appellate Body remains unable to function fully. We warmly invite Japan to join. Not only would this help preserve Japan’s dispute settlement rights in the WTO; it would also signal a shared commitment to the rules-based system and the authority of international trade law, helping to pave the way for the multilateral re-establishment of a fully functioning, two-tier, independent and binding dispute settlement mechanism in the WTO.

Our cooperation with Japan and other like-minded partners is also very important for us to ensure a global level playing field and tackle practices that lead to severe overcapacity, create unfair competitive conditions and undermine international trade. In this context, I would like to mention as an example the trilateral cooperation we have with Japan and the US with the shared objective of developing new rules to fill the gaps in the WTO’s rulebook. We are grateful to Japan for our good cooperation to achieve that goal.

As a highly developed economy and major global trader and investor, Japan is an important economic partner for the EU. Both economies together cover 600 million people and account for approximately 30% of the world GDP.

For the EU, Japan is the second-biggest trading partner in Asia after China, and for Japan, the EU is its third biggest trade partner. In 2019, Japan was the EU’s sixth export partner and the sixth import partner accounting for 3.5% of EU’s external trade.

More specifically, in 2019, the value of trade in goods between the EU and Japan was €142,2 billion. EU exports were worth €68.5 billion and EU imports amounted to €73.6 billion. EU-Japan trade is dominated by imports/exports of, e.g. machinery, motor vehicles, optical and medical instruments, pharmaceuticals and chemicals. Japan is the EU’s 4th biggest market for agricultural exports.

As regards trade in services, it has expanded steadily over the years and it reached €57,2 billion in 2018.

FDI investment in both directions has also been significant, with inward investment stock from Japan growing from €122 billion in 2008 to around €260.6 billion in 2017, mainly into automotive manufacturing sector. Outward EU investment to Japan has fluctuated between €70 and €98.8 billion over the 2008 and 2017 period. The EU is Japan’s second most important investment destination after the US.

The EU-Japan Economic Partnership Agreement, the EPA, is one of the most important and comprehensive trade agreements ever concluded by both sides. It reinforces the economic cooperation between the EU and Japan and the competitiveness of the two mature but innovative economies. The EU-Japan EPA removed the vast majority of the €1 billion of duties paid annually by EU companies exporting to Japan and opened up entirely the Japanese market for 97% of all product categories, with the remaining ones benefitting from partial liberalisation.

At a moment of crisis in international trade, when more than ever it is essential to defend the integrity of a rule-based trading system, the EU-Japan EPA strikes as a symbol of the importance of cooperation, common rules and predictability for the development of economic relations. It is noteworthy that the EU-Japan EPA contains chapters through which the two partners have agreed bilateral disciplines on issues, such as subsidies and State Owned Enterprises.   

The first year of the EPA implementation was completed in a satisfactory manner. There have been some initial implementation difficulties, as is usually the case with ambitious and comprehensive trade agreements, but the EU and Japan efficiently cooperated and eventually found positive solutions. On this and other issues, the stronger institutional links between the EU and Japan and their common bilateral trade objectives have demonstrated their usefulness to deliver mutually beneficial outcomes.

During the first year of the implementation, after the EPA’s entry into force in February 2019, merchandise trade with Japan increased by 5.8% in both directions compared to the previous year. It is hoped that the new economic partnership will facilitate a rapid resumption of that upward trend once the Covid-19 crisis is fully under control.

The EU and Japan have strengthened cooperation on digital and data policies. The EU welcomes the determination shown by Japan in addressing the challenges of digital transformation of its economy, promoting international cooperation through the ‘Data Free Flow with Trust’ initiative, and entering in a mutual adequacy arrangement with the EU as regards data protection. This has established the world's largest area of free transfers of data based on a high level of protection for personal data. The EU is willing to continue its close cooperation with Japan on other key digital issues.

The EU is also cognisant of Japan's contribution to the implementation of the Paris Agreement. At the same time, we closely watch the current efforts deployed to reconcile the domestic challenges in terms of de-carbonisation efforts with the overall level of ambition, in particular taking into account the role played by Japan in coal technology transfer in the region and beyond.

The EU, in its questions, has raised several issues, inter alia on SPS measures, government procurement, agriculture and services. As regards SPS, while the EU welcomes Japan's constructive approach and cooperation regarding the establishment of a positive list for food contact materials in Japan, we would appreciate concrete progress on market access applications for agricultural commodities that, currently, cannot be traded, as well as work on regionalization.

We appreciate Japan’s commitment and on-going efforts to facilitate trade and investment and we are hopeful that it will address any concerns we may have in this regard.

Last but not least, the EU expects that FTAs concluded by Japan with other WTO Members comply with its WTO commitments, in particular with the requirement to cover “substantially all trade”.

The EU is grateful to Japan for having replied in a very comprehensive manner to its advanced questions and for using the alternative timeline.  I wish Japan a very successful review. Thank you.

 

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