The new Japan-EU Free Trade Agreement and what it means for world trade

Origin Calculation | 26 September 2018

The Japan-EU Free Trade Agreement was signed in December 2017. What is it and what does it mean for the economies of the two blocs?


The Japan-EU Free Trade Agreement (Jefta) is one of the world's newest economic treaties. Here, we'll take a look at exactly what it is and what difference it will make for trade between the two blocs and the wider world.

Jefta is signed

Negotiations were concluded on a free trade deal between Japan and the European Union in December 2017, creating the world's biggest open economic area and going against a trend for protectionism being favoured by nations including the US.

The legal text opened up trade for economies that make up around 30 per cent of total global output, with the aim of building a fair and rule-based economic zone that "will be a model of an economic order in the international community in the 21st century", Japanese prime minister Shinzo Abe said.

Changes made under Jefta

EU companies had already been exporting more than €8 billion in goods and €28 billion in services to Japan every year, but trade barriers existed that made competition difficult.

For example, Japan had high customs taxes of almost 40 per cent on beef and 30 per cent on chocolate, as well as a raft of other products. In addition, the country had complex and difficult customs rules, such as a long procedure to approve different varieties of fruit, which had been off-putting to EU exporters.

Jefta changed all this by removing EU tariffs, including the ten per cent on cars. For the EU, Japanese duties on European foodstuffs were scrapped, allowing it to boost exports and access public tenders in Japan.

Indeed, around 99 per cent of tariffs on Japanese goods to the EU have been removed, while 94 per cent of those that applied to EU imports into Japan are no longer relevant.

For people in the two blocs, prices are set to get cheaper for items such as tea and pork, which the governments hope will encourage spending.

By increasing its ties with Europe, Japan hopes to raise mutual direct investment, move away from protectionism and increase the competitiveness of Japanese brands.

For its part, the EU hopes to see growth in exports and better job security for people in Europe.

Jefta going forward

Over recent months, negotiators in Japan and the EU have worked on tariffs and the means of protecting food and drink, but discussions will be ongoing on the topic of investor protection.

Mr Abe has called this a "new era" for Japan and Europe - and with the trade bloc covering an open trade zone of more than 600 million people, he is likely to be right.

EU trade chief Cecilia Malmstrom said: "This is the biggest trade agreement we have ever negotiated for the European Union. It sends a powerful message in defence of open trade based on global rules."