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Is the EU-Japan ‘trade deal’ real – or just a stunt?

6 July 2017

7:17 PM

6 July 2017

7:17 PM

There is much celebration in Brussels today about what’s being described as a EU-Japan trade deal, but for political rather than economic reasons. Donald Trump has arrived in Hamburg for the G20 summit where he finds himself cast as a wicked protectionist, at odds with a pro-free trade global order. To hammer home this point, the EU is claiming to have agreed a trade “deal” with Japan, with whom Mr Trump pulled out of talks when he abandoned Barack Obama’s Trans-Pacific Partnership. At this stage, Tokyo gave precedence to Brussels – and today’s, erm, political agreement is the result.

Donald Tusk, president of the European Council, is already trying to use this to taunt Trump. ‘Some are saying the time of isolationism and disintegration is coming again,” he said, a clear reference to Trump. “We are demonstrating that this is not the case.’  For his part, Shinzo Abe has hailed ‘a major pillar in our economic growth under Abenomics’ – and ‘the birth of the world’s largest, free industrialised economic zone.’

But here’s the snag: there isn’t, actually, a deal. It’s an ‘outline,’ a ‘political’ agreement, the sort that is the basis for a deal – a staging post to a deal that may or may not be done in two years’ time. The EU has simply said that it is prepared, in principle, to lower the 10pc tariff slapped on Japanese cars, in exchange for being able to export food more easily. So it’s a cars-for-cheese agreement, the first stage towards a free trade deal. With plenty ground left to cover.


For example, there’s no agreement on…

  • How to resolve trade disputes – a fairly major part of any trade deal. The EU wants a court system, Japan doesn’t.
  • How to settle any complaint from foreign investors that their rights are being violated.
  • What protection Abe would offer to Japanese producers of pork, wood and dairy products.
  • The sale of illegal logging products
  • What kind of protection would be covered to Europe’s car manufacturing sector.

All this will take until 2019 and it then it needs to be approved by all 28 (or, by that time, 27) member states. And then tariffs will likely stay in place for a further seven years – so even if all goes well we’re looking at about another ten years before it would come off.

So: a EU-Japan deal? Not yet, and not for some time yet. It’s essentially a progress report on talks, dressed up as a deal ahead of the G20 to try in an attempt to embarrass America. Ah the games, the games.

UPDATE: my thanks to Housuk Lee-Makiyama of ECIPE for pointing out the normal order of these things. A “political agreement” with Canada was declared in 2013 but the deal didn’t come for another three years – and, even then, almost floundered. With South Korea, the political agreement came a year before the deal.

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