Japan and the European Union formally agreed on Monday to kick off negotiations on a bilateral free trade agreement aimed at eliminating import tariffs on most products traded between them.
The agreement came when Japanese Prime Minister Shinzo Abe held telephone talks with European Council President Herman Van Rompuy and European Commission President Jose Manuel Barroso.
Van Rompuy and Barroso had planned to meet Abe in Tokyo on Monday for a regular Japan-EU summit meeting. But the EU leaders canceled their trip at the last minute due to the Cyprus crisis. Abe and the EU leaders held the telephone talks instead.
According to a joint statement issued after the talks, Japan and the EU will hold their first round of FTA negotiations in April and seek to conclude the negotiations at the earliest possible date.
The EU is Japan’s third-largest trading partner after China and the United States. In 2012, Japan exported 6.500 trillion yen ($68.4 billion) worth of products to the EU and imported 6.642 trillion yen ($69.9 billion) worth of goods from the 27-nation bloc, according to figures from Japan’s Finance Ministry.
Japanese automakers and electronics manufacturers have called for an FTA with the EU.
South Korea’s FTA with the EU entered into force in July 2011, giving that nation’s automakers and electronics manufacturers an advantage over their Japanese rivals in the EU market.
The EU still levies high import tariffs on products from Japan and other countries. The EU’s tariff rates for automobiles and flat-screen TVs, for example, are 10 percent and 14 percent, respectively. Autos account for about 20 percent of Japan’s overall exports to the EU.
But the Japan-EU FTA talks are expected to be tough, especially over the auto sector, as many European automakers are now struggling due to slumping sales amid the regional debt crisis and are becoming increasingly concerned about a possible flood of imports from Japan.
Japan’s import tariff rates for most industrial products, including autos, are already zero. In the FTA talks, the EU is expected to call for Japan to eliminate what it perceives as non-tariff trade barriers in various sectors, including autos, chemicals and medical products.
Monday’s agreement between the Japanese and EU leaders came only 10 days after Abe announced Japan’s decision to participate in negotiations on the U.S.-led Trans-Pacific Partnership free trade pact.
The TPP is a regional free trade initiative currently being negotiated among the U.S. and 10 other Asia-Pacific countries — Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. The TPP is intended to require member economies to scrap all import tariffs in principle. The 11 countries are aiming to conclude the TPP talks by the end of this year.
The EU also reached a basic agreement with the U.S. recently to inaugurate negotiations on creating a free trade zone across the Atlantic.