It’s being billed as the more-intelligent and passable alternative to the now-essentially defunct Trans-Pacific Partnership (TPP) and the conception of “the world’s largest, free, advanced, industrialized economic zone” (at least by Japanese Prime Minister Shinzo Abe).
But while the broad agreement between the European Union and Japan, announced this week just one day before the G20 summit in Hamburg, is certainly a good start to bringing down regional trade barriers and facilitating increased commercial ties throughout a region that constitutes roughly a fourth of the world’s economy, when examined under a scrutinizing microscope, it turns out to be a lot more hype than substance.
The thrown-together deal — which is more a show of political theater for Japan and Europe to thumb their nose at a defiantly “America-First” U.S. President Donald J. Trump than an anti-protectionist commitment — will need a lot of tweaking and further negotiations before it can be rolled out, particularly in terms of getting down to the brass tacks of specifics.
If implemented, the agreement would slice tariffs on Japanese cars entering Europe (currently amounting to 10 percent of the retail value of the vehicles) in exchange for better access for certain European agricultural producers to the Japanese market.
But there are a lot of caveats to the new trade accord.
To begin with, the tariffs on Japanese cars will be “phased out” over a seven-year period, and could be reinstated at any time should the EU decide that too many new Japanese cars are entering Europe (no word on what constitutes “too many”).
On the other hand, only certain European goods such as specific types of cheese will be granted untethered access to the Japanese market, and the Japanese as a nation are not particularly fond of dairy products (in fact, about 20 percent of the country’s population is lactose intolerant).
Another key aspect of the agreement is that, at least in theory, European corporations will now have more opportunities to bid on major Japanese government contracts, but, bidding and having your bid given the same weight as a national tender are two different things.
To tie a bow on the highly conditional trade accord, Japan and the EU have also agreed to work closer together on issues of cybercrime and climate change, but, then again, they were already doing that before the new agreement was announced.
What the new agreement does not cover are sacred-cow sectors on both sides, including lumber (which Tokyo is not keen on letting into Japan) and whaling (Japan kills about 250 whales each year, even though there is little demand for the meat).
Oh, yeah, and, as it stands now, there are no legal safeguards or courts of arbitration to ensure that investors’ commercial interests are protected or that the new rules of trade are enforced.
In other words, the trade agreement has no teeth.
The new commercial accord between Europe and Japan is a skeleton agreement at best, meant to send a powerful message to Washington that its proponents are in favor of free-trade even if the United States wants to play the economic isolationist game.
And, in that respect, it is certainly a powerful instrument.
But before it can be implemented, the agreement is going to have to be a lot more specific and detailed.
It will also have to get ratified in Europe, and we all remember how difficult it was for the EU to get its trade accord with Canada passed last year when an obstinate Belgian region (yes, I’m talking about Wallonia) decided to have a hissy fit and nearly derailed eight years of meticulous negotiations.
All of which means that the so-called EU-Japan free trade agreement is far from a done deal, and in no way can replace the potential of the TPP, which, if it could be dusted off and overhauled in such a way that it regains U.S. support, would account for about 40 percent of all international trade, encompassing an area of about 800 million people, and would substantially reduce a wide range of barriers among member economies in accordance with clear-cut rules and regulations that would facilitate commerce in all fields.
Thérèse Margolis can be reached at therese.margolis@gmail.com.