Opening speech – How can Japan-EU trade relations be improved? What has prevented closer ties in the past?

Pascal Lamy, former Director-General of the World Trade Organisation, explains the challenges in Japan-EU trade relations, and Haruko Satoh, Professor at Osaka University, what part culture plays in the bilateral relations.

– ecfr.eu >

Thursday, 3 December

VIII: Opening speech by Pascal Lamy, former European trade commissioner and director general of the World Trade Organization on “Opening trade between Japan and Europe”

The EU and Japan are already major trading partners and act as trading gateways for their respective geographical areas, with a network of existing trade agreements. Against this backdrop Pascal Lamy explored the strategic reason for Europe and Japan to open trade between themselves: The 3 billion people who will join the global middle class by 2020. Given long-term forecasts for the global economy, an economic partnership between Europe and Japan – both predicted to grow not more that 1.5 percent annually for the next ten years – looks like an alliance between the lame and the blind. It is obvious that most demands addressed to the EU and Japan are not going to come from themselves but from elsewhere – largely the US and emerging economies. And yet an EU-Japan FTA makes sense for structural long term reasons. Pascal Lamy expressed that in the “old world” of trade restrictions to market access were implemented to protect domestic producers from foreign competition (tariffs, quotas, regulatory obstacles to protect service markets, etc.). In the “new world” of trade, market restrictions are implemented to protect citizens and consumers from risks . The “old world” was about protection; the “new world” is about precaution (though there is a grey zone between them, e.g. phyto-sanitary standards preventing the import of European apples to the US). This binary between old and new can also act as an analogy for the difference between TPP and TTIP. TPP is the last of the negotiations of the “old world” and TTIP is the first negotiation of the “new world”.

The potential EU-Japan FTA consists of four pillars, some of which have to do with the old agenda of protection and others to do with new agenda of precaution. The first is market access for goods – which  might be thought of as  “TPP+”. Here, the important issues are the auto sector, services, agriculture, public procurement, and rules of origin. The second pillar is regulatory standards on food, cars, lighters, toys, insurance, banking, etc. This is where the largest efficiency gains are to be made for the EU and Japan, but the question is how to harmonise standards within a complex “regulatory triangle” between the EU, Japan and the US (e.g. crash tests in automotive safety). The third pillar is geographical indications, which sit somewhere between protection and precaution, and where the EU and Japan have a similar approach compared to the US (e.g. in terms of protecting food brands), hence TPP ++ . The fourth pillar is “trade and…” (i.e. trade and corruption, trade and environment, trade and labour, etc.) – here there is quite a lot of space for a “TPP+” in an EU-Japan FTA.

Overall, then, even if  at first sight the economic case for the agreement is not particularly compelling, trade opening between EU and Japan has a significant potential in so far as what matters  what matters is not quantum or size, but the multiplication of the two. The switch from the “old world” to the “new world”, from protection to precaution requires a different mental framework. In the “old world” of protection, ideology was rather flat, but values matter more in precaution than in protection. In this respect, the EU and Japan are more similar to each other than to anyone else. Concluding, Lamy expressed the hope that governments and the public on both sides will come to accept that more open trade would, as usual, work for both EU and Japan as a much needed growth booster.