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JAPAN-EU Economic Partnership Agreement- A potential for India to expand its trade?

Japan and the European Union recently announced their agreement on an economic partnership that would form a free-trade zone between the partners as early as 2019. The agreement between the 2nd (EU) and 4th (Japan) ranked countries in terms of nominal GDP is called JEEPA (Japan-EU Economic partnership Agreement) and is described as the largest and most important bilateral trade deal ever made as it will cover nearly 30 per cent of the world economy.

The U.S. President’s aversion for multilateral trade liberalization hit Europe and Japan the hardest. Both the countries had their sight on separate trade agreements involving the United States- Trans-Pacific Partnership (TPP) for Japan and the Transatlantic Trade and Investment Partnership (TTIP) for EU. These separate deals with the U.S. were viewed as a way to uphold the international rules-based order by setting high joint standards that would force emerging powers like China to accommodate. But the early decision by the President of the U.S. to withdraw from TPP and freeze the TTIP negotiations intensified Japan and Europe’s desire to strike their own trade deal with each other. Their agreement on a free trade pact timed with the G20 meeting in Germany can be substantive as it is symbolic, and might serve as a turning point for the United States as the present administration decides on its future trade agenda.

Impact on Japan and EU

From EU’s point of view, the EPA is set to remove the vast majority of duties paid by the EU companies which sum up to €1 billion annually, open the Japanese market to key EU agriculture exports and increase opportunities in a range of sectors. The exports from EU to Japan could increase by as much as €20 billion, meaning more possibilities and jobs in many EU sector.

EU agricultural exports to Japan are worth more than 20 times those of Japan to the EU, despite European firms facing trade barriers when exporting to Japan. Japan currently taxes imports of European cheese at 30-40%, beef at 38.5%, wine at 15%, pasta at 24% and chocolate up to 30%. JEEPA will eliminate duties on more than 90% of the EU agricultural products, making European products more affordable and more attractive to Japan’s consumers.

In return, the EU agreed to phase out its 10 per cent tariff on Japanese passenger cars over seven years, as well as immediately abolishing tariffs on Japanese auto parts. An assessment of the impact of the deal suggested that almost half of the benefit to Japan would be from these lower tariffs. Japan’s export to the EU is expected to increase by 29%. Brussels also agreed to eliminate immediately tariffs on Japanese beef, sake, whiskey and wine as well as electronics.

The signed JEEPA sets highest standards of labor, safety, environmental & consumer protection, fully safeguards public services and has a dedicated chapter on sustainable development.

India’s Perspective

Will there be any benefit to India if the offer to join JEEPA is extended to the country? Should India join this trading bloc? The answer to these questions seem positive at present. The sectors that would be gaining major focus and boost in this trading bloc like automobiles, pharmaceuticals, medical devices, agricultural & food products, clothing & shoes and leather are the sectors in which India has competitiveness in the world market. Joining the bloc would not only boost these Indian sectors exports, but also open up more possibilities and increase job opportunities in India as well.

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