As the potential EU-Japan Economic Partnership Agreement (EPA) edges closer, Europe’s agri-food chain partners are joining forces to urge politicians to ratify the trade deal quickly. A number of trade bodies want EU producers to take full advantage of the new opportunities and tariff-free trading that would result from what would be the world’s largest open economic area.
The EU and Japan finalized the negotiations of a free-trade EPA which was officially signed by both parties in July, but it has not entered into force yet. The agreement was recently given the green light by the European Parliament’s Trade Committee which has given its recommendation to approve the EU’s landmark trade agreement with Japan.
The resolution was passed by 26 votes for, nine against, and two abstentions. The recommendation to consent was passed by 25 votes for, ten against, and one abstention.
According to the trade bodies, which include the European farmers' group Copa-Cogeca, FoodDrink Europe and the European Liaison Committee for Agricultural and Agri-Food Trade (CELCAA), MEPs need to support a swift ratification of the agreement at the final plenary vote in December.
If the deal is approved in Parliament next month, it can enter into force as soon as the Japanese Diet ratifies it.
a FoodDrinkEurope spokesperson outlines some of the biggest market opportunities for European producers.
“About 85 percent of tariff lines of EU agri-food products exported to Japan will be liberalized over time. While not ruling out the potential for any EU food and drink exports to Japan, some of the most prominent product categories expected to benefit from liberalization include: wine and sparkling wines, hard and soft cheeses, beef meat, pig meat and processed pig meat, and many processed products such as pasta, processed fruit and vegetables, to name a few,” says the spokesperson.
More than 200 European geographical indications (GIs) and specialty products are thought to stand to benefit from the same status and level of protection in Japan as in the EU.
“The European Parliament’s International Trade Committee (INTA) voted in favor of the EPA and the vote brings this major agreement one step closer to ratification. We now strongly count on the Honourable Members of the European Parliament to provide their consent and support for a swift and successful ratification of this major agreement at the final plenary vote in December. A positive vote at the end of the year would allow the EU-Japan EPA to enter into force in Q1 2019,” the spokesperson adds.
A joint statement from the three agri-food partners stresses the strategic importance of Japan as an export destination for EU agri-food products, with further potential for growth.
It explains how the elimination of tariffs and non-tariff barriers agreed with Japan, the protection of European geographical indications (GIs), and future cooperation on agriculture and food-related matters will create new opportunities and help to better respond to changing consumer demands in each other’s economies.
“The agreement will also enhance the sector’s competitiveness in the dynamic Asia-Pacific region,” it states. “The opportunities of the EU-Japan EPA should also be recognized in the broader economic context and considered as an important signal to promote rules-based international trade.”
What does the deal mean?
The EPA creates a trade zone of 600 million people and covers a third of global GDP as well as about 40 percent of global trade. It will eventually remove almost all customs duties worth approximately €1 billion (US$1.1bn) annually on European products and services exported to Japan.
It opens up services, including e-commerce, maritime transport, postal services, energy, and telecommunications, while also creating common rules for bilateral trade and common standards for the two trading blocs.
The agreement “represents a timely signal in support of open, fair, values-based and rules-based trade, while promoting high standards, at a time of serious protectionist challenges to the international order,” stressed Trade Committee MEPs.
The committee also commented positively on the ambitious level to which tariffs are being liberalized in parallel with safeguarding sensitive sectors.
A question of timing
Of course, the prospect of an EU-Japan trade deal comes at a time when the UK is a few months away from leaving the EU and in the longer-term will not be part of the bloc to be able to take advantage of the opportunities it may offer.
It’s clear what the key products are from Europe to Japan, however, there is growing interest in what EU countries can expect from Japanese exporters. There are questions around what types of products will be coming the other way.
The EU-Japan EPA negotiations were initially launched in March 2013 so this has been a long time in the making.
What products is Japan particularly interested in?
As the fifth destination for EU agri-food exports in the world, worth €6.4 billion (US$7.2 billion), Japan is considered a large and wealthy market with 130 million consumers.
Significantly, there is a growing demand for EU high-quality products. The deal promises greater market access for EU products to Japan with 85 percent of EU agri-food products exported to Japan being liberalized in the coming years.
Products include wine and sparkling wines (duty-free from day one of the agreement), hard cheese (duty-free), soft cheese (duty-free quota with volume increase), beef meat (significant duty reduction), pigmeat and processed such as sausages and ham (duty-free or quasi duty-free), pasta (duty-free), processed fruit & vegetables (duty-free) and fresh fruit and vegetables (duty reduction).
The Trade Committee has also commended Japan for opening up the procurement markets, including in 54 large cities and in the railway equipment sector. This allows EU suppliers to compete in this market. Another sector that trade MEPs estimate would benefit most from the deal is agriculture and the food industry, especially wine, pork and cheese producers.
Asia’s fast-moving dairy market is going through a period of growth, which looks likely to continue, as consumers’ taste preferences shift. Traditionally this has not been a high growth market for dairy but that is changing.
There is plenty of room for robust growth in Asia’s cheese market, particularly for Australian dairy exporters who are well-placed to take advantage of increasing demand for cheese, even though it’s not a traditional part of the Asian diet. Market competition is already intensifying and there are opportunities to tap into growing demand from Asia, according to a recent Rabobank report.
However, the opportunities are there for Europe as well. Despite Australia being closer, the EU is also well-placed to take advantage of the buoyant Asian dairy market. Competition is picking up pace as leading cheese manufacturers in the US, Europe and New Zealand are all looking to gain ground in the Asian dairy space, according to Rabobank Senior Dairy Analyst, Michael Harvey, who says these regions are investing in production operations and capacity building.
Earlier this year, GlobalData’s Q4 2017 global consumer survey found that dairy manufacturers should align their new product development and marketing practices with the growing demand for dairy products during snack occasions within the Asia region. Asia has emerged as the region where consumers are most likely to opt for dairy products when snacking. In Asia, 26 percent of consumers prefer to snack on dairy products compared to 22 percent of the global average, according to the report.
