The European Union (E.U.) and Japan will launch the world’s largest free trade zone early next year after their economic partnership cleared a final hurdle on Wednesday. Approximately 70 percent of European Parliament lawmakers backed the agreement which will account for nearly a third of global gross domestic product (GDP). Japan’s parliament approved the deal on Saturday. The trade deal follows widespread anti-globalization protests. Critics say the agreement will give too much power to multinationals and could undermine environmental and labour standards.
The agreement will remove E.U. tariffs of 10 percent on Japanese cars and 3 percent for most car parts. It will scrap Japanese duties of some 30 percent on E.U. cheese and 15 percent on wines, as well as open access to public tenders in Japan. It will also open up services markets, such as financial services, telecoms, e-commerce, and transport.
EU Trade Commissioner Cecilia Malmstrom claimed the deal would bring clear benefits to EU companies and farmers, saying, “If all goes well, it should be able to enter force on February 1. The agreement is not only sending a signal to the world. It is also extremely advanced when it comes to opening markets.”
Japan had been part of the multi-lateral Trans-Pacific Partnership (TPP), comprised of twelve nations, which American President Donald Trump stated he would not participate in when he took office as it did not offer advantageous terms to the United States (U.S.). Without the economic capital of the U.S., there was little advantage to the TPP trade pact, therefore Japan and the other nations involved sought new bi-lateral trade deals with potential partners. A similar scenario played out between the U.S. and the E.U. when negotiations stalled in 2016 regarding the Transatlantic Trade and Investment Partnership (TTIP).
Both the E.U. and Japan want the new trade deal in place before Britain leaves the E.U. at the end of March 2019. Japan, whose many car makers serve the E.U. market from British bases, had wanted it to then apply to a Brexit transition period until the end of 2020, although that period is uncertain due to political turmoil in Britain.