The EU-Japan EPA is the biggest ever EU trade deal - what does it mean for future global fair trade?

#CriticalThinking

Picture of Sandra Alverà
Sandra Alverà

Chair of the trade policy committee at the Japan Business Council in Europe (JCBE). She is also the Head of Government Affairs for Panasonic Europe and an Executive Board Member at DIGITALEUROPE

Nobody in Brussels needs to be reminded that 2019 is a year of change. New elections, new MEPs, a new Commission – all of these await us this year, and the EU bubble, as usual, has its eyes trained on the future. On trade, people will no doubt be wondering how the ‘new class’ will manage relations with Washington and Beijing. However, a look back at the achievements of the past five years is a useful exercise, too, if we are to ensure that we fulfil the potential that these developments have to offer and move forward with best practices in mind. Among them, the EU’s biggest ever trade deal, the EU-Japan Economic Partnership Agreement (EPA), stands out.

The numbers alone tell a story. The EU-Japan EPA creates an open market of 640 million people. It covers one-third of global economic output and 40% of world trade. It will stimulate economic growth for both partners and will support hundreds of thousands of jobs.

The EPA represents Europe and Japan standing as partners on the global stage

However, to understand the true value of the EU-Japan EPA, we have to look beyond the obvious figures. Never before has multilateral, rules-based trade—itself a remarkable achievement of global cooperation, often taken for granted—been more under attack, as trade protectionism continues to gain supporters. In this complex environment, the conclusion of the EU-Japan EPA becomes all the more remarkable – and its signalling power ever more essential.

The EPA represents Europe and Japan standing as partners on the global stage, defiantly defending a system which prioritises rules over retaliation, cooperation over confrontation, trust over distrust. This joint stance is principled, of course, but it is also pragmatic – both partners are facing similar challenges of ever-growing urgency, which only joint actions can successfully overcome. For instance, both will have to devise ways to harness the transformative power of technology (including in the context of ageing societies), figure out how to adapt to the ever-changing security landscape and confront the reality of climate change.

These challenges go well beyond any bilateral relationship – they are global problems that require global solutions. Consensus-based approaches are ideal but increasingly unattainable in the current context. With the two largest national economies in the world raising questions about the present multilateral system, it is crucial that like-minded partners such as the EU and Japan work together to provide leadership on the world stage.

Trade is a key element of this shared mission. EU-Japan cooperation (along with the United States) through the World Trade Organization (WTO) trilateral shows promise on how areas of mutual concern can be identified and addressed. Key stakeholders should engage in these combined efforts with the objective of finding consensus on how to reform the WTO and, by extension, its capacity to arbitrate on a level playing field. Such cooperation will become even more important as we move towards the development of new rules on e-commerce, of which the concept of Data Free Flow with Trust (DFFT) presents an opportunity for further development.

But not all trade problems can be fixed with trade policy – broad-based political cooperation will also be required. The EU-Japan Strategic Partnership Agreement represents a crucial step in the pursuit of this cooperation. Japan’s hosting of the G20 Summit in June 2019 will provide yet another forum wherein this valuable work can be carried forward, including through discussion of the concept of Society 5.0. The latter underlines an important truth: the digital revolution, while presenting innumerable opportunities, also requires thoughtful policymaking.

But not all trade problems can be fixed with trade policy – broad-based political cooperation will also be required

To give an example, the benefits of artificial intelligence can only be reached if users have trust in the technology. We must therefore continue to work towards the creation of a trustworthy ethical framework. Blockchain technologies can be a game-changer for businesses of all sizes, but the alignment of regulatory mechanisms will be key to scaling up these services and their benefits. In an increasingly data-centric world, we must create spaces for the free flow of data while also cooperating on the management of security threats.

The recent agreement on adequacy, which de facto has created the world’s largest area of safe data flows, allowing for personal data to flow freely between the EU and Japan, lays an important foundation for cooperation in these fields. This shows just what can be achieved when working together.

If economies and societies are to benefit from the digital revolution, we must be even more ambitious and proactive. One concrete step that could be taken to bolster EU-Japan joint activities, in this regard, would be the establishment of an expert group on cybersecurity, bringing together industry, civil society and institutional stakeholders. This forum could become a place for exchanging ideas and experiences, but also a space where a common cybersecurity agenda could be debated and developed.

Ultimately, strong leadership and cross-cutting actions such as these will define the unique EU-Japan partnership. This demonstrates how two economies can use a foundation built on trust and wide stakeholder involvement to the fullest advantage. Free and fair trade is the shared goal, but a comprehensive approach that includes all sectors – focusing on trade policy but with an outside-the-box perspective – is the only way to achieve this.

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