On July 6, 2017, the EU and Japan announced an “Agreement in Principle” on the EU-Japan Economic Partnership Agreement (“EPA”). Negotiations on “the world’s largest, free, industrialised economic zone” began in 2013, and have now culminated in a political agreement which sets out the commitments of both Parties on numerous topics. While parts of the draft text have been published, many issues remain under negotiation. Nonetheless, the EPA provides useful guidance on what European and Japanese businesses can plausibly expect from this deal. A summary of key issues is set out below.
Tariffs and other Market Access Measures
The EU and Japan have committed to significant levels of liberalization of trade in goods. For example, tariffs will be lowered on: European pork (“practically free access” though the Japanese pig meat sector “will be safeguarded during the liberalisation phase” through safeguards on volume; European wine (currently 15%, dropping to 0% from entry into force); beef (dropping from 38.5% to 9% over 15 years); and European cheese (up to 29.8% on hard cheese, dropping to 0% after 15 years).
EU tariffs on Japanese cars will be gradually phased out within seven years, and duties will be reduced on some car components from entry into force to seven years. In addition, Japan and the EU will align themselves to the same international standards on motor vehicles, simplifying EU exports of cars to Japan.
Geographical Indications (“GIs”)
The EPA anticipates a high level of protection for EU GIs. Japan has committed to recognizing 205 GIs. Therefore, only products with GI status (such as Chablis, Chianti, Tiroler Speck, Münchener beer, and Jambon d’Ardenne) will be allowed to be sold in Japan under the corresponding name.
EU businesses operating in the procurement markets of 48 large cities in Japan will be guaranteed non-discriminatory treatment. The EPA also opens up the railway procurement sector – Japan will liberalize railway procurement above SDR 400,000 by removing its “operational safety clause”, while the EU will open procurement of railway facilities in certain specified areas for an amount corresponding to the estimated value of Japanese contracts awarded to the EU “freed” by Japan’s removal of the safety clause.
Commitments here will be based in large part on existing EU standards for IPR protection and enforcement. Notably, “for the first time in a major agreement, the IPR Chapter provides rules on trade secrets, which are very similar to those in the EU”. The IPR Chapter also covers rules for patent term extension (“maximum 5 years”) for pharmaceutical and plant protection product patents.
Investor-State Dispute Settlement (“ISDS”)
In line with its new approach to ISDS, the EU has advanced a proposal on a reformed Investment Court System. However, there is no accord on this as yet. The EU has declared that “there can be no return to the old-style Investor to State Dispute Settlement System”, while Japan remains unconvinced by such a structure.
In summary, the enthusiasm behind the announcement of the EPA sends a positive message that, despite current turbulence in the EU trade arena precipitated by Brexit, the European Union remains committed to global trade liberalization.
Nevertheless, if the Canada-EU Comprehensive Trade Agreement is anything to go by (over eight years from commencement of negotiations to provisional application set for September 21, 2017), finalizing and implementing this treaty will likely require a significant amount of time.
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