New Japan-EU Free Trade Agreement Opens New Opportunities

The European Union and Japan have signed one of the world’s biggest free trade deals today.

The EU has called the agreement “highly ambitious and comprehensive.” The total trade volume of goods and services between the EU and Japan is currently €86 billion.

Expected to come into force by autumn 2019, the EU-Japan trade deal promises to eliminate 99 percent of tariffs that cost businesses in the EU and Japan nearly €1 billion ($1.17 billion) annually.

Firms in the EU, the world’s biggest free-trade zone, currently export more than $100bn (£75bn) in goods and services to Japan, the world’s third-biggest economy, every year.

From ParcelHero’s perspective, parcel delivery to and from Japan will become much easier. It will mean no tariffs on most items sent to Japan from the EU, and a significant reduction in red tape.

The majority of parcels ParcelHero customers tend to send to Japan include books, car parts (some might say that’s like sending coals to Newcastle) and clothing; while more exotic exports our customers ship include caving equipment and fancy-dress items.

As yet, how the deal with impact on UK shippers post-Brexit is not certain. Much will depend on whether we continue to benefit from the trade agreements negotiated by the EU or leave all agreements behind in a Hard Brexit under WTO rules. Only time will tell.

Popular items traded between the UK and Japan such as car parts (one of the most popular large parcel delivery items to Japan for ParcelHero customers) would see the ending of all tariffs if the UK retains an arrangement that mirrors EU regulations. Cheap international shipping to and from Japan is a welcome development with much uncertainty hanging on the future of trade with the EU and beyond.

We foresee that the export of processed foods to Japan from the EU is likely to be biggest winner, expect to see volumes increase by around 180 percent.

Although Japan’s economy is the world’s fourth largest, following the EU, the U.S. and China, it is only Europe’s seventh-largest export market. The new deal will gradually make it easier for European countries to expand exports of goods and services to Japan, which totalled 58 billion euros ($68 billion) and 28 billion euros, respectively, last year.

Japan’s main interest in a trade deal with Europe was to increase its auto exports. The EU currently imposes a 10% tariff on Japanese cars. Under the agreement, it will lower this to zero over eight years. Although cars and auto components account for about a fifth of Japan’s exports to Europe, Japanese carmakers’ share of the European market is only about 10%, much lower than in the U.S. or Asia.

One of President Trump’s first acts was to cancel joining the Trans-Pacific Partnership (TPP) a free trade agreement between the US, Japan and other countries, agreed upon by his predecessor Barack Obama’s administration. It will be interesting to see how the EU’s new free trade agreement stacks up opposite Trump’s new protectionist tariffs on Japanese steel imports. The EU believes 600,000 EU jobs are related to trade with Japan.

This deal, once implemented, promises benefits for businesses both large and small. It’s great news for ParcelHero customers shipping to Japan from Autumn 2019… as long as the UK continues to remain in or mirror EU Customs agreements.

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