TOKYO – Japan’s prime minister will discuss a possible free trade pact with the European Union even as a summit in Tokyo to launch the negotiations is postponed because of the financial crisis in Cyprus.
Chief government spokesman Yoshihide Suga said Monday that Prime Minister Shinzo Abe will talk by phone with Herman Van Rompuy, president of the European Council which sets the EU’s political agenda, about the negotiations later in the day.
Van Rompuy’s visit to Tokyo was cancelled over the weekend. Cyprus later secured an agreement that paves the way for a 10 billion euro ($13 billion) bailout.
As the global momentum builds for regional trade pacts, Japan has been eager to get started on talks with Europe. Japan and the EU account for about 30 per cent of global economic output.
Earlier this month, Abe announced Tokyo will join talks on a Pacific trade pact, the U.S.-led Trans-Pacific Partnership. The announcement with the EU had been decided weeks ago.
European Trade Commissioner Karel De Gucht is in Tokyo and meeting with Japanese government and business officials as scheduled.
Although resistance is high in some industries to removing tariffs, such as long-protected rice farmers, manufacturers and others are concerned about getting left behind on the trade agreements being negotiated by other countries.
Among the likely beneficiaries of free trade would be Japan’s giant manufacturing exporters such as Toyota Motor Corp., the world’s biggest automaker.
Japanese consumers may also have much to gain with access to cheaper imports, including new kinds of services. And boosts in spending may help breathe life into the Japanese economy, the world’s third largest.
“It would be not only great for the manufacturers seeking exports. It should also lead to a more efficient domestic economy because of increased competition. And it’s the Japanese consumer who will benefit,” said Azusa Kato, economist at BNP Paribas.
The U.S. and Europe announced free trade talks earlier this year aimed at creating the world’s largest free trade agreement.
The fresh push to start talks on joining free trade deals is part of the Japanese prime minister’s “Abenomics” strategy, centred on super-easy money and generous public works spending.
Abenomics has already driven up the Tokyo stock market and brought down the yen, a boon for Japan’s exporters.
Kato believes that sectors that could change for the better include pharmaceuticals and medical services.
In 2011, the EU represented 11 per cent of Japan’s trade, making Japan its third most important trade partner. Japan was the EU’s seventh biggest export market. EU exports to Japan reached 49 billion euros in 2011, while EU imports from Japan were 69 billion euros.
The EU remains Japan’s third largest destination for exports, and Japan’s second largest source of imports after China.
A free trade agreement with Japan could boost Europe’s economy by 0.6 per cent to 0.8 per cent, EU exports to Japan could increase by 32 per cent and Japanese exports to the EU could increase by 23 per cent, according to the EU. The deal could also create 420,000 jobs in Europe, it said.
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