The European Union (EU) signed a free trade agreement (FTA) with Japan on Tuesday (July 17) that will eliminate tariffs on almost all products traded between the two trading blocks.

Japanese Prime Minister Shinzo Abe (left) and President of the European Council Donald Tusk.

Prime Minister Shinzo Abe signed the trade pact with European Council President Donald Tusk, who speaks for the 28 EU national leaders, and European Commission President Jean-Claude Juncker, the bloc's executive head.

Japan and the EU have around 600 million consumers combined and account for about a third of global GDP. Their trade relationship has room to grow, according to EU officials who expect the deal to boost the EU economy by 0.8 percent and Japan's by 0.3 percent over the long-term.

The agreement is seen as a significant counter-measure to US President Donald Trump's recent policy of raising tariffs with its main trading partners.

The deal eliminates about 99% of tariffs on Japanese goods sold to the EU, while Japan will continue to protect some segments of its agricultural market - including rice.

The FTA will slash tariffs from 10% to 0% on vehicle imported into Europe from Japan, giving the country's vehicle industry the same free access to Europe enjoyed by the Republic of Korea (RoK) vehicle manufacturers since a similar FTA was signed in 2009.

The deal clouds the outlook for Japanese vehicle manufacturers located in the UK, however, given the potential of "Brexit" going ahead next year without a customs agreement with the EU.

The agreement also addresses specific sensitivities in the EU, for instance in the automotive sector, with transition periods of up to 7 years before customs duties are fully eliminated.

The agreement is now awaiting ratification by the European Parliament and the Japanese Diet following which it could enter into force in 2019.

At the same time, negotiations between the EU and Japan continue on investment protection standards and investment protection dispute resolution.

Source: NDO

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