The Art of a Good Deal
AUHTOR
Prof. Dieter Kempf
President
Federation of German Industries (BDI)
After five years of tough negotiations, Japan and the EU have ample reason to be proud of the outcome. In a give- and-take process both economies struck a deal which promises to benefit both sides. Moreover, the timing of the agreement could not have been better, given the escalating tensions over trade disputes and tariffs. Japan and the EU offer a consensus-driven alternative to the conflict-oriented path other major powers seem willing to take.
The rationale behind this and other trade agreements is simple but seems worth repeating. In Germany, every fourth job depends on exports. If barriers to international trade fall, quality goods “Made in Germany” can be sold cheaper and in higher quantities. More jobs are being created. The same holds true for other countries, emerging economies and developed markets alike. They are all part of today’s complex value chains and, building on their particular strengths and resources, can sell and buy more products at more affordable prices if they join free trade agreements.
Through their free-trade-agreement, the EU and Japan can capitalize on their strengths, they can create more wealth and establish common standards that the rest of the world cannot ignore – after all, Japan and the EU represent a third of global GDP. With its innovative, competitive and efficient products and services, Japan will surely enjoy the gains from easier access to Europe as much as Europe and Germany will profit. Consumers in both markets have a strong preference for quality goods and can now choose between greater varieties of excellent products. Politically, Europe maintainsandexpandsitsrelevanceon the global stage through cooperation with like-minded partners such as Japan and others.
The relevance of the agreement for Germany is evident: In 2017, Japan was the sixth most important destination of German exports outside of the EU and the second most important in Asia, while Germany is Japan’s most important trade partner in Europe. Traditionally, trade between Germany and Japan is marked by a trade surplus on the Japanese side. The free-trade- agreement will lead to the elimination of tariffs and non- tariff barriers to trade. Public procurement in Japan will be opened-up in important localities. The elimination of the operational safety clause for transportation procurement will help European railway companies to do viable business with the island nation. Labour, safety, environmental and consumer protection have been given top priority. Importantly, the agreement will not conflict with existing EU provisions on specific issues in these fields, for instance with the already existing prohibition of whale meat imports.
However, the art of a good deal does not end with signatures on a piece of paper. We now have to make sure that our companies are well-informed and able to benefit from the agreement. In the past, cumbersome paperwork and non-tariff barriers introduced after the conclusion of trade agreements made it sometimes difficult for businesses to make use of trade preferences. I am optimistic that the close partnership between the EU and Japan will help our companies use the agreement to the fullest for the benefit of our economies and our societies.
Published 2018