Japan and the European Union are signing off on a trade truce that cancels most of the tariffs on imported goods and services between them.
While the world’s largest economies of the USA and China are entangled in a war of words over tariffs against each other, Japan and the EU have decided to take an alternative route by establishing a free trade zone.
Japan is the world’s third largest economy, while the EU has Germany, the UK, France and Italy, which all rank in the world top 10, according to the International Monetary Fund.
The trade pact covers a third of the global economy and 600 million people, so amounts to a big deal for both sides.
Free trade zone
The EU and Japan have agreed to scrap 99% of trade tariffs– the import duty each government slaps on the other’s goods and services – although Japan will keep some extra tariffs on rice for now, because the price is politically and culturally sensitive to the Japanese.
The talks started in 2013, but were stepped up because of the bickering started by US President Donald Trump.
Dropping tariffs will make Japanese consumer goods, such as cars, electronics and games software cheaper in Europe.
In return, Japanese shoppers will pay less for clothing, cosmetics, beer and cheese, such as gouda, Parmesan and cheddar.
Negotiators have rushed the deal through to avoid Brexit issues over if Britain is included or not.
Trump claims US is disadvantaged
The terms will apply to the UK during any transition period, providing the details are ratified by all governments involved by March 2019.
Donald Tusk, president of the European Council, heralded the agreement as the “largest bilateral trade deal ever.”
“Relations between the European Union and Japan have never been stronger,” he said. “Geographically, we are far apart, but politically and economically we could hardly be any closer.”
Trade between the EU and Japan was worth around £115 billion in 2017.
Trump has been widely criticised for his protectionist trade policies. He claims foreign powers are unfairly taking advantage of trade deals with the States and that the terms are costing the USA jobs and exports.