Trade agreement 'close' between Japan and EU

Japan and the EU could forge a trade agreement later this week, officials said.

Cecilia Malmstrom, the European Commissioner for trade, told reporters in Madrid she was hopeful the two sides would resolve their remaining differences and announce a deal when Japan's prime minister Shinzo Abe meets EU leaders in Brussels ahead of a G20 summit in Germany.

Ms Malmstrom said: "The Japanese don't agree with some of the key technical issues (in the deal) which are fundamental for the EU, especially those referred to investment."

Japanese foreign minister Fumio Kishida said over the weekend that he was hopeful the two sides would resolve remaining differences, mainly over trade in cheese and cars, and was ready to visit Brussels this week to help the talks along.

Talks on the proposed Economic Partnership Agreement for two of the world's biggest economies ended late on Saturday in Tokyo with officials saying they believed a deal was within reach.

Such a deal will require fine-tuning regarding Japan's protections for its dairy farmers, whose home market is protected by tariffs of up to 40% on processed cheese.

Japan wants the EU to lift tariffs on cars, a demand that EU officials said was difficult to carry out immediately.

Both sides are asking the other to open their markets to each other's wines, and there are a few other issues still yet to be resolved, Japanese media said.

It is unclear just what the potential for compromise on cheese might be, given Japanese farm minister Yoji Yamamoto's rejection of a EU request for Japan to match its commitments for relaxing its trade rules on cheese imports to match those it agreed to in negotiations with members of the Trans-Pacific Partnership.

That trade pact was cast into question by US president Donald Trump's decision to pull out of the formerly US-led Pacific Rim trade initiative.

However, the 11 remaining members have been discussing ways to pursue a revised version without the US as the anchor.

Australia and New Zealand, the biggest exporters of cheese and other dairy products to Japan, fought hard to persuade Tokyo to gradually open its market over a 15-year period.

Both Japan and the EU have a tradition of protecting their politically powerful farming sectors, and dairy products are an especially sensitive issue for the EU, with its long traditions and half the world's market share for cheese.

Japanese eat only about 1lb of cheese per person a year, a lot less than Europeans, partly because of different tastes and food cultures, and partly because costs are so high.

Costs are relatively high thanks to a complicated system that is engineered to ensure the country's 17,700 dairy farmers, overwhelmingly small family businesses, continue to provide a stable supply of raw milk, even though their average costs are double those of farmers in Europe and the US.

About a quarter of the cheese imported into Japan is reprocessed and repackaged so as to "add value" before products reach consumers.

A glut in milk production in the past two years in the US, Europe and Oceania has helped push prices lower and boosted imports, according to a recent US department of agriculture report.

It also has lent urgency to the EU's efforts to win easier access to Japanese consumers.

- PA

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