EU pushes trade deal with Japan

BRUSSELS: The European Union's trade chief pushed Europe yesterday toward an ambitious trade deal with Japan despite opposition from carmakers, saying the region's auto industry could not make trade a scapegoat for its falling sales.
The European Union is trying to sign free-trade deals across the globe to lock in access to fast-growing economies after years of failure to seal the 10-year old Doha round of global trade talks.
Auto and autopart companies, however, worry about being undercut by imports while being kept out of closed markets abroad.
"If growth in the next 20 years is likely to come from Asia, then overlooking Japan would be a serious mistake in our trade strategy," Trade Commissioner Karel De Gucht said in a speech following the European Commission's decision to ask EU countries for a mandate to negotiate with Japan on their behalf.
Japan has struggled to deliver more than 1-2 percent growth for the most of the past two decades but remains one of the world's largest and wealthiest economies; its markets would be a shot in the arm for a euro zone now threatened by a similar syndrome of high debt and inflation outpacing growth.
EU governments are expected to support the Commission at the next leaders' summit in October, giving it the mandate to negotiate with Japan on behalf of the bloc's members. A first round of talks could start early next year.
"We are trying to open markets for our industries, and industries must make sure there is a demand for their products," De Gucht later told reporters. "That is a very fundamental rule in trade. If you look at the automotive sector, then you see why this is a fundamental truth."
After more than four years of falling demand and profits, Europe's carmakers have yet to restructure or consolidate and have faced added competition from South Korea after the EU signed a trade pact a year ago with Seoul.
ACEA auto industry association President Sergio Marchionne, who is also chief executive of Fiat, said last month South Korea's increasing car exports were a "warning sign" ahead of any free-trade deal with Japan, Asia's biggest car exporter.
The European Union imposes a 10 percent tariff on imported Japanese cars and carmakers fear an influx of Japanese cars if that is lifted. A decision by French carmaker PSA Peugeot Citroen to cut 8,000 job cuts and close an assembly plant has added to the opposition to foreign competition.
European manufacturers say the close relationship between carmakers and their suppliers in South Korea makes it hard for foreign parts makers to break into the market there.
But De Gucht said European carmakers needed to learn to compete and analysts believe Europe needs to emulate the United States, which forced carmakers to overhaul their businesses.
"We have to sort this out independently of free-trade agreements," De Gucht told reporters. "Let's not try to find a scapegoat somewhere," he said. "Let's try to get our act together and sort out what we have to do in this automotive industry if it wants to have a brighter future," he added.
Still, De Gucht said he had told Japan that Europe would not reduce tariffs before Japan delivers results on regulatory barriers. "This includes the car sector," he added.
The commission must still win the approval of the EU's 27 countries to proceed with Japan talks. But there is a consensus at least to start negotiations, diplomats say, and the Commission is treading a careful path by agreeing to halt talks after a year if Japan does not move on opening up its markets.
A deal with Japan, which could be sealed in a couple of years, could increase the European Union's economic output by almost a percentage point and increase EU exports to Japan by a third, a Commission study shows.
That could create 400,000 jobs in Europe, an attractive proposition at a time when unemployment in the 17-nation euro zone is a record high and several large EU economies, including Spain and Britain, are in recession.
"Let's be clear: We need these jobs, and we need this growth in the current economic climate," De Gucht said.
The EU and Japan account for more than a third of global economic output and a trade deal would open up markets for European industries ranging from chemicals to pharmaceuticals.
Although there is barely a corner of the world where the European Union is not negotiating trade deals, the bloc has yet to seal an accord with a major world economy. A deal with Japan would probably follow a pact with Canada that is expected by the end of this year, building on last year's agreement with Seoul.
The EU says that signing trade accords with more than 80 countries where negotiations have already begun — including India — could create 2 million new jobs and make a 275 billion euro ($340 billion) contribution to the European economy.