The Japanese-German Business Association (DJW) is a non-profit organization based in Duesseldorf and Tokyo. Founded in 1986, DJW connects 1,200 members, among them companies, institutions, freelancer, and individuals. It provides a platform for exchanging contacts, gaining information, and developing business in a German and Japanese economic context. Offering various services, DJW also organizes and supports up to 50 events per year. The following text summarizes individual evaluation by company representatives given during FTA-related DJW events in Stuttgart (March 2019), Erfurt (June 2019), Munich (September 2019).
In February 2019, after just four years of negotiation, ratification and entry into force, the EU-Japan Free Trade Agreement (FTA) was eagerly expected by a large majority of companies. According to a nationwide survey by German Chambers of Industry and Commerce (IHK) conducted in April 20191, more than two-thirds of the participating companies felt confident of the agreement having a positive impact on their own businesses, be it through improved business operations, expansion or a simplified access to the Japanese market.
It is precisely these points that the agreement is intended to take effect: New opportunities for market expansion and international cooperation enabled with the almost all-encompassing dismantling of tariff barriers to trade, full access to public procurement, thorough definition of explicit standards in areas such as employee and environmental protection, guarantee of intellectual property rights, and the support for small and medium-sized enterprises.
Experiences and challenges in a Nutshell
The major challenge for businesses seems to be the processing of registrations and certifications as well as determining the rules of origin for products. The bureaucratic and time-consuming effort required for documentation is perceived as too overwhelming, in an extend that the potential advantages in tariffs cannot be utilized. Simplifying the rules of origin and focusing on manageable, less bureaucratic procedures could mean a step towards improvement and at the same time lead to a more beneficial agreement.
Further hurdles are seen in the lack of transparency and an overall abundance of information; any simplifications made possible by the agreement are not tangible nor are the concrete advantages for businesses visible. One approach to lowering this hurdle could be to simplify practical information and create platforms of exchange, i. e. by providing events that allow for a direct exchange with the European Commission. With the agreement not covering all products comprehensively, some companies do not expect the agreement to have any impact on their trade to and from Japan, as their products have already been traded duty free before agreement’s entry into force.
Aspects of Improvement
Representatives of German and Japanese companies concur that the agreement will put both sales markets back in the spotlight. It also anchors stable framework conditions and securities for (capital) investments. These are fine prerequisites for an expansion of bilateral cooperation, and they should be a starting point for potential next steps.
On the one hand, the contract provides a variety of tools for the European Commission and the Japanese government to adjust and improve individual points of the agreement. After slightly more than four years of negotiations, the agreement was implemented comparatively quickly, while still leaving enough room for potential adjustments and improvement. These require a smooth communication with industry and, more specifically, feedback from companies that are expanding their activities based on the agreement in order to incorporate their experience into the adjustment process. On the other hand, the EPA can serve as a basis for further intensifying cooperation in fields such as digitization, artificial intelligence, or automation and for significantly accelerating exchange of know-how, i. e. in the area of research and development.
Currently, companies seem to be cautiously optimistic and operate in a state of “wait-and-see”. National responsibilities for customs will consolidate trade figures within the coming year and should provide an initial evaluation of results regarding the import and export of goods and services. In general, export figures that are already available should be seen with reservation, as companies sometimes withheld their products and only exported them when the agreement came into force in order to benefit from tariff advantages. It is further expected that the adjustment process – especially non-tariff aspects – will have an impact in five to ten years at the earliest. Nonetheless, the Free Trade Agreement between the EU and Japan sets an example as an antipole to isolationism and protectionism, which will positively influence further negotiations of future free trade agreements.