Automotive trade is key to many trade agreements, and the proposed EU-Japan trade agreement is one of them. The second round of negotiations between the EU and Japan, which is being held in Tokyo, Japan from June 24, 2013 through July 3, 2013, will place much focus on the automotive area.
During the negotiations, the EU and Japan plan to discuss the possibility of agreeing on mutual recognition of automotive safety standards. Currently, a European automaker needs to undertake safety inspections in Japan in order for them to sell cars in Japan, and vice versa. If the EU and Japan can reach an agreement on mutual recognition of safety standards, a European automaker can undertake safety inspections in Europe, using data obtained in Europe, to determine whether their cars meet Japanese safety standards, and vice versa. Through the implementation of such mutual recognition, European and Japanese automakers can save both time and cost that are currently necessary to export cars into each other’s region.
After the talks on mutual recognition of automotive safety standards, the focus of the negotiations will then turn to issues on tariff and non-tariff barriers. The EU currently has 10% tariff on imported cars, and Japan is requesting the abandonment of such tariff. On the other hand, the EU claims that, although Japan has zero tariff on imported cars, Japan has various non-tariff barriers, including distinctive safety and environmental standards. With several European countries being concerned about the increase of Japanese cars being imported into Europe, there will likely be long and tough negotiations on these issues.
As such, there is still much uncertainty in the development of the EU-Japan trade agreement negotiations. In addition, the negotiations will likely be affected by the negotiations that are concurrently being done in connection with the US-EU trade agreement and the Trans-Pacific Partnership (which includes the US and Japan). Despite this uncertainty, it is true that the EU and Japan have started to move to a mutual recognition of automotive safety standards. If this move is actually realized, it will accelerate the import/export of cars between Europe and Japan and will have an impact on US-based auto parts suppliers doing business in these regions.