European Union and Japan EPA negotiate to start European car companies worried about the impact

The EU Economic Cooperation Agreement (EPA) negotiations with the Japanese government were officially launched in recent days. The signing of the EPA will further consolidate the relationship between the EU and Japan. The agreements negotiated between the EU and Japan include free trade in goods, services, and investment, as well as the establishment of trade-related rules between Europe and Japan, and the elimination of non-tariff trade barriers. However, countries such as France and Italy are concerned that this move will impact the auto manufacturing industry in the country.

EU's insistence

After more than four months of "quarrel", the boycott of European car companies did not seem to play a big role. Japan eventually entered the EU free trade signing process. “This is an extremely important decision,” said EU Trade Commissioner Karel De Gucht. “If we want to improve the overall European economy or increase employment, then a free trade agreement with Japan will be necessary. At that time, the overall European economy will increase by 0.8. % GDP, and increase more than 400,000 jobs. This is what we need most, and we will be able to further explore the Japanese market. European companies will have the most tangible benefits in Japan."

The EU Trade Ministers' Meeting clarified the guidelines for the initiation of restrictive measures when Japan’s auto imports surged, and the relevant countries accepted the resolution. The EU also stated that after one year of negotiations, if it is judged that the Japanese government is not open enough and the degree of liberalization is not sufficient, negotiations will be suspended. “In the past few months, we have conducted quite a lot of research on the closure of the Japanese market. It is gratifying that Japan has already stated that it will eliminate non-tariff trade barriers as soon as possible.” Karel De Gucht said, “We must see It is said that Japan is the EU’s second largest trading partner and one of the EU’s most important partners. The economic development in the next 20 years will inevitably come from Asia, especially Japan.”

European car companies worry

The European Association of Automobile Manufacturers (ACEA) stated that free trade negotiations between the European Union and Japan will have a negative impact on the European automotive industry, leading to an increase in unemployment. ACEA Secretary-General Ivan Hodac criticized the EU’s treatment of Japan’s relevant policies: “The free trade agreement with Japan will have a negative impact on the European automotive industry. Independent research has shown that such an agreement is a single good for Japan only. "Agreement." Deloitte's analysis shows that if free trade negotiations succeed, then the number of cars exported by the European Union to Japan will increase by 7,800 in 2020. In the same period, the increase in the number of cars exported by Japan to the European Union will reach 443,000. This high import of Japanese cars will force European automakers to reduce their production capacity, resulting in the loss of between 35,000 and 73,000 employees. Ivan Hodac believes that the EU should learn lessons from the impact of the South Korean free trade agreement last year on the European automotive industry. According to data released by Ford earlier this year, South Korea’s exports to Europe have grown by 70%, while the EU’s exports to South Korea have only increased by 15%.

Countries such as France and Italy are worried that they will face some "unfair" competition once they reach consensus. On the face of it, at present, the restrictions and tariffs faced by Japanese cars entering the EU are much higher than the EU's exports to Japan, but if analyzed from a deeper level, the EU cars are facing greater difficulties in the Japanese market. The main reason on the one hand is the positioning of motor vehicles. Japan has established the concept of “light car” and can enjoy the government’s tax and fee concessions, but most small cars in Europe, such as the Fiat 500, cannot meet the requirements of 660 cc for Japanese light vehicles and the size requirements. The Japanese market competes with local cars, and "light cars" occupy a relatively high market share in the Japanese market. Therefore, European automakers hope that the EU will resolve the following two issues when negotiating with Japan: First, after European models are exported to Japan, there is no need for additional testing and revision, and Japanese local approval of European models; secondly, Japan should Recognition of small cars produced in Europe is in line with its concept of "light car" and enjoy the same tax benefits.

Japanese excuse

Facing the concerns and dissatisfaction of the European auto manufacturers in this free trade negotiation, the Japanese side showed great confidence and believed that even if a consensus is reached in this negotiation, it will not have a serious negative impact on the European auto industry. Mikura Hiraku, chairman of the Japan Federation of Economic Organizations, said: “Before this, the Japanese and European business communities have conducted long-term consultations on how to open up their respective markets. The degree of understanding between the Japanese and European business communities on the two markets is in the process of exchanges. The deepening of this will make sense for the signing of a free trade agreement as soon as possible.” He believes that although there are some comments that after the signing of the Korea-European Free Trade Agreement, due to the massive entry of Korean cars, it has not actually brought good economic benefits to the European economy. The effect, but cooperation with Japan will not have such consequences, because the production of Japanese car companies originally concentrated in Europe.

Akio Toyoda, chairman of the Japan Automobile Industry Association, also denied the possibility of a surge in Japanese car exports, and stressed that Korean carmakers have two car factories in Europe, while Japanese carmakers have 13 car factories in Europe. Last year, Toyota sold 60% of its sales in the European market from the local market. Nissan sold 91% of its sales in Europe from its factories in the United Kingdom and Spain. As for Honda, its output in the European market is even higher than its sales. According to data from the Japan Industry Association, in the past fiscal year, Japan’s auto exports to the European Union had fallen by 15.7% to 484,264 vehicles, which accounted for only 10% of Japan’s total auto exports.