The EU on the move: A Japanese view H.E. Mr. Kazuo KODAMA Ambassador of Japan to the EU Brussels, 06 February 2018
I. The Japan-EU EPA Table of Contents 1. World GDP by Country (2016) 2. Share of Japan + EU27 Economies in the World 3. Japan s Investment (2016) 4. Contents of the Japan-EU EPA 5. Economic Impact of the Japan-EU EPA on Japan s Economy 6. Economic Impact of FTAs on Japan s GDP Growth Rate II. The Challenge of Brexit 1. EU-UK Transitional Arrangement 2. The UK s Desired Future Relationship III. The Future of Europe 1. Continued integration towards a United States of Europe 2. Continued enlargement + expansion of EU membership 2
The Japan-EU EPA World GDP by Country (2016) Russia 1.7% South Korea 1.9% Brazil 2.4% India 3,0% China 14.9% Other 16,1% Non-TPP countries 61.8% TPP countries 38.2% US 24.7% Japan 6.6% Japan-EU EPA: 28,4% TPP11: 13,5% TPP: 38,2% TTIP: 46,5% NAFTA: 28,1% Canada 2.0% EU 21,8% Mexico 1.4% Australia 1.7% SOURCE: World Economic Outlook Database April 2017 3
Share of Japan + EU27 Economies in the World 1) EU27 s share of UK exports: 44% UK s share of EU27 exports: 7% 2) EU27 s share of UK imports: 56% UK s share of EU27 imports: 4% 3) UK-EU27 trade/ EU27 total trade: 6% UK-EU27 trade/ UK total trade: 51% Source: Eurostat 2015 4
Japan s Investment (2016) EU: the largest investor in Japan Outbound Investment Inbound Investment 8.2% 23.0% Total = $1,4 trillion 34.0% 22.5% 12.3% EU* TPP-11 US China Others 0.5% 21.4% 27.4% Total = $202 billion 11.1% 39.6% EU* TPP-11 US China Others Exchange Rate: 110/1$ Exchange Rate: 110/1$ *U.K. (8,7%) Netherlands (7,3%) Germany (1,4%) Belgium (1,3%) France (1,0%) Source: Japanese Cabinet Secretariat Economic Impact Analysis, 2017 *France (14,7%) Netherlands (11,7%) U.K. (6,8%) Switzerland (5,5%) Luxembourg (2,3%) 5
Contents of the Japan-EU EPA The EPA will bring our two economies closer by addressing issues related to market access, services and investment, procurement including railways, non-tariff measures and protection of geographical indications as well as intellectual property rights. Tariffs on 94% of EU exports to Japan will be eliminated (including 82% of agriculture, forest and fishing products and 100% of industrial products.) Tariffs on 99% of Japanese exports to the EU will be eliminated, Market access for dairy products to Japan will be improved and the tariff on wines will be eliminated upon entry into force of the agreement. In addition, an unprecedented import quota of soft cheese will be established. In return, the EU s is committed to lifting tariffs on cars and car parts. This agreement will allow us to renew and strengthen our joint commitment to international standards for even closer future cooperation. 6
Economic impact of the Japan-EU EPA on Japan s economy 0,99% increase in GDP growth ( 5,2 trillion / $47,2 billion) Employment creation: 290,000 jobs (%) 1.5 1 Private Consumption 0,6 0.5 Investment 0,24 Gov. Consumption 0,17 0 Exports 0,24 Imports -0,28-0.5 Net Impact of Japan-EU EPA (Agricultural production expected to be reduced by 60-110 billion) Source: Japanese Cabinet Secretariat Economic Impact Analysis, 2017 Exchange Rate: 110/1$ 7
Economic Impact of FTAs on Japan s GDP Growth Rate Private Consumption Investment Gov. Consumption Exports Imports 4.0% + 2,59% ($123,6 billion) 3.0% 2.0% 1.0% 0.0% + 0,99% ($47,2 billion) +0,60% +0,24% +0,17% +0,24% -0,28% + 1,49% ($70,9 billion) +0,90% +0,36% +0,24% +0,36% -0,38% +1,59% +0,57% +0,43% +0,60% -0,61% -1.0% Japan-EU EPA TPP11 TPP12 Source: Japanese Cabinet Secretariat Economic Impact Analysis, 2017 Exchange Rate: 110/1$ 8
The Challenge of BREXIT: EU-UK Transitional Arrangement Customs Union European Union European Economic Area (EEA) Eurozone Schengen Area Possible Major Elements - Level of Single Market access equivalent to EU membership; - Inside Customs Union; - EU budget contributions; - No representation within the EU s political institutions. Source: The Mission of Japan to the EU 9
The UK s Desired Future Relationship Customs Union European Union European Economic Area (EEA) Eurozone Schengen Area Source: The Mission of Japan to the EU A Sui Generis Relationship - Frictionless Single Market access for UK businesses; - A hard customs border mitigated by technological solutions; - Controls on EU Migration; - Independent UK trade and commercial policies; - An end to the jurisdiction of the ECJ. Possible Consequences for businesses - Restrictions on access to talent; - Disruptions to supply chains; - UK/EU regulatory divergence; - Import/Export tariffs; - Rules of origin. 10
The Future of Europe: Two outstanding challenges: 1) Continued integration towards a United States of Europe European Economic Area (EEA) OTHER EU MEMBERS CUSTOMS UNION European Free Trade Association (EFTA) Switzerland Iceland Liechtenstein Norway Denmark** Poland Bulgaria Hungary EURO AREA Austria Belgium Malta Greece Cyprus Netherlands Slovakia Ireland Estonia Spain Portugal Slovenia Finland Romania Sweden Croatia Czech Republic Andorra Monaco San Marino Turkey Latvia Lithuania France Italy UK* Luxembourg Germany Based on UK government data WEST Multi-speed? NORTH SOUTH Discipline Solidarity EAST * Sui generis customs agreement with the EU **Opt-out of eurozone membership 11
2) Continued enlargement (expansion of EU membership) EU Enlargement policy in the Western Balkans: Accession talks started with Serbia (2014) and Montenegro (2012) FYR Macedonia and Albania: Awaiting Commission recommendation Bosnia & Herzegovina, Kosovo. 12
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