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Japan and EU clear way for trade pact by year's end

Both sides set aside investment dispute issue to reach goal

Negotiations leading up to the basic agreement in July included Cecilia Malmstrom, EU trade commissioner, and Fumio Kishida, Japan's foreign minister at the time.

TOKYO -- Japan and the European Union are expected to finalize an economic partnership agreement within the year by shelving provisions on resolving investment disputes, a major sticking point in the negotiations.

The two sides will affirm that course Wednesday when Japan's Foreign Minister Taro Kono and Trade Minister Hiroshige Seko speak on the phone with Cecilia Malmstrom, the EU's trade commissioner.

After striking a preliminary deal this July, Japan and the EU could not agree on rules governing conflict resolution between investors and national governments. Tokyo wanted to establish an investor-state dispute settlement system that would let corporations sue countries for alleged unfair practices.

But Brussels, maintaining that such a framework would lead to frivolous lawsuits by large companies, has called for a reformed investment court system that would involve a stricter process. Unable to find common ground, the two sides will set the issue aside so they can wrap up and sign the rest of the pact.

The bilateral accord will either lower or eliminate tariffs, and set wide-ranging rules for businesses. For Japan, this will lead to cheaper wine, cheese, pork and other food imports. The key trade deal will follow the broad agreement recently reached on the 11-member Trans-Pacific Partnership -- a pact recrafted following the departure of the U.S.

An early signing of the Japan-Europe deal, plus the TPP 11 agreement, would be a coup for Japanese Prime Minister Shinzo Abe, who has positioned economic partnerships as a pillar of his national growth strategy. Jean-Claude Juncker, president of the European Commission, is also looking to have the Japan pact go into effect before his term ends in 2019.

Considering the need for parliamentary ratifications of the accord, an EU source says a final agreement within the year is essential.


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