August 13, 2017 12:54 am JST

Japan lags behind on free trade, despite EU partnership

Trade covered by FTAs to exceed 30% for 1st time, but ratio remains low

YUTA KOGA, Nikkei staff writer

Agreement on the economic partnership between the European Union and Japan was reached at a summit in Brussels in early July. © Reuters

TOKYO -- The share of Japan's total trade which is covered by free trade pacts or economic partnership agreements will stand at a little more than 30% when its EPA signed with the European Union takes effect, according to data from the Japan External Trade Organization. Achieving the official target of 70% by 2018, however, looks distinctly unlikely.

According to an analysis of trade statistics conducted by Jetro, Japan's FTA coverage ratio stood at 22.5% last year. The EU-Japan EPA, which was broadly agreed in July, is expected to boost the ratio by 11.9 points to 34.4%. This will be the first time the ratio exceeds 30%, but the figure remains low by international standards.

Chile, which has agreements in place with China, the U.S. and the EU, leads the field with 93.1% of its trade falling under FTAs.

In Mexico the ratio stands at 79.9%, while in Canada it is 70.5%. Both countries are members of the North American Free Trade Agreement alongside the U.S.

With nearly half of its gross domestic product relying on exports, South Korea has made establishing FTAs a national strategy, leaving Japan far behind.

Japan has signed agreements with the likes of Singapore, Mexico and Mongolia, but the value of trade with these countries is relatively low. The Trans-Pacific Partnership agreed in 2015 was expected to boost the country's FTA coverage ratio by 17.6 points, but the U.S. withdrew from the pact after President Donald Trump took office. The remaining 11 countries implementing the pact increases Japan's ratio a mere 1.8 points.

If an agreement could be reached on the Regional Comprehensive Economic Partnership, which comprises China and 15 other countries, Japan's FTA coverage ratio would increase by 27.6 points. However, disagreements over tariffs and the liberalization of intellectual property mean the RCEP coming into force remains a long way off.

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