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International relations

Free trade sphere grows, leaving US in the cold

Japan-EU pact cuts duties on cars, wine and cheese in blow to American competitiveness

Japanese Prime Minister Shinzo Abe, center, flanked by European Commission President Jean-Claude Juncker, left, and European Council President Donald Tusk (Photo by Uichiro Kasai)

TOKYO -- Japan's economic partnership agreement signed with the European Union on Tuesday looks to invigorate a host of other free trade efforts including the 11-nation Trans-Pacific Partnership and deals between the EU and South America, raising the unexpected possibility the U.S. will be left out in the cold as the world speeds toward multilateralism.

Under the new Japan-EU pact, both sides will tear down barriers on industrial products and agriculture. Europe's 10% tariff on Japanese passenger cars will be phased out over eight years, and levies on 92% of Japanese autoparts will vanish immediately. Mazda Motor, which exports from Japan over half the vehicles it sells in Europe, hails it as a "major accomplishment."

Tokyo will abolish tariffs on European wine and lower levies on soft cheeses, with a plan to abolish them entirely in the agreement's 16th year.

When a 2007 agreement between Japan and Chile removed tariffs on the South American country's wine, Japan's imports increased fivefold in a decade, while imports of California wine fell by 30%. The spread of free trade agreements that exclude the U.S. is likewise expected to hurt the competitiveness of American products.  

"This is a very important achievement," said Hiroaki Nakanishi, chairman of Keidanren, Japan's top business lobby. "It counters a destructive trend of building trade barriers and launching tariff battles," he said, pointing to the trade war between the U.S. and China.

Chief negotiators on TPP 11 -- re-worked to function without the U.S. following its withdrawal in 2017 -- gathered near Tokyo on Tuesday for a three-day meeting, during which they will discuss how additional countries can eventually join. Nations including Thailand, Colombia, South Korea and the U.K. have shown interest.

Another round of negotiations over the Regional Comprehensive Economic Partnership kicked off in Bangkok the same day. That pact proposes to join the 10 members of the Association of Southeast Asian Nations, plus China, Japan, India, South Korea, Australia and New Zealand, in a pan-Asian free trade zone. Ministers agreed in early July to target an agreement by the end of 2018. The current round of talks looks to determine what issues will require political decisions to settle.

The EU, meanwhile, launched free trade talks with Australia and New Zealand in June. Negotiations are also ongoing with Mercosur, a South American economic bloc comprising Brazil, Argentina, Paraguay and Uruguay.

These efforts, spanning the Atlantic and Pacific oceans, aim to underscore the value of free trade at a time when the U.S. is pulling away from multilateral deals of all kinds. Japan, in particular, views action on this front as a way to pull America back into these expansive agreements. The Donald Trump administration has shown a strong preference for bilateral deals, and will sit down with Japanese ministers as soon as this month to launch talks on so-called free, fair and reciprocal trade.

Europe has taken a more confrontational approach with the U.S. since the country slapped tariffs on steel and aluminum in June, imposing retaliatory levies on American products including bourbon whiskey and Harley Davidson motorcycles. Trump has threatened additional tariffs on European automobiles if these measures are not retracted -- a step that would have heavy economic consequences and could lead to further escalation.

America's absence from major trade efforts is already creating challenges for free trade. Malaysia's Prime Minister Mahathir Mohamad, who took office in May, has called for TPP 11 to be renegotiated. On other fronts, China is filling the vacuum left by the U.S. with trade deals that may not meet international standards. A free trade agreement took effect in January between the Asian economic powerhouse and Georgia, a key partner in Beijing's Belt and Road initiative targeting new trade routes through central Asia.

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