The Mission of Japan to the European Union

Remarks by H.E. Ambassador Odano

at the Committee on International Trade

13 April 2011

0. Opening

              Mr. Chairman and the distinguished members of the Committee on International Trade, I am pleased to be here today to have a discussion with you on the important issue of Japan-EU trade relations.

              I would also like to thank this Committee for its keen interest in Japan, which is reflected by its planning an official visit to Japan in the second half of this year.

1. Common values and joint initiatives

Japan and the EU share common values such as plural democracy, the rule of law, freedom of speech and other civil rights. We have been cooperating in many policy areas. For example, cooperation in the areas of counter-piracy off the coast of Somalia, the capacity building of the Afghan police, border management in Tajikistan, civilian CSDP missions, and PEGASE in the Middle East and the EU assistance mechanism for the Palestinian Territories. In Haiti, Japan and the EU cooperated on disaster relief and are now involved in the rebuilding of that country.

              Japan and the EU are major players in global trade. We have been promoting the WTO Doha Agenda and we are committed to the early conclusion of the negotiations.

Japanese investment in the EU27 is illustrative of the strong bilateral ties with the EU. Foreign direct investment from Japan to the EU amounts to 140 billion euro on a stock basis in 2009, which is 15 times the level of investment from the Korea and 23 times the size of investment from China. If one looks at the recent investment flows to the EU, the value of investment from Japan is much greater than investment from these two Asian countries. There are now about 3,300 Japanese companies operating in the EU, creating about 400,000 employments. The EU is the largest FDI stock holder in Japan at the same level as Americans.

As for the inaugural EFSF bond (European Financial Stability Facility) which was floated on 25 January as a financial support for Ireland, Japan purchased 20.5%; that is about 1 billion euro, out of total issue of 5 billion euro. This purchase by Japan has contributed to the success of this benchmark issue.

Recently there have been large business deals by Japanese companies to purchase European products. In the aviation sector, Skymark Airlines signed in Toulouse a contract for the purchase of four Airbus A-380 aircraft, its largest passenger model with an optional order of an additional two A-380s. In addition, A&F Aviation, owned mainly by All Nippon Airways, signed a Memorandum of Understanding for the lease of 10 Airbus A-320s with a possibility for additional leases. In the railway sector, Knorr-Bremse, a German manufacturer, reached a contract with JR East, a major Japanese railway company and will supply brake components for the latest Japanese high-speed trains.

2. Significance of the EPA in Japan and EU

              Japan and the EU have close relations, but there is still vast untapped potential. In the area of trade and investment, I believe that the conclusion of an economic partnership agreement, so called-EPA, which covers a variety of issues including tariff and non-tariff measures, is the most effective tool for realizing this potential. By concluding an agreement, we can also expect more and more cooperation among business in such areas as the development of new generation of vehicles, electric cars, and finding substitutes for rare earth elements. It is fresh in our memory that the disruption of the rare earth elements supply has been of serious concern to many in business and industry.

              In addition, strengthening our economic relations through the EPA will lead to enhanced mutual interaction and mutual trust, which will contribute to more comprehensive cooperation between Japan and the EU in the political and security fields. We can also expect enhanced cooperation in global issues such as climate change and environment protection. Please take a look at the paper “Why Pursuing Japan-EU EPA?” which is distributed to your table.

3. Political commitment and request from industry towards EPA

              Against this background, Japan is strongly committed to launching an economic partnership agreement with the EU.

              Japanese business has high expectations for a start of EPA negotiations. I am aware of certain voices among Japanese business that, without a Japan-EU agreement, some of their production sites in the EU could be moved to other countries for comparatively more favorable investment and production conditions because they will face discriminatory conditions in the EU, after the EU-Korea FTA comes into force this July.

              I would like to add that the launch of Japan-EU EPA negotiations is not something that only Japan is advocating. The joint letter from leaders of 9 EU member states to the EU leaders on 18 March and the European Council Conclusion on 25 March tell us that there are strong and positive views. They find merit in starting negotiations and merit in a trade agreement. In the Public Consultation conducted by the European Commission on‘The Future of EU Japan Trade and Economic Relations’ vast majority of the respondents call for closer and enhanced cooperation or economic integration through an Economic Integration Agreement (EIA) which corresponds to an ambitious deep and balanced Free Trade Agreement..

4. Engagements towards EPA

Following the agreement at the Summit of 2009, Japan and the European Commission started working on a few specific non-tariff issues. This is a so-called Paragraph 34 exercise dealing with 4 areas of interest to the EU and 3 areas interest to Japan. We have completed the negotiations at the beginning of this year and the agreements have been put into implementation.

Based on these experiences, and preparing for this year’s Summit, we have expedited the process of the EU-Japan Joint High Level Group, which was established at last year’s Summit. The senior officials’ meeting is scheduled at the end of this week in Brussels and there will be a Minister’s meeting before the Summit.

5. Possible elements of the EPA

              The Japan-EU economic partnership agreement should bring benefits to both sides. Japan will actively engage in the following sectors and issues, in the course of the negotiations.

              Firstly, Japan addresses non-tariff measures or non-tariff barriers, including those 27 measures which the EU has indicated. There is a new mechanism established in Japan. The Government Revitalization Unit, which is chaired and supervised by the Prime Minister, has already started working and decides that the three of the EU requests are to be addressed at this stage: wholesale liquor licensing, zoning on automotive service shops and food additives.

Secondly, regarding tariffs, taking into consideration the sensitivity of trade in certain products, Japan subjects all goods to negotiations for trade liberalization. Through such negotiations, Japan will pursue a high-level Japan-EU Economic Partnership Agreement that will withstand comparison with the global trend of high level economic partnerships. To put it concretely, Japan will give positive consideration for any items of interest to the EU, taking into consideration our domestic sensitivities.

              Thirdly, with regard to liberalization in trade in services and investment, Japan will subject all sectors of investment and of trade in services to negotiations without any prior exclusion to pursue a high-level economic partnership. Given that the level of inward direct investment to Japan is low, Japan will take measures to promote inward investment, aiming for the level comparable with other OECD countries.

              Fourthly, concerning government procurement, Japan is ready to discuss measures beyond the WTO Government Procurement Agreement and significant expansion of its scope. On railway procurements, this issue has been a priority for the EU. There is a misperception - Japan National Railways no longer exists. It is privatized and divided into independent private companies. Nonetheless Japan takes note of the EU’s request and will take an initiative to hold conferences that involve railway-related firms of both sides to invite more access of EU firms to Japan’s railway procurement market.

Fifthly, Japan will introduce a system to protect geographical indications and will consider the system’s design and the concrete items to be protected based on the interests of both Japan and the EU, and the existing practices for similar systems in other countries.

6. Conclusion

              The Japan-EU economic partnership agreement that Japan has been advocating will bring significant economic benefit to the EU as well as to Japan. Through this initiative, Japan-EU relations will be further strengthened in a variety of areas.

              In addition, Japan attaches much importance to the economic partnership agreement not only in terms of trade and investment but also as a tool to deepen our relations. That is why Prime Minister Kan and other political leaders in Japan have been committed to this initiative.

Finally, I would like to convey my sincere appreciation on many words of sympathy and solidarity and assistance from Europe after the earthquake and Tsunami in my country on 11 March. Commissioner Georgieva delivered a first shipment of European Disaster Relief assistance to several affected local communities in Northern Japan. Altogether, more than 300 tones of relief materials have been airlifted there. Japan sincerely appreciates the solidarity of the European Parliament and European citizens who stand firmly with Japanese people at this time of great difficulty.

Mr. Chairman and the distinguished members, Japan would like to agree on launch of the negotiation for an economic partnership agreement at the next Japan-EU Summit before summer. I would be happy if you could support us in achieving this objective.

              I thank you for your attention.

[Some of additional remarks following the MEPs’ comments]

Concerning the earthquake in Japan, Japan will continue to provide prompt and accurate information to the international community. With regard to food safety, Japan has been taking steps to ensure distribution of safe food by establishing provisional standards for food and beverages and introducing shipment restrictions among other measures. Industrial products are also subject to stringent quality control. At the current time, the amount of radiation affecting Japan’s industrial products is not at a level that impacts upon the health of people. The safety of seaports and airports that serve as hubs for global distribution is also recognized by international organizations. Keeping trade between Japan and the EU is vital for the recovery of the Japanese economy. I would like to sincerely ask the Members of the European Parliament and other EU institutions not to introduce any non-tariff barriers which are not based on scientific facts.