EU and Japan advance ties with focus on China, US

The EU’s relationship with the Japanese is first seen as a counterpoint to Sino-European engagement in fields ranging from trade and investment to closer cooperation on connectivity. But the emphasis of the two sides on the importance of multilateralism and the World Trade Organization was clearly a response to the protectionist policies of US President Donald Trump.

President of the European Council Donald Tusk and head of the European Commission Jean-Claude Juncker met with Japanese Prime Minister Shinzo Abe in Brussels. The three leaders took stock of the EU-Japan economic partnership agreement (EPA), the largest trade deal in the world, which entered into force on February 1.

The EU and Japan account for nearly a third of the world’s Gross Domestic Product. The EU is Japan’s third-largest trading partner, and their combined trade topped US$161 billion in 2018, with the Japanese running a deficit of $4.7 billion.

The EU-Japan free-trade agreement has removed most of the $1.1 billion in tariffs paid annually by EU businesses exporting to Japan, Juncker said. This means annual trade between the two parties could grow by over $40 billion once the FTA is implemented in full, according to the European Commission.

The global gold standard?

With their economic partnership, the Europeans and Japan aim to shape global trade rules in accordance with their high standards and shared values. The two parties want their principles in areas such as labor, safety, climate and consumer protection to become the “global gold-standard” in free-trade pacts.

But despite progress at this early stage, Abe and the European leaders were unable to provide a timeline for implementation of the EPA. On April 10, an ad-hoc EU-Japan joint committee defined procedures for implementation of the agreement amid differences over trade and sustainable development, product standards, customs procedures and public procurement markets.

During the summit, the Japanese premier and his European counterparts made no mention of a possible integration of the EU-Japan FTA with the Trans-Pacific Partnership (TPP). The TPP was to be the signature initiative in Asia of former US President Barack Obama, but Trump withdrew from it in 2017. This sweeping free-trade deal finally entered into force last December under the impulse of Japan and participation of 10 other Asia-Pacific countries.

In a recent speech at the Japan Institute of International Affairs in Tokyo, EU Trade Commissioner Cecilia Malmström criticized the United States’ withdrawal from the TPP, especially at a time when “China builds influence in the Pacific region.” However, while he said the Union saw the TPP as a vehicle to expand power and shape globalization, it seems the European bloc is more committed to free-trade negotiations with the Association of Southeast Asian Nations (Asean).

In their joint statement, the EU and Japan further signaled their distance from Trump’s positions on global governance and multilateralism by making explicit reference to their cooperation on ensuring the correct functioning of the WTO appellate body, the ultimate settler of trade disputes involving WTO members countries.

In the lead-up to the Brussels summit, European media reports said the Japanese would refuse to meet the EU’s demand on the issue because of pressure from Washington. The Trump administration is, in fact, boycotting the WTO dispute settlement mechanism, which the EU views as the best instrument to solve trade confrontations, such as that between China and the US. Some speculated that Abe would have refrained from taking a position on the WTO appellate body issue ahead of his talks with the US President.

Connectivity partnership

The other pillar of the EU-Japan relationship is their strategic partnership agreement, which is being provisionally applied in large parts. Development policy and connectivity between Europe and the Indo-Pacific region were extensively discussed by Abe and the EU’s top officials.

Significantly, the gathering in Brussels coincided with the opening day of the Belt and Road Forum in Beijing, which is being attended by many EU heads of state and government.

On April 11, the European Development Finance Institutions reportedly signed a deal with its US and Canadian counterparts to offer emerging nations a development alternative to state-endorsed models like China’s Belt and Road Initiative, Chinese President Xi Jinping’s plan to improve trade links and infrastructure across Eurasia and beyond.

Asked if the EU was ready to enter in this kind of agreement with Japan, an EU official told Asia Times that the summit was indeed “an opportunity to advance EU-Japan cooperation on sustainable connectivity in third countries based on our similar strategies [the EU’s approach to connectivity and Japan’s ‘free and open Indo-Pacific’ concept].”

He explained that the two sides would work together in support of quality infrastructure, with a stress on environmental, economic and fiscal sustainability. He also said that EU-Japan cooperation was also aimed at ensuring a level playing field for public and private companies and sustainable development goals.

This actually seems a blueprint for challenging the Belt and Road model, which detractors say lacks transparency, particularly as far as investment financing, the quality of infrastructure projects and the predominant role of state-owned Chinese companies is concerned.

In this respect, the European bloc and Japan announced the launch of a connectivity partnership that could also include strengthening operational cooperation in investment or development cooperation in certain regions or third countries.

Different security priorities

Security and defense policies were also part of the talks. Abe, Juncker and Tusk said the EU and Japan would deepen collaboration on maritime security, cybersecurity, counter-terrorism and crisis management operations.

But their priorities in the security sphere appear very different. The EU is focused on the crisis of migrants and asylum seekers from Africa and the Middle East, as well as Islamist terrorism and the resurgence of an assertive Russia. For its part, Japan is concerned with China’s growing military clout, which manifests itself in its territorial claims to the East and South China seas.

Denuclearization of the Korean Peninsula was at the center of the discussions between Abe and the EU leaders, but the reality is that the EU is a minor actor in this whole story, while Japan has been sidelined by Trump’s “direct diplomacy” with North Korean leader Kim Jong Un.

The EU and Japan are undoubtedly closer than ever, both politically and economically, and their relationship could help balance China’s increasing influence in Eurasia and Africa. But the impression is that the pace of their future strategic integration will be set by their cumbersome ally in Washington.