“Over 30 percent more exports”
Who benefits most from the free-trade agreement between the EU and Japan? Marcus Schürmann, Managing Director of the German Chamber of Commerce and Industry in Japan, believes there is immense potential.
Mr Schürmann, the European Union has concluded its widest-ranging free-trade agreement to date with Japan. A reason to cheer in the wake of the protectionist trends in other countries?
The most important reason to celebrate is that the treaty will substantially intensify trade relations between Japan and the EU. I expect trade to develop dynamically in both directions, which is good for companies and will create jobs. I consider the agreement as further proof that Japan is realigning. The country is making a name for itself in Asia as the reliable pillar of rule-based free trade and is shifting globalization up a gear. That’s a signal from Japan which often gets overlooked.
The EU Commission predicts 180-percent growth in the agricultural sector.
In what areas will the EU and Japan benefit most when the agreement comes into force in 2019?
From the EU viewpoint, pharmaceuticals, medical appliances, vehicles and foodstuffs are among the greatest beneficiaries. The EU Commission predicts 180-percent growth in the agricultural sector, for example, as Japanese customs duties on cheese, wine and pork will be eliminated. A second key opening will be for services, for example in the fields of finances, telecoms, transport and distribution. Japan will probably be happiest about the advantages for its car industry. The import duty, currently 10%, will be removed completely over the course of eight years. Customs for automotive components will also be abolished.
And which sectors of the German business world can look forward to a better deal in Japan?
Germany is strong, amongst other things, in chemicals and electrical machines. The agreement creates additional free scope for these sectors, and in the medium term I think German dairy and meat products will be beneficiaries. German companies should also profit in the railways sector, for example, as Japan is improving access to public tenders. One real area of potential that is often underestimated in trade relations with Japan is business with Japanese partners outside Japan. According to our last survey on business sentiment, 60 percent of the companies polled book at least one additional euro in sales to Japanese clients outside the country for every euro in sales recorded inside Japan. And for a third of those surveyed, the additional sales to Japanese customers outside Japan constituted at least four times the volume of sales in Japan.
The agreement is expected to lead to a 32-percent rise in the volume of trade.
Japan lies 17th in terms of exports to Germany’s trade partners, while it is 15th when it comes to imports. Do you anticipate there being tangible macroeconomic impacts?
The agreement is expected to lead to a 32-percent rise in the volume of trade heading to Japan over the next five years. Imports into the EU are likely to rise by 23 percent over the same period. In other words, Germany as the largest EU economy will lock into this trend in a big way. Gauging by the number of enquires the Chamber receives, at the German end at any rate there is a discernibly greater interest in entering the Japanese market, be it via local partners or through a subsidiary. And this includes areas of business hitherto somewhat neglected, such as IT services and New Economy service providers. The current figure of some 12,000 German companies who have business relationships with Japan could therefore see double-digit growth in percentage terms over the next few years.
And what will be the advantages for German consumers?
Stronger trade between the EU and Japan will probably translate into more Japanese goods being available for sale in Europe, and often at lower prices if the EU importers pass the customs duties saved onto customers. The sale prices of cars and spare parts for Japanese marques will probably decrease immediately – and the choice of culinary offerings increase. Consumers can look forward to a greater choice in particular when it comes to alcoholic beverages such as sake.
