Japan-EU agreement may help save Abe’s credibility

By Chen Youjun Source:Global Times Published: 2017/7/23 17:28:39

Illustration: Luo Xuan/GT


Japanese Prime Minister Shinzo Abe, European Council President Donald Tusk and European Commission President Jean-Claude Juncker jointly announced in early July that they had reached agreement in principle on the Japan-EU Economic Partnership Agreement (EPA).

Both sides have made great efforts in reaching a broad accord for the EPA, with concessions and compromise made on certain individual core issues. For instance, the EU is expected to gradually abolish tariffs on Japanese cars over a period of seven years once the EPA is in effect, while Japan will open part of its agricultural market and give more favorable import conditions for agricultural products produced in the EU, such as cheese, beef and pork.

Nevertheless, the agreement in principle doesn't mean that the EPA will take effect immediately, not to mention that Japan and the EU still need to negotiate over the arbitration system for investor protection. Due to their major differences on this issue, it may be hard for the two sides to reach a consensus in the short term.

But it is noteworthy that Japan and the EU each have their own reasons to be eager to reach a basic agreement and announce the result. Especially for the Abe government, the agreement not only contributes to its "glorious" image as a free trade advocate in the international arena, but also helps moderately ease domestic opposition, consolidating its ruling position for the time being.

First of all, the Abe government intends to use the EPA to create conditions to help the negotiations of the Trans-Pacific Partnership (TPP). In fact, after US President Donald Trump announced the US would pull out of the TPP, Japan has spearheaded efforts to continue the TPP negotiations. While still leaving the door open for a US return, Japan intends to establish a TPP without the US. However, TPP negotiations are not going smoothly in the absence of the US, with major differences among various parties. Meanwhile, Japan's leadership is not as strong as the country anticipated, failing to get the results on TPP negotiations that it hoped for. Against such a backdrop, the Abe government urgently needs to create a favorable external environment for the next round of TPP negotiations, and the EPA agreement is undoubtedly one of its key strategic deployments. In addition, the Japan-US economic dialogue as well as the steady development of the Japan-US alliance have also sent important signals.

Second, with the concessions made on agricultural trade, the Abe government intends to further accelerate its structural reform for domestic industries. Frankly speaking, the Abe government has made great compromises on agricultural imports to reach the agreement with the EU, but in exchange it also got huge returns on the export of automobiles and auto parts. In this sense, the content of the Japan-EU EPA actually reflects the structural reform intention of "Abenomics." On one hand, the Abe government hopes to break the long-term monopoly in the domestic agricultural industry by introducing external pressure to force domestic agricultural and other vested interest groups to implement reform measures designed by the government. Of course, Abe does not want to give up on the whole agricultural industry, and he only wants to sacrifice uncompetitive agricultural sectors to save resources so as to support some fully competitive agricultural products and sectors, dubbed as "aggressive agriculture." On the other hand, the Abe government will continue to support the manufacturing industry, represented by Japanese automakers. It will create necessary and sufficient space for the transformation and upgrading of the domestic manufacturing industry by expanding exports and obtaining international market share.

Third, the Abe government also hopes to use its diplomatic "achievements" to ease domestic criticism and disagreement. As we all know, Abe's Liberal Democratic Party suffered a crushing defeat in a key election in Tokyo. Just ahead of the election, his defense chief Tomomi Inada even made politically sensitive remarks. Nevertheless, Abe, amid a school scandal, failed to recognize his party's defeat and his mistakes, which directly led to a crisis of trust. In view of this, Abe urgently needs to show his political capability and credibility. Therefore, the Japan-EU EPA agreement in principle may play a crucial role at this point in time, which not only transfers the focus of Japanese citizens, but also creates conditions for Abe's return to domestic affairs.

The author is a senior research fellow at the Institute for World Economy Studies of the Shanghai Institutes for International Studies. bizopinion@globaltimes.com.cn

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