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News Navigator: What is an Economic Partnership Agreement?

A woman compares French wines at Takashimaya Nihombashi department store in Tokyo's Chuo Ward on July 6, 2017. (Mainichi)

With Japan and the European Union (EU) reaching a broad Economic Partnership Agreement (EPA), the Mainichi Shimbun answers questions readers may have about this particular type of free-trade agreement.

Question: What is an EPA?

Answer: Short for "Economic Partnership Agreement," an EPA is an international agreement to broadly strengthen the economic relationship between nations or regions. It is not just designed to reduce or remove tariffs on industrial and agricultural products. It also consists of rules to enable firms to invest in the other country or region with peace of mind, such as investment and intellectual property protections. Additional benefits include simplifying immigration procedures, making travel between the parties easier. Furthermore, unlike a Free Trade Agreement (FTA), aimed mainly at removing tariffs, an EPA has a wider scope, promoting increased freedom across a wider range of areas.

Q: Has Japan ever finalized an EPA with a country or region apart from the EU?

A: The first EPA that Japan sealed was with Singapore in 2002. As of June 2017, Japan had finalized 16 EPAs with 20 countries including Mexico, Malaysia, Chile, members of the Association of Southeast Asian Nations (ASEAN), Switzerland and Australia. The total value of trade with fellow EPA countries accounts for 40 percent of Japan's total.

Q: What effect will the Japan-EU EPA have on people's lives in Japan?

A: The impact will be enormous. For example, it will enable Japan to export cars and electronics at a cheaper price, and the market share of Japanese products in partner countries will increase. In 2004, prior to the EPA with Mexico, Japan received some 80.3 billion yen (about $706 million) through car exports to that country. In 2015, after import tariffs on Japanese vehicles had been removed, the figure had risen to about 191.7 billion yen (about $1.7 billion). Similarly, Japanese beer exports to Singapore generated 60 million yen (about $527,000) in 2001, but some 390 million yen (about $3.4 million) in 2015.

Furthermore, agricultural products imported into Japan such as food also become cheaper, which will of course be beneficial for consumers. For example, Chilean wines have become very popular in Japan with the gradual reduction of wine tariffs under the 2007 EPA with Chile. As a result, wine producers from other countries reduced their prices, resulting in the average price of imported wine in Japan becoming much cheaper.

Q: So this EPA seems like a good thing, right?

A: Not entirely. It is now likely that cheese and wine producers in the EU will be able to sell their products in Japan at a cheaper price than before, which would put pressure on competing Japanese makers and processors. For example, the domestic consumption of cheese in fiscal 2015 increased by about 10 percent to 300,000 metric tons compared to fiscal 2014, but if cheese imports increase rapidly, there are concerns that Japanese makers might not be able to survive, according to a source in the agricultural sector. As a result of these fears, potentially affected industries have been pressing the government for greater support. (Answers by Akihisa Kudo, Business News Department)

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