JEEPAs Creepers: Cars, cheese and competitive advantage

by | Jul 13, 2017 | Trade Working Blog

Remove

Japan and the EU have reached agreement in principle on ‘JEEPA’ – the Japan-EU Economic Partnership Agreement. Although some details are still to be resolved, the announcement represents an affirmation of support for more open markets by two of the world’s largest economies. For others including New Zealand, however, JEEPA could result in a significant competitive disadvantage. That only serves to increase the pressure on securing a TPP-11 deal in short order.

Japan and the EU have now reached a hard-fought “political agreement” on an FTA (as foreshadowed in our blog last week). The deal has been derided in some quarters as an old-fashioned “cheese-for-cars” trade-off, although the strategic significance is far greater.   The announcement, on the eve of the G20 meeting in Hamburg, enabled both sides to deliver a strong supportive message about trade liberalisation.

There are still some significant details of JEEPA to be resolved, including the highly contentious issues of investment protection and data flows, which could take several more months to settle. Assuming those details can be resolved, however, an eventual deal could set a new benchmark for trade in much the same way as the Trans Pacific Partnership (TPP) was originally intended to do.

It is also the case that an eventual deal may leave other trading partners at a competitive disadvantage, particularly while the TPP remains in limbo.   Access to Japan has high commercial value for many New Zealand exports, including beef, cheese and wine.

JEEPA includes provisions to eliminate Japanese duties on all these products with different timeframes. In beef, for example, JEEPA brings down the current tariff to 9% over fifteen years – compare this with the TPP outcome, which would also reduce the tariff to 9% over 16 years, with a sharp cut on entry into force.

Clearly, without a timely outcome to the initiative to conclude TPP-11 amongst the remaining members, the position of New Zealand food and beverage exporters in the Japanese market is likely to be increasingly uncomfortable once JEEPA is implemented (which is likely to be at least a couple of years off).  This adds to the disadvantage already created by the Australia-Japan trade agreement now in effect, where the beef tariff has dropped to 27.2% for frozen beef and 29.9% for chilled beef; New Zealand and others pay 38.5%.

Likewise for post-Brexit Britain, JEEPA seems unlikely to be cause for much celebration. Agriculture aside, the UK has already been grappling with how to reassure large Japanese investors – whose car plants in the UK mainly supply the Continental European market – about the prospects of a ‘hard Brexit’ (that is, an abrupt departure from the EU Customs Union and Single Market). Under the implemented JEEPA, however, Japanese exporters will eventually have duty-free access to the EU-27, where they already have alternative assembly plants and a large consumer market – not a great prospect for British-assembled cars.

JEEPA is a further sign that global markets do not remain static: trade negotiations clearly matter! For New Zealand, JEEPA has raised the stakes for a successful outcome to the TPP-11 initiative.

This post was prepared by Stephanie Honey, Associate Director of the New Zealand International Business Forum.

REGISTER WITH TRADE WORKS

Register to stay up to date with latest news, as well as saving and discussing articles you’re interested in.

Latest News

AMIDST THE STORM: ABAC MEETS IN AUCKLAND

Perhaps a cyclone was after all a fitting backdrop for the meeting of the APEC Business Advisory Council (ABAC) which was held in Auckland on 12-14 February – the global environment against which the meeting took place is decidedly stormy.  In the event the wind...

A YEAR FOR RECONNECTING

As I write this end of year dispatch, NZIBF is preparing to host the first meeting for 2023 of the APEC Business Advisory Council (ABAC).  We are looking forward to welcoming the 200 or so business leaders and senior officials from APEC member economies across the...

NZ Herald: Time to lift our game in India

Following his recent visit to India our Executive Director Stephen Jacobi penned this article advocating a more strategic approach to the further development of the relationship. The article was published by the NZ Herald on 9 December.

APEC Rolls out Priorities for 2023

Issued by the Informal Senior Officials’ Meeting - Honolulu, The United States, 13 December 2022 Aiming to provide tailwinds for member economies to strengthen recovery and resilience, as well as advance broad-based economic growth, the United States rolled out its...

NZIBF 2022 Chair Report

ANNUAL GENERAL MEETING 2022 CHAIR’S REPORT I am pleased to present my second report on the activities and achievements of the NZ International Business Forum (NZIBF) for 2022-23, our fifteenth year of operations.  At the outset I would like to thank Members for...

NZ BUSINESS LEADERS AT APEC 2022

New Zealand business will be represented at the APEC Leaders’ Week in Bangkok, commencing 13 November, by members of the APEC Business Advisory Council (ABAC). New Zealand’s three members – Rachel Taulelei, Malcolm Johns and Anna Curzon – supported by Stephen Jacobi...

Submission to MFAT for CPTPP Review

30 September 2022 Phil Mellor Economic Division, Ministry of Foreign Affairs and Trade, Wellington (By email) Dear Phil, Thank you for your email of 1 September, seeking our comments on the three year review of the Comprehensive and Progressive Agreement for Trans...