Japan, EU set to take small step in free trade deal

Containers are loaded onto a cargo ship at Tokyo port The European Union and Japan look set to agree on the principle of negotiating a free trade deal linking the world's third economy and the leading global market at a summit Saturday, diplomats say. After months of tough talks heightened by a history of trade friction, an accord between the two economic giants to move ahead would be significant even if falling short of hopes in Tokyo to wrest a formal launch at the weekend meeting.
"This summit cannot launch negotiations, but it can send a strong political message that we're seeking to launch negotiations," said an EU diplomat who requested anonymity.
EU officials say further work is needed to explore trade sticking-points and line up a to-do list of problems to overcome before the EU's 27 member states approve the official launch of negotiations to ink a free trade agreement (FTA).
Prompted by Britain, EU leaders in March called for FTA negotiations to aid recovery in disaster-struck Japan -- but on the proviso that Tokyo move to lift restrictions to trade.
British Foreign Secretary William Hague said earlier this month that the removal of tariff and non-tariff barriers could deliver over 40 billion euros ($60 billion) of additional European exports to Japan, and more than 50 billion euros of additional exports from Japan to the EU.
Trade ties between the two have consistently shown a strong surplus in favour of Japan -- the EU currently being Japan's third largest trade partner while Japan is Europe's sixth.
Tokyo's better record "is partly a reflection of continuing market access problems for foreign firms in Japan," a European Commission report said this year.
That view from the EU's executive arm is shared by European business leaders, who say Tokyo is failing to offer companies real market access.
Prime Minister Naoto Kan earlier this month asked his cabinet to work on reforms demanded by the European Union, such as removing non-tariff trade barriers and liberalising public procurement.
And last week EU trade ministers acknowledged in meetings that recent Japanese proposals were "a good first step towards negotiations", and agreed the two sides start drawing up over the next months their to-do list -- known as a scoping exercise.
"Europe is important to Japan and Japan is important to the EU," said the diplomat. "We're struggling both of us from the new kids on the block, China, India, Korea."
EU FTA negotiations lasted two and a half years with South Korea, 20 with the Gulf Cooperation Council.
"The more you prepare the negotiations through the scoping exercise, the quicker it will be," said another diplomat.
Japan has been eager to launch free trade negotiations with the European Union as it believes the elimination of EU tariffs on cars and electrical appliances would benefit Japanese companies.