ing preliminary talks, Trade Commissioner Karel De Gucht [EU statement] will now allow the member states of the European Union to start trade negotiations with Japan. During the EU-Japan Summit in May of 2011, both Japan and the European Union agreed to start a “scoping exercise” to determine the content and the level of ambition of a possible Free Trade Agreement between the two sides. This scoping exercised ended in May of this year.
On July 18, 2012, the European Commission expressed its interest in the European Union opening up free trade talks with Japan. Following the European Commission’s call for free trade talks between the European Union and Japan, the European Automobile Manufacturers’ Association (ACEA) is concerned about the potential free trade. The free trade agreement would require the European Union to remove their 10% duties on automobiles. The removal of this duty would cause the European Union to loss 1.2 billion euros in tariff revenues from Japanese car manufactures and about 1,500 euros for every imported. “This would trigger a higher flow of cars into the EU. Car production could go down by some 160,000 units as a result, leading to job losses,” stated Ivan Hodac, Secretary General of ACEA.
The ACEA also has other issues with Japanese domestic car market. The ACEA finds it unfair that Japan requires EU type-approved vehicles to have modifications done to them in order to be sold in Japan. Another major concern of the ACEA is the Japanese ‘kei’ cars. The ‘kei’ cars has over 35% of the Japanese market share. This limits to amount of European made cars in Japan.
Despite this, the European Union must have found the benefits of this potential free trade agreement outweigh these issues.