- On 17 July the EU and Japan signed their free trade agreement, the largest negotiated by the Union.
- The treaty removed most tariffs between the two economies, in contrast to the escalation between Washington and Beijing.
- An agreement is not automatic: it is worth finding out which products benefit, what origin requirements apply and when the reductions take effect.
On 17 July 2018, the European Union and Japan signed their free trade agreement, the largest negotiated by the Union, which removed most tariffs between the two economies. The signing came at a time when other major players were facing ever higher tariffs, which gave the agreement an added symbolic value. Symbols matter in trade, because they guide expectations and help companies decide where to invest and with whom to partner.
For European companies, and for exporters in particular, the news opened a door to a very large market on more favourable terms. It was neither an immediate change nor a promise of success, but it was a reduction of barriers that, well used, could improve the competitiveness of European products and services. As always, the details of the text mattered more than the headline. Signing is one thing, entry into force another, and the moment each reduction turns into real savings another again.
A counterpoint to trade tension
While Washington and Beijing were raising tariffs, Brussels and Tokyo were signing the opposite: an agreement to open their markets. It was a sign that other major economies continued to bet on stable trade rules and on the reduction of barriers.
The contrast has practical value. It shows that international trade does not move in a single direction and that, even in a climate of tension, there are partners willing to agree clear rules. For a company seeking to diversify its markets, it is good news: faced with uncertainty in one region, there are alternatives with more predictable frameworks where it may be worth exploring opportunities. Diversifying does not mean abandoning current markets, but widening the range so that no outside political decision carries excessive weight.
What a free trade agreement is
An agreement of this kind reduces or removes tariffs and usually includes common rules on matters such as technical requirements, intellectual property or public procurement. It makes it easier for companies on both sides to sell in the other market on better terms.
Even so, the small print matters. A product only benefits from the reduction if it meets certain rules of origin, that is, if it can show that it is made in the agreement area in the proportion required. And the reductions are not always immediate: they may be applied gradually, so the full benefit takes time to arrive. Reading the text or consulting a specialist avoids expectations that are later not met. This holds for exporters and also for importers, since a reduction can make inputs or finished products cheaper.
What companies can do
For an exporter or importer, an agreement is not automatic: one must find out which products benefit, what origin requirements must be met and when the reductions apply. A foreign-trade adviser can help determine whether it opens sales or sourcing opportunities.
It helps to start by reviewing which of the company’s products are sold or could be sold in that market, how much they currently pay in tariffs and how their competitiveness would change with the reduction. One must also weigh the costs of entering a distant market, such as adapting products, logistics or finding local partners. A tariff reduction is a help, not a substitute for commercial strategy. Success in a new market depends on understanding the customer, offering a suitable product and maintaining a presence over time.
The opening of a market only benefits those who prepare to make use of it.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
