EU-Japan trade deal a boost for German chems, globalisation - VCI

06 July 2017 13:07 Source:ICIS News

Abe and Tusk

LONDON (ICIS)--The EU-Japan free trade agreement (FTA) signed on Thursday will benefit Germany's chemicals and send a signal of support for open markets and against protectionist winds, according to the country’s chemical trade group VCI.

The German chemical industry enjoyed in 2016 a large trade surplus with Japan, according to figures by VCI which showed the country’s exports of chemicals and pharmaceuticals to Japan at €4.3bn, compared to imports from Japan into Germany at €2.8bn.

“Our contacts with Japan highlight the importance of free trade for Germany’s export-intensive chemical industry,” said the trade group's director general Utz Tillmann.

The signature of the EU-Japan free trade deal comes after two other major FTAs failed to be concluded in 2016 on the back of protectionist winds in the US following Donald Trump’s victory in the presidential election.

The EU and the US had been years negotiating the Transatlantic Trade and Investment Partnership (TTIP) but the arrival of Trump to the White House put negotiations to rest for the time being.

Even before that happened, social pressure from unions and left-wing political parties were putting a strain in the EU-US negotiations and, already in July 2016, the chief economist at VCI conceded in an interview with ICIS the chances of TTIP's survival were diminishing by the day.

Soon after taking office in January, Trump signed the withdrawal of the US from the nearly concluded Trans-Pacific Partnership (TPP) with other 11 countries in the Pacific.

An EU-Canada free trade deal managed to be approved after resistance form a Belgium province, which according to the country's Constitution also had to pass the deal in its regional assembly. The two parties finally signed the agreement in October 2016.

On Thursday, the European Commission, the EU’s executive body in charge of trade policy, said exports by corporates from the 28-country bloc to Japan stand at €58bn in goods and €28bn in services every year, figures which could be increased were current trade barriers removed after the FTA implementation.

“As far as we are concerned, there is no protection in protectionism. Only by working together will we be able to set ambitious global standards. This will be the message that the EU and Japan will bring together to the G20 tomorrow [7 July],” said Jean-Claude Juncker, the Commission’s president.

The G20 group of the largest developed and emerging nations is set to meet in Hamburg, Germany, during the coming weekend.

The German chemical industry’s trade group was a strong supporter of TTIP, and VCI reiterated on Thursday its support for free trade agreements which would allow the German chemical industry to keep its edge globally.

“International agreements are the right way to steer globalisation towards open markets and fair competition. Therefore, the EU and Japan are sending a clear message to the other participants of the G20 summit for free trade and against protectionism,” said VCI’s director general.

Another seismic shift in US policy after Trump was sworn into office was the country’s withdrawal from the 2015 Paris Agreement to reduce greenhouse gases (GHG) emissions to limit global warming.

The US President argued he was looking to protect the country’s corporates and consumers, and said he would seek a renegotiation of the terms under which US companies need to reduce their GHG emissions.

VCI said that the EU should go ahead whatever the US climate policy is, and demanded a joint effort from G20 countries to try and “find lines of compromise” regarding the implementation of the Paris Agreement.

The trade group’s main worry now lies, according to Tillman, with the carbon dioxide (CO2) pricing mechanisms under which corporates and countries pay a tax according to their emissions.

 “Basically, it would be the best if the G20 – as the economic core of the international community of states – committed in Hamburg to joint climate protection efforts. That would open the door for getting a global CO2 price underway,” said Tillmann.

“This [US withdrawal from the accord] makes it even more important for the G20 in Hamburg to try to find lines of compromise based on the Paris Agreement.”

Pictured above: EU Council President Donald Tusk (left) and Japan's Prime Minister Shinzo Abe in Brussels. Source: Isopix/REX/Shutterstock

By Jonathan Lopez