EU and Japan push back against Trump’s protectionist antics by signing the largest ever trade deal
At the EU-Japan Summit on 17 July, the world’s biggest trading bloc and the world’s third largest economy showed that they remain committed to free trade with the signing of the EU-Japan Economic Partnership Agreement (EPA). The largest trade deal ever negotiated by the EU, it will create a trade zone covering 600 million people and nearly a third of global GDP. The EPA will remove tariff barriers on almost all goods and services between the EU and Japan and both sides reaffirm their commitment to fight protectionism and defend the rules-based trading system. The signing of the EU-Japan EPA came a day after a successful EU-China summit in which both parties agreed to enhance market access and investments and work toward the early conclusion of a comprehensive investment agreement.
Negotiations for the EU-Japan EPA started in 2013. Both sides made significant concessions to wrap up the deal this year to send a strong statement about their support for free and fair trade, and “finding win-win solutions for all” as against Trump’s unilateral tariffs and threats of trade war. As a criticism directed against Trump, the President of the European Council, Donald Tusk told the press that the EU-Japan EPA was good “not only for all the Japanese and Europeans but for all reasonable people of this world who believe in mutual respect and cooperation”.
Besides the EPA, Japanese Prime Minister Shinzo Abe and EU leaders Donald Tusk and Jean-Claude Juncker also signed the EU-Japan Strategic Partnership Agreement to boost cooperation between both sides on issues such as security and defence, energy and climate change and people-to-people exchanges. Both agreements will bring the EU and Japan politically and economically closer than at any other time.
An editorial in Japan Times echoed the importance of the EU-Japan EPA and SPA at a time when the US under Trump is “rapidly abandoning its leadership roles in international affairs” and call on Japan and the EU to push forward a global agenda. It also called on Japan to keep pushing the multinational free trade agenda as reflected in Japan’s role in the launch of CPTPP or TPP-11 after Trump pulled the US out of the Trans-Pacific Partnership agreement. The EU-Japan EPA is also an important contribution to this multilateral free trade agenda.
The EU-Japan EPA and SPA are expected to take effect in 2019 after due ratification process by the European institutions and the Japanese parliament. (More background on EU-Japan relations and the significance of the EPA and SPA can be found here.)
EU has its eyes on Google?
The European Commission slapped Google with a record fine of €4.34 billion for abusing its dominant position to limit competition in search engines and browsers in the sector of mobile internet. Margrethe Vestager, the European Commissioner for Competition said that Google has abused its dominance of internet search by imposing restrictions on Android device manufacturers and mobile operators, and thus holding back innovation from competitors. Google’s action is “illegal under EU antitrust rules”. The fine announced on Wed (18 July) after three years of investigation came not long after Google was fined €2.4 billion in 2017 for manipulating search results. It seems that the battle between Google and Commission is not over yet as the Commission has been investigating Google closely on several issues, including the restrictions Google imposed on third party websites to display advertisement from its competitors.
The penalty announced this Wednesday represents the largest ever anti-trust fine levied by the EU against a single company, and “marks a significant step by Vestager in her ongoing battle with the US search giant”. It was seen also as a serious setback for Google “which must now open up its Android software to greater competition” and includes “permitting phonemakers greater freedom to choose which digital services to appear on people’s handsets, potentially hampering its ability to garner revenue from online advertising”.
Google was quick to rebuff the charges and said it will appeal the fine. Its chief executive Sundar Pichai accused the Commission of undermining its business model and “ignores the fact that Android phones compete with iOS phones” and “misses just how much choice Android provides to thousands of phone makers and mobile network operators … and the millions of app developers around the world who have built their businesses with Android …”
The decision by the EU to impose the fines on Google has also made some wonder if it would further aggravate the trade tensions between the EU and US. President Donald Trump has called Vestager the “tax lady” and told president of the European Commission Jean Claude Juncker that “she really hates the US” because of the various actions taken against US tech companies such as Apple, Facebook. Juncker is scheduled to visit the White House next week to meet Trump to discuss a wide range of issues from foreign policy, counter-terrorism to energy security and economic matters. This visit comes amid strong tensions, heightened after the NATO summit in Brussels last week, and with Trump calling the EU a foe of the US in his recent interview with CBS news. Trump has already responded to the fine on Google with his tweet that it was a European attack on a great American company.
Brexit negotiations – UK remains divided and the EU prepare for the worst
Prime Minister Theresa May survived Trump’s backstabbing last week and now faces a full frontal attack from her colleagues. On Wed (18 Jul) Boris Johnson, the former Foreign Secretary, accused May of “planning a phoney Brexit” that would betray voters who wanted to take the country completely out of the EU. He added that it is “not too late the save Brexit” but was short on details on how he would achieve “a Brexit that does not ravage the economy”.
Fortunately for May, Johnson’s attack did not stop her from clearing the final hurdle on her Brexit plan. She managed to avert defeat on key legislation that would have her rewriting her negotiating priorities and “could have been the killer blow to her fragile leadership”. Pro-EU parliamentarians had wanted an amendment to the Trade Bill that would tie UK to a customs union with the EU but the amendment was defeated.
May’s Conservative party colleagues remained firmly divided between the Brexit hardliners and the pro-EU Europhiles, and of the two groups, a Politico report opined that “the hard-liners now look far stronger than the Europhiles – and that could have implications for the kind of Brexit May ultimately delivers”.
With the continued divisions within May’s own party and the implications this would have on Brexit, the European Commission warned of the repercussions of Brexit for citizens and businesses, and called on EU member states to step up efforts to prepare for possible disruptions arising from a “no-deal” Brexit.
The Commission issued a 17-page Communication on Thursday (19 Jul) outlining the impact on the rest of the EU if the UK leaves the EU and becomes a third country on 30 March 2019. The impact could range from new controls at the EU’s outer border, to the validity of UK-issued licences, certificates and authorisations and to different rules for data transfer. This warning from the Commission came at the time when the UK’s new Brexit Secretary, Dominic Raab was to hold his first talks with the EU’s chief Brexit negotiator, Michel Barnier. Raab took over from David Davis after he quit over May’s Brexit trade plans.
The International Monetary Fund (IMF) also issued a warning on the same day that if Britain leaves the EU without a trade deal next year, it will be damaging for both the EU and the UK. EU member states will suffer long term damage equivalent to about 1.5% of annual economic output by 2030, and the damage for the UK would be much higher, amounting to almost 4% of its GDP. However, faced with skepticisms from Brussels that her Brexit White paper (produced at the Chequers a week ago) amount to “cherry-picking” and hence unlikely to be accepted, May has reiterated her earlier stance that “no deal is better a bad deal”.
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