BRUSSELS—The European Union Friday opened the door to negotiating a trade deal with Japan, saying the agreement could help the Japanese economy recover following March's devastating earthquake and tsunami.
The deal, which could slash tariffs and eliminate a host of rules that block trade, would be the most significant trade deal signed by the EU with a single country. EU goods trade with Japan was worth €109 billion ($153 billion) in 2010, easily topping the €67 billion in trade impacted by the new EU-South Korea deal, the EU's biggest trade agreement to date.
But a potential deal would likely prompt stiff opposition from some of the EU's most important industries, who fear the export muscle of Japanese manufacturers. Japan's car industry has been eager for a free-trade deal with the EU, particularly after South Korean auto makers secured tariff-free access to the European market under the South Korean deal.
The leaders said in a statement following their meeting Friday that an upcoming May summit with Japan could be the time to start free-trade talks.
"The forthcoming summit must be used to strengthen this relationship and bring forward our common agenda, including through the potential launch of negotiations for a free trade agreement on the basis that Japan is willing to tackle inter alia the issue of non-tariff barriers and restrictions on public procurement," the statement said.
The EU has for some time complained that Japanese regulations make it difficult for EU companies to win Japanese government contracts.
The European Commission, which is charged with negotiating trade agreements on behalf of the 27 EU nations, said a trade deal with Japan would be possible, but only if ending regulatory barriers to trade and more liberal government purchasing rules are part of the deal.
"It is also important to understand that there is no fixed timeline at this stage, but clearly the upcoming EU/Japan summit would allow for leaders to look at this issue further," said John Clancy, the commission's trade policy spokesman.
Speaking to reporters after the meeting, U.K. Prime Minister David Cameron said he was one of the main advocates for pursuing a trade deal with Japan: "I believe one of our priorities in order to demonstrate our good faith must be to invite Japan to enter into a free-trade area with the EU, which would help boost their economy and help their businesses to recover."
EU auto exports to Japan don't face tariffs, but the industry says various Japanese regulations limit their sales in the country. The EU places tariffs on Japanese auto imports, making European auto makers less than thrilled about the prospect of negotiations that could eliminate those tariffs.
"We'll be scrutinizing further proceedings closely," said Sigrid de Vries, spokeswoman for the European Automobile Manufacturers Association.
Write to Matthew Dalton at Matthew.Dalton@dowjones.com
Online.wsj.com
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