In this episode of Mission Japan, we are honored to welcome H.E. Patricia Flor, the EU Ambassador to Japan. The EU Ambassador sheds light on the recently signed Economic Partnership Agreement (EPA), the lesser-known Strategic Partnership Agreement (SPA), data protection, and how Brexit will likely affect EU-Japan relations.
Make sure to watch this new instalment of Mission Japan to find out about the EU’s role in creating a free trade agreement covering about 1/3 of the world’s GDP.
Full Transcript below:
Tim: The EU-Japan relationship: what’s in store? Don’t forget to hit like, subscribe, and share! Hi, everyone. Welcome back to Mission Japan. Today, I have the honor of welcoming the Ambassador from the EU, Patricia Flor. Welcome to the show!
Ambassador Flor: It’s my pleasure to be here.
Tim: It’s great. The EU has been a real force with trade agreements in between Japan and the EU; there’s a lot going on recently for allowing free trade between Japan and the EU. This is a huge deal.
Ambassador Flor: You are absolutely right. We are creating one of the largest markets through our Economic Partnership Agreement, meaning more than 600 million people in this area. We, of course, if you put Japan and EU together, then globally, we are more than one third of global GDP and more than one-third of global trade. And so, you can imagine that the new partnership agreement offers a lot in terms of growth, in terms of business opportunities, in terms also of benefits to our consumers both in the EU and in Japan. So, good times for us.
Tim: Two landmark decisions were signed late last year and they were put into implementation in February. Shoppers in Japan can already see the benefits of that.
Ambassador Flor: Absolutely right, we signed last July the Economic Partnership Agreement (EPA) and the Strategic Partnership Agreement (SPA). Now, the entry into force of the economic one was 1st of February this year (2019) and, indeed, in my neighborhood in Hiroo you can already see that European wine is on offer for cheaper prices and that is exactly what we wanted. So, let’s bring the tariffs down, let’s increase trade, because it will be beneficial to both of us. The second agreement, the strategic partnership, is not less important but more complicated.
Tim: It’s more complicated and that’s why it’s having a little bit of difficulty in the implementation stage, right?
Ambassador Flor: It’s in provisional application, why is that? Because it’s an agreement which all member states of the European Union also needto ratify, so it has a longer preparation period but it covers all of the global challenges which we have to face together. So, the idea is that the EU and Japan really become strategic partners in pushing for good ocean governance (getting rid of the plastics in the oceans, for instance); for implementing the Paris Agreement about climate change, so increasing adaptation, lowering emissions and making sure that we can avoid future natural disasters related to climate change.
Tim: This is one of the first international agreements that actually initiates the Paris Accord, isn’t it?
Ambassador Flor: It is, from the EU side, the first of our agreements that explicitly mentions the Paris Agreement and the commitment to fully implement it. So, therefore it’s very good because, as you know, Japan and the EU are major economies and so we can be trendsetters; we can set a good example also for others to follow in this area.
Tim: Well, isn’t that kind of the whole idea that it’s a leap forward: it’s not like the free-trade agreement or TPP. It’s actually something broader and more integrate than the former bilateral or unilateral trade agreement.
Ambassador Flor: Absolutely, I mean, first of all, the Economic Partnership Agreement (EPA) is what we call a deep trade agreement, so it’s more comprehensive and it’s bigger than anything else that the EU has signed before. What does it mean? It means that: yes, we bring the tariffs down. But, you also need to look at non-tariff barriers. So, we try for instance to bring our regulations, rules and standards together. What does it mean? It means that if you are a business in Japan and you produce a certain item that needs to conform with certain, you know, specific measurements or standards, then you should also at the same time produce for the European market. So, if the standards are the same or are mutually accepted, you just lower the barriers to production, to trade, between those two neighbors. So it’s very good!
Tim: Absolutely, so the benefits that the Japanese have seen in this trade agreement are also being witnessed by people in the European community, as well. Automobile parts, other accessories, electronics, that sort of thing are being offered now on the shelves for a lower price.
Ambassador Flor: Indeed. I mean, the whole agreement, the idea of the agreement, is of course to bring positive results for both partners, so that means that, you are absolutely right, that car prices and, you know, prices for car parts should go down in the EU when we talk about Japanese production, but even more I would also look at what we call “geographical indications”. What what does it mean? Scotch Whisky, Sake or Kobe beef or ramen or, you know, some other specialties that you can actually bring from Japan to the table in European restaurants, where the the consumer would like to know if this is the real thing. So, if I read in the menu that this is pure Sake or Awamori or Shochu or whatever the thing, then you have the confidence because it is protected under the agreement.
Tim: There are two really large agreements that we’re talking about. It’s difficult to talk about them at the same time: one is about trade and services and the other is about the strategic partnership. The Strategic Partnership is much deeper and it requires a kind of governing mechanism too. So, the EU has to set up actually a mechanism here in Tokyo, an office, for providing guidance and perhaps even weight-in disputes.
Ambassador Flor: What you describe is actually what the EU Delegation does. So that is our task, I mean, like an embassy the EU Delegation is now in charge of looking at the implementation, but we also we will have other…
Tim: That’s huge, isn’t it? It’s a huge task.
Ambassador Flor: That’s a huge task but we are not alone. That means that we, of course, are working together with member states and there is something which is called the Japan-EU Center for Industrial Cooperation, which is a body which was actually created 30 years ago, in order to increase business opportunities and business cooperation. So, they will also be part of our linkage with Japanese and EU businesses here in Tokyo. By the way, they also have an office in Brussels so they link again between Brussels and Tokyo. There is going to be what you call the governance structure too, which means that there will be joint committees and working committees looking at all different aspects of the agreements and their implementation, and they will meet on a regular basis. Actually, we are going to have the very first joint committees under these two agreements in Tokyo.
Tim: Is this not being created from old cloth? This is a new initiative, isn’t it?
Ambassador Flor: Well, the agreements actually foresee that you have this kind of a governance structure, and I would like to point out that both Japan and the EU were very fast in terms of ratification and creating also these structures. I think I’ve never seen an international agreement which you sign in July and then you bring it into force barely six months later.
Tim: Gosh, I wonder who we have to thank for that.
Ambassador Flor: Well, it’s our political leaders and you have to thank them because, I think, they had the vision to see that these agreements matter. And, if you have the political will to actually be fast and you can convince your Parliaments, your Diet, to then also move fast in terms of their procedures, then it’s doable.
Tim: Well, I was actually thinking more about the Trump decision to kill TPP as an impetus to that. Is that an inaccurate statement?
Ambassador Flor: Well I’m sure that you are right in saying that the global environment that we currently see has convinced everyone in the EU, and also in Japan, that we have to do something. If we believe that free, fair and open trade and a rules-based international economic system is the right way to go, we have to be an example. Therefore, these agreements do send a powerful message: it’s a message about a global system as we think it should work. And, that doesn’t mean that you should increase barriers to trade or to economic interaction and economic cooperation, but rather that you should bring it down.
Tim: Okay. One of the techniques that has been applied to assist this speed is that there are certain things that are just difficult: agriculture is difficult; opening certain sectors of the Japanese economy is difficult. So, they have certain stages where they’re grandfathered in a step-by-step process. So, when the whole agreement is fully implemented that’s, what, in eight years?
Ambassador Flor: Fifteen years. Any negotiation in any agreement, especially also about trade and economic interaction is about balancing the different interests. Now, very simple example: if you are a consumer you like French champagne or wine from Italy or from Spain or from Greece…
Ambassador Flor: Well, I do too. Then, of course, for you it’s simple because you simply want the price to go down, so you want to get rid of the tariffs. But, of course, there is another side to this which is about agriculture and the producers: if you open the Japanese market to additional competition or you open the European market to, you know, cheaper imports for cars and automobile parts, then your industry or your farmers might say “well, but what about us?”. So, that means that to find the right balance, the agreement contains some clauses which say that for the first years you actually have a quota ,so you can use these better tariffs but only up to a certain volume of input. This is not about subsidies really, because it’s about trade so that means that you have quotas and then you also have stages of lowering the tariffs. So, for some products we went from more than 30 percent of tariffs to zero in one day…which, of course, is great. But, for other products it is phases, so you have the first year, then the second year, then after five years, and so that’s why I say after fifteen years will be the moment when actually we’ve reaped the full benefits of the agreement. Let me say one other thing: we’ve done projections in Brussels about what would we expected, in terms of impact, and the projections actually would say that we would actually look forward to an increase in trade of about 20-25%. So, you have to balance these interests in order to do that, you might use quotas which means that you can use preferential tariffs but only up to a certain volume of trade. What we’ve also agreed in the agreement is that for certain products, you don’t go from like 35% of tariffs down to zero in one day, which of course would be perfect, so for some products you might actually have several years where you then decrease step by step, and only after fifteen years will it then have achieved and reaped the full benefits of the agreement.
Tim: So, one of the things that came up immediately when there was an implementation was the rules of origin and it began to stop things at the port. And, this caused a little bit of confusion… apparently, they’ve worked that out, but you have to be able to show and reveal how your product was made; what inputs were put into it; and where these inputs came from, in order to benefit from the agreement.
Ambassador Flor: Actually, you don’t you. But, it’s true that there was a problem. Now, let me explain, because you’ve mentioned TPP before, so Japan recently, together with other Asian countries, has entered into TPP which came into force in December. TPP demands what you say, so it has a very complicated procedure in terms of how you need to prove the origin of the product. The
EPA, the agreement between the EU and Japan, says that “actually, yes the importer or the European company exporting needs to certify what kind of a product it is”. So, it’s cheese or it’s wine or whatever it is, but that’s where it ends. It’s not required that you actually certify anything else. So, therefore the confusion which we had and which, actually, led to some difficulties for companies also, as somehow everybody got asked then to provide this additional information. While it was relevant for some, but not for others. Now, very recently, we work this out together with the EU delegation and with colleagues from the European Tax Agency, so we looked at that and now these days you can find instructions on the internet, on the website, or from the customs authorities here in Japan, which tell you that if you are an EU company then you might still be asked but you don’t need them to provide this information and it will not lead to any denial of import.
Tim: My computer was on fire for the first five days as all of the embassies were weighing in and saying “look there’s been a misunderstanding at the port from the Japanese authorities applying the standard for the TPP that is not applicable to the EPA”.
Ambassador Flor: Indeed. Now, let me underline one other point because I think it’s very relevant to us, because the colleagues said, they’re actually in the Trade Section of the EU Delegation, they work every day with our Japanese partners in METI, in the Tax authorities and the customs authorities, and let me say that this is an extremely constructive cooperation, so that means to say that if you start a new agreement, nobody can be surprised that you’ve run into certain difficulties. It’s clear because you change the procedures; you have to establish new procedures; you know, people are not yet aware. So, it’s normal the key is: can one sit down and then sort out these problems as soon as possible and come to an understanding as to how we go about this. In this regard, I must say that we have a very good and constructive cooperation here between the two.
Tim: No, it’s monumental task and it’s only going to get bigger and probably a little bit more complicated, as we move into it. How does the EU handle that in Tokyo? I mean, how large is the staff that you have and is this going to be expanding? Do you have enough space in Minami Azabu where your very fabulous building is located now?
Ambassador Flor: We have about 60 staff, 60 colleagues working, and about half of them are, a little bit less than half, our officials coming from Brussels, meaning they all work for the European Union.
Tim: Seconded or they come here with their families and live?
Ambassador Flor: Well, they come here with their families and live, so they are colleagues who work for the EU, but they come from all over the EU, meaning that there are Spanish colleagues, Italian colleagues, colleagues from Lithuania, colleagues from Romania. So it’s a very colorful crowd, if you look at them. And then, of course, we have also local colleagues whom we hired here in Tokyo and they are both Japanese but also some of them come from the EU but have lived in Tokyo for a long time. But, all of them come with their families and so Tokyo is our home. Now, is it big enough to implement all of the agreements? Well, I could always use more staff, but then I don’t know any ambassador or a head of an office who would say otherwise. But, no… frankly, I think that we actually have grown so the number of staff has increased and we also will run separate and specific projects to support implementation, so we will also outsource some of the tassel. We work with a contractor who then might organize workshops or seminars about rules of origin, about geographical indications (what does it mean), we work with the contract agency to, for instance, invite EU small and medium-sized businesses to participate in big fairs, like very recently there was a Tokyo Big Sight, we had a big fair about water and the environment, so we brought about 40 small businesses from the EU to show their wares at the fair. And, we’ll have another one on health and ageing, and medical equipment, so there’s lots of things that we initiate, but then we work with others in order to implement. So it’s good.
Tim: You know, one of the things that I read recently is that the largest thing that kind of prevents a better integration of the EU and Japan is just the flow of people and that the expectations of the Japanese about people from the EU, or foreigners generally, is not very well developed. And similarly, apparently, in the EU the inclusion of Japanese companies or Japanese workers is not very well developed, and that seems to be the biggest stumbling block.
Ambassador Flor: There is one stumbling block which is also not so easily overcome which is language. In the EU, I think many are now used to knowing several European languages and then because of the European Union, you have a high engagement also for young people, students: they go and study all over the place and you can do that without visas, you have the euro, the same currency, so it’s easy. Between Japan and the EU, to learn Japanese… I’ve started doing it, it is quite a big task, I’m still working on it. I can say “Nihongo wo benkyou shite imasu”, that I can say but it’s hard and with the kanji so… Therefore, if you want to bring, let’s say scientists specialists, technicians engineers, and then you have to work and integrate into a Japanese company for a joint venture, or something like that, that’s a challenge. Well, I think we have to get better at that and I think it’s very important also in the field of science and technology, research and development, because I think that Japan and the EU face the same challenge in that regard, namely that our wealth, our prosperity, our stability, peace, it really depended on our technological powers and our powers in terms of producing new technologies and new products. Now, in this changing world with a lot of competition, also from countries around that are not so far from here, can we do it again? Can we remain on the cutting edge of say, artificial intelligence, or society 5.0, robotics? I think that there is scope for actual good cooperation in the science field but then also in terms of application but to leverage that, we need to increase cooperation in these areas.
Tim: You know, we’ve talked about these two landmark agreements that are opening up trade and investment between the two countries, but we haven’t talked about data transmission. This is a huge issue that actually is being addressed by the two countries, by the EU and by Japan, and I had never really thought that it was that huge of an issue until I looked at the implementing legislation and the fact of transferring information safely and securely and making sure that whatever it is that you’ve bought, through the internet or through some sort of a device like that, is actually secure and was a big deal is addressed in the agreements, as well.
Ambassador Flor: Indeed, and in this regard and very recently in Tokyo and in Brussels, decisions were made about data adequacy. So, we made an agreement which said that our rules and standards in the data field for data protection, for consumer protection of private data, and also company data, business information, is mutually adequate so we recognize each other’s standards: what does it mean? It means that the EU and Japan actually have created one of the biggest unified data spaces on this globe, and it matters because big data will be the key to entering this new digital age. So, if we talk about a digital society of the future that you can actually have trust in the transmission modes of data all over a certain space is extremely relevant, so therefore it opens up scope for this type of business engagement and people-to-people engagement, which we need between Japan and the EU.
Tim: So, you’re not afraid of challenges and tough things that just happen on a daily basis. What I’d like to ask you about now is what’s going on with Brexit with regard to these agreements between Japan and the EU, because it is most likely that the EU will not consist of the UK as well.
Ambassador Flor: First of all, let me say that, also at a personal level, I really do regret that the UK is currently on a path to leave the EU. I do respect at the same time the decision made by the British people: it’s a sovereign decision, it’s their democratic right, it’s their choice. However, at the same time, I think whatever the future now may hold in terms of the Brexit term itself to have a very strong partnership in the future between the UK and the EU is essential because they might leave the EU, of course currently we still don’t know how that will function, they might leave the EU but they will remain our European neighbors, and I know of so many mixed couples, so many businesses engaged on either side of the channel, so let me say that in this sense the UK will not leave Europe. Now about Brexit, it is where we are today. Now, the EU has negotiated with the UK a withdrawal agreement. It would actually ensure that there can be a smooth and orderly Brexit, which would give certainty to the many citizens who will actually have a stake in this, for personal reasons or business reasons or whatever, and it would also give certainty to the Japanese and some companies. The EU has invested a lot of energy and a lot of other resources in these negotiations in order to handle this very difficult situation as well as possible. But, of course, it depends on the decisions to be made in London and that is where we are right now. The EU is prepared as far as we can for all scenarios. Nobody hopes that there will be something like a hard Brexit, but we just will need to see where decision-making in London will.
Tim: Currently, it looks like there’s a party that they’re not going to be invited to, but the party hasn’t quite started, as far as the UK is concerned. Or it has started, so they can benefit from the agreement until they’ve made a firm decision.
Ambassador Flor: Well, it’s very simple because currently today the UK is a member of the European Union, meaning with all rights and obligations. Therefore, fully covered by the EPA today and by all other agreements that exist between the European Union and any other third country. Now, the moment they leave it then depends on what is then the new regulation…
Tim: What turmoil. You can already see that in front of you.
Ambassador Flor: Well, so if there was a withdrawal agreement, if it were ratified by the British Parliament, then we would have an interim period where the UK would not be a member, but the withdrawal agreement actually foresees that all of the existing agreements would continue to apply in this interim period until the end of 2020. However, since at this moment we haven’t seen ratification of this agreement by the UK, we don’t know what will happen. But, as long as the UK is a member of the EU, all of our agreements can also apply to them.
Tim: You can imagine how much scurrying is going on under the carpet with the the administrators and the bureaucrats, because they’ve got to prepare for two, perhaps three, different scenarios. And, maybe they’re taking a benefit from the agreement and then when it stops that benefit is not theirs anymore. Maybe the prices go up or the restrictions on importation come up?
Ambassador Flor: Brexit does not change anything in terms of the relations, and also the economic relations, between the EU and Japan. So, if you are in any other country of the EU or you are in Japan then Brexit will have no impact on these relations. Of course, if you are in the UK then it all depends on: will the UK still be in or will they be out? And then, if they are out, under which conditions. So, this is where we are on the Brexit issue.
Tim: When you came to Japan were you presenting your credentials to the Emperor?
Ambassador Flor: Yes.
Tim: Okay, so it’s the whole deal, isn’t it?
Ambassador Flor: It’s the whole deal and I must say I come from Germany, by the way, and I was working in the German Foreign Ministry before and I’ve worked as an Ambassador at this bilateral capacity before, so let me say that there’s very little difference between an ambassador of a normal state and the European Union Ambassador in terms of my activities with the outside world. I give interviews, I go to meetings with ministers, I meet parliamentarians, I meet NGOs… The difference is that I need to base whatever I do and say on a unified foreign policy which is shared among all of the European states. But, that gives me also additional strength because I know it’s broad based and it’s not only representing one national interest, but it’s representing really the European continent, the EU.
Tim: Sounds like a much tougher job to me.
Ambassador Flor: It’s actually a pleasure because I meet my colleagues of all the EU Member States regularly (actually, we had a meeting this morning) and also the other colleagues: the Commercial Council, political counselors, the press counselors. They meet in this circle very regularly which allows us to actually be well coordinated and to also have a joint message for Japan.
Tim: Thank You! The European Union just signed a couple of agreements that make Japan and the EU much tighter, much more bound together: one-third of global GDP. Please stay tuned!