Japanese companies, don't forget about the EU

Yasuo Tanabe

, Managing Director

, EU-Japan Centre for Industrial Cooperation

Responses to the coronavirus pandemic appear to be increasingly inward-looking. Once the corona crisis is under control and international economic relations have recovered, Japan's regional interest may focus on the US and Asia including China. However, I would like to suggest Japan should pay more attention to the EU as a business partner.

The United States are becoming increasingly protectionist, although no one knows if President Trump will be re-elected in November. China's on-going trade war with the US has led to a move in Japan to lessen our economic interdependence after the corona crisis is overcome.

According to trade statistics from Japan's Ministry of Finance, the EU's share in Japanese trade was 12% in 2019. Given it was 10.5% in 2010 that is slow growth considering that the number of EU member-states is increasing. However, if we cannot expect much from the US and China, I believe that our links with the EU, which shares basic values and historical ties with us, will develop.

With regard to frameworks between Japan and the EU, the Economic Partnership Agreement (EPA) and the Strategic Partnership Agreement (SPA) were concluded in 2018. In 2019, there was also an agreement on cooperation on investment in sectors including digital infrastructures in the Indo-Pacific Ocean area.

In July 2020, the EU's European Commission announced its Hydrogen Strategy towards decarbonisation. Hydrogen is attracting attention as one of the next generation energy sources. Japan is doing research in the area too. So, there is a good potential for mutual cooperation. Nonetheless, it may not go smoothly on every issues, because the EU’s environmental regulatory hurdles tend to be tighter. We should also not overlook the fact that the post-Brexit negotiations between the EU and the UK on their future relationship have stalled.

The Centre, which I co-manage, promotes partnerships between EU and Japanese companies. For instance, business opportunities in Africa are promising – Japanese companies could find tremendous benefit from partnering with EU companies, because many African countries have strong historical ties with Europe. Our business development would be different, if we can be sure that there are reliable partners for us, despite instabilities caused by the conflicts between the US and China.

The Japanese version of this article was originally published on the Nikkei website on 29 July 2020 (password required). A copy of the full Japanese version is available here.