Necessity and Benefit of EU-Japan EIA(Economic Integration Agreement) Oct. 2010 Executive Director, Japan Machinery Center Brussels Office Takayuki SUMITA

１．Why FTA/EIA with Japan? ○　Japan is 6th trading partner for EU. 　　　EU has already concluded FTA with 4th (Switzerland) and 5th (Norway) partner. ○　EU has been the largest origin of FDI in Japan since 2007. ○　Japan is a comfortable place to live for Europeans. clean, safe, healthy and delicious food, inexpensive, healthy, enjoyable, convenient transportation, IT equipped, hospitality 　　 However, highly sophisticated demand of consumers ○　Japanese industries has already been globalized 　　・many business basis throughout Europe with almost 400 thousand direct employment 　　・easily transfer production base to foreign countries depending on the lot of demand 　　・most Japanese are conflict averters. ○　EU and Japan are partners with common sense of value. １．Why FTA/EIA with Japan? 2

Source： External trade statistics (Eurostat) Japan is an important partner for the EU in trade and investment. Source： External trade statistics (Eurostat)

Japan is an important partner for the EU in trade and investment. Inward Direct Investment into Japan (stock base) Since 2007, the EU has been the largest origin of Foreign Direct Investment in Japan. Others U.S. EU Source; Direct Investment Position (Bank of Japan) Unit:Billion Yen The net inflow of direct investment from Japan to the EU area: more than 15 billion Euros The number of Japanese companies operating in the EU area: about 3200 including around 750 manufacturing companies.

２．Benefit of ＥＩＡ with wide coverage of areas= FTA+++ ○　Improved access to Japanese market 　　tariff, rules and regulations, procurement, investment 　　Even in NTM area, some progress and readiness of industries ○　Macro economic effect ○　Additional chance of employment 　　direct, indirect, EU companies in supply-chain ○　Establishment of high standard rules meeting social needs 　　= responsible capitalism ○　Balance with east Asian collaboration and US-Japan tie ○　Innovation through investment and exchange in high-tech and culture ２．Benefit of ＥＩＡ with wide coverage of areas= FTA+++ 5

A Japan-EU EIA is a comprehensive economic cooperation model which moves beyond existing FTA Cooperation on climate change issues/ environmental problems Cooperation in the field of Innovation Cooperation in the field of IPR Technical Regulations, Standards Cooperation towards third countries Environmental regulations Cooperation Electronic Commerce Cooperation in the field of Competition Policy Rule making Harmonization ＦＴＡ -Elimination of customs duties -Promotion and facilitation of trade in Goods Promotion and facilitation of trade in Service -Protection of Intellectual Property Rights Etc. Trade Security Regulatory cooperation Service Etc... Investment Public procurement Etc... 6

Successful outcomes of non-tariff issues will lead to the launch of a “Joint Study” as a next step. Successful Outcomes of “a few specific non-tariff issues” Government Procurement Japan proposed upgrading the JETRO website to expand access to information on intended procurement of 47 local governments which are NOT covered by the Agreement on Government Procurement (GPA)　as well as 59 local governments which are subject to the GPA. Japan proposed steadily proceeding with the process of the designation of “specified design strength” * *Lumber companies that have obtained a conformance certification in the EU as a producer of lumber with designated standard strengths will be allowed to export lumber to Japan without any special procedure. Construction Material Automotive Japan proposed to be committed to streamline and increase transparency of the Technical Guidelines procedure for acceptance of new technologies. e.g.)- Accepting data used for the approval of the new technology in the EU. -Within 14 working days, the authority should specify whether the device is covered by an existing guideline and confirm whether the device complies with it. -Drafting for revising existing guidelines or new guidelines should be completed within 90 days or 180 days respectively. Subsequently the final decision by the authority should be in principle made within 60 days. ・Japanese QMS (Quality Management System) is almost aligned with that of the ISO. ・Japan is taking the position that it should wait for the result of GHTF (Global Harmonization Task Force) where 5 countries are discussing a revision of ISO-GCP (Good Clinical Practice). Medical Devices “Joint Examination” -High Level Group -Working Group

Outline of the Economic Integration Agreement Japan’s industries are ready to start EIA negotiations including non-tariff issues. “Call for the Start of Negotiations on Japan-EU Economic Integration Agreement” –Third Proposal for Japan-EU Economic Partnership Agreement– (17 November, 2009) by Nippon Keidanren (Japan Federation of Economic Organizations) 1. Urgent Need to Create a Framework for Strengthening Japan-EU Economic Integration 2. Japan-EU Economic Integration Agreement as a New Framework - The paper presents an outline of a new framework for strengthening economic integration centered on the lowering of non-tariff barriers as well as tariffs. Japan’s industries (Keidanren) call for the government of Japan, the European Commission, and the EU member states to prepare for the start of negotiations on this agreement as soon as possible following next year’s summit. Outline of the Economic Integration Agreement Trade in Goods Technical Regulations, Standards, and Conformity Assessment Procedures Investment Competition Trade in Services Intellectual Property Movement of Natural Persons Government Procurement Customs Procedures and Trade Facilitation Electronic Commerce, etc. Sanitary and Phytosanitary Measures

Technical Regulations, Standards, and Conformity Assessment Procedures Proposed outline of the EIA by Japan’s industries includes harmonization of standards of pharmaceutical products, medical devices, motor vehicles and construction materials. Technical Regulations, Standards, and Conformity Assessment Procedures Harmonization of Technical Regulations and Standards Ensure harmonization between Japan's good clinical practice (GCP) related to medicinal products and international standards (ICH-GCP) to promote efficient and smooth implementation of joint international clinical trials and to reduce the time needed for approval. Promote harmonization between Japan's GCP related to medical devices and international standards (ISO14155) to shorten the review period for approval. Considering that the ministerial ordinance for medical devices quality management system (QMS) is identical to international standards (ISO13485), shorten the review period for approval and certification by accepting audit results from foreign countries that are based on ISO13485. Promote and improve international harmonization and mutual recognition of technical standards for motor vehicles. Mutual Recognition of Technical Regulations and Standards (Recognition as equivalence of technical regulations and standards) Promote equivalency assessment between EN standards and CE marking for strength and other specifications of construction materials (structural lumber, glued-laminated timber) and Japan Agricultural Standards (JAS) / Japanese Industrial Standards (JIS). Mutual Recognition of Conformity Assessment Results Expand the range of GMP (Good Manufacturing Practice) for medicinal products under the Japan-EC Mutual Recognition Agreement to include non-solid medicinal products. Others

EIA will benefit both the EU and Japan through reducing of tariff and non-tariff measures. “Assessment of barriers to trade and investment between the EU and Japan” (3 February, 2010) prepared for the European Commission, DG Trade, by Copenhagen Economics While tariff dismantling would be beneficial to both economies, the real gains would be reaped by lowering regulatory differences. - The study focuses predominantly on regulatory measures in seven key sectors in Japan. (pharmaceuticals, medical devices, processed foods, cars, transport equipment, telecoms and financial services) • The study estimates that trade flows could increase by €43 billion for the EU and €53 billion for Japan. e.g.) - EU motor vehicles exports to Japan could increase by up to 84% (by up to €4.7billion) - EU pharmaceutical exports to Japan could increase by 60-100% (by up to €3.4billion) - EU medical devices exports to Japan could increase by 51% (by €1.1billion) • While more than half of the trade benefits go to Japan, two-thirds of the welfare benefits go to the EU (€33 billion for the EU and €18 billion for Japan). - The study uses information on the trade costs of regulatory barriers obtained through a survey of European firms operating in Japan. Summary of Impact EU Japan Export Effects (Tariffs) +€14bn +€25bn (NTMs) +€29bn +€28bn Welfare Effects +€33bn +€18bn

Current status of Japan’s EPA/FTA negotiations Took Effect (10 countries and 1 region) Singapore, Mexico, Malaysia, Chile, Thailand, Indonesia, Brunei, ASEAN, Philippines, Switzerland, Vietnam Under Negotiation (4 countries and 1 region) South Korea, GCC, India, Australia, Peru Under Study/discussion by the governments (3 region) ASEAN+6, ASEAN+3, Japan-China-S.Korea Switzerland took effect in Sep. 2009 Mexico took effect in Apr. 2005 Chile took effect in Sep. 2007 GCC Under negotiation GCC : Saudi Arabia, Kuwait, United Arab Emirates, Bahrain, Qatar, Oman South Korea negotiation suspended Peru Under negotiation Japan-China-S.Korea Under joint study by the governments/scholars/industries China Japan ASEAN (AJCEP) took effect in Dec. 2008 India Under negotiation Philippines took effect in Dec. 2008 Vietnam took effect in Oct. 2009 Thailand took effect in Nov. 2007 ０９年７月１７日ペルー反映 ０９年4月２４日ペルー反映 ０８年１２月２５日ベトナム署名反映 090220スイス署名 Brunei took effect in Jul. 2008 Singapore took effect in Nov. 2002, revised in Sep. 2007 Malaysia took effect in Jul. 2006 ＮＺ Indonesia took effect in Jul. 2008 ASEAN+6 / 3 Australia Under negotiation Under discussion by the governments 11