What has the EU-Japan trade agreement achieved?

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The EU-Japan Economic Partnership Agreement (EPA) entered into force in February 2019. It is a comprehensive free trade agreement aimed at reducing tariffs and other trade barriers, making it easier for companies in the EU and Japan to trade with each other.

Has the agreement lived up to the high expectations?

"Yes and no. The economic benefits and total trade between the EU and Japan have increased, both in goods and services. However, trade is still subject to regulations and controls on both sides. Large companies have the resources to take full advantage of the EPA, as they are better equipped to handle the necessary paperwork. For small and medium-sized companies, participation remains limited due to the significant administrative burden. There are also structural problems that make it harder for European firms to participate in Japanese public tenders."

"An interesting spin-off from the EPA negotiations is that the EU and Japan also began discussing environmental and security cooperation, leading to the EU-Japan Green Alliance and the EU-Japan Strategic Partnership Agreement."

What is the most surprising finding from your evaluation?

"European direct investment in Japan has not increased since the EPA entered into force. In fact, it has decreased, even though our regulations on foreign direct investment are largely equivalent. Our findings suggest that many EU companies that are new to Japan see language barriers and cultural differences in business relations as the main obstacles. On the other hand, Japanese direct investment in the EU has increased since the EPA entered into force."

Can you see any reasons why Japanese direct investment in the EU has increased over the past seven years?

"There is strong complementarity between Japanese and European companies, not least in areas related to the green economic transition. Increased geoeconomic cooperation has also led to greater acceptance of Japanese investment in the EU. Furthermore, Japanese multinational corporations, particularly in the automotive and energy sectors, have long been established in the EU, with both sales offices and production facilities. Expanding their investments in the EU has therefore not been a major step for these companies."

What impact has the agreement had on Sweden and companies here in West Sweden?

"The EPA has been important for multinational companies in West Sweden. But we should not forget that Japan, as the world's fifth-largest economy, is a profitable market even without the EPA. Volvo Cars, SKF, Getinge and Smart Eye are examples of companies from West Sweden that are already well established in Japan."

What should the EU and Japan focus on going forward?

"When it comes to direct trade between the EU and Japan, the EPA meets today's needs. Nevertheless, we have identified three areas for improvement. First, there is a need to eliminate the remaining differences in product standards. Second, companies need less paperwork to prove the origin of the products they export. Third, the EU and Japan need to recognise each other's quality assurance procedures and product safety certifications to a greater extent, particularly for products with high trade volumes."