The European Union (EU) - Japan Economic Partnership Agreement (EPA). An Analysis of Intra-Industry Trade and Strategic Implications

Sebastian Bobowski , Bogusława Drelich-Skulska

Abstract

The European Union (EU) – Japan Economic Partnership Agreement (EPA) was signed on 17 July 2018 as the biggest trade agreement ever made by the EU. On 1 February 2019 the EU-Japan EPA entered into force, establishing market inhabited by over 600 million of people with potential of one third of the global GDP and exports. The main objective of the paper is to characterize the EU-Japan trade in the 21st century, key provisions of the EU-Japan EPA and their strategic implications for both sides. Authors conduct an analysis of intra-industry trade in key sectors of bilateral flows disaggregated to 6-digit HS tariff codes using the UN Comtrade database. An analytical part is preceded by literature review concerning phenomena of trade regionalism, mega-regionalism and intra-industry trade. Key sectors dominating in the EU-Japan trade proved to be machinery, electrical machinery, motor vehicles, pharmaceuticals, medical and optical instruments. Economic gains of the EU-Japan EPA in the fields of trade and investment are recognized, potentially translating into employment and productivity growth, technology transfer and social welfare improvement. Among strategic implications of the EU-Japan EPA, authors stressed the fact that progressive changes of the global economic governance architecture, including “America first” policy by Trump administration, require adoption of a more offensive attitude by the EU and Japan to take advantage of the opportunity to influence on the rules and the shape of trade regime in the global economy of the 21st century and resist protectionism in trade.