The European Union (EU) and Japan have just signed a huge free trade deal on Tuesday, reducing or eliminating tariffs (taxes) on almost all goods that they are importing from each other! This also allows EU companies to work more easily in Japan. This will give companies on both sides the opportunity to serve more people in both regions, thereby increasing the likelihood of jobs and greater earnings for workers.
The EU is the second largest exporter in the world, after China, and before the USA. And the EU is the largest importer of goods in the world! This agreement is pretty big. It covers 600 million people living in the EU and Japan.
Amongst other things:
- Japan is a big importer of dairy products from the EU
- and the EU is a big importer of cars and machinery from Japan.
The President of the European Council, Donald Tusk, proclaimed this to be the “largest bilateral trade deal ever.”
Why is this such a big deal? We have spent a lot of time over the past few months talking about trade wars that the US has started to engage in – with China, Canada, the EU and others. Donald Trump says that putting heavier taxes on stuff that is being imported into America will make imported products more expensive and give an advantage to American products. He believes that this will help to boost business in America. This is what is called protectionism, as he is ‘protecting’ American business.
This free trade deal between two large economies is a good example opposing the current U.S. Trade stand.
What are other countries doing in the face of this? They have increased taxes on American products that are being imported into their countries, but clearly, they can, and are, striking more open deals with each other!
Written by: Biyash Choksey and Sunaina Murthy