Introduction

The EU and Japan, as pivotal partners to the USA, have sustained the development of democracy and the market economy in the world. The two parties have made great contributions to the steady growth of major industrial sectors from manufacturing to services. They have propped up the liberal trade regime and multilateralism under the General Agreement on Tariffs and Trade (GATT)/World Trade Organisation (WTO) as the base of the growth of the world economy.

Japan as an emerging economic power in Asia began inroads into the European market in the 1970s, and subsequently forged close trade and investment ties with major European nations. In order to strengthen and deepen the existing economic ties, Japan and the EU began to search for the conclusion of a free trade agreement (FTA) around 2010, and formal negotiations on the EU-Japan FTA (EJFTA) began in April 2013. The negotiations took a longer time than expected, reaching a signature on the agreement in July 2018. The EJFTA, which creates a huge economic zone that accounts for 28% of the world GDP and 37% of the world trade, is expected to have significant positive impacts on the maintenance of the liberal trade regime and global economic governance.

In general, research on trade politics pays attention to internal political interactions over distributional effects brought by a trade pact. This article, by taking into account the character of the EJFTA as a representative ‘mega-FTA’, examines how key variables that are relevant to the international level influenced the development process of this trade pact.Footnote 1 This article makes two main arguments. First, the presence and substance of other FTAs in which the EU and Japan had been involved brought about both positive and negative effects on the development of the EJFTA. Second, moves towards anti-multilateralism and market disintegration in 2016–17 urged Japanese and European leaders to pursue a swift conclusion of negotiations on the EJFTA.

This article is organised as follows. The following section presents analytical frameworks to examine the development of the EJFTA. The third section provides a brief overview of the process of talks on the EJFTA up to the signature of the agreement in July 2018. The following two sections examine the interconnected structure between the EJFTA and other FTAs, and political leaders’ responses to protectionism and anti-multilateralism.

The EU-Japan FTA in the mega-FTA era

The conclusion of an FTA primarily aims to expand trade with a partner country by removing tariffs, quotas, and other border measures and facilitating access to larger markets in contracting parties. The societal groups that have strong interests in protecting domestic markets and employment opportunities undertake political lobbying to arrest market liberalisation through FTAs. From such a standpoint, the study of FTA politics has focused on internal politics of a contracting party such as the configuration of competing political and societal interests and the internal institutional structure of trade policy-making.

There are a number of studies on FTA politics in the EU and Japan from the internal politics perspective. While Dür and Bièvre (2007) and Dür and Lechner (2015) analyse the influence of nongovernmental organisations (NGOs) and business groups on the EU’s trade policy, Young and Peterson (2006) articulate significant changes in the EU’s trade policy with particular attention to more representation of new actors such as NGOs, non-trade ministries and parliaments. As for Japan’s domestic politics, Solís and Katada (2007) and George Mulgan (2015) explore the lobbying and demands from major societal groups on the development of FTAs, whereas Sakuyama (2015) and Kim (2016) examine the development of Japan’s FTAs through political interactions among policymaking players within the government and the involvement of societal and political groups.

In the development of the EJFTA, internal politics surely matters because a key focus of its negotiations was still on ‘old’ issues such as the tariff reduction of automobiles, electronics and agricultural products (Suzuki 2017). At the same time, it is necessary to take into account international aspects because this FTA constitutes a part of the global mega-FTA formation. The FTA between the second and fourth largest economies in the world has significant impacts on the maintenance of an open trade regime and the creation of high-standard trade rules.

By taking into account the characteristic of the EJFTA as a mega-FTA, this article focuses on two conceptual angles for analytical frameworks. The first is relevant to FTA interconnectedness. The FTA interconnectedness implies a situation that negotiations on and the content of one FTA are influenced by existing FTAs or ongoing negotiations on other FTAs. The past research has shown that the influence of FTA interconnectedness is particularly important in the initiation of an FTA by using specific concepts such as the ‘domino theory’ (Baldwin 1993), ‘protection for exporters’ (Dür 2007) or ‘emulation and competition’ processes (Solís and Katada 2009). The conclusion of one FTA encourages a country that is not a member of the FTA to pursue a trade agreement with one or both of the contracting parties to it. This is because the excluded country is eager to offset trade diversion effects or avoid competitive disadvantage compared with the parties of the trade pact by becoming a member of this pact or forming a new trade pact with other partners. There are quite a few studies that demonstrate how a conclusion of one FTA urges excluded countries to find interests in new FTAs that were previously passed over through the logic of loss-avoidance by offsetting trade diversion effects (Solís and Katada 2009; Sbragia 2010; Ravenhill 2010; Baccini and Dür 2011).

Significantly, the FTA interconnectedness matters not only in the initiation but also in subsequent negotiations. The progress of negotiations on one FTA influences that of another FTA because the allocation of human resources to one negotiation limits those to another negotiation and because the scope of agendas and the degree of concession on one FTA are generally key concerns for negotiators for another FTA. Furthermore, the contents of pre-existing trade pacts or ongoing negotiations on them are likely to have significant influences on strategies for negotiations on or the content of a following trade agreement (Goff 2017). While one government attempts to present the level of tariff concessions reached at a previous FTA as a ceiling of concession to be accepted at negotiations in a subsequent FTA, another government seeks to bring its favoured agenda put in a previous FTA to a negotiation table for a subsequent one.

The initiation of and negotiations on the EJFTA took place in complicated conditions in which negotiations on other mega-FTAs—the TPP and TTIP—were undertaken in parallel. This condition of the mega-FTA race is likely to influence the initiation and progress of negotiations on the EJFTA. In particular, the growing importance of trade-related rules and regulations in FTAs has deepened the implication of FTA interconnectedness. Various behind-the-border issues in addition to border measures of tariff reduction were taken up in negotiations on the EJFTA. The behind-the-border issues were important since the EU had been concerned about non-tariff measures in regulatory systems in the Japanese market (Mazur 2016; Felbermayr et al. 2017). Since other mega-FTAs such as the TTP and TTIP have included agendas on behind-the-border trade rules, this interconnected bargaining condition is likely to have significant effects on the substance of the EJFTA.

The second analytical angle is pertinent to the impact of major developments in the global political-economy on trade negotiations. The mega-FTA trend emerged in the context of complicated geopolitics and geo-economics. A general shift in economic power occurred from advanced nations to the emerging economies. While the combined share of GDP of the Group of Seven (G-7) members declined from 67.1% in 1994 to 45.9% in 2014, that of Brazil, Russia, India and China (BRICs) rose from 7.3 to 21.9% in the same period. Such trends led to weak increases in individual incomes in most Western nations, and the American and European nations raised dissatisfaction with economic integration and trade liberalisation. Indeed, the main sources of public appeals against market integration and trade liberalisation were not identical—concerns about consumer and environmental protections and labour rights in Germany, the losses of employment in the USA, and the challenge of immigration in the UK (Young 2017a, 915). But, intensive popular opposition led to pressures on the local, national and supranational governments to reconsider multilateralism and outward-looking economic diplomacy.

In the process of negotiations on the EJFTA, significant evolutions in the global political-economy occurred. While the UK government decided to leave the EU following the citizen’s will at a referendum in June 2016, inward-looking Donald Trump gained a victory in the US presidential election in November 2016. These evolutions should have had significant impacts on European and Japanese leaders’ perception of the global economy and world politics and their preferences for diplomatic affairs including the development of the EJFTA.

There are quite a few articles and reports that refer to the impact of the Trump administration’s protectionist policy and the UK’s exit from the EU on the development of the EJFTA (for instance, Frenkel and Walter 2017; Nelson 2018, 132–33). It is necessary to articulate the value of a trade agreement as an economic statecraft to attain a specific diplomatic objective. For this purpose, this study examines the concrete process and logics in which the two evolutions have influenced Japanese and European leaders’ prepetition of the reality and the articulation of policy objectives, which led to their renewed initiatives and actions.

In summary, this article examines the development of an EJFTA from the pre-stage of formal negotiations to the signature of the agreement. In so doing, it analyses the influence of two variables on the development: the interconnected structure between the EJFTA and other FTAs, and political leaders’ reactions to global moves towards anti-multilateralism and market disintegration. Before delving into the analysis of these two elements, the following section provides an overview of the development of the EJFTA.

The brief overview of the development of the EU-Japan FTA

The business circles kindled talks on an FTA between the EU and Japan. In May 2007, Richard Collasse, Chairman of the European Business Council in Japan, first proposed searching for a feasibility of an economic integration agreement between the EU and Japan. In the following month, Nippon Keidanren (Japan Business Federation) issued a position paper entitled ‘Call for the Start of Joint Study for a Japan-EU Economic Partnership Agreement.’ At the 19th EU-Japan summit in April 2010, leaders decided to establish a joint high-level group to identify options for the comprehensive strengthening of all aspects of EU-Japan relations, and conduct a joint examination of ways to comprehensively strengthen and integrate the EU-Japan economic relationship. At the following year’s summit in May 2011, leaders agreed to start the process of negotiations for a deep and comprehensive FTA, and to begin discussions with a view to defining the scope and level of ambition of negotiations, which was called a scoping exercise. This scoping exercise as pre-negotiations ended in May 2012. According to the Commission’s estimate, the EJFTA would increase the EU’s GDP by 0.8% with the expansion of exports to Japan by 32.7% and the creation of 420,000 new jobs, while it would expand Japan’s exports to the EU by 23.5% (European Commission 2012).

In July 2012, European Commissioner for Trade Karel de Gucht announced that he would ask EU members and the European Council to give a negotiation right to the Commission, and 4 months later the Council approved the provision of the right to the Commission. The Council also asserted the commencement of an EU-Japan Strategic Partnership Agreement (SPA). This political agreement would be a legally binding framework, which would cover, on the basis that the EU and Japan are crucial partners with common values such as democracy and rule of law, a wide range of issue-areas from security affairs and cooperation on climate change. The two-track bargaining of the FTA plus SPA has been the EU’s conventional approach to articulate economic partnership within the broader political dialogue (Ponjaert 2015, 105–7).

Prime Minister Shinzo Abe came back to power after the LDP’s victory in the general election in December 2012. Abe has pushed forward proactive foreign policy under the slogan of ‘diplomacy taking a panoramic perspective of the world’, and trade policy has been a key area of such diplomacy. After a summit meeting with US President Obama in February 2013, Abe formally announced a decision to join TPP negotiations on March 15. In concurrent with this move, Japanese and European leaders held a telephone summit on March 25 during which they agreed on the launch of the negotiations for the EJFTA.

The first round of negotiations on the EJFTA took place in Brussels in April 2013. In June 2014, the European Commission completed the review of negotiations after 1 year, and decided to continue negotiations. During an EU-Japan summit in November 2014, Prime Minister Abe and European Commission chief Jean-Claude Juncker confirmed a goal to reach an agreement in principle on the EJFTA within 2015, but 1 year later, the deadline was postponed to early 2016. The two parties failed to meet even this new deadline. The negotiators were confronted with great difficulty in overcoming each other’s offensive interests. While Japanese negotiators required their European counterparts to remove duties on auto and auto parts including 10% tariffs on passenger cars, and those on electronics products (maximum 14%), European negotiators sought to scrap tariffs on Japanese farm products such as cheese, wine and pork, and ease regulations on participation in public procurement by European firms, particularly in the railway sector.

The TPP members reached an agreement in principle in October 2015 and the TPP was signed 4 months later. However, the newly elected US President Donald Trump announced the withdrawal from the TPP. Despite such moves, the remaining 11 countries decided to reinvigorate negotiations on a renewed TPP, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) under Japan’s strong leadership. In such moves, the EU and Japan intensified their efforts to conclude negotiations on the EJFTA, and the two parties reached an agreement in principle. On July 6, 2017, just before the Group of Twenty (G-20) summit in Hamburg, Germany, Abe, Juncker and European Council President Donald Tusk announced that Japan and the EU sealed an agreement in principle on the EJFTA. Afterwards, Japan and the EU continued intensive negotiations on remaining issues. In December 2017, Abe and Juncker issued a joint statement that proclaimed the finalisation of the EJFTA, and a signing ceremony for the EJFTA and SPA took place in Tokyo 7 months later. The EJFTA came into force on February 1, 2019.

The final agreement consists of 23 chapters plus annexes. The EU would eliminate 10% tariffs on passenger cars over 7 years and those of 14% on colour televisions in 5 years, and remove duties on auto parts immediately after the agreement comes into force. Japan would abolish tariffs on more than 90% of the EU’s exports immediately, and the liberalisation ratio would reach 97% when it is fully implemented. Japan would remove tariffs of 29.8% on hard cheese such as gouda and cheddar over 16 years, and set up an import quota up to 31,000 tons for soft cheese such as mozzarella and camembert. Furthermore, Japan agreed to abolish the so-called operational safety clause, which de facto excluded foreign railway equipment operators from entering into the Japanese market.

The influence of FTA interconnectedness

Before the start of formal negotiations on the EJFTA in April 2013, the EU and Japan concluded, negotiated, and considered FTAs with other trade partners. The existence of parallel FTAs had significant impacts on decision to begin negotiations on the EJFTA and the subsequent negotiation process.

Japan paid due attention to trade policies of South Korea. The country has been Japan’s rival in the automobile and electronics sectors, and FTAs have significant impacts on competitive conditions between Japan and South Korea. South Korea began negotiations on an FTA with the EU in May 2007, and the two parties reached the conclusion of negotiations in October 2010. Consequently, Korean car manufacturers would get zero tariffs on the exports of commercial vehicles no later than 5 years after the FTA comes into effect, and its electronics manufacturers would be exempted 14% tariffs. The EU-Korea FTA, which came into effect in July 2011, had positive impacts on Korean car sales in the EU market. Hyundai Motor and Kia Motors increased the number of new car registration by 9.4 and 14.1% in 2012, compared with the previous year. In contrast, Toyota Motor saw a 3.1% decrease while Nissan Motor faced a 6.3% drop. Footnote 2 Moreover, the EU-Korea FTA led to declining sales of Japanese products relative to European ones in the Korean market. Japanese exports of products covered by the EU-Korea FTA declined by 1.8% in the year after the FTA came into effect while the EU’s exports increased by 15.4% over the same period (Okuda 2013, 108–9).

The Japanese business groups and government had serious concerns about trade diversion effects, which resulted from declining price competitiveness against their Korean rivals in the European market. As already explained, Keidanren issued a position paper to call on the start of joint research on an FTA with the EU in June 2007, 1 month after the start of negotiations on the EU-Korea FTA. The Ministry of Economy, Trade and Industry admitted that Japan’s FTA commitments were slow compared with South Korea’s and that several Japanese products would incur more than a 10% tariff gap in large markets in the EU and the USA because of the EU-Korea FTA and the Korea-US FTA (Ministry of Economy, Trade and Industry 2011, 247). The demand from the business group and deepening concerns within the government became crucial factors for considering an FTA with the EU seriously.

The interconnected FTA structure influenced the EU’s stance on an FTA with Japan. The EU did not show an interest in the FTA for a long time because European industrial products entered into the Japanese market with no tariffs and the removal of non-tariff barriers in Japan was deemed to be extremely difficult. However, Japan’s interest in the participation in TPP talks gradually influenced the union’s attitude towards an FTA with Japan. The progress of Japan’s commitments to the TPP offered both a risk and an opportunity for the EU. The progress posed a serious concern for the EU and European exporters. If the EU-Japan FTA were to fail or even to be significantly delayed, European exporters would stand to suffer serious damaging discriminatory treatments against their rivals in the TPP members in the Japanese market (Hallinan 2016: 10). This concern was particularly serious for European producers of dairy goods, pork and automobiles that had rival companies in the TPP members. Accordingly, these producers’ groups delivered concerns to the European Commission through the processes of consultation and regular stakeholder dialogues, as well as being raised with representatives of EU member governments and members of the European Parliament (Hallinan 2016: 17–18).

At the same time, Japan’s participation in the TPP provided the EU with an incentive to consider an FTA with Japan more positively. The EU’s key interest in the FTA with Japan was the removal of non-tariff measures and the promotion of regulatory cohesion that disturbed the entry of European firms and products into the Japanese market. The easing or eliminating domestic regulations was also a major objective of the US-led TPP, and accordingly, the EU raised an expectation that it would put the removal of non-tariff measures for exports and investment as key agendas for negotiations on an FTA with Japan (Okuno-Heijmans and Terada 2018, 108).

The context of parallel FTA negotiations influenced the progress of negotiations on the EJFTA. Before joining TPP negotiations formally, Japan had preliminary talks in which the USA identified three issues that Japan needed to address as ‘confidence building measures’: Japanese restrictions on imports of US beef, market access for US-made cars and insurance and express delivery issues (Cooper 2014, 12). The EU emulated this US tactic of preliminary consultation. When political leaders of the EU and Japan agreed to commence negotiations, Trade Commissioner Karel De Gucht expressed a view that ‘dismantling the persistent non-tariff barriers will be the key for the success of the negotiations’, and proposed a 1-year review clause that EU members would suspend negotiations after 1 year if Japan’s efforts to discuss the non-tariff barriers were found unsatisfactory (European Commission 2013).

After the start of negotiations on the EJFTA, different views on major agendas surely disturbed the progress of negotiations. However, there was a crucial factor that discouraged Japan from making sincere commitments to the EJFTA: parallel negotiations on the TPP. The Japanese government considered that it was difficult to determine the substance of the EJFTA prior to the TPP, which would have more significant impacts on the Japanese market and society. Like the USA, the EU hoped to expand the export of agricultural products and processed food to Japan. Since the treatment of the agricultural sector was the most sensitive issue in TPP negotiations, the Japanese government did not show a clear stance on the reduction of tariffs on agricultural products during negotiations with the EU. The EU’s report for the member governments after the 11th round of talks in July 2015 stated that the Japanese side was clearly waiting for a conclusion of the TPP talks. Footnote 3

The context of parallel FTA negotiations also influenced the European Commission’s commitments to the EJFTA. This was particularly the case of the EU-Canada Comprehensive Economic and Trade Agreement (CETA). In August 2014, the EU and Canada declared the conclusion of negotiations on the CETA. The Commission originally intended to treat the CETA as an ‘EU-only agreement’ and pursued the pact’s early entry into force. However, demands for requiring more commitments from member states rose, and the Commission decided to propose it as a ‘mixed agreement’ that would require both the EU and member states’ competences. In October 2016, the government of the French-speaking region of Wallonia in Belgium refused to accept the CETA text due to concerns about Canadian agricultural exports and the investor-state dispute provision that would restrict the governments’ authority to regulate (Kanargelidis and Silver 2016). This Wallonia drama illustrated the union’s paralysis and inability to propel trade policy. The slow progress in the ratification of the CETA motivated the European Commission to accelerate negotiations on the EJFTA. The Commission hoped to regain its authority for and organisational values in trade policy by concluding negotiations on the FTA with Japan smoothly and successfully.

The TPP agreement was used by Japanese negotiators as a defensive pretext to protect Japan’s interests in negotiations on the EJFTA. In late-June 2017, Japanese Agricultural Minister Yuji Yamamoto held a meeting with his counterpart, European Commissioner for Agriculture Phil Hogan. Yamamoto raised the TPP agreement as a crucial reason why Japan was unable to make concessions on soft cheese. In the TPP agreement, Japan accepted the removal of tariffs on hard cheese but maintained duties on soft cheese that was more popular among Japanese consumers. The Japanese government feared that new concessions made towards the EU would invite demands from partners in existing FTAs to admit similar concessions.

Both the EU and Japan sought to use the outcomes of past FTA negotiations positively to sustain their assertions. EU negotiators sought to introduce innovations consolidated through previous negotiations to the EJFTA. The EU’s major interests in the FTA lay in regulatory cooperation in order both to eliminate regulatory non-tariff measures in the Japanese market and to lead the formation of rules and standards in the world. Accordingly, the EU sought to include comprehensive contents of regulatory cooperation in the EJFTA. The EU had prepared for concrete clauses for regulatory cooperation and good regulatory practices for the TTIP. The Chapter on Good Regulatory Practices and Regulatory Cooperation in the EJFTA, which was based on the EU proposal, adopted similar structures as the Chapter on Regulatory Cooperation and Good Regulatory Practices in the TTIP. Moreover, the establishment of the Joint EU-Japan Financial Regulatory Forum in the EJFTA (Annex 8-A) emanated from an idea in the TTIP to set up the Joint EU-US Financial Regulatory Forum.

Japanese negotiators strongly asserted that a data flow clause should be included in the EJFTA. The Chapter 14 of the TPP agreement—Electronic Commerce—includes the comprehensive set of rules for electronic commerce: the prohibition of imposing customs duties on electronic transmissions (Article 14.3), the prohibition of requiring to use or locate computing facilities (Article 14.13) and the forbiddance of requiring the transfer of, or access to, source code of software (Article 14.17). One of such clauses is relevant to cross-border electronic data transfer to ‘allow the cross-border transfer of information by electronic means, including personal information’ (Article 14.11). Japan expected that the EJFTA include a similar clause of cross-border date flow and thereby Japan and the EU would establish a state of the art digital economy which can be a model for the rest of the world (Mucci et al. 2016). However, the EU adamantly opposed the inclusion of a data flow clause due to Japan’s insufficient protection of personal information. The EU and Japan agreed to reassess within 3 years the need for an inclusion of provisions on the free flow of data into the agreement (Article 8.81).

The interconnected FTA structure produced sharp confrontation on several key agendas in the EJFTA. A typical example was the removal of tariffs on automobiles. On the one hand, Japan demanded the removal of 10% tariffs on passenger cars over 5 years. This was the period on which the EU agreed in its FTA with South Korea. The Japanese government adhered to this demand—the most substantial benefit from the conclusion of an FTA with the EU—in order to get equal competitive conditions with Korean carmakers in the European market. On the other hand, Japan had allowed the USA to cut 2.5% tariffs on passenger cars over a 25-year period in the TPP. Accordingly, European negotiators could assert the longer period of tariff elimination than Japanese negotiators demanded by referring to this TPP agreement. Eventually, the negotiators reached a compromise to abolish tariffs on passenger cars over 7 years and those on auto parts immediately after the agreement comes into force.

A more controversial agenda was the treatment of disputes between the state and investors. The TPP agreement adopts Investor-State Dispute Settlement (ISDS) in Chapter 9, Section B, and the Japanese government demanded the inclusion of the ISDS clause in the EJFTA. Japan’s TPP negotiator Koji Tsuruoka stated that ‘there was nothing dramatic in the [TPP] chapter on investor protection compared to other FTAs. But there was a deliberate effort of improving on the existing system’ (Dreyer 2017). The EU successfully got Canada and Vietnam to accept the investment court system (ICS) in the CETA and the EU-Vietnam Free Trade Agreement (Meunier and Morin 2017). The EU considered that the ICS ‘represents another important step in shaping globalisation and ensuring a fair, rules-based system founded on the highest standards’ (European Commission 2018). Accordingly, the union strongly demanded that the EJFTA adopt the ICS clause. Despite intensive negotiations on this issue, the negotiators were unable to find a compromise by the time of signature in December 2017. The two parties confirmed that separate negotiations on investment protection standards and investment protection dispute resolution would continue.

Political leaders’ responses to inward-looking diplomacy

The negotiations on the EJFTA that began in April 2013 did not make steady progress, and the two parties postponed a goal to reach an agreement by the end of the year twice in 2015 and 2016. However, negotiations were accelerated in 2017, holding direct and telephone meetings between Foreign Minister Fumio Kishida and European Commissioner for Trade Cecilia Malmström five times from December 2016 until early July 2017 when the two parties reached an agreement in principle. What was a major international factor that encouraged political leaders of Japan and the EU to accelerate negotiations in 2017?

New developments in international politics had much to do with the progress of negotiations on the EJFTA. The first of such developments was the victory of Donald Trump at the US presidential election in November 2016 and his administration’s economic nationalism and anti-multilateralism. Trump launched his ‘America-first’ policy and exhibited a willingness to challenge the liberal trade regime by not hesitating to adopt protectionist policies. Since the start of his presidential campaign, Trump showed hostile postures towards multilateral trade. He signed an executive order to pull out of the TPP just after the start of the administration in January 2017. In the Annual Policy Review issued in March 2017, the US Trade Representative stated that the USA would not follow WTO judgements and prefer to bilateral rather than multilateral negotiations. Trump has sought to rectify the US trade deficits, which were regarded as the main cause of robbing American workers of their jobs. The administration has posed a deal to rectify trade imbalances with its major trade partners including Japan and the EU members otherwise imposed sanctions such as high tariffs.

Not only has the USA been Japan’s sole ally but it had also been Japan’s key partner for sustaining the open trade regime in the Asia-Pacific. Accordingly, Prime Minister Abe attempted to persuade Trump to stay in the TPP at direct talks in Washington in February 2017, stressing the value of the TPP as a pact with the most advanced rule of trade and investment for the standards in the twenty-first century. Trump shared the recognition that Washington and Tokyo supported free trade in the post-war period, but did not agree to return to the TPP. Abe then geared up on talks with the EU as the main partner to keep the open trade regime. Just after coming back from Washington, Abe sent Takaya Imai, an executive secretary to the prime minister, to Brussels in secret, and Imai agreed with Commission chief Jean-Claude Juncker on a schedule to express a broad agreement at an EU-Japan summit on July 6.Footnote 4 This schedule reflected Abe’s hope to send a clear message to sustain trade liberalisation against protectionism just before the Hamburg G-20 summit on July 7–8 where Trump would join.

Abe intensified preferences for maintaining the multilateral trade order, arresting moves towards economic nationalism and protectionism caused by the Trump administration. Abe considered that the early conclusion of the EJFTA would make significant contributions to preserving the liberal trade order in the world. Such a consideration was shown in his statement during the participation in the CeBIT (Centre for Office Automation, Information Technology and Telecommunication) 2017 in Hannover, Germany in March 2017:

In growing concerns about the rise of protectionism and inward-oriented preferences in the world, Angela and I today reached an agreement that the free and open international order was the cornerstone of peace and prosperity. In increasing moves towards protectionism in the world, Japan and Europe, in collaboration with the United States, should keep hoisting the flag of free trade high. From this point of view, the conclusion of negotiations on the Japan-EU EPA will be extremely important as a symbolic message to the world (Prime Minister of Japan and His Cabinet 2017).

As the US Trump administration intensified protectionism, the maintenance of high-standard trade rules was positioned as a crucial means to maintain the open and liberal trade order. At the 24th EU-Japan summit in July 2017, Abe confirmed the value of rule-making in the EJFTA, stating that ‘this comprehensive, high-level, balanced agreement further contributes to the promotion of international trade and investment . . . and would become a model of the 21st century economic order on the basis of free and fair rules’ (Ministry of Foreign Affairs of Japan 2017). The joint statement at the 25th EU-Japan summit in July 2018 referred to the agreement’s value to demonstrate to the world the firm political will of Japan and the EU to keep the flag of free trade waving high and powerfully advance free trade as the model of high standard, free, open and fair trade and investment rules in the twenty-first century. This statement also included a phrase that ‘to enforce existing international rules and develop new rules, to foster a truly level-playing-field, addressing in particular non-market-oriented policies and practices, and inadequate protection of intellectual property rights such as forced technology transfer or cyber-enabled theft’ (Ministry of Foreign Affairs of Japan 2018). Significantly, this phrase demonstrated political will to maintain liberal and fair trade rules against China’s state-led economic management and less market-oriented economic practices.

An equally crucial incident was the UK government’s decision to exit the EU, following the result of the referendum in June 2016. While the referendum originated from internal politics within the Conservative Party, it represented the British people’s dissatisfaction with increasing globalisation and immigration of which the EU had been a main promoter. The Japanese government and business actors raised strong concerns with Brexit as the UK had maintained the dominant position as the destination of Japanese foreign investment in Europe. In 2015, for instance, the UK accounted for 45.1% of the total investment amount and 31% of the total employees in Japanese affiliated companies in the EU. The EJFTA was positioned as a crucial means to respond to Brexit because the agreement was expected to function as a backup for Japanese multinationals that operate in the UK but will lose access to the Single Market after Brexit (Frenkel and Walter 2017, 363).

The emergence of the Trump administration had crucial impacts on the EU’s relations with Washington. Indeed, the administration’s turn away from multilateral talks and free trade provided the EU with opportunities in that European firms would gain competitive advantage against their American rivals and Europe would raise its attractiveness as an export destination (Young 2017b, 10–11). However, Europe lost the most important partner in sustaining the multilateral trading system, and the administration’s antagonistic postures towards the existing WTO rules would undermine the multilateral trading system, which ‘must remain the cornerstone of EU trade policy’ (European Commission 2015, 27). More specifically, the US retreat from the TTIP was serious blow to the EU that hoped to create the new global rules of international trade through the long-honoured transatlantic partnership.

Brexit led to the reduction of the EU’s market power in terms of the GDP, trade and investment, and consequently undermined the EU’s bargaining leverage in trade negotiations (Young 2017b, 6–8). Moreover, Brexit kindled moves towards nationalism and disintegration in other parts of Europe, and raised opposition to freer movements of goods, capital, and people. This was particularly serious because the UK as a major supporter of free trade had formed a coalition with smaller members such as Portugal to sustain the union’s stance for liberal trade.

Being confronted with these new developments, the European Commission raised a sense of crisis. In particular, the Directorate General for Trade (DG Trade), a strong promoter of the EU’s diplomacy with relatively autonomous power, and its head Cecilia Malmström considered that the EJFTA would become a crucial means to maintain the EU’s authority and show the union’s continuous adherence to liberal trade policy. Malmström, who put stress on human rights issues, regarded Japan as a desirable FTA partner because the EU and Japan shared common values in democracy, the rule of law and high standards for environmental and labour protection.Footnote 5 A successful conclusion of trade negotiations with Japan was expected to raise the union’s organisational values amidst the ongoing threat incurred by Brexit and disintegration movements in several member countries by demonstrating its capability to wrap up negotiations on a crucial trade pact that would give substantial economic benefits to the members.

Trade Commissioner Malmström expressed, in June 2017, her will to make the EU the global leader in free trade, and a deal with Japan would issue a defiant counter-blast against Trump’s protectionist agenda, calling an accord with Tokyo her ‘main priority in the short term’ (Osborne 2017). Malmström exhibited decisive postures to propel negotiations. She told Mauro Petriccione, the EU’s chief negotiator, ‘to not come home until it’s done’ when Petriccione headed to Tokyo for final-stage negotiations in mid-June (Marks et al. 2017). On July 1, 2017, the Commission issued a new pamphlet entitled ‘A New EU Trade Agreement with Japan’. It raised Japan as a desirable partner for an FTA in terms of an established democracy with high product standards and consumer protection, and concrete economic benefits from the FTA in the exports of goods and services as well as employment creation.

Several industrial sectors that desired to gain more concessions to penetrate into the Japanese market through the EJFTA opposed an easy compromise with Japan. The representative was the automobile sector, which had argued for intensive negotiations with Japan over rules of origin, a ‘snapback clause’, and the so-called kei-car problem in the Japanese market (ACEA (European Automobile Manufacturers’ Association) 2017). Footnote 6 Malmström stressed the value of regulatory cooperation in the automobile sector, which contributed to removing non-tariff measures in Japan, arguing that ‘Already, our negotiations have born valuable fruit, as the EU and Japan have intensified their cooperation in several international standard-setting fora, for instance on motor vehicles’ (European Commission 2017).

Conclusions

In this article, I examined the development process of the EJFTA by searching for the influence of two variables that function at the international level: the influence of the interconnected FTA structure, and political leaders’ responses to anti-multilateralism movements in the world. The two elements conditioned the progress of talks on the EJFTA in various manners.

The existence of other FTAs had various influences on the development process of the EJFTA. While the conclusion of the EU-Korea FTA raised the Japanese business and government’s sense of crisis resulting from the lack of an FTA with Europe, Japan’s positive moves towards the TPP participation urged the EU to consider the EJFTA more seriously. Moreover, the existence of parallel FTAs provided for rationales to sustain the key assertions of the two parties. The defensive parties raised the agreements at past FTAs as the ceiling of concessions to be made at the EJFTA, whereas the offensive parties sought to acquire concessions beyond the past agreements. The EU and Japan also sought to include key issues that they had achieved in previous FTAs into their trade agreement. Furthermore, negotiators faced great difficulty in finding compromises in major issues such as the removal of tariffs on automobiles and the investor-state dispute system because the EU and Japan sought to reflect the results of previous FTAs on the content of the EJFTA.

The FTAs are governmental agreements in the economic field. However, they function as political means to respond to other states’ diplomatic postures. The EJFTA provided a typical example of how an FTA is used as an economic statecraft. In the intensified moves towards economic nationalism and market disintegration, European and Japanese leaders raised their willingness to realise the early conclusion of negotiations on the EJFTA, intending to make this agreement as a symbolic engagement to counter the protectionist movements. Japan expected that the EJFTA function as a driving force to maintain the liberal trade regime that was jeopardised by the protectionist policies by the Trump administration. The EU leaders expected that the EJFTA contribute to maintaining the union’s organisational values by showing practical benefits produced by the EU-led trade negotiations.

The conclusion of the EJFTA surely makes contributions to maintaining the liberal trade regime. However, the prospect of the international trade system has become uncertain with the US Trump administration’s continuous persistence to economic nationalism and anti-multilateralism. The EU and Japan are required to continue efforts to keep the momentum acquired by the EJFTA by diffusing the agreement’s high-standard trade rules to underpin the liberal trade regime to other trade agreements.