Strengthening partnerships

The 2020 EBC white paper

May/June 2020 Feature / Text by Gavin Blair

Few will forget the year 2020. It is certain to be one that will bring significant change to the world. Against the backdrop of the global Covid-19 pandemic, the EBC is releasing its 2020 white paper, Strengthening partnerships in crisis and opportunities alike.

The EU–Japan relationship is also changing, most significantly by the EU–Japan Economic Partnership Agreement (EPA), which came into effect in February 2019.

“Yet the work of the EBC does not end with the EPA: a significant number of issues hindering European business in Japan lie outside the scope of the agreement,” writes Michael Mroczek, president of the EBC, in his introductory message. “Some of these issues are specific to European companies, but very many affect all companies, domestic and foreign, and serve only to delay new products, inflate costs, and restrict consumer choice.”

EBC Chief Policy Director Bjorn Kongstad uses the example of the railway sector to illustrate both the opportunities being created and the challenges ahead. “The removal of the operation safety clause in February 2020 will give [European railway firms] access to the [Japanese] procurement market,” he notes in his message in the white paper. “[But this] will require monitoring to make certain that what has been offered by the agreement is also properly implemented.”

Five other sectors covered in this year’s white paper warrant particular focus: food and agriculture, materials, human resources, logistics, and automobiles.

The EBC Food & Agriculture Committee notes that on the day the EPA came into force, supermarkets in Japan were using the accord to promote European wine.

“Newly released trade statistics show a dramatic increase in imports of European food into Japan,” the white paper states. However, problems remain around the harmonisation of approval for additives, enzymes, and processing aids, as well as safety testing. In addition, rules in Japan’s Food Sanitation Act on materials — mostly packaging — that come into contact with food have created new issues to be resolved.

Thanks to the EPA, the Materials Committee has seen tariffs removed on imports from Europe of metals and chemicals, but shipments of waste to Europe — where they are processed — are being delayed by time-consuming bureaucracy in Japan. The EBC is also requesting harmonisation of procedures regarding safety warnings on materials. One of the few positive aspects of the pandemic has been the spotlight it has shone on some of Japan’s rigid corporate practises, notes HR Committee chair Craig Roberts.

“This is quite a turning point — and possibly a point of no return — in terms of a shift towards more flexible working styles,” he says. “There is certainly more consciousness of the need for it, particularly working from home, and many companies are now seeing that it is possible.”

With a large number of firms continuing to rely on paper-based processes, there are still barriers to teleworking.

“However, we’re encouraged by Prime Minister Abe’s recent comments that the government is planning to review the use of seals and document procedures, which is something that is still quite ingrained. This is an important step as part of the shift to digitalisation,” states Roberts. “And the current situation with Covid-19 is helping companies realise that it is more important to set clear targets and focus on outcomes rather than on time spent at a desk.”

The committee also acknowledges the government’s measures to increase the number of foreign workers in Japan, but urges it “to take an increasingly proactive approach to immigration policies and deregulation”.

Labour shortages were already particularly acute in the logistics sector, only to have been exacerbated by the pandemic. The Logistics Committee has similar requests around easing visa requirements and enhancing flexible working structures, as well as calling for temporary foreign labour to be permitted during peak periods.

More efficient use of the Nippon Automated Cargo and Port Consolidated System for customs clearance, as well as clearer guidance around quarantine requirements for cargo, are also essential, according to the committee.

In addition, the committee is asking the government to improve the efficiency of last-mile delivery by allowing larger vehicles for inter-city transport and promoting the use of autonomous vehicles.

The Japanese vehicle market is another sector where considerable progress has been made, but where work remains to be done, according to the EBC Automobile Committee and the Japan Automobile Importers Association (JAIA).

“The Japanese and European authorities have been working hard at implementing the EPA and harmonisation, which is very much appreciated,” writes committee chair Kintaro Ueno, but adds that there are unresolved issues around non-tariff measures (NTMs).

One of these issues concerns a new licence category for elderly drivers expected to be issued in 2022. This recommends that they drive cars equipped with certain safety features. The committee is asking that the new regulations, along with those for autonomous driving in general, are internationally harmonised ahead of this deadline and take into account technology developed in Europe.

Another NTM relates to the International Whole Vehicle Type Approval (IWVTA), which allows entire vehicles to be certified rather than each individual component. Japan adopted the IWVTA in July 2018, but has yet to harmonise all the required regulations. These include some complex, technical issues such as the precise placing of seats in vehicles and rules on exhaust emissions.

Japan’s kei-car category of light vehicles, which attract a much lower tax rate than other cars, also remains a bone of contention. While acknowledging that the tax gap has been reduced, the committee and JAIA maintain the preferential treatment given to these Japan-made vehicles is unfair because it is not viable for European automakers to build such cars solely for the Japanese market.

“There is no point in removing barriers, only to replace them with others,” states Kongstad. “Consequently, the EBC will be devoting considerable energy to [monitoring] the progress of the EPA, not only as it works its way through the political process, but also, ultimately, as it enters into effect.” •