At the start of the journey

Valdis Dombrovskis, executive vice president of the European Commission

FEBRUARY 2021 The Interview / Text by Andrew Howitt / all photos © European Union 2021

A member of the European Commission since 2014, Valdis Dombrovskis has served the European Union as executive vice president of the European Commission for an Economy that Works for People since 2019 and as EU commissioner for trade since August of last year. Prior to being appointed to his current roles, he was EU commissioner for financial stability, financial services, and capital markets union (2016–2019); European Commission vice president for the euro and social dialogue (2014–2019); and prime minister of Latvia (2009–2014). Dombrovskis spoke with Eurobiz Japan to mark the second anniversary of the EU–Japan Economic Partnership Agreement (EPA), which came into force on 1 February, 2019.

How successful have the first two years of the EPA been?

The EPA is one of the largest free trade agreements in the world, and its entry into force represents a great success for both Europe and Japan. Now, we should both focus on getting maximum value from the deal — to benefit exporters, farmers, and consumers.

Overall, the first two years have brought positive results for both sides. In the first full year of implementation, from February 2019 to January 2020, EU merchandise trade with Japan increased 5.1%. The increase was particularly noticeable for goods with better tariff preferences, such as for wine (+13.5%), dairy (+12%), and clothing (+10%). The EU and Japan have engaged intensively to ensure that the EPA will deliver even better results.

European businesses gave strong support for the signing and entry into force of the EPA, and the European Commission maintains an open dialogue with our companies to assess and improve its implementation. This is particularly important in the early years of implementation of a comprehensive trade deal, when it is common to face challenges and “teething problems”. One concrete example of the value of this dialogue is that, thanks to feedback from businesses, the EU and Japan took swift action to simplify the customs procedures under the EPA, which had caused some concerns in the initial months of 2019.

What is your message to Japanese businesses and European firms in Japan on the second anniversary of the agreement?

My first message to businesses is that we are only at the start of the journey, and we need their active involvement to take the next steps.

We policymakers need to step up our efforts to improve implementation and market access, and we rely on proactive feedback from business in this regard. We want as many economic operators as possible to benefit from the agreement, particularly small and medium-sized enterprises, both in the EU and Japan.

It is worthwhile for businesses to invest time and effort into finding out more about the opportunities offered by the EPA. Any company might wish to reassess its business plans in light of the new trading conditions. There are useful tools and institutions that can assist businesses. For example, the European Commission recently launched the Access2Markets online portal to help companies navigate global trade. Also, thanks to the good work carried out by the EU–Japan Centre for Industrial Cooperation, there is now a dedicated EPA Helpdesk to reply to enquiries from businesses.

My second message concerns the importance of establishing a true partnership between public authorities and private operators with a view to supporting the full and effective implementation of the EPA. As I mentioned, feedback from businesses is of invaluable importance for governments to identify areas where the operation of the EPA could be improved. This is particularly relevant for administrative practices such as customs; pre-market approval mechanisms for food, additives, or medicines; and the transparency of government procurement tenders. Moreover, businesses can develop ideas to ensure that regulations for new products and technologies are developed in a compatible way — to the greatest possible extent — in Japan and in the EU. This is what we call “regulatory cooperation” under the EPA.

How has the Covid-19 pandemic affected trade between the EU and Japan?

The Covid-19 crisis has, of course, had a serious impact on the second year of EPA implementation, just like it has had on most aspects of our lives. EU–Japan trade flows have been affected quite severely. The EU’s trade surveillance database shows a 14% decrease in EU imports from Japan in the period between January and November 2020 compared with the same period of the previous year. This is in line with the decline of overall EU imports in 2020. EU exports to Japan have similarly declined, albeit a bit less, by around 12%.

However, 2020 was not a lost year for EU–Japan trade. Both sides have made a tremendous effort to ensure that our cooperation under the EPA moves forward. Intensive bilateral cooperation continued in the framework of ten specialised committees and two working groups set up according to the terms of the EPA.

All of these specialised committees and working groups have carried out their work virtually over the past year. We have worked hard to further develop the commitments in the EPA. Amendments to the rules on technical regulations for cars, for instance, will ensure that internationally recognised manufacturing standards can be applied both in Japan and the EU. Moreover, changes to the Geographical Indication annex will allow for a significant increase in the number of geographical indications protected under the EPA. We expect both amendments to be adopted and enter into force very soon.

What are your hopes for EU–Japan trade for the coming years?

It is my hope — and my sincere belief — that we can continue to grow EU–Japan trade as we improve our implementation efforts. This will be very important as we strive to recover from the economic impact of the Covid-19 pandemic.

The EPA will, therefore, provide a basis for closer economic ties between the EU and Japan, and we should use it to work together in other important areas of policy. Japan and the EU are both engaged in a gradual political and economic process of transformation towards a greener, more digitalised growth model, which will rely on new rules and technologies. The EPA should be used as a platform to coordinate our regulatory responses to the challenges ahead, insofar as trade-related topics are concerned. We should aim to move closer together in areas such as product regulations, green procurement, and safe data-handling, inter alia.

The EU and Japan can be key allies in our efforts to achieve multilateral targets such as the Paris Agreement and the UN’s Sustainable Development Goals, and we can develop a shared agenda for reform of the World Trade Organization (WTO). The EPA will underpin all these possibilities.

What are the priorities of the EU Commission’s Directorate General for Trade right now?

The European Commission will adopt a new communication this month, outlining our priorities and strategy for a fresh, medium-term direction for EU trade and investment policy. This roadmap will respond to the new global challenges we are facing — such as the rise of unilateralism, threats to the rules-based international trading order, and the need to contribute to the green and digital transitions — while taking into account the lessons learned from the Covid-19 crisis.

The communication will address a number of important issues, including the EU’s fundamental interest to sustain rules-based trade and focus efforts on the reform of a rules-based multilateral order — this is why the document will have a specific section outlining our plans for WTO reform. It will also address the necessity for trade policy to deliver on sustainability goals; the need to reinforce free and fair trade while ensuring a level playing field for EU companies, workers, and consumers; and the importance of managing and developing our key global trade relationships, including, of course, the EU–Japan EPA.

How is the European Commission working to see reforms made to the WTO?

Reform of the WTO is crucial to revitalise multilateralism and preserve the rules-based trading environment that has allowed economies around the world to prosper. The EU is committed to working in a number of important areas of WTO reform in the run-up to the WTO’s 12th Ministerial Conference in June.

We will initially focus on confidence-building measures, such as unblocking the selection of the new director general, and on gathering broad support for the Trade and Health Initiative, which aims to contribute to an effective response to the Covid-19 pandemic. We also hope we can establish a lasting and multilaterally agreed solution to the current Appellate Body situation. Finally, we hope that a conclusion to the fisheries subsidies negotiations will soon be within reach.

In parallel, we will work on other initiatives that can hopefully be launched at the Ministerial Conference. Through the Trade and Climate Initiative, we want to start a reflection on the liberalisation of climate change-mitigating goods and services. We also need to look carefully at other important issues, such as industrial subsidies, the role of state-owned enterprises, and differential treatment of developing countries. The EU will continue its engagement in the plurilateral negotiations on e-commerce, the domestic regulation of services, and investment facilitation. •