“We showed the world that we are able to come up with this type of comprehensive, ambitious agreement”

The tools of the trade

Marjut Hannonen, Minister-Counsellor, Head of Trade Section at the EU Delegation in Japan

Text by Andrew Howitt  /  Photos by Benjamin Parks

Finland joined the EU in 1995, the same year Marjut Hannonen completed her post-graduate studies in EU law. The next year, she became one of Finland’s first EU officials and has spent her career at the European Commission, holding roles in three different Directorates-General (DGs), the longest stint being with DG Trade since 2002. Hannonen has dealt with all aspects of trade, including bilateral and multilateral negotiations, trade policy and trade defence. In September, Hannonen took up the role of Minister-Counsellor, Head of Trade Section at the EU Delegation in Tokyo. She spoke with Eurobiz Japan about improvements to the way the EU implements trade agreements and how the Economic Partnership Agreement (EPA) will give a positive jolt to trade relations between Japan and the EU.

What were you doing immediately before you came to Tokyo?

I was working as an advisor in DG Trade. I was in charge of coming up with a new strategy on how the DG implements trade agreements. I looked at how we had done it before and what we could do better. Then I started implementing the strategy, beginning with the new-generation FTAs [free trade agreements] we’ve concluded but that have not come into force yet, such as with Vietnam and Singapore.

What needed to be improved?

One of the lessons we learned is that we have to start preparing for the implementation of an agreement much earlier. When it actually enters into force, everything should be ready and there shouldn’t be any obstacles. All the legislative changes should be made before this. Once we have the final text of the EPA, we’ll start preparing immediately for implementation. This is going to be an extremely important part of my work here in Japan.

We also started looking at what we call the preference utilisation rate of our FTAs, which is how much they are actually used, how much of the total trade is conducted under an FTA. We can trade 100 units of something, but if only 50 of these are under the FTA, we wonder ‘Why not 100?’ When we started looking at these figures, we saw that our partners had, in most cases, a much higher preference utilisation rate than EU companies. Astonishingly, one of the major reasons is that EU companies, and especially the SMEs [small and medium-sized enterprises], just don’t know about the FTAs. Or, if they know, they don’t really understand the agreement or how to use it; they think it’s automatically applied. They don’t know that they have to get approved exporter status, for example.

We want to see a high utilisation rate, so there is a lot of educative work to be done. The EU Commission is responsible for explaining our agreements and making them easy for companies to use. We need to show that FTAs work, they deliver, and they bring the growth and jobs that they are expected to bring. If we can’t demonstrate that they actually work, then why are we negotiating them?

What is the current state of trade between Japan and the EU?

We are both large, mature markets, and we have huge trade relations. Japan is our seventh-largest trading partner and we are Japan’s fourth-largest partner. Over the last few years, there has been a steady increase, with no major ups and downs. But I think there’s a lot of potential that still needs to be realised, and to see a leap, we need the EPA. It will open up new possibilities.

After the agreement with South Korea came into force, EU agricultural exports went up 86%, and our car exports went up 56%. We see huge potential on the EU side in agri-food exports — our pastas, chocolates, cheeses, dairy products. We’ve looked at the impact assessments, and agri-food trade is an area where the benefits are spread among a large number of member states. This is also an area where SMEs benefit. There’s also a lot of potential in high tech.

What do you see as some of the other benefits of the EPA?

Geopolitically and strategically it’s also very important. We showed the world that we are able to come up with this type of comprehensive, ambitious agreement at a time when FTAs are not very much in vogue. It was a good decision to make the announcement just before the 2017 G20 Summit [on 7–8 July] so we could tell our G20 partners that we had reached this agreement. This was not a coincidence.

For my colleagues on the political side, when you have a partnership agreement, you have different types of dialogues than you had before. It has raised our bilateral relations to a completely different level.

What are some responses you have heard since the agreement in principle was announced?

It was very much welcomed in Brussels. And in Japan, as well. Even the Japanese agricultural cooperatives have been very positive because they also see that this opens up possibilities for them to export more to the EU.

I think the Japanese have really realised that this is in their interest, and they have engaged in a different way than they have in the decades before. We have seen a very different dynamic. Japan is also very courageous in taking leadership on TPP11 and trying to push that agreement towards a conclusion, which I think is also an extremely good development. It’s very new. Japan hasn’t traditionally been very active in this area.

What is the EU Delegation’s relationship with the EBC?

I believe we have an excellent relationship with the EBC. It was instrumental in providing us with input on the priorities of industry during the negotiations. It is absolutely a valuable partner, and we will continue this work with the EBC in the implementation phase of the EPA. We need industry input as badly as before, so that we are able to fix any problems that arise. 

“If we can’t demonstrate that [free trade agreements] actually work, then why are we negotiating them?”