* Japan is part of EU strategy to sign deals with world's
* European industry and EU countries divided over the
benefits of a deal
* EU could miss out as Japan shifts focus to its Pacific
By Robin Emmott and Kaori Kaneko
BRUSSELS/TOKYO, Nov 28 Britain is trying to
convince France and Italy to agree to negotiations with Japan to
create a free-trade area with the European Union despite
concerns that a deal would hurt the continent's weaker
European free-trade advocates, including Britain, the
Netherlands and Sweden, want EU trade ministers on Thursday to
formally ask the Commission - the EU executive - to start talks
with Japan, the world's third-largest economy.
Paris and Rome, however, are determined to defend their
carmakers against strengthened competition from Japan after a
free-trade deal with South Korea was followed by rising car
imports when it came into force in July 2011.
A deal between Europe and Japan would bring together two
trading partners responsible for a third of global economic
output, but because a deal would take several years to finalise,
those pushing for an accord worry Japan could lose interest.
Japan is currently more focused on parliamentary elections
due on Dec. 16, as well as on a Pacific free-trade area that
Tokyo sees as a priority.
"There is a window of opportunity that could easily close,"
said a British diplomat involved in discussions.
The plan is part of the EU's ambition to sign free-trade
deals on behalf of its 27 member states with major economies,
including Canada and the United States, in the hope that trade
will help revive stagnant demand in the European Union.
Japan is the EU's third-largest trading partner after the
United States and China, accounting for 150 billion euros ($194
billion) a year in trade in goods and services.
Japan already has low import tariffs, with no duty on Scotch
whisky or French cognac for instance. But Europeans say Japanese
laws make it hard for them to do business there today, with
special regulations on everything from music to imported cars.
For example, Japan gives copyright protection to sound
recordings for 50 years as opposed to 70 in most of the rest of
the world. Music labels would like Japan to let royalty payments
run for longer, an issue underscored by artists like the Rolling
Stones, who have been celebrating 50 years in music this year.
"We need to ensure our products can actually reach Japanese
consumers without being blocked by legal or security barriers,"
said one Italian diplomat.
Britain, a purchaser of high-speed trains from Japan's
Hitachi, is keen to keep Japanese competition in a
European market dominated by France's Alstom and
Overall, an accord could increase EU economic output by up
to 1.9 percent, or by 320 billion euro ($415 billion), by 2020,
according to an internal EU document prepared for the talks.
Japan could see a 0.7 percent boost.
Reluctance in France and Italy, and to a lesser degree
Germany, stems from doubts over whether Tokyo is prepared to
significantly open its auto, agriculture and services markets to
France and Italy say they could go ahead with negotiations
but suggest that trade in cars be subject to checks to avoid a
surge in imports.
READY TO TALK?
Japan's elections next month look likely to return to power
the long-dominant Liberal Democratic Party, which has been more
vague about its trade agenda than the current Democratic Party
of Japan government.
A deal with the EU also stirs little passion in Tokyo, where
officials are focused on the proposed Trans-Pacific Partnership
that would link Asia, the United States and Australia.
"Japan is ready to start negotiations with the EU," said a
Japanese source familiar with discussions in Tokyo. "But it is
for the Europeans to decide. Japan has done what we could do."
Tokyo says it is serious about a deal and has dropped a ban
on French and Dutch beef imports as well as agreeing to allow
food additives in European food imports.
There are still potential conflict areas, however, including
access to public tenders in Japan, ranging from road building to
supplying software. The European Commission says Europe's public
procurement market is far more open than Japan's, which allows
foreign bidders on fewer than 3 percent of public contracts.
On the surface, the EU car market has more barriers than
Japan's, with a 10 percent tariff on imported Japanese cars.
But EU carmarkers say they face numerous "non-tariff
barriers" that hinder exports to Japan. The country has a
category of "light" cars, which benefit from tax breaks.
Most small European cars, such as the Fiat 500, do not meet
the category's demanding criteria on size and power, however,
making it hard for them to compete with Japanese vehicles.
"It is troubling that the European Commission, in the midst
of a serious economic crisis, would propose launching
negotiations with Japan before the Japanese remove important
non-tariff barriers against the European auto industry," Ford
Motor Co, a U.S. automaker with a big presence in Europe,
told Reuters in an emailed statement.
Partly because of such worries, the Europeans have insisted
that negotiations can be called off after a year if they feel
Japan is not doing enough to open up its markets.