July 18, 2012 / 1:46 PM / 5 years ago

UPDATE 2-Don't fear Japan trade deal, EU tells carmakers

4 Min Read

* 27 EU states to hand Brussels task of talking with Tokyo

* Deal could add 400,000 jobs, percentage point to EU output

* Carmakers worry about closed Japanese market, imports

By Robin Emmott

BRUSSELS, July 18 (Reuters) - The European Commission asked EU governments on Wednesday for a mandate to negotiate a free-trade deal with Japan, challenging strong resistance from carmakers in the bloc who fear a surge in cheaper imports hitting their home markets.

Announcing the Commission's decision to ask European Union countries to let it negotiate with Japan on their behalf, Trade Commissioner Karel De Gucht accused the automotive sector - one of the most vocal opponents of the talks - of using foreign competition as a "scapegoat" for its economic problems.

"We have to sort this out independently of free-trade agreements," De Gucht told reporters.

"Let's not try to find a scapegoat somewhere ... Let's try to get our act together and sort out what we have to do in this automotive industry if it wants to have a brighter future."

EU leaders are expected to grant the Commission its mandate at their next summit, in October. Talks could start early next year and would take a couple of years to conclude.

The EU is seeking free-trade deals across the globe to lock in access to fast-growing economies after 10 years of failure to seal the Doha round of global trade talks.

The EU and Japan account for more than a third of global economic output and a comprehensive trade deal would open up markets for industries including chemicals and pharmaceuticals as well as cars and car parts.

"If growth in the next 20 years is likely to come from Asia, then overlooking Japan would be a serious mistake in our trade strategy," De Gucht said.

The Commission says a deal deal could create 400,000 jobs in Europe, increase EU economic output by almost 1 percentage point and boost exports to Japan by a third.

"Let's be clear: We need these jobs, and we need this growth in the current economic climate," De Gucht said.

Warning Sign

The EU imposes a 10 percent tariff on imported Japanese cars and European carmakers and their suppliers worry about a surge of Japanese imports if that is lifted.

A free-trade deal with South Korea, in force for the last year, led to a large increase in Korean car imports, something Sergio Marchionne, chief executive of Fiat and head of the European carmarkers' association ACEA, said was a "warning sign" about a deal with Japan, Asia's biggest car exporter.

The EU sector's problems, after more than four years of falling demand and profits, were illustrated by a recent announcement by France's PSA Peugeot Citroen to cut 8,000 job cuts and close an assembly plant.

De Gucht said he had told Japan that Europe would not reduce tariffs before Japan reduced its regulatory barriers. "This includes the car sector," he said.

Britain, a leading proponent of the EU's trade agenda, said it hoped talks could start as early as the end of this year. British minister Norman Lamb said a trade deal with Japan would be a "significant economic prize for Europe" that would generate more than 70 billion euros a year for the EU.

The Commission must win the approval of the EU's 27 countries to proceed with Japan talks. There is a consensus at least to start negotiations, diplomats say, and the Commission is treading a careful path by agreeing to halt talks after a year if Japan does not move on opening its markets.

Although there is barely a corner of the world where the EU is not negotiating trade deals, the bloc has yet to seal an accord with a major world economy. A deal with Japan would probably follow a pact with Canada that is expected by the end of this year, building on last year's agreement with Seoul.

The EU says that signing trade accords with more than 80 countries where negotiations have already begun - including India - could create 2 million new jobs and make a 275 billion euro ($340 billion) contribution to the European economy.

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