A new study conducted by Copenhagen Economics for the European Commission shows large gains from reducing the barriers to trade and investment between the EU and Japan. The study looks at reductions of both tariffs and non-tariff barriers, and focuses predominantly on differences in regulatory measures in seven key sectors in Japan: pharmaceuticals, medical devices, processed foods, cars, transport equipment, telecoms and financial services.   Key results of the study: • While tariff dismantling would be beneficial to both economies, the real gains would be reaped by lowering regulatory differences, which have become the main obstacle in EU-Japan trade relations. • As the study notes, trade gains for the EU could be even higher if Japan were to open public procurement and transport equipment markets. • The study also estimates that trade flows could increase by €43 billion for the EU and €53 billion for Japan. Two-thirds of these benefits could come from potential reductions in the trade costs of non-tariff regulatory measures, and about a third from tariff dismantling. • While more than half of the trade benefits go to Japan, two-thirds of the welfare benefits go to the EU (€33 billion for the EU and €18 billion for Japan).

The study uses a novel approach to quantify the economic cost of non-tariff barriers between EU and Japan. The quantification is based on firm-level surveys and gravity model estimates. Impacts of trade liberalisation are simulated using a global CGE model developed by Professor Joseph Francois.

To read the news letter on the DG TRADE Chief Economist webpage click here

The full report can be downloaded here

For further information, please contact Martin Hvidt Thelle