Japan envoy to visit Brussels for trade pact talks with EU

By ELAINE KURTENBACH Markets Associated Press

Japanese Foreign Minister Fumio Kishida plans to travel to Brussels on Wednesday for talks on a trade accord with the European Union.

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Kishida told reporters he hoped the two sides could reach a "basic agreement" after failing to bridge differences blocking a proposed Economic Partnership Agreement during last week's negotiations in Tokyo.

Japan and the EU have been working to reach an accord before a summit of the Group of 20 industrial nations later this week in Hamburg, Germany and to send a message in support of free trade, countering a U.S. backlash against broad trade pacts.

"Based on the ministerial talks we had on June 30 and July 1, we are currently continuing tough negotiations," Kishida said. "Although we cannot be too optimistic about the prospect of the talks, I strongly hope to strike a basic agreement on Japan-EU EPA this time around as I head into the talks."

"I will work up until the last minute so that we can achieve the best results for our national interest," he said, noting there were "sensitivities" on both sides.

Cecilia Malmstrom, the European Commissioner for Trade, said Monday that she believes a deal can be reached later this week.

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The hope is to announce a deal when Japan's prime minister meets EU leaders in Brussels on Thursday ahead of a summit of the Group of 20 industrial nations in Germany.

"The Japanese don't agree with some of the key technical issues (in the deal) which are fundamental for the EU, especially those referred to investment," Malmstrom said in a speech to a conference in Madrid.

She did not go into detail.

Japanese officials have said the main sticking points are over ending tariffs on imports of cheese and autos.

A deal would require finessing Japan's protections for its dairy farmers, whose home market is protected by tariffs of up to 40 percent on processed cheese.

It's unclear just what the potential for compromise might be.

Australia and New Zealand, the biggest exporters of cheese and other dairy products to Japan, fought hard to persuade Tokyo to gradually open its market over a 15-year period during negotiations for a Pacific Rim trade pact, the Trans-Pacific Partnership.

That initiative has been imperiled by U.S. President Donald Trump's decision to pull out of the formerly U.S.-led arrangement. But the 11 remaining members are discussing ways to pursue a revised version without the U.S. as the anchor.

Both Japan and the EU have a tradition of protecting their politically powerful farm sectors, and dairy products are an especially sensitive issue for the EU, with its long traditions and half the world's market share for cheese.

Japanese eat only about 2 kilograms (about 1 pound) of cheese per person a year, way less than Europeans, partly because of different tastes and food cultures, and partly because costs are so high. A small, chocolate-bar sized block of imported Parmesan costs over $7 and a similar amount of Swiss cheese at least $6.

Japan has a complicated distribution system engineered to ensure the country's 17,700 dairy farmers, overwhelmingly small family businesses, continue to provide a stable supply of raw milk, even though their average costs are double those of farmers in Europe and the U.S.

A glut in milk production in the past two years in the U.S., Europe and Oceania has helped push prices lower and boosted imports, according to a recent U.S. Department of Agriculture report. It also has lent urgency to the EU's effort to win easier access to Japanese consumers.

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Associated Press writers Mari Yamaguchi in Tokyo and Aritz Parra in Madrid contributed to this report.