Racing against the clock to secure a deal by the end of 2016, Japan and the European Union are currently in the works of securing a free-trade agreement which could not only smooth connections between the Eastern and Western hemispheres, but also modernize the European economy. While reaching an agreement touts benefits for both parties (with Japan seeking to abolish European Union tariffs on appliances and automobiles and the European Union looking for access to Japan’s food markets and railways as well as a possible .6-.8 percent rise in gross domestic product growth), many economists argue that such a deal could lead to a broadened income divide and job losses.
Countries have long been eager to tap into Japan’s markets. However, to develop proper business and trade relations, one must understand the culture and history of a society to effectively carry out a partnership. “Japanese capitalism” is a complex structure of “informal cartels” known as keiretsus. Literally meaning “system”, Japan relies on full harmony between the social, economic, and political aspects for national security prospects as well as full employment. The fear many Japanese economists have is that letting an external entity interlope in Japan’s highly respected social/ political/ economic system would upset the delicate balance they have so well established. Should jobs go, as they often do with free trade agreements, one of the major tenants of their unique economy would go as well. However, by staying in their rigid system, they shut themselves off from large trading opportunities all over the world and put their consumers at a disadvantage.
At the end of the day, while a trade agreement with a bloc with as much weight and influence as the European Union seems like a no brainer to most people, it often comes down to a matter of a country’s own nationalist pride and values. With Japan having the third largest nominal gross domestic product in the world, it may be a while before they realize the benefits and significance of fashioning such a deal.