Tariffs on Japanese vehicle parts could be scrapped in EU deal

19 June 2017

19 June 2017

A deal between the European Union and Japan could see import tariffs on vehicle parts from the country scrapped, which may lead to a drop in their cost on domestic markets.

Currently, the EU imposes a tariff of around 3-4% on automotive parts and a 10% tariff on cars shipped into the continent from Japan. Negotiators from both parties are in discussions which could see the Asian country remove import duties on agricultural products such as port, cheese and wine, according to the Nikkei daily newspaper. There is hope that an economic partnership agreement (EPA) could be signed by July 2017.

Japan’s exports grew in May 2017 by the fastest in more than two years, thanks to shipments of cars and steel. The 14.9% annual increase was the biggest rise since January 2015, although it must be noted that exports of cars and car parts rose partly because an earthquake in Kumamoto last year in May temporarily shut down production of these goods.

In the UK during 2016, motorists increased their annual spend on vehicle maintenance by 1.7% to an average of £707 (€811), with industry turnover rising 2.4% to £21.6 billion (€24.7 billion). Some drivers and fleet managers chose their vehicles based on the cost of parts and servicing, meaning any reduction in price on parts from Japanese firms could aid manufacturers such as Nissan, Honda and Toyota.

Meanwhile, a deal is also being put together to remove the 10% import tariffs on Japanese cars. While a number of vehicles are built by carmakers in the EU, some do need to be imported into the continent. Progress on these negotiations would be a boost for Japan, which in 2016 exported some 600,000 cars to the EU.

A potential sticking point is how long the EU would take to eliminate tariffs on cars. Japan wants them to be scrapped in seven years, while the EU is pressing to have more than 10 years to phase them out.

Speaking about the EPA, a spokesman for Japan’s Prime Minister Shinzo Abe said: ′Amid moves promoting protectionism, as seen in Britain’s exit from the European Union and in the policies of President Trump [withdrawing from the Trans-Pacific Partnership], Japan is looking to strike a broad agreement with the European Union as soon as possible.’

The news comes as airbag manufacturer Takata is facing bankruptcy following manufacturing issues that have required carmakers to initiate mass recalls. Shares in the company were temporarily suspended on the Tokyo stock exchange because of the news. The company faces around 1 trillion yen (€8 billion) in liabilities over the recall, which has seen over 100 million airbags affected by issues which can cause them to rupture and spray shrapnel at passengers. The company is said to be in talks about a potential deal with US auto parts maker Key Safety Systems to buy some of its assets under a restructuring plan.

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