(Adds details, Ford comments and background beginning in eighth
paragraph)
By Matthew Dalton
BRUSSELS--European Union trade ministers Thursday agreed to
start talks with Japan on a free trade agreement, starting a
lengthy process that must overcome concerns about the impact of a
deal on Europe's ailing automobile industry.
France, Italy and a few other nations have worried that an
agreement with Japan could boost imports from the country's
powerful car industry without giving enough access to the Japanese
market in return. These nations are feeling some buyer's remorse
about a trade deal they signed with South Korea that was followed
by a surge in car imports over the last year from Korean auto
giants Kia Motors Corp. (000270.SE), Hyundai Motor Corp.
(005380.SE) and the South Korean subsidiary of General Motors Co.
(GM).
To address those concerns, the negotiating orders approved
Thursday for the European Commission, the EU's executive arm,
require the deal to include a safeguard clause that would allow
tariffs to be reinstated if Europe faces a flood of imported
Japanese cars or other "sensitive" goods.
The deal also allows the commission to end the talks if Japan
hasn't already moved to eliminate "non-tariff
barriers"--regulations that EU companies say restrict their ability
to export to Japan.
"No other partner has ever gone as far as Japan before we sat
down at the negotiation table together," EU trade commissioner
Karel De Gucht said.
But European automobile makers were unconvinced.
"Independent studies have shown that this deal is a one-way
street as far as the automobile industry is concerned," said Ivan
Hodac, secretary general of ACEA, the main lobbying group for
Europe's automobile industry. "This has already been our experience
with the free trade agreement with South Korea which entered into
force last year."
Struggling auto makers in France and Italy--mainly PSA Peugeot
Citroen SA (PEUGY, UG.FR) and Fiat SpA (FIATY, F.MI)--have the most
to lose from stiffer Japanese competition. Auto makers such as
Toyota Motor Corp. (TM, 7203.TO) and Honda Motor Co. (HMC, 7267.TO)
specialize in the kind of smaller cars that are the bread and
butter of Peugeot and Fiat.
The European operations of Ford Motor Co. (F) also stand to
suffer because of increased competition from Japanese auto
makers.
"It is deeply troubling that the commission, in the midst of a
serious economic crisis, is pressing ahead with the start of
negotiations on a (trade deal) with Japan when studies have clearly
indicated that this could result in further job losses in the
European auto industry," Ford said in a statement.
The commission argues that a deal would have formidable economic
benefits, even if individual sectors might lose out. A deal would
create 420,000 additional jobs in Europe, the commission said.
It will likely be several years before the trade deal comes into
force, if it is completed at all. The commission and Japan must
first negotiate the terms of a deal, and then it must be approved
by the European Parliament and EU national governments at the
European Council.
Write to Matthew Dalton at matthew.dalton@wsj.com