Japan and the European Union have signed a free trade agreement. This will create the world’s largest open economic area. The deal removes EU’s 10 per cent tariff on Japanese cars and three per cent on most car parts. It would also scrap Japanese duties of some 30 per cent or more on EU cheese and 15 per cent on wines, and secure access to large public tenders in Japan.

Europe’s food sector is one of the biggest winners from the deal, which should allow it to capitalize on Japanese demand for high-quality cheese, chocolates, meats and pasta. Japanese car and car parts makers are also expected to increase sales to Europe, where they have lagged behind European rivals.

However, Japan’s dairy industry is expected to lose market share to European products once tariffs of up to 40 per cent on some cheese imports start coming down. Japan and the EU account for about a third of global GDP and their trade relationship has room to grow. The agreement is expected to boost the EU economy by 0.8 per cent and Japan’s by 0.3 per cent over the long term.

The trade pact comes amid fears that a trade war between the United States and China will diminish the role of free trade in the global economic order.