Japan, EU launch talks on free trade pact

Japan and the European Union launched talks on a free trade agreement Monday with a telephone summit between their leaders, a Japanese minister said.

The telephone talks were in place of a face-to-face meeting between European Council and European Commission heads Herman Van Rompuy and Jose Manuel Barroso, and Japan's Prime Minister Shinzo Abe, which was shelved while Europe grappled with debt problems in Cyprus.

"A formal decision to launch free trade negotiations has just been made during a teleconference between the EU leaders and Prime Minister Abe," said Minister of Economy, Trade and Industry Toshimitsu Motegi.

"I consider that it is a matter of great significance," Motegi said.

"Japan and EU combined represent an economic area of approximately 30 percent of the global economy and 40 percent of global trade."

EU Trade Commissioner Karel De Gucht, calling the decision after many years of discussions an "historic event", said bilateral trade has been hampered by a range of barriers.

"The agreement that we have in our mind is a comprehensive one, tackling barriers and non-tariff barriers, public procurements, intellectual property rights," he told reporters after the telephone summit.

De Gucht said earlier in the day that only three percent of European foreign direct investment was in Japan and "this shows the EU-Japan trade and investment relationship could and should be greatly enhanced".

The EU is trying to broker bilateral trading agreements with both the United States and Japan as it looks to boost its sometimes struggling economy.

Japan is a big prize for exporters, who complain that its large market is currently heavily weighted in favour of domestic producers, with sometimes steep tariffs and a range of other barriers.

De Gucht said any talks must make substantial progress on the non-tariff issue within 12 months.

"From the European perspective, it's clear to me that dismantling the persistent non-tariff barriers will be the key for the success of the negotiations," he said.

"In order to convince the sceptics, we need to include a review clause in the mandate.

"After one year from starting off the negotiations, I will take stock of the progress made by Japan in implementing the road maps on non-tariff barriers and... procurement, and if the conclusion would be that the progress has not been satisfactory, the negotiations would be suspended."

The European and Japanese leaders were also believed to have discussed the outcome of crisis talks on Cyprus.

Cyprus, the European Union, the European Central Bank, the International Monetary Fund and eurozone leaders have agreed a deal that will mean the breaking up of the island's second largest lender Laiki (Popular Bank), and a hefty levy on deposits above 100,000 euros ($130,000).

Markets feared that failure to reach a deal would have seen the small Mediterranean country exit the 17-nation eurozone, with the fallout spreading to other troubled bloc members including Italy and Spain.