Trade and trade finance players have welcomed the free trade agreement between the EU and Japan, the largest such deal the EU has ever signed.

The EU-Japan Economic Partnership Agreement is being welcomed as a timely reminder of the significance of free trade to both signatories, at a time when protectionist rhetoric and actions are running high, led by the US, but also in numerous economies around Asia.

The FTA is set to eliminate 99% of tariffs that amount to combined costs of more than €1bn to businesses in the EU and Japan each year. It will remove barriers to trade in a zone of more than 600 million people and almost one-third of global GDP.

Bilaterally, the trade of goods and services between Japan and the EU is worth €86bn per year.

The deal has been hailed by the Japanese prime minister Shinzo Abe as one that shows “the world the unshaken political will of Japan and the EU to lead the world as the champions of free trade at a time when protectionism has spread”.

Notably, it was announced during US President Donald Trump’s tour of Europe, in which he further isolated America from the multilateral systems. As well as taking aim at fellow members of Nato for perceived underspend, Trump cosied up to Russian President Vladimir Putin. Russia has of course been heavily sanctioned by the EU due to its invasion of Crimea.

The new agreement was finalised late in 2017 after four years of negotiations and is set to boost EU agricultural exports to Japan, with tariffs on wine and pork being wiped out. EU contractors will gain better access to construction projects in Japan, while chemical exports are set to jump by almost one-quarter following the removal of tariffs.

Japanese companies in the high-tech engineering, computing, electrical and auto industries are set to benefit. For Japan’s car industry, the removal of a 10% tariff on exports to the EU will be welcomed.

But above all, the symbolism of the agreement has been hailed by those in the trade sector.

“Against a rising tide of global trade tensions, the free trade banner is flying high in Asia Pacific with the signing of the EU-Japan Economic Partnership Agreement. As Asia and the EU strengthen their trade links, the time is now for companies across Asia Pacific to capitalise on the increasing business opportunities with the world’s largest trade bloc,” says Ajay Sharma, Asia Pacific head of global trade and receivables finance at HSBC.

The EU is currently waiting to ratify trade agreements with both Singapore and Vietnam. Deals with Indonesia, Australia and New Zealand remain in the pipeline. With talks being held this week between the EU and China, the bloc is clearly pivoting eastward at a time when its erstwhile ally in Washington is turning its back on the free trade system it was instrumental in establishing.

Ross Denton, trade partner for Baker McKenzie in London describes the deal as a “very strong signal to the US administration that the EU and Japan, two major trade partners of the US, both see the benefits of removing barriers and reducing, not increasing tariffs”.

He adds: “Both sides have granted concessions to the other, such as Japan on agriculture and the EU on cars, and come up with a balanced outcome that will give world trade a significant boost at a time of marked uncertainty.”

The deal will now go to be ratified on both sides, with a view to entering into force in March 2019, just before the UK exits the EU. The UK may gain some benefit from the agreement during the implementation phase, but Brexit places huge pressure on the UK to replicate such an agreement independently, Denton says.

Asia has been a beacon of free trade during the recent years of protectionist tumult. The revamped Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) was hailed as the “most important trade agreement in two decades” by Asia Trade Centre CEO Deborah Elms upon its signing in March 2018.

Negotiations over the Regional Comprehensive Economic Partnership (RCEP), a trade agreement which includes China, continue, with some hope that they can be completed this year.