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EU inks its largest trade deal ever with Japan

The European Union and Japan today signed a free trade deal that creates the world's largest open economic area, covering nearly one third of global GDP.

Both sides hope that the deal will counteract any damage done to the role of free trade by recent US protectionist policies, ahead of a looming trade war with China.

EU officials expect the deal to boost the EU economy by 0.8 per cent, and Japans by 0.3 per cent over the long term.

"We are sending a clear message that we stand against protectionism. The EU and Japan remain open for cooperation," said European Council president Donald Tusk at a news conference after the signing ceremony.

His sentiment was later echoed by Japanese prime minister Shinzo Abe, who added: "There are rising concerns about protectionism, but I want Japan and the EU to lead the world by bearing the flag of free trade."

Read more: IMF warns of $440bn risk to global growth from Trump's trade war

The deal will remove current EU tariffs of 10 per cent on Japanese cars and 3 per cent on most car parts. It will also provide a boost to the EU's luxury foods industry, scrapping Japanese duties of up to 40 per cent on EU cheese and 15 per cent on wines.

An agreement was also reached that will allow businesses to freely transfer data between the bloc and Japan, concluding several years of data talks in Tokyo.

As a whole, the economic partnership agreement still needs to be ratified by each side, with a view for it to come into force by March 2019.

Ross Denton, a trade partner at Baker McKenzie, said that the deal is "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 added that there will be strong pressure on the UK to replicate the deal with foreign partners as part of its own web of trade agreements, ahead of exiting the European Union by the same date.

Read more: Nicky Morgan: Free trade benefits will not outweigh Brexit hit

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