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Japan signs off on historical trade agreement to remove tariffs on wines and spirits

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Today Japan’s parliament, known as the Diet, approved the world’s largest trade agreement, the Regional Comprehensive Economic Partnership (RCEP) which was signed last November amongst 15 Asia-Pacific countries such as China, Australia, Japan, New Zealand and South Korea.

Japan becomes the fourth country after China, Thailand and Singapore to ratify the deal, thus creating a free trade zone accounting for 30% of the world’s gross domestic product. All members will ratify the deal by the end of the year and aim to initiate it by January 1, 2022. In retrospect, it can manifest once domestic ratification procedures are completed in at least six of the Association of Southeast Asian Nations (ASEAN) and three other countries.

RCEP will repeal tariffs on about 91% of goods traded between member states, in addition to becoming Japan’s first ever economic partnership deal with China or South Korea.

RCEP will repeal tariffs on about 91% of goods traded between member states, in addition to becoming Japan’s first ever economic partnership deal with China or South Korea. India was also one of the founding members of the agreement but dropped out due to worries regarding an increase in their deficit to China. 

“It should therefore help to draw in investments, offering companies a broad array of production locations with differing comparative advantages, and the opportunity to export at preferential tariff rates to a wide economic area comprising both high-income consumers and a large and growing middle-income segment,” read the biannual macroeconomic review from the Monetary Authority of Singapore regarding RCEP. 

The free trade teal involves a wide array of trade areas in the Asian economy, ranging from industrial goods, e-commerce and intellectual property protection. However, this specifically brings a sign of good news to the wine and spirits industry in the region, since the deal involved removing tariffs on agricultural products essential to Japan. This includes rice, wheat, beef and pork, dairy products and sugar.

The country also stated in March that they expect positive results for its economy due to RCEP, thus expecting a GDP growth of 2.7% and creating over 500,000 jobs in the coming years. The key question is which wines and spirits will benefit from this monumental deal?

Bourbon Whisky

Japan has now lifted the tariffs on bourbon whiskey imported from other countries within the agreement, specifically with an alcoholic strength of 50% or higher and excluding those in containers holding less than two liters. 

Sparkling Wine

Japan has issued unbound tariffs for sparkling wine, meaning that they are unconstrained and can be raised on a most-favored-nation (MFN) basis.

Other Wine

In containers holding two liters or less, wines such as sherry, port and other fortified wines will gradually be lowered in tariffs in the coming years. After ten years, there will be no tariffs for these wines. The current base rate is at 112 yen, or 1.03 USD, but will be lowered by 10% each year until it is essentially duty free. 

Japan will also discard tariffs for Shaoxing rice wine from China and makgeolli alcoholic drinks from South Korea, considered to be sparkling rice wine. 

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