Talk of EU-Japan Trade Deal Riles Carmakers

Forging a free trade agreement with Japan would be in Europe's best interests as Asian economies grow, EU trade chief Karel De Gucht tells the European Commission.

The EC has decided to seek the approval of the 27 EU member countries to negotiate a trade deal with Japan. Such a pact would boost EU exports to Japan by one-third, thus boosting Europe's gross domestic product by almost a percentage point and creating 400,000 jobs there, De Gucht predicts.

But European carmakers and auto suppliers strenuously object to trade talks with Tokyo. The companies contend their Japanese rivals would gain an advantage if the EU abolished its 10% tariff on autos from Japan. They don't expect Japan to ease its non-tariff restrictions on imported cars.

Fiat CEO Sergio Marchionne, who heads European industry group ACEA, says the effects of the year-old EU trade agreement with South Korea are a "warning sign." Since the pact took effect, Korea has exported almost 400,000 vehicles to the EU, up 40% from the year-earlier period. EU auto exports to the Asian country have risen only 13% to 73,000 during that time.

The EC has promised to halt talks with Japan after a year if the country has not started to open its markets to European imports.