The European Union (EU) signed a free trade agreement (FTA) with Japan on Tuesday that will eliminate tariffs on almost all products traded between the two trading blocks.
The EU and Japan together account for close to one-third of the global economy and have around 600 million consumers combined.
The agreement is seen as a significant counter-measure to US President Donald Trump's recent policy of raising tariffs with its main trading partners.
At a joint news conference with the European Council president Donald Tusk hailed the agreement as "the largest bilateral trade deal ever", while Japanese Prime Minister Shinto Abe said the "EU and Japan showed their determination to lead the world as flag-bearers of free trade".
The deal eliminates about 99% of tariffs on Japanese goods sold to the EU, while Japan will continue to protect some segments of its agricultural market - including rice.
Prohibitively expensive European agricultural products such as wine and cheeses, for example, will be much cheaper in Japan as tariffs are reduced to zero, while Japan's automotive industry stands benefit significantly from the deal.
The FTA will slash tariffs from 10% to 0% on vehicle imported into Europe from Japan, giving the country's vehicle industry the same free access to Europe enjoyed by South Korean vehicle manufacturers since a similar FTA was signed in 2009.
The deal clouds the outlook for Japanese vehicle manufacturers located in the UK, however, given the potential of "Brexit" going ahead next year without a customs agreement with the EU.
President of the European Commission Jean-Claude Juncker said: "The document we signed today is much more than a trade agreement. It is of course a tool that will create opportunities for our companies, our workers and our citizens and that will boost the European and Japanese economies. But it is also a statement. For its content, its scope and also its timing. It is a statement by two likeminded partners that together represent nearly a third of the world's GDP and reiterate their commitment to uphold the highest standards in areas such as labour, safety, environmental or consumer protection. And what we're saying is that we believe in open, fair and rules-based trade. What we are saying is that a trade agreement is not a zero sum game, but a win-win for the involved parties. This agreement will bring tangible benefits to both sides and at the same time safeguard each other's sensitivities."
The agreement also addresses specific sensitivities in the EU, for instance in the automotive sector, with transition periods of up to 7 years before customs duties are fully eliminated.
The agreement is now awaiting ratification by the European Parliament and the Japanese Diet following which it could enter into force in 2019.
At the same time, negotiations between the EU and Japan continue on investment protection standards and investment protection dispute resolution.
Source: Just Auto