Japan, Mercosur to start EPA trade talks

TOKYO: Japan is preparing to open formal negotiations for an Economic Partnership Agreement (EPA) with the South American trade bloc Mercosur, a move that could deepen trade ties with one of the world’s largest agricultural and resource-producing regions as Tokyo seeks to diversify supply chains and expand overseas markets.

The launch of the EPA talks is set to be announced at a summit meeting between Japan's Prime Minister Sanae Takaichi and Brazilian President Luiz Inacio Lula da Silva on the sidelines of the Group of Seven meetings in France next month, Kyodo said.

Lula last year told the Mercosur summit in Buenos Aires that the bloc should focus on strengthening its ties with Asian nations such as Japan, China, South Korea, India, Vietnam and Indonesia.

According to a report by Kyodo, the Japanese government plans to begin discussions with Mercosur member states — Brazil, Argentina, Paraguay and Uruguay — amid growing geopolitical and economic uncertainty affecting global trade.

Mercosur, formally known as the Southern Common Market, represents a combined population of more than 290 million people and a gross domestic product exceeding $2 trillion.

The bloc is one of the world’s biggest exporters of soybeans, beef, corn, iron ore and lithium, resources increasingly viewed as strategically important for food security and electric vehicle supply chains.

Japanese officials reportedly see the talks as part of a broader strategy to strengthen economic ties with emerging economies while reducing excessive dependence on China-centred manufacturing networks.

Tokyo has recently pursued a series of trade and investment agreements across the Indo-Pacific, Europe and Latin America as companies seek more resilient sourcing routes following disruptions caused by the COVID-19 pandemic, wars and rising U.S.-China tensions.

The proposed EPA is expected to focus on lowering tariffs, improving investment rules, protecting intellectual property and easing customs procedures. Japanese automakers and industrial manufacturers could benefit from reduced duties in South America, while Mercosur countries are expected to push for greater access to Japan’s lucrative agricultural market.

Agriculture, however, may become one of the most sensitive issues in the negotiations.

Japan has historically protected domestic farmers through high tariffs and import quotas on products such as beef, pork, wheat and dairy.

Mercosur countries, particularly Brazil and Argentina, are among the world’s largest agricultural exporters and are likely to demand wider market access.

Trade between Japan and Mercosur has expanded steadily in recent years. Japan imports large volumes of food products, minerals and energy resources from the bloc while exporting automobiles, machinery, electronics and chemical products.

Brazil, home to one of the largest Japanese diaspora communities outside Japan, remains Tokyo’s biggest economic partner in Latin America.

The talks also come as Mercosur seeks to broaden its network of trade partners beyond traditional markets.

The bloc finalised a long-delayed trade agreement with the European Union in 2024 after years of negotiations, though ratification challenges remain in some European countries due to environmental concerns linked to Amazon deforestation.

Analysts say a Japan-Mercosur agreement could enhance cooperation in clean energy, critical minerals and infrastructure development, particularly as demand grows for lithium used in electric vehicle batteries.

Argentina and Brazil hold significant reserves of lithium and rare earth resources that Japanese firms are increasingly targeting for long-term investment.

No formal timeline for the negotiations or possible conclusion of the agreement has yet been announced.