Japan, India EPA to Encourage Steel Trade

Japanese steel export would increase to Japanese transplants and local manufacturers in India without import tariff when Japanese and Indian government reached final agreement for Economic Partnership Agreement. India will remove the tariff for almost all steel products in 5 years after the effect of the agreement. Japanese steel makers expect India will increase the steel import despite of recent higher yen rate when Japanese steel users expand the operation in India and the world No.4 steel consuming country increases the consumption every year.

The governments reached basic agreement for EPA in September after the negotiation since 2007. Indian Prime Minister Manmohan Singh and Japanese Prime Minister Naoto Kan signed the agreement on Monday in Tokyo.

Through the agreement, around 94% of the trade between Japan and India enjoys tax free condition. India removes 5% import tariff for hot and cold rolled flat steel, alloyed steel and galvanizing steel in 5 years under the steps to reduce the tariff by annual 0.83 percentage points in 6 years while the tariff of some items is removed in 10 years. The agreement gets into effect a coupe of months after Japanese Diet approves the agreement. The tariff is completely removed in 2017.

Japanese steel export represents 13.5% of 569.6 billion yen of total export to India in 2009, according to Ministry of Finance. The steel is No.3 largest export items to India after machinery and chemical products. Indian steel export represents 2.5% of 344.5 billion yen of total export to Japan. The agreement encourages the steel trade.

Japanese steel export increased by 39% to record 890,000 tonnes in fiscal 2009 ending March 2010 from 2008 due to strong demand from transplants of Japanese automakers. Japanese companies expand the activity in India and Japanese direct investment tripled in 2008 from 2007. The trend would increase the steel demand in India. Japanese steel makers expect the agreement encourages the export when the competition gets severer in Indian market while South Korea already had EPA with India.