Now it’s settled, the world’s largest free-trade agreement, which concerns 30 percent of world trade, between the EU and Japan. It will enter into force in two months, in February, and means that all customs duties are immediately removed on Japanese shoes sold in Europe, and stepped down the other way. Here I go through what it means for the shoe industry in each region.
Since 2013, the EU and Japan have worked to get the free-trade agreement in place, and this week it was finally signed and finalised. All that remains is for it to be ratified by all EU member states and Japan, which is only a formality. It will therefore most likely go into force in February 2019, since they want it ready before the current EU commission’s mandate ends. You can read all about the agreement here, but here I will summarize what it means for the shoe industry.
If we start with what is most interesting for us living in Europe, it is that all customs duties are completely removed for Japanese shoes sold to the EU. This means that it will be cheaper for customers to buy directly from Japan, either online or when traveling, and that it becomes cheaper and easier for retailers or wholesalers to import Japanese shoes and sell in the EU. However, since the VAT is as low as eight percent in Japan, it will still be a little higher here in Europe, but it will be a clear difference compared to now.
For European shoes sold in Japan, it is a bit different. Since Japan has a relatively large domestic production of shoes, and today’s competition is already high from European manufacturers, this is one of the areas where they will phase out duties slower. Today, customs duty is 30 percent, it is directly reduced to 21 percent in February, and then during a period of ten years it’s stepped down to zero. This also applies to leather, which makes it easier for Japanese shoemakers to import European leather, which is often used for better shoes.
What does this mean for the industry for classic shoes and bespoke shoes in the respective markets then? The answer is likely that it will be any dramatic changes in the short term, but in the long term there may be a lot of things that is changed.
For Japanese manufacturers it is now important to establish themselves in Europe, something very few have done so far. It is necessary that the tariffs are removed completely straight away in order to make this possible, and government-sponsored investments such as Japan Shoes Export Platform, JSEP, which I’ve written about earlier and who have exhibited in the super trunks in both London and Stockholm, are important factors to succeed with this. They also exhibit at fairs like Pitti Uomo and Micam, as many other Japanese brands have begun to do now. As I’ve mentioned earlier, Japanese brands, both factory-made and bespoke, are generally very affordable in their home country, which will now be the case in Europe as well in another way now.
In Japan, European brands already have a large part of the market today, as Japanese is generally very fond of European and American products. Even though they have to pay more for them. When this eventually will be leveled out, it will be even tougher for the Japanese manufacturers to compete in their home country. On the RTW side, some factories are likely to be closed, it is already tough for many people and if you do not start selling internationally, it will be difficult to handle. Bespoke shoemakers also have a tough competition today, especially for new players it’s a struggle to survive. It is likely that the already established will continue to grow and use more freelancers to meet demand, and that new bespoke makers will work for the larger ones to a greater extent.
The shoe district Asakusa in Tokyo will probably look different in 10-15 years. Today, there are a lot of small and big players everywhere here, but in the long run, it’s likely to be more like in Europe, the big ones manage, while the small ones may disappear in many cases. This is a development that would not necessarily be different if the free-trade agreement hadn’t happened, it has been going in this direction anyway. Maybe the opening to the European market will be the rescue for many Japanese shoe manufacturers? The future will tell.