On February 10 in Tokyo, Japan’s Prime Minister, Shinzo Abe, and his Mongolian counterpart, Chimed Saikhanbileg, signed an economic partnership agreement (EPA) between their two countries.
Negotiations towards the EPA began in 2012. The deal includes an agreement that both countries will lower almost all of their tariffs on goods over a period of 10 years.
Mongolia will remove its import duty on most Japanese cars, while Japan will eliminate its tariffs on the majority of Mongolia’s exports of industrial products (including cashmere) over the same period. Japan will also reduce its duty on Mongolian processed beef, subject to a quota.
Passenger vehicles and their components amount to more than half of Japan’s total exports to Mongolia, which totaled some USD290m in 2013. Mongolia’s exports to Japan, which are intended to be boosted by the EPA, currently consist mainly of coal and other natural resources, and outflows were worth just over USD20m in the same year.
Completion of the EPA is also intended to ensure that Japan can access stable future supplies of rare earths, which are used by its motor industry. Such supplies from China have been put in doubt after China replaced its export quotas, which were challenged before the World Trade Organization, with a licensing system, on top of high export duties.
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