July 6, 201712:15 PM ET

European Council President Donald Tusk (left), Japanese Prime Minister Shinzo Abe (center) and President of the European Commission Jean-Claude Juncker meet at the European Council on Thursday in Brussels.
AFP/Getty Images

The European Union and Japan have reached an agreement in principle for a new free trade deal, set to lower barriers to trade between two of the world's most important economic powers.

The Economic Partnership Agreement signed in Brussels Thursday comes after 18 negotiating rounds over four years.

It is, on its surface, "a deal easing the flow of cheese in one direction and cars in the other," as The Economist writes.

But it is also a statement about free trade on the eve of the G20 summit in Germany, which U.S. President Donald Trump will attend.

In January, Trump pulled the United States out of the Trans-Pacific Partnership, a major trade deal with Japan and other Pacific Rim nations.

"Ahead of the G20 summit tomorrow, I believe Japan and the EU are demonstrating our strong political will to fly the flag for free trade against a shift toward protectionism," Japanese Prime Minister Shinzo Abe said at a news conference, Reuters reported. "It is a strong message to the world."

EU Commissioner for Trade Cecilia Malmstrom added that "we are demonstrating that the EU and Japan, democratic and open global partners, believe in free trade. That we believe in building bridges, not walls."

The Economist says both sides "want to show that they can fill the vacuum left by America's withdrawal under Mr. Trump from its role as the world's trade leader."

"Although some are saying that the time of isolationism and disintegration is coming again, we are demonstrating that this is not the case," European Council President Donald Tusk told reporters, according to Reuters.

There are details that still need to be ironed out. The European Commission said a statement that negotiators hope to finalize the text by the end of the year. Then it will need to be formally approved by the countries involved, with the aim of it being in force in early 2019.

The EU and Japan already have strong economic ties, and together account for a third of the world's GDP, Reuters reports.

The agreement stands to eliminate tariffs on more than 90 percent of EU exports to Japan when it goes into effect, ultimately saving EU exporters some $1.1 billion in customs duties annually.

In the beginning, the EU would eliminate tariffs on 75 percent of its imports from Japan. That would climb over 15 years to nearly 100 percent. Tariffs on cars from Japan would be phased out within seven years, according to the agreement in principle.

The European Commission also noted that the deal will "include a specific commitment to the Paris climate agreement." Last month, Trump announced that the United States is also withdrawing from that agreement.

Four years ago, when the talks began, it was "neither side's main priority," the Economist writes. Aside from the changing U.S. stance on trade, the magazine adds that "the EU wanted success before Brexit negotiations and national elections swamp its agenda."