1B691 Cofficial]ournal of the European communities ^oCh!59^ 
lnpresentcircumtances,atleastthefollowingclanfi mother methods can he used provided that their 
cation should he added^ equivalence has heen demonstrated hy the manufac 
turer to the satisfaction of theLechnicalSer^iceB 
POone at Brussels, 25 April 1991. 
Opinion on relations between die United States and Japan and between the European 
community and Japan 
(91^Cf59^20) 
On 2B^ starch 1990 the Economic and Social committee, acting under the fourth paragraph 
of Article 20 of itsRules of Procedure,decidedto draw upanOwninitiati^eOpimonon 
Relations between the United States andjapan and between the European Commumtyand 
Japan. 
^PheSection forE^ternal Relations, which was responsiblefor preparing theCommittee^s 
worl^ on the subject, adopted its Opinion on9Apnll99PLhe Rapporteur was Air Romoh. 
At its 286th plenary session (meeting of 25Apnl 1991),the Economic and Social Committee 
unanimously adopted the following Opinion. 
in this Opinion theEconomic andSocial Committee 
considers the development of economic relations 
between the United States andjapan and between the 
European Community andjapan. 
LheOpmionbegins by recalling that recently feelings 
of distrust, frustration and hostility towards Japan ha^e 
developed in the United States, in tandem with the 
increase in the US trade deficit, the penetration of 
Japanese products and the acquisition b^ Japanese 
firms of US industry and real estate (see point 1.1). 
Japanhasreacted withequal bitterness,pointmgout 
(pointl.2) that the deterioration inthe United States^ 
economicsituation was essentiall^due to thelacl^of 
competitiveness ofUS exports,an apparently dwindling 
entrepreneurial spirit and inadequate domestic savings, 
aggravated by the impact of deficits in the US balance 
of payments and federal budget and long penodsdunng 
which the dollar was o^er^Balued. tn!990,withthe aim of removing the main causes of 
the economic friction which had developed, the US and 
Japanese governments concluded an agreement entitled 
the^Structural impediments mitiati^(SH) which con 
stitutes an unprecedented experiment in bilateral 
relations (pointlm^. 
Under the SH, each partner undertakes to tal^e economic 
and social measures designed to improve thechmate 
and conditions governing relations between the two 
countries. If successful, the SH may also improve 
relations with third countries. 
On EC^Japan relations, the Opinion examines the situ 
anon of imbalance which de^elopedmthe^Os and ^80s 
asaresult of the sharp growth injapanese exports and 
the closedjapanese market combined with the lacl^ of 
interest shown by EO firms in exporting to Japan 
(point 2.1). 
Lhe Community^ trade policy ^^^B^ Japan 
developed mainly throughthe application of the anti 
dumping rules drawn up b^ the general Agreement on 
LanffsandLrade(C^ALL)(point22) 
No C 159/64 Official Journal of the European Communities 17. 6. 91 
For Japanese firms, the arrival of the Community-wide 
single market by the end of 1992 continues to awaken 
fears that they will be hit by discriminatory protection­
ist measures (point 2.3). 
On the other hand, they are aware of the attractions 
of a large homogenous market (320 million people) 
open to cooperation with the countries of Central and 
Eastern Europe. 
The increase in direct investments by Japanese firms in 
productive plant in Europe is a response to these new 
prospects (point 2.4) and gives some indication of their 
desire to play an active part in the development of the 
European economy. 
Special problems have arisen in the motor vehicle and 
other sensitive industries concerning the proportion of 
components and parts supplied by EC firms contained 
in the final products (point 2.5). 
In January 1990 meetings were held between the 
Japanese Prime Minister and representatives of the EC 
Commission, followed by meetings at technical level. 
The two sides declared their wish to strengthen mutual 
cooperation and establish close relations on a perma­
nent basis (point 2.5). 
The final part of the Opinion sets out conclusions and 
puts forward recommendations for the improvement of 
EC-Japan relations. 
The need to deepen understanding of each other's cul­
tural and social aspects is stressed (point 3.4). 
Japan's socio-economic structures are changing: the 
efforts of the Japanese authorities to open up the 
internal market, boost domestic demand and public 
investment and improve its population's quality of life 
must be followed with interest (points 2.2.5, 3.2, and 
3.10). 
EC entrepreneurs should step up their own efforts to 
establish themselves permanently on the Japanese mar­
ket (points 3.5 and 3.6). The rise in direct Japanese 
investment in Europe should be welcomed, since it 
involves transfers of technological know-how and 
organizational methods, and a growth in new jobs 
(point 3.8). 
Finally, the Opinion points out that the world's three 
main centres of political and economic power—the United States, the European Community and Japan— 
should cooperate more closely in order to solve the 
problems of the international economy (point 3.11). 
The world scene against which this Opinion is set 
From the end of the Second World War up to the mid-
1980s the world stage was dominated by two countries 
exercising virtually absolute power: the United States 
and the Soviet Union. 
The United States enjoyed clear superiority in the politi­
cal, military, industrial, financial and scientific spheres. 
In contrast, the Soviet Union's ideological, military and 
economic leadership prevailed in extensive areas of the 
less developed world. 
In the space of five years, between 1985 and 1990, this 
situation radically changed. The Soviet Union saw a 
rapid decline in its political power on the world stage 
and is currently torn by dramatic economic and struc­
tural upheavals. Nonetheless, its massive military force 
is still a factor to be reckoned with. 
Today the international scene is dominated by three 
centres of power, each with its broad area of influence: 
The United States, Japan and the European Com­
munity. 
The United States is now the only superpower to exerci­
se international military, political and economic in­
fluence. However, its leadership is constrained by 
domestic economic and financial problems and the need 
to coordinate any international political action with its 
allies, within the responsible political institution 
(United Nations). 
Community Europe, reinvigorated by the pending Sin­
gle Market and reinforced by the reunification of Ger­
many, faces an exciting future with the opening up of 
Eastern Europe and possibly the Soviet Union too. 
However, it still lacks political clout. 
Japan, which has become a world economic and finan­
cial power, is in a similar situation to the EC. 
All three centres of economic power, the United States, 
Japan and Europe, have market economies and already 
bound by very close ties: 60% of international trade, 
90% of world investment, an overwhelming share of 
world Research and Development (R & D) capacity, a 
virtually exclusive monopoly over new technology and 
lastly, absolute pre-eminence in the financial and 
monetary sectors. 
Nonetheless, in terms of their economic and social 
structures and cultural origins these three powers differ 
substantially from each other. In the economic sector, 
17. 6. 91 Official Journal of the European Communities No C 159/65 
however, all three adhere to the principles of the free 
market economy. 
Relations between the three powers have had their ups 
and downs, with phases of productive cooperation and 
common objectives alternating with periods of friction 
and sharp clashes of interests. 
Nonetheless the partners are united by their increasing 
interdependence and clear duty to draw up plans, within 
the framework of the United Nations, for an internatio­
nal order counteracting international instability and 
tensions and to frame new arrangements for 
cooperation between the industrialized countries and 
the less developed countries (LDCs). 
The purpose of this Own-initiative Opinion is to shed 
light on the state of US-Japan and EC-Japan economic 
relations and to chart the way ahead for more effective 
cooperation in future on a number of fronts. 
1. Relations between the United States and Japan: 
frictions between partners 
1.1. US anxieties 
1.1.1. In recent years a highly disquieting wave of 
frustration, distrust and mutual hostility has emerged 
in the two friendly partners. 
In a recent US opinion survey, 68% of the respondents 
mentioned Japan as an even greater threat to the United 
States than the Soviet Union had been in the past. 
Assailed by criticism and accusations, Japanese public 
opinion reacted with resentment and intolerance reflec­
ted in a surge of nationalism. 
1.1.2. The cause of the current unease in the United 
States lies in the general public's frustration and anxiety 
fuelled by the incomplete information provided by the 
press and declarations by certain politicians who find 
it easy to blame Japan for being the main cause of the 
woes of the US economy, the persistent trade deficit (]) 
and the difficulties faced by US exports. 
The US mass media also tend to highlight the acqui­
sition by the Japanese investors of major sectors of US 
industry and the property market. 
(') In 1987 the US ran a US$ 52 000 million trade deficit with 
Japan; this dropped to US$ 45 000 million in 1989 and US$ 
38 000 million in 1990. In addition, the Japanese economy is spared the burden 
of heavy military expenditure (2). 
1.1.3. In addition, US economic experts and politi­
cians find the Treasury's increasing dependence on 
financing from Tokyo (which is now vital to cover the 
federal budget deficit) particularly disquieting. 
Within a short space, as a result of the cumulative effect 
of these financial movements, the United States has slid 
into a state of heavy debt to international financial 
sources, particularly Japan. 
Underlying the above developments is the vague fear 
current among public opinion, politicians and econo­
mists that the United States is gradually losing its tradi­
tional technological leadership and hence its 'status' as 
a world economic superpower. 
1.1.4. Prompted by these anxieties, US moves have 
been in progress for some time to tackle the problem 
of economic relations with Japan by resorting to all 
manner of bilateral trade instruments and 'managed 
trade' arrangements, even if these breach commitments 
under GATT multilateral agreements. 
Consequently, during the 70s and '80s a large number 
of general and specific agreements were framed which 
contained increasingly precise demands by the United 
States for Japan to liberalize certain categories of prod­
ucts or types of operations in order to give US exports 
preferential access to the Japanese market. Again and 
again the Tokyo Government was asked to give volun­
tary restraint undertakings as regards the export of 
particular products (cars, steel, semi-conductors, etc.). 
The tangible results of these operations proved disap­
pointing and fuelled further mutual recrimination and 
heated disputes. 
1.1.5. Some groups within Congress and Washington 
intellectual circles have become increasingly convinced 
that it is wrong to harbour any illusions: the Japanese 
would never change their attitudes, their industrial 
policies or their desire to conquer world markets. The 
only way to fight back and curb such expansionist 
tendencies is direct, unilateral retaliation in the shape 
of appropriate legislation. 
This line of argument led the US Congress to draft and 
approve the protectionist Trade Act of 1979, reinforced 
10 years later by the Omnibus Trade and Competiti­
veness Act of 1988, which President Reagan signed in 
July that year. 
(2) Japan points out that it has stepped up its aid to the LDCs 
and now heads the list of donor countries (at over US$ 10 000 
million per annum). In addition, Japan provides substantial 
aid to Eastern Europe. 
No C 159/66 Official Journal of the European Communities 17. 6. 91 
The Economic and Social Council (ESC) has had 
occasion to express its views on these laws, which are 
inconsistent with the multilateral undertakings given 
by the United States in international forums and in 
particular undermined the Uruguay Round of GATT 
negotiations (!). 
In July 1989 the Bush Administration took the initiative 
of proposing to the new Japanese Government headed 
by Prime Minister Toshiki Kaifu that it made a fresh 
effort on the bilateral front to get trade relations bet­
ween the two countries off to a new start and improve 
the climate of mutual relations. This proposal, known 
as the 'Structural Impediments Initiative-SH' will be 
discussed below (point 1.3). 
1.2. Japanese response 
1.2.1. The wave of criticism and recrimination in the 
United States, which does not seem to have abated now 
that the Gulf War has ended, has directly affected 
Japanese political and economic circles, which remain 
highly sensitive to US arguments, and triggered heated 
and conflicting reactions. 
Japanese public opinion is still largely favourable to 
the United States. The assistance provided during the 
difficult years of post-war occupation and the aid recei­
ved during the period of reconstruction have not been 
forgotten. 
However, such feelings have recently been marred by 
bitterness, disillusionment, pessimism for the future and 
certain symptoms of growing nationalism. 
1.2.2. In the first place Japan refuses to accept the 
argument that it is mainly to blame for US economic 
difficulties. 
Japan explicitly urges the United States to acknowledge 
that the root cause for its economic problems is the 
misguided economic policy pursued in the '80s. This 
period was not only one of proud expansion (as the 
official propaganda of the Reagan era has so often 
repeated) but also one which laid the foundations for 
the structural imbalances now becoming visible, which 
indicate that the country has been living far too long 
beyond its productive means. 
The most obvious sign of this plight is the dwindling 
competitiveness of US exports on international markets, 
which in the past were further undermined by the policy 
of an overvalued dollar. 
1.2.3. Japanese observers hold that one of the key 
reasons for this phenomenon is the psychological chan­
ge that has recently taken place in US businesses, which 
seem to have lost their traditional creative drive and 
now focus solely on the mirage of short-term financial 
(•) OJ No C 332, 31. 12. 1990, p. 151. benefits and quick profit. (2) This approach is argued 
to have generated excessive faith in the idea of a 'post-
industrial society' based virtually entirely on services, 
at the expense of manufacturing industry and pro­
duction of consumer goods, which today the United 
States has to import on a large scale. 
Japanese critics also claim that Japan cannot be blamed 
if the United States has in the past invested far less in 
plant and research than Japan and even Europe. 
1.2.4. Further, the United States has had to fund its 
own needs from borrowed capital (a substantial part 
of which comes from Japan) since its own level of 
domestic savings was inadequate. It has therefore had 
to maintain high interest rates. This has sometimes led 
to an overvalued dollar fluctuating sharply against 
other currencies. This situation persists. 
According to some Japanese (and even US) observers, 
the declining standards of the US educational system 
(especially at primary and secondary school level) may 
also have contributed to the difficulties besetting the 
country's economy. 
1.2.5. However, the theories advanced by Japan were 
not confined to a defence against US accusations but 
included an analysis of the internal aspects of Japanese 
economic policy. This new development is of some 
importance. 
Japan recognized, for instance, that its internal market 
had effectively remained isolated and sealed off for far 
too long and that the complaints of other countries 
are at least partially justified. Japan could not have 
continued to conduct a trade policy designed solely to 
boost exports without making space for goods and 
services imported from third countries. 
Consequently urgent action was needed and the Uru­
guay Round of GATT negations are seen by Japanese 
political protagonists as an opportunity for a general 
reduction of non-tariff barriers by all contracting par­
ties. 
(2) The President of Sony, Mr Akio Morita, in his much-discus­
sed book 'The Japan that can say NO', co-authored with the 
politician Mr Shintaro Ishihara, claims that something has 
gone wrong with US business. Its only concern is four-
monthly balance sheets and share ratings rather than long-
term investment. Apparently it has forgotten that the creation 
of real wealth presupposes the creation of new value-added, 
especially in manufacturing industries able to compete on the 
international market. 
17. 6. 91 Official Journal of the European Communities No C 159/67 
1.2.6. A number of more recent Japanese studies 
indicate that the time has come to move to a new phase 
and away from a trade policy where national export 
priorities were established and efficient plans as to how 
targets were to be attained were drawn up by Japan's 
Ministry for International Trade and Industry (MITI). 
It is claimed that the MITI's activities in recent years 
have been confined to identifying the long-term stra­
tegic objectives to be pursued by Japan. 
Such claims are viewed with considerable caution in 
the United States and EC. 
Though the MITI has apparently scaled down its direct 
efforts to guide and influence the various sectors of the 
economy, close-knit cohesion continues to prevail in 
Japan's systematic, consistent pursuit of long-term 
goals, which are invariably attained. 
In practice the 'Japan Inc." concept does not yet seem 
to have been superseded. Japanese firms are able, now 
as in the past, to make substantial profits on the dom­
estic market, which is well-protected and allows the 
maintenance of high prices. In this way they can 'subsi­
dize' their exports and frame long-term expansion pro­
grammes, which even allow for sustained losses over a 
lengthy period, for the ultimate aim of penetrating 
specific markets (including both the industrialized 
countries and LDCs) and establishing bridgeheads in 
pre-targeted sectors. In this connection, firms can rely 
on the direct support of government agencies and the 
cooperation of a powerful financial system which pro­
vides them with long-term funding at interest rates well 
below the rates prevailing on US and EC markets. 
However, the Japanese economy seems to be undergo­
ing major structural changes. 
One important typical change is the climate of cut­
throat competition between Japanese firms within one 
and the same industrial sector. This very specific form 
of competition is exclusively based on quality and inno­
vation as opposed to prices (which remain very high 
on the domestic market). 
Such competition extends beyond national frontiers to 
the markets of South East Asia, North America and 
Europe. 
The large Japanese industrial conglomerates, on 
account of their size, financial authonomy and 'global' 
approach to the world market, are now de facto 'multi­
national' and no longer heavily dependent on Japanese 
economic policy. 1.2.7. Other observers and experts have also focused 
attention on the far-reaching upheavals currently under 
way in the very structures of Japanese society (*). 
They have pointed out, for instance, that demographic 
indicators augur a significant ageing of the population, 
together with behavioral changes whereby individuals 
and families will gradually turn away from the values 
of sobriety, frugality and acceptance of spartan living 
conditions towards a higher standard of living. 
The rejection of traditional values is particularly mar­
ked in the younger generation. 
It is even claimed that changes are discernible as regards 
total dedication to work, loyalty to the group and the 
company and the relinquishing of individuality, all of 
which distinguished the Japanese worker in the decades 
from the end of the war to the present day (2). 
These trends will obviously move very slowly. But, 
should they become established, could alleviate concern 
over the continued, unstoppable growth of Japanese 
economic power, entailing deficits and tensions with 
both the United States and the rest of the world. 
We should therefore ask ourselves about the future of 
Japan as a country whose population wishes to model 
itself more on the behaviour of the affluent societies of 
the Western world and to derive more direct economic 
and social advantages from Japan's extraordinary econ­
omic success. There is greater willingness to participate 
and contribute to the world political and economic 
order while still retaining distinctive Japanese cultural 
characteristics. 
With this in mind, even the large Japanese trade sur­
plus (3) could ultimately be spontaneously reabsorbed 
as a result of the above phenomena of an ageing popu­
lation, increased quality of life and domestic consump­
tion and the sharp rise in social welfare costs. 
As already mentioned, this will be a slow process and 
encounter much resistance but it seems reasonable to 
hope that the western countries (first and foremost 
(*) See 'The Sun also sets — the limits to Japan's economic 
power' by Bill Emmott, The Economist, London, which 
received widespread circulation in Japan. 
(2) Western observers, however, point out that the Japanese 
industrial workforce still work a far longer week/year than 
its EC or US counterparts. In some instances, working hours 
have actually increased if overtime is taken into account. 
(3) The appended Table 1 sets out statistics on Japan's overall 
trade surplus, which was as high as US$ 82 700 million in 
1986 (of which US$ 51 400 million vis-a-vis the United States). 
Other statistics indicate that the US ran a US$ 52 000 million 
trade deficit with Japan in 1987; dropping to US$ 38 000 
million in 1990. 
No C 159/68 Official Journal of the European Communities 17. 6. 91 
the United States and the EC) with which Japan has 
substantial political, economic and cultural relations 
will do everything possible to facilitate and encourage 
the trend in Japanese society that currently seems dis­
cernible. 
1.3. The 'Structural Impediments Initiative': An agree­
ment 'sui generis' between the United States and 
Japan 
1.3.1. The SII talks, launched in July 1989 by Presi­
dent Bush, are unique. Though their stated aim is to 
remedy imbalances in trade between the United States 
and Japan, they focus on the root causes of the two 
countries1 economic and social policies and take a new 
approach to matters previously considered to be the 
exclusive preserve of the individual governments. 
The SII is less a traditional trade agreement than a 
reciprocal commitment autonomously given by each 
party on points suggested by the other. 
This 'sui generis' agreement is therefore an attempt 
which, if successful, could influence relations between 
Japan and the entire community of Western countries. 
As devised, it is an innovatory model which the United 
States could also propose (or impose) in respect of other 
countries. 
1.3.2. In April 1990 two 'ad interim' reports were 
signed in Washington which separately list the measures 
that the Japanese and US governments agree to take at 
the request of the other party, the following June the 
two provisional reports were consolidated in a single 
final document setting out in detail the aims which the 
two parties undertook to pursue. 
During the talks, the United States presented an exten­
sive set of proposals and suggestions, which were large­
ly accepted by Japan. 
The Japanese Government's undertakings can be sum­
med up as follows: 
— acknowledgement of the need to reduce Japan's 
current trade surplus by adopting economic policies 
aimed at stimulating non-inflationist growth gener­
ated by domestic demand; 
— substantial increase in public investment (increase 
of YEN 430 trillion over ten years — approx. 10 % 
of GDP) with priority emphasis on urban infrastruc­
ture, housing, construction, airports and ports, 
environmental protection and conservation of the 
natural heritage. The stated aim is enhancement of 
the popuation's quality of life and the absorption 
of a substantial part of the capital constituted in 
Japan, thereby giving a sharp boost to domestic 
demand and imports and benefiting the national 
economy as a whole; — alleviation of urban land cost discrepancies which 
are a major obstacle to the siting of foreign firms' 
offices and production units, by making more pub­
licly-owned land available for building purposes; 
— liberalization of the distribution sector which is 
now a de facto obstacle to other countries' exports 
reaching the end consumer in Japan; 
— streamlining of import procedures; 
— more stringent application of Japanese legislation 
protecting market competition from illegal inter­
company deals, restrictive practices, cartels, mon­
opolies, barriers to market access and providing for 
measures to check preferential agreements between 
large concerns designed to keep out foreign entre­
preneurs (Keiretsu relationships); 
— gradual alignment of the Japanese working week 
with practices in Western countries; 
— more active and systematic curbs on price differen­
tials between Japanese goods sold on the domestic 
marekt and the very low prices at which the same 
products are sold on external markets. 
Lastly, the US negotiators explicitly requested preferen­
tial access for specific US industrial and agricultural 
exports and services (forestry products, satellites, air­
craft, supercomputers). 
1.3.3. Here it is clear that tradional trade clauses 
go hand in hand with measures relating to national 
economic and social policy which are unprecedented in 
the history of bilateral economic agreements. Some 
Japanese circles have condemned them as intolerable 
interference, infringing Japans's sovereignty. 
Interestingly, however, many of the US demands are 
based on proposals which had already been tabled and 
discussed by Japanese politicians and economists in 
favour of opening up the country to the outside world 
(cf. the 1986 Mekawa report). This partly explains the 
favourable reaction of Japanese public opinion to this 
initiative. 
1.3.4. The proposals addressed by Japan to the US 
Administration and accepted by the latter, also contain 
a number of new and somewhat surprising features. 
Washington is asked to take decisive action to remedy 
the structural problems inherent in the federal budget 
deficit, the low US family savings ratio, the failure of 
17. 6. 91 Official Journal of the European Communities No C 159/69 
US products to compete successfully on the inter­
national market, the emphasis placed by US firms on 
short-term management, the low commitment to 
R&cD and, lastly, the poor standard of schooling and 
vocational training. 
Nor are the unduly tough discretionary regulations 
impeding Japanese imports into the United States over­
looked. 
These requests largely relate to US domestic policy and 
have already been identified by the Bush Administration 
as priority aims for the near future. However, they have 
been adopted as bilateral commitments vis-a-vis Japan, 
almost as if they exclusively concerned the two partners 
as opposed to exercising an undoubted influence on 
the balance of relations between the world's largest 
economic power and the rest of the world. From this 
angle, the SII agreement has been criticized by Com­
munity observers. 
1.3.5. Cooperation within the SII framework has 
only recently got under way and a number of difficulties 
and delays are already on the horizon. 
Regardless of this undertaking, US-Japan relations are 
bound to become increasingly close in the near future, 
especially if the predicted expansion of the 'Pacific 
Area' (which is far more dynamic than the North Atlan­
tic area) becomes a reality. 
2. EC-Japan relations 
2.1. From initial indifference to the flood of Japanese 
exports in the '70s and '80s 
2.1.1. Immediately after the war, up to the late '60s, 
relations between Japan and the individual European 
countries (grouped within the European Communities 
since 1959) were far from close. 
Community businessmen saw no particular reason to 
take an interest in Japan, which they regarded as a 
remote, unfamiliar country, grappling with serious 
economic difficulties. 
On the Japanese side, Europe was seen as a region 
with great cultural traditions, capable of substantial 
economic growth but of no immediate interest. Atten­
tion was focused primarily on South East Asia and on 
bilateral relations with the United States, which became 
very close after 1950, as a result of the Korean War. 2.1.2. It was not until 1970 that trade relations 
between the two areas rapidly gathered momentum, 
triggered by Japan's impressive industrial and trade 
potential. 
During the decade 1970 to 1980 trade between the 
partners shot up from US$ 30 000 million to 
US$ 250 000. However, the balance was heavily in 
favour of Japan, which quickly accumulated a large 
export surplus. European exports offset only 34% of 
imports from Japan and found it difficult to penetrate 
the Japanese market. 
The Japanese 'economic miracle' therefore became a 
reality for Europeans as well as the United States. 
2.1.3. European concern was soon translated into 
pressures for the adoption of protectionist-type 
measures to curb the flood of Japanese products. Sev­
eral of the Member States' governments took the step 
of reactivating the large number of quota restrictions 
left over from the immediate post-war period. Others 
adopted new ones. 
Such action was demanded by industry and the trade 
unions, enraged at aggressive Japanese export tactics. 
Such exports were sold at rock bottom prices (justified 
only partly by low labour costs) and targeted danger­
ously on specific sectors and segments of the market, 
jeopardizing national industrial firms and even forcing 
their closure. 
The EC Commission—which only received full powers 
to conduct a common trade policy in 1970—initially 
stood by passively while the Member States tried to 
defend themselves in a period of serious economic crisis, 
inflation and growing unemployment, generated by the 
1973 and 1979 oil shocks. 
On its side, Japan seemed unperturbed by the absence 
of a uniform Community-wide trade policy and con­
tinued to step up contacts and talks with the govern­
ments of the individual Member States, offering prag­
matic solutions in the shape of partial voluntary export 
restraint agreements. For a long time little notice was 
taken of the EC authorities in Brussels, despite the 
latter's right to discuss relations affecting the EC in its 
entirety on a global basis. 
2.1.4. This disjointed state of affairs hindered EC 
trade relations with Japan from taking coherent shape 
so that for a long time they continued to be fragmented, 
with reactions varying from country to country. Hardly 
surprising in the circumstances that frictions and trade 
disputes proliferated. 
No C 159/70 Official Journal of the European Communities 17. 6. 91 
The sectors worst hit by the first wave of Japanese 
exports were shipbuilding, electronic goods, audiovisu­
al and photographic equipment, cars and motorcycles. 
In some sectors, the very survival of EC firms was 
threatened. 
2.2. Dynamic phase of EC trade policy 
2.2.1. In the '80s the EC Commission started to 
frame its own trade policy vis-a-vis third countries. 
The starting point was effective application of the 
GATT multilateral anti-dumping agreements. With 
increasing frequency, procedures were instigated to stop 
third countries exporting goods at prices below those 
obtaining on their home markets. While this policy is 
not specifically directed against Japanese exports, the 
fact remains that Japanese products are frequently 
affected. 
2.2.2. In 1982 the French Government took the con­
troversial step of concentrating customs clearance oper­
ations for Japanese video recorders in a single regional 
customs office, at Poitiers, (a decision which was sub­
sequently revised following EC intervention) (1). 
In 1984 the EC instigated an anti-dumping procedure 
in respect of imports of electronic typewriters. In 1985 
it was the turn of photocopiers and, in 1986 microwave 
ovens, printers and microconductors. 
2.2.3. The purpose of these much publicized initiat­
ives was primarily to impress on Japan that the EC 
would not stand by idly while its traditional or new 
technology industries were destroyed as a result of trade 
practices deemed to be unfair. Concurrently, Brussels 
explored the feasibility of adopting, within the frame­
work of GATT, safeguard measures selectively targeted 
on specific countries. 
The EC Commission has also focused attention on the 
expediency of supporting the US attempt to give legal 
substance to the idea that advantages must be equitably 
balanced in relations between the GATT contracting 
parties. Legal action and safeguard measures would 
then have been justified in the event of persistent 
Japanese structural trade surpluses. (This attempt as 
we know, was unsuccessful.) 
With a view to improving its relations with Japan, the 
EC launched a number of positive measures, including 
training schemes enabling young business executives 
(') In Japan the Poitiers episode triggered fierce indignation and 
for a long time was seen as symbolizing the EC countries' 
protectionist attitude. from the Twelve to spend extended periods in Japan 
for the purpose of studying, working and learning 
Japanese (2). 
The Commission also made approaches to the Japanese 
authorities in an attempt to improve market access for 
EC goods and services. 
2.2.4. In 1984, after lengthy debate, the EC approved 
a regulation (commonly known as the 'New Instru­
ment') designed to strengthen EC trade policy to curb 
illegal trade practices by third parties that were not 
covered by anti-dumping legislation (Regulation 2641/ 
84). These provisions came as a response to the US 
Congress measures reinforcing US unilateral trade safe­
guard powers (Section 301 of the Trade Act of 1979). 
The 'New Instrument', however, was of limited scope 
and was never applied vis-a-vis Japan (3). 
Lastly, in 1987 the EC instigated a procedure (sub­
sequently upheld) under GATT against discrimination 
in the Japanese system of levying duties on imported 
wines and alcoholic beverages. Here the EC started to 
turn its attention to the opening-up of Japan's internal 
market, a matter in which the United States alone had 
previously been interested. 
2.2.5. The Japanese authorities reacted strongly, 
accusing the EC Commission of interpreting the GATT 
anti-dumping rules in an arbitrary manner applying 
devious and discriminatory procedures and introducing 
new protectionist instruments into its trade legislation. 
In addition, the Tokyo Government drew the attention 
of the Community and the governments of the individ­
ual EC Member States to the changes effected in the 
mid-'80s in Japanese trade policy, reflected in substan­
tial cuts in, and even abolition of, many customs duties, 
the scrapping of many import quotas and the improve­
ment and streamlining of certification systems and 
import procedures. 
Japan seems seriously committed to assuming a new 
profile, no longer anxious to push its own exports at 
(2) See European Community Export Programme 'Exprom' and, 
in particular, one of its key elements: the Executive Training 
Programme. 
(3) The Commission is currently examining, in accordance with 
this Regulation, an official complaint submitted to it by the 
European Community Shipowners Association concerning 
the Japanese Harbour Management Fund. (The alleged illicit 
practices consist of contributions by the shipowners to a 
Harbour Fund on the basis of an agreement concluded under 
the threat of non-handling of containerships in Japanese ports 
if it was not signed.) 
17. 6. 91 Official Journal of the European Communities No C 159/71 
all costs but ready to meet US and EC demands for 
easier access to its internal market. At the same time 
however, the Tokyo authorities insist that low EC 
exports to Japan are not due solely to market access 
difficulties but first and foremost to the indifference 
and disinterest of Community businessmen, who fail to 
make the requisite effort. 
The EC partners are also asked to bear in mind that 
Japan's strategies are currently undergoing rapid 
changes so as to allow considerable scope for direct 
investment in new manufacturing plant, as is occurring 
in the United States. Japan wishes the EC to take 
account of this new desire for cooperation. 
2.3. Japan's position in the run-up to the Community-
wide single market in 1992 
2.3.1. The Community's announcement, in June 
1985, that it intended to achieve complete unification 
of the markets of the Twelve by 1992 spurred Japan to 
review its policies vis-a-vis the 'old continent', which it 
had hitherto regarded as a conglomeration of widely 
disparate national economies. 
Japan became keenly interested in the prospect of a 
large, economically and legally unified, market of 
320 million consumers, once the last barriers to internal 
circulation of goods and services came down. There 
was growing realization of the potential advantages of 
uniform EC rules for imports from non-EC countries, 
accompanied by the phased dismantling of quota 
restrictions which, in some Member States, have restric­
ted, and even totally blocked, some Japanese exports. 
However, in Japanese eyes, completion of the large 
Community-wide single market and gradual progress 
towards greater political union were of even greater 
importance because they laid the foundations for a 
pooling of resources that could trigger, throughout the 
Community area, a surge of growth with huge poten­
tial. Commission reports on the general and sectoral 
impact of economic union are carefully scrutinized by 
the Japanese Government's economic departments and 
by the large Japanese multinational concerns, which 
now regard Europe as an integral part of their global 
strategies. 
2.3.2. Events in Europe since 1985 have increasingly 
assumed the proportions of a historic change. The EC 
is the focus of international interest, after a long and 
troubled period, and is exerting a pull on many 
countries, both near and further away. Undoubtedly 
this process is influenced, among other things, by the current upheavals in Eastern Europe, and indeed in the 
Soviet Union. 
Since then, spurred by fears that any new protectionist 
trends ('Fortress Europe', to quote the expression used 
in certain US circles) could create further problems for 
Japanese exports, Japan has recognized the need for a 
more active presence including the siting of industrial 
plant in the Community (1). 
2.3.3. During this period, when the Uruguay Round 
of GATT negotiations got under way, the EC under­
took to look harder at its own trade policy vis-a-vis 
non-EC countries. 
The official stance of the EC Council and Commission 
(enshrined in the December 1988 Rhodes declaration) 
is firmly in favour of general multilateral free trade 
rules based on a substantial reinforcement of GATT. 
On the 1992 single market, the Community authorities 
stated categorically that the benefits of Community 
liberalization could not be extended automatically to 
non-EC countries unless accompanied by negotiations 
on reciprocal concessions to give Community firms 
similar access to non-EC markets, preferably within the 
multilateral framework of GATT, which specifically 
provides for efforts to achieve mutually balanced 
advantages (2). 
2.3.4. The Community's position vis-a-vis Japan is 
set out in its Communication of 15 March 1988 (3), 
the Commission states its intention of constructing 'a 
balanced relationship' safeguarding reciprocal interests 
as part of closer cooperation in the fields of trade, 
industry, services and science and technology. 
However, the Commission stressed the need for a 'con­
sistent and firm approach' to secure results from dis­
cussions with Japan, particularly to convince Japan to 
i1) A number of surveys carried out by Japanese government 
bodies and industrial associations highlight persistent fears 
that the Community's 1992 target conceals future discrimi­
nation against Japanese exports. 
(2) 'Europe 1992: Europe World Partner' — Commission infor­
mation memorandum on statements made by Lord Cockfield 
and Mr De Clerck, Members of the Commission, at a debate 
on the external dimensions of the Single Market — 19 Octob­
er 1988. 
(3) 'Relations between the Community and Japan' — Com­
mission Communication — 15 March 1988. 
No C 159/72 Official Journal of the European Communities 17. 6. 91 
place less emphasis on exports and take serious steps 
to liberalize and reform its economic structures, while 
opening up its market to Community firms (1). 
2.4. Problems connected with direct investment by 
Japanese firms in the Community: the car industry 
2.4.1. The Commission's cautious and measured lan­
guage regarding trade relations with Japan was 
prompted by the wide trade gap and differences of 
opinion between the two parties on the scope of GATT 
anti-dumping rules. 
The Commission was inclined to interpret these rules 
broadly and adopted appropriate regulations to tackle 
a new aspect: the practices deployed by Japanese firms 
for the purpose of circumventing anti-dumping duties 
(parts and components are imported and then pur 
together at assembly plants) (2). 
The concept of a 'minimum local content' entitling a 
product to be considered as being of Community origin 
(i.e. exempt from the quota restrictions still applied by 
some Member States to Japanese imports) sparked off 
an impassioned debate. 
However, standpoints differed significantly from one 
industrial sector to another. Some high technology sec­
tors (e.g. the chemical industry) rejected even the prin­
ciple of 'local content', which was deemed incompatible 
with GATT rules. 
The industrial sectors most directly affected by the all-
out onslaught by Japanese firms to conquer market 
segments are at the opposite extreme. In the motor 
vehicle sector, in particular, there is much heated dis­
cussion about cars assembled at UK plants but which 
are in fact of Japanese origin and hence subject to quota 
restrictions limiting sale in some Member States. 
Attention gradually shifted to the percentage of EC-
manufactured components and parts (60-80%) needed 
if such products were to qualify for Community origin. 
f1) In this connection, Japan pointed out that its GDP growth 
had for several years been based on increased domestic 
demand and not on export trends. 
(l) The parent regulation setting out EC policy on anti-dumping 
dates back to 1984 [Regulation (EEC) No 2176/84]. These 
provisions were later supplemented by Regulation (EEC) 
No 1761/87, which dealt with 'screwdriver plants'. In 1988 
the Council adopted a consolidated anti-dumping regulation 
[Regulation (EEC) No 2423 88] incorporating the previous 
regulations. In addition, the Commission pointed with concern to 
a dangerous trend emerging in Member States, 
prompted by a wave of competition to attract Japanese 
investment in certain manufacturing sectors. 
2.4.2. Given the Community's hesitancy and internal 
dissension, Japan took action on two separate fronts. 
Firstly, • the Tokyo Government formally invoked 
GATT to challenge the legality of Community regu­
lations on the circumvention of anti-dumping duties via 
the device of 'screwdriver' assembly plants. 
After an investigation lasting several months, an arbi­
tration panel supported the Japanese complaint and 
declared the EC provisions incompatible with 
Articles III and XXX(d) of the General Agreement. 
The Commission appealed against the procedure and 
validity of the panel's conclusions. The entire matter 
has now come within the scope of the Uruguay Round 
since the new anti-dumping code being framed should 
encompass the problem of circumvention of anti-dump­
ing duties. 
Secondly, Japanese car producers in the Community 
are tackling the roots of the problem. In an effort to 
enhance their image, they accept the substance of the 
arguments advanced by Community manufacturers and 
are losing no time in launching programmes for 
revamping their industrial plant sited in the Community 
in order to step up the proportion of EC-manufactured 
components and parts. 
These decisions show that Japanese firms are anxious 
to reappraise their role and become 'good corporate 
citizens of Europe'. 
2.5. Top-level EC-Japan meetings in January 1990 her­
ald the dawn of a new phase in cooperation 
2.5.1. In January 1990 a Japanese Government del­
egation, led by Prime Minister Toshiki Kaifu, held a 
meeting with the responsible Commission officials. 
The cordial and constructive atmosphere of these talks 
highlighted both parties' willingness to achieve a quan­
tum jump in their joint relationship, putting narrow 
clashes of short-term commercial interests behind them 
and espousing a broader, more farsighted approach. 
Institutional cooperation between the Community and 
Japan entered a new phase. Official statements stressed 
17. 6. 91 Official Journal of the European Communities No C 159/73 
the need to establish close relations on a permanent 
basis, on a par with longstanding Japan-US and Com­
munity-US relations. 
2.5.2. These talks were not confined to (often contro­
versial) aspects of trade relations but embraced other 
broader issues such as the upheavals in Eastern Europe, 
EC economic and political union, North-South relations 
and relations with the US. 
On behalf of his Government Prime Minister Toshiki 
Kaifu wholeheartedly welcomed the completion of 
plans for EC economic and political union as conducive 
to the progress and development of trade relations and 
to international stability. 
Japan acknowledged the key role played by the Twelve 
within the 'Group of 24', whose task is to provide 
practical aid and assistance to the fledgling democracies 
of Eastern Europe. Japan was already an active con­
tributor to the group's programmes and stated its inten­
tion of coordinating its projects in Eastern Europe with 
Community operations. 
Further, as regards relations with the developing 
countries (LDCs), the Community and Japan proposed 
to coordinate implementation of their development aid 
and technical assistance policies more closely (1). 
2.5.3. As to the future, the meeting in January culmi­
nated in the decision to place EC-Japan bilateral 
relations on a permanent footing operating at three 
levels: (a) meetings, at a personal level, between the 
Commission President and the Japanese Prime Minis­
ter, (b) regular annual meetings at ministerial level and 
(c) at a technical level, closer liaison and consultations 
in the economic, science and technology, environment, 
cultural and social sectors. 
A ministerial-level meeting took place in Brussels in 
May 1990 and addressed key aspects of bilateral EC-
Japan relations. A 'standing working group on trade 
questions' was set up with the task of identifying 
impediments to satisfactory two-way trade and dis­
cussing possible action and solutions in the individual 
sectors concerned. 
The Japanese delegation confirmed that the measures 
envisaged in the US-Japanese 'Structural Impediments 
Initiative' would not be exclusively bilateral but applied 
erga otnnes so that thev could also be extended to the 
EC. 
(J) Japan now tops the development aid league table to the LDCs 
($... in...). In response to Japanese anxieties the Commission rep­
resentatives gave assurances that the future Com­
munity-wide Single Market would be open to non-EC 
partners (i.e. including Japan). 
2.5.4. On removal of the remaining barriers to the 
Japanese market, the Commission announced a Com­
munity export drive to go hand in hand with a Japanese 
Government programme to promote Community 
imports. 
Both delegations were particularly exercised by the 
matter of direct investment by Community firms in 
Japan, which is still very small. Proposals and sugges­
tions for action will be framed in the near future. 
An agreement was signed on cooperation in the field 
of nuclear safety and protection. Other joint schemes 
are planned to step up future cooperation in the fields 
of science and technology, the environment, social 
affairs and cultural exchanges. 
2.5.5. The vexed issue of imports and Japanese 
investment in the car industry in the Community was 
not broached directly at the ministerial meeting in 
Brussels but discussed at separate talks both before and 
after the meeting. 
The discussions, which are still going on, focus on the 
following points: 
1) Definition of a 'transition period', running at least 
until 1991, to enable the Community car industry 
to restructure and boost its competitiveness in prep­
aration for an entirely open Community car market. 
2) During this period Japanese industry will restrict 
and monitor the number of vehicles exported to the 
Community; cars manufactured within the EC will 
also be included. 
3) The quota restrictions on Japanese cars in a number 
of Member States will be phased out. 
In a more general context, global trade reciprocity is 
another discussion topic. 
2.5.6. High-level meetings between the Community 
and Japan will continue in 1991. 
At the end of May, Commission President Jacques 
Delors will pay an official visit to Tokyo. 
No C 159/74 Official Journal of the European Communities 17. 6. 91 
The Committee understands that the matter of a future 
joint declaration on EC-Japan relations is currently 
under discussion both in the Commission and in the 
Council. 
A further ministerial-level meeting between EC rep­
resentatives and the Japanese Government is planned 
in the autumn for the purpose of re-examining matters 
that are still unresolved and stepping up economic and 
political cooperation. 
Additional bilateral contacts are scheduled in order 
to break the deadlock in the GATT Uruguay Round 
negotiations, which are of vital importance to both the 
EC and Japan. 
3. ESC conclusions and recommendations on EC-
Japan relations 
3.1. In the light of the Committee's studies and delib­
erations on EC-Japan relations over the past years, a 
number of conclusions can usefully be drawn, in the 
shape of recommendations addressed to the Com­
munity authorities with a view to bringing about a 
speedy and substantial qualitative improvement in this 
relationship and translating hopes for closer cooper­
ation into reality. 
3.2. First, implementation of the decisions already 
taken or announced by the Japanese Government for 
an overhaul of Japan's economic and trade policy and 
structures will clearly require much time and effort. 
However, it is encouraging to note that there have 
already been tangible signs of a change in direction. 
We will have to wait for these trends to be consolidated. 
Increased Japanese domestic demand, due to greater 
public investment and a rise in personal consumption 
has become the key factor in national economic growth 
and is pushing up imports generally, and manufactured 
imports in particular. 
For the first time for many years, the overall picture is 
one of Japanese imports rising faster than exports in 
terms of both value and volume, i.e. the overall Japane­
se trade surplus is contracting. 
This welcome trend is reflected in the reduction of 
Japan's trade surplus vis-a-vis the US and EC. Although it is difficult to compare EC and Japanese statistics, 
they would seem to bear out this downward curve (J). 
Japanese commentators take for granted that Japan's 
external trade patterns are becoming more mature 
(increased room for imports from the West of finished 
manufactures and consumer goods and from South-
East Asia of semi-finished products and components 
for use in Japanese industry, plus of course continuing 
imports of raw materials and energy) (2). 
Trade relations between Japan and its Western partners 
could improve rapidly if, as is hoped, this trend is 
consolidated in the near future. The US, Japan and the 
EC could then focus their attention and efforts on a 
substantial expansion of cooperation in all areas. 
3.3. The Committee warmly welcomes the outcome 
of the latest meeting between Japanese Government 
and EC Commission representatives, which culminated 
in a joint decision to achieve a quantum jump in their 
joint relationship and espouse a broader, more far-
sighted approach. 
The Committee would welcome the issuing of the moot­
ed joint declaration on EC-Japan relations, especially 
if it reinforces high level institutional contacts. 
This new phase will have to be underpinned by insti­
tutional cooperation at top level between the Japanese 
Government and the Commission, and at technical 
level. But there must also be regular liaison and consul­
tation in the economic, scientific, cultural and social 
sectors. 
The Committee fears that this second facet of cooper­
ation may progress too slowly or that unexpected diffi­
culties may arise when it comes to implementing the 
requisite projects, with the risk that official declarations 
will ultimately prove no more than empty words. That 
would be most unfortunate since the hoped-for 
improvement in EC-Japan cooperation cannot conceiv­
ably be reduced to a formal list of dates. 
The Committee calls for immediate steps to establish 
the planned contacts at all levels and in particular 
stresses the importance of determining arrangements to 
(') Official Japanese statistics indicate that Japan's trade surplus 
vis-a-vis the EC dropped to US$ 19 700 million in 1989 
compared with US$ 22 800 million in 1988. EUROSTAT 
figures show an EC deficit of 21 200 million ECU for the first 
ten months of 1989, as against 24 500 million ECU in 1988. 
It is unfortunate, however, that the two parties cannot agree 
on a uniform method for quantifying such important data. 
(2) See 'A l'Ecoute du Japon', 10. 12. 1990. 
17. 6. 91 Official Journal of the European Communities No C 159/75 
bring the socio-economic groups together in order to 
study their problems and compare notes. 
With this in mind, the Economic and Social Committee 
could play a key role and assume significant responsi­
bilities. 
3.4. Appraisal of Japan-EC relations highlighted sev­
eral cases where mutual ignorance of the other's cul­
tural and social values proved a serious obstacle. 
Europeans in particular are ignorant about Japanese 
society, which is rooted in spiritual and practical values 
that differ radically from European traditions. 
In Japan, a considerable effort has been made for many 
years to study and understand the European (and US) 
past and present, with particular reference to economic 
and cultural (and, perhaps, to a lesser extent, social 
and political) aspects (!). 
Europe therefore has to be better briefed about the 
distinctive characteristics of the Japanese population as 
a whole (including its culture, history and institutions), 
and the detailed workings of Japan's economic, manu­
facturing, financial and services sectors. 
The Committee hopes that immediate plans will be 
made for constructive schemes on all fronts, starting at 
school and university, with the emphasis on direct 
contacts between EC and Japanese businessmen and 
ordinary citizens and stressing the value of meetings, 
visits and seminars facilitating a wide-ranging inter­
change of experience at all levels. 
For instance, it would be useful to explore ways of 
exploiting fully the presence of thousands of families 
of Japanese businessmen and officials working in EC 
Member States. Similarly, ways should be found of 
awakening the interest of the waves of Japanese tourists 
and encouraging them to play their part in promoting 
two-way information. 
3.5. EC-Japan economic and trade relations continue 
to be dominated by the need to boost the volume of 
EC exports to the Japanese domestic market. 
Here it must be remembered that Japanese rules and 
regulations are changing fast: many formal obstacles 
and constraints have already been scrapped while the 
(') It has been pointed out that one reason for successful Japanese 
penetration of ECU and US markets is the meticulous research 
carried out by Japanese entrepreneurs into Western con­
sumers' requirements and preferences. EC firms by no means 
have a comparable insight into the Japanese consumer 
market. most obstructive non-tariff barriers are slowly being 
relaxed. 
The Committee feels that the EC Commission must 
play a dynamic role in pinpointing the remaining direct 
or indirect obstacles and reach agreement with its 
Japanese counterpart on what action is required. 
That does not mean that the Japanese market will be 
easily accessible to EC industrial firms. On the contrary, 
in the immediate future it will become increasingly clear 
that the main hurdles stem from the highly competitive 
Japanese domestic market, cut-throat competition both 
between local firms and against newcomers, strict rules 
and local practices and the psychological inhibitions of 
Japanese customers vis-a-vis foreign products. 
Following the example of those Community firms 
which have already gained a foothold in the Japanese 
market, all Community businessmen eager to succeed 
in Japan will have to make a special effort to tailor 
their products and sales tactics to the dictates of an 
economic and social climate that differs in many 
respects from the situation in the Member States. 
The EC Commission must give its backing and assist­
ance to such drives which, over the next few years, will 
have to focus on improving the EC-Japan trade balance. 
3.6. The dearth of EC manufacturing plants in Japan 
is clearly a source of concern. 
Past explanations for this state of affairs are now well-
known. However, as already mentioned in the case of 
EC exports to Japan, the situation is rapidly improving, 
partly as a result of the steps being taken by the Japane­
se government to liberalize trade, both on its own 
initiative and in connection with the Structural Impedi­
ments Initiative. 
The Committee urges the Commission to conclude with 
its Japanese counterpart a set of rules and specific 
incentives to encourage the establishment of EC firms 
in Japan (2) and to flesh out the concept of 'reciprocity', 
which has so long been the subject of discussion. 
Concurrently, the Commission should endeavour to 
persuade Community businessmen to try harder to 
(2) The Commission has already started to study the matter: see 
the recent publication—Guide to EC investment in Japan. 
No C 159/76 Official Journal of the European Communities 17. 6. 91 
export to Japan's large and fast-expanding domestic 
market. 
3.7. The Committee is concerned by the virtual 
absence of joint EC-Japanese business ventures in third 
countries, particularly the LDCs, which cater for these 
countries' development needs. 
The increasing competitiveness of Japanese products 
on such markets, undermining long-established EC 
exports, highlights another weak link in the Member 
States' economies. 
The EC authorities should keep a keen eye on the 
question of industrial cooperation in third countries at 
future talks with their Japanese counterpart and press 
for studies, seminars and practical proposals. 
3.8. Particular attention should be focused on the 
problems associated with direct investment in Japanese 
manufacturing plant set up in the Community, partly 
because of the sharp increase in the number and size of 
such plants. 
In principle the Committee would stress that direct 
Japanese investment in the Community must be wel­
comed, especially when it means a boost in 'technologi­
cal value-added of Community origin (!) and the cre­
ation of new jobs. 
Similarly, cooperation agreements and joint EC-Japane­
se business ventures, which are frequently accompanied 
by technological innovation and modern business lead-
erschip and management practices, should be encour­
aged. 
Japanese manufacturing plant set up recently in the 
Community has frequently led to extensive transfers of 
know-how and organizational methods to the small 
and medium-sized EC sub-contractors who provide 
parts and components meeting the buyers' strict quality 
control rules (2). 
(*) 'Technological value-added of Community origin' seems a 
more relevant criterion than 'minimum local content'. 
(2) The Japanese government agency JETRO's International 
Economic and Trade Information Center undertakes per­
iodical in-depth surveys of direct investment by Japanese 
manufacturing firms in the Community, the reasons 
prompting such investment and problems that have arisen. 
Its 6th Report 'Current situation of business operations of 
Japanese manufacturing enterprises in Europe', was published 
in March 1990. In this connection, the moves by Japanese 
businesses to set up Research and Development centres and 
'Design Centres' in Europe are of interest; these centres seek to 
pinpoint the actual requirements of the Community market. However, careful Commission supervision will be need­
ed to avoid distortion of competition caused by Member 
States trying to outbid each other in offering incentives. 
In addition, the Commission should ensure overall 
'cohesion' between non-EC plants and Community-
aided regional development schemes. 
3.9. On the agricultural front, the EC and Japanese 
stances have many points in common. Both are under 
pressure from the US (whose agricultural policy is 
strongly protectionist) and other food producer 
countries to open their borders and cut farm-subsidies. 
The EC and Japanese replies to such pressures have 
much in common. They can be summed up as follows: 
— agreement to an all-round, but gradual, balanced 
and reciprocal reduction in subsidies, 
— agreement in principle to the framing of multilateral 
rules governing international agricultural trade, 
— willingness to review existing agricultural policies, 
while protecting the basic principles that underpin 
them. In both cases, these policies safeguard prin­
ciples unrelated to the trade negotiations, such as 
preservation of the traditional rural values, regional 
and environmental protection and prevention of 
excessive dependence on food imports (particularly 
acute in Japan where the immediate post-war period 
is still a vivid memory). 
Both the EC and Japan are convinced that the way 
ahead lies in strengthening the multilateral instruments 
concluded within GATT; both disapprove of the pro­
liferation of calls for bilateral partial agreements on 
trade in specific agricultural products. 
3.10. The Committee observes that EC and Japanese 
socio-economic problems in the long run have vital 
points in common. 
For instance, the Ministry of International Trade and 
Industry (MITI), in presenting its internal reform pro­
gramme to be implemented in the 1990s (3), listed 
among its key concerns improvement of quality of life, 
consumer protection, the emerging needs of an ageing 
society and protection of women. 
These matters also receive considerable attention in the 
Community. The two parties could therefore profitably 
(3) Ministry of International Trade and Industry, international 
Trade and Industrial Policy in the 1990s ... Creating Human 
Values in the Global Age'. 5 July 1990. 
17. 6. 91 Official Journal of the European Communities No C 159/77 
cooperate closely in organizing a continuous two-way 
flow of experiences and monitoring the effectiveness of 
the chosen solutions. 
The same holds good for the long-term development 
of the Japanese economy, flexible industrial structures, 
promotion of small and medium-sized businesses and 
energy and environmental policies. 
In the Committee's view, exchanges of views and 
experiences in these fields could be accompanied by 
joint research and projects. 3.11. On the broader issue of economic relations 
and international policies, the Committee calls for a 
deepening and widening of EC-Japan relations to place 
them on a par with current EC-US and US-Japan 
relations. 
The world's three main centres of political and econ­
omic power should also embark on a strategy of cooper­
ation and coordination aimed at achieving the 'new 
international order'—on which the security, harmony 
and prosperity of all peoples hinge. 
Done at Brussels, 25 April 1991. 
The Chairman 
of the Economic and Social Committee 
Francois STAEDELIN 
APPENDIX 
to the Opinion of the Economic and Social Committee 
TABLE 1 
JAPAN'S MERCHANDISE TRADE BY AREAS 
(1977-89) 
(USSM-Customs clearance basis) 
1977 
1980 
1983 
1986 
1989 Total 
Exports 
80 495 
129 807 
146 927 
209 151 
275 175 Imports 
70 809 
140 528 
126 393 
126 408 
210 847 balance 
9 686 
(10 721) 
20 534 
82 743 
64 561 with USA 
Exports 
19 717 
31367 
42 829 
80 456 
93 188 Imports 
12 396 
24 408 
24 647 
29 054 
48 246 balance 
7 321 
6 959 
18 182 
51402 
44 942 with EC 
Exports 
8 736 
16 650 
18 523 
30 675 
47 908 Imports 
4 195 
7 842 
8 120 
13 989 
28 146 balance 
4 541 
8 802 
10 403 
16 685 
19 762 
Source: Japan Institute for Social and Economic Affairs, Keizai Koho Center, Japan 1990—An international comparison, 
Tokyo 1990, page 36. 
No C 159/78 Official Journal of the European Communities 17. 6. 91 
TABLE 2 
DIRECT INVESTMENT: EUR 12 
(Unit: million ECU) 
Partner 
Country Year 
1984 1985 1986 1987 1988 
Outward Flows 
USA -11650 -10 063 -17 662 -23 901 -20 074 
Japan -295 -36 -116 -18 -187 
EFTA -929 -760 9 -1826 -2 306 
Total World (^ -17 395 -15 349 -22 164 -30 780 -30 711 
Inward Flows 
USA 
Japan 
EFTA 
Total World f1) 2 919 
390 
1661 
6 177 1766 
646 
1666 
5 637 2 484 
445 
3 267 
6 840 2 356 
1502 
3 543 
12 578 606 
1461 
9 021 
14 278 
{') Excluding intra EUR 12 investments. 
Source: EUROSTAT, Unit C3, Direct Investment of the European Community 1984 to 1988, Luxembourg 1990, pages 73 
and 75 (UEROSTAT estimates). 
Outward flows: 
A positive figure indicates a net disinvestment, 
A negative figure indicates a net investment, 
Excluding reinvested profits. 
Inward Flows: 
A positive figure indicates a net investment, 
A negative figure indicates a net disinvestment, 
Excluding reinvested profits. 
TABLE 3 
DIRECT INVESTMENT: EUR 12—USA—JAPAN 
(Unit: million ECU) 
made by: 
EUR 12 
USA 
Japan (l) 
received by: 
EUR 12 
USA 
Japan (!) 
net investment by: 
EUR 12 
USA 
Japan(^ 1984 
-17 395 
7 128 
-7 558 
6 177 
28 460 
-13 
-11 218 
35 588 
-7 571 1985 
-15 349 
1233 
-8 455 
5 637 
26 733 
841 
-9 712 
27 966 
-7 614 1986 
-22 164 
-8 796 
-14 713 
6 840 
36 969 
230 
-15 324 
28 173 
-14 483 1987 
-30 780 
-8 605 
- 16 916 
12 578 
39 357 
1010 
-18 202 
30 752 
-15 906 1988 
-30 711 
-1997 
-28 931 
14 278 
43 870 
-410 
-16 433 
41 873 
-29 341 
0) These data are investments recorded in the Balance of Payments by the Bank of Japan, and not investments 'notified' 
to the Ministry of Finance. 
Source: EUROSTAT, Direct Investment of the European Community 1984 to 1988, Luxembourg 1990, page 11