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Vol.1980/0156

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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(80)444 final
Brussels/15thJuly1980
•./*._%•>> -A*"i.A
m•'Vï\fci/'*f:'4
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,^Ά *""* /
THETRADEPOLICYOFTHECOMMUNITY ANDJAPANi
ARE-EXAMINATION
(Communication fromtheCommission totheCouncil)
COM(80)444final

'THE TKADF .POLICY OFTHE COMMUNITY AMD JAPAN:-
ARE-EXAMNATION
- .•;v:; • /
Introduction
« *
1. .This paper examines thetrade policy oftheCommunity towards
Japan *Itdoes soforthree sets ofreasons .
(a)Our trade relations with Japan areunsatisfactory .
Asweenter the1980s ,theCommunity isdealing with Japan
thebasis ofguidelines set intheearly 1960s .ButJapan ,
as-the third economic power ofthe free world ,feels
/ *
entitled toarole ofequality with the Community and the
United States .Given itsprevious performance andeconomic
potential /itisintheCommunity 'sinterest todevelop with
Japan apartnership which belongs tothe !1930s andstretches
• from political "questions tothepractice oftechnological
cooperation .Theaimofextending cooperation with Japan
soastocover the full range ofareas ofmutual concern is '
hindered ,however ,bythemaintenance ofnational protection­
ist measures ,
-.Thearrangements wehave are discriminatory (asource
ofgrowing resentment inJapan quite out ofproportion
totheeconomic importance tousofthese restrictions ),
are embodied inapatchwork ofseparate national trade
restrictions (more arelic ofthe1950s than aCommunity
policy ofthe1980s ),andare infact generally frozen
inapattern'twenty years ormore outofdate .
? v
(b)Ourpresent patchwork oflargely national restrictions against
Japan will damage the international comoet ivityoflarge •
sectors ofthe Community 'sindustries inthe 1990s .
Differences innational treatment are bound tolead toa
distortion ofconditions ofcompetition within theCommunity
and aconsequent undermining oftheCustoms Union ,Andthis
partitioning ofnational markets within thoCommunity has amore

fundamental andharmfuleffectthan1disadvantaging
consumersand.offendingagainstageneraldoctrine.
Itweakenstheinternational competitiveness ofCommunity
industry;,
e •
•.-MemberStateXengagesinaspecialprotective
arrangementagainstJapan;itseeksfurther
..protection byArticle115,butitisnotsufr
ficienttobecompetitiveonlyinitsownmarket,
jj*°prosperitmustbecompetitiveinternationally;
,-thusseparatenationaltreatmentunderminesits ■
«
ownprosperityandwillincreaseitsunemployment .
•-. -■
* *
(c)JapanisoneofthemajorgapsintheCommonCommercialPolicy.
Thusthereisastrongargumentfromthepointofviewof
industrialpolicyforaunifiedpolicy;inrelationtoquant­
itativeimportrestrictions againstJapan.Andherethereis
amajorgap.Thereisnocompleteand'unified Communitypolicy
inrelationtoquantitative "importrestrictìons .Individuai
*
MemberStatesmaintainavarietyofdiscriminatory import
restrictions ;so-calledvoluntaryrestraintarrangements of
equalorgreaterimportancearenegotiatedwithscantregard
/ i
forCommunityrulesbynationalGovernmentandindustriesin
MemberStatesseparatelywiththirdcountries.Thisispart­
icularlythecasewithJapan.
Thisrepresents agapinthecommoncommercialpolicy.This
gapisnotmentionedcriticallybecauseitconflictswithsosis
idealisticmodelofprogression towardsEuropeanunity.Itis
mentionedbecauseoftheverypracticalreasonthatthewhole
strengthoftheCommunityinitsdealings'withthirdcountries
•liesinitsactingtogether.Onlybythismeansforexample
wasitpossibleintheTokyoRound.togetfromtheUnitedStates
suchconcessions-unobtainable inpreviousGATTnegotiations-
astheintroduction ofamaterialinjurytestandtheabolition
IofAmericanSellingPriceforchemicals.

«*J«
*
Ontheotherhand,equallyclearlyforMemberStatesto
engageInnegotiations *ontheirownwiththirdcountries
meansthatthesecan'.playMemberStatesoffagainsteachother;
thusthecombinedstrengthoftheCommunityissplitand
squanderedinour'dealings withtheexternalworld.Thiscan
onlymeanalesseffectivedefenceof.,»ourinterests,andmore
jobslost.orlessopportunities realised,thanwouldhave.been
ithecoseifthecombinedstrengthoftheCommunityhadbeen
,'applied.Allthisisincreasingly relevantinconsidering .the
growingpressureofJapaneseexportsandthelikelyworsening
/
ofouralreadyconsiderablebilateraltradedéficit.
Andonefundamentalpointneedsconstantlytoberemembered.•
v /' .
Anymajorderogation fromacommon<i.e.Communitywide)
» . •
policyonimportsstandsinthewayofachievingasingle
marketwhichistheCommunity'sfirstraisond'etre.
' 1
2.Hesitations *
' Ï,
Theseconsiderations mightencountercertainhesitations.
Howwillanyadjustmentofthepresentnationalrestrictions
workout?Willitresultintheabruptendingofthe
'existingmechanisms,leavingtheindustryconcernedwithout
-anyprotection,or,assomemayfear,leadtoasystem
whichismorerestrictivethanthepresentone?
b.Whatdowegetinreturnforabolishingquantitative
restrictions ? .'
3.Tothisitcanonlybesaidthat:
__ *~V*1^ysnjm.yiv*i«y-r?T'.y-i l■'111'"w

Thebalance ofprotection inanynewarrangement needs I
tobelooked atcase bycase .Generally thecase for
liberalisation -thethelong-term interest ofthe
competitiveness ofourownindustry -isstrong ;there could beexceptions ;thegeneral case inrelationstothese isconsidered later .
b.Problems donotgetanyeasier bybeing postponedandtheblunting ofthecompetitive edge of -sectors
ofCommunity industry (through quantitative restrictions ) "will continue apace ,inthis context theCommission has
certain independent responsibilities® Ithasinparticular j
'■/ · '■ . ·.. ■..■■■■■<· , . 1
· · ■· . , · 4
-todecide whether togrant requests fortheapplication of
Article 115; ' I
.-todecide whether ornot itcon and should make the a
necessary proposals fromtimetotimeforrenewal of j
existing Member Statecommercial agreements withJapan ;j
-todecide whether torefer arrangements made bythe j
Member States totheCourt ,ofJustice asbeing incomp -j
"*atible with thecommon commercial policy ; 1
•. ' ' •''i
• • •4
.• •*toensure theapplication oftheprinciples ofCommunity
competition policy .
c. Inreturn forthephasing out ofourquantitative restrictions ,
wecould get "notonly the removal ofafestering sore inEC/Japan
relations ,butalso increased access interms oftariff andquota
concessions and increased ECexports •(examples are the severe quotas ?,
onourexports ofleather footwear andhightariffs oncertain 1
foodstuffs ). • *.
( ·
4,Thepresent state ofEC/Japan trade relations
Thepresent situation hasthefollowing main features : '
a.Throe regions oftheCommunity (UK,France ,Benelux )
have bilateral safeguard clauses incommercial treaties
with Japan that canbeterminated bytheCommission ceasing

topropose .their periodic renewal .Oneregion (Italy )has f
• '■
apower ofderogation ^foraconsiderable number ofItems on j
thecommon liberalisation list inrespect of/apan (the f\ t
"experimental list"). ' '
b.Residual quantitative restrictions ,most ofthem derived
from bilateral treaties with Japan ,aremaintained by
different Member States ..,Some are ongoods which are
important intrade butmany areanachronistic oroflittle
I
<obvibus value .Some areselective against Japan intho j
' . ' . . 1 . . . . . . ;sense that thequantitative restriction ismaintained against
anOmber ofcountries ,including Japan ,but notagainst
other major industrialised trading partners .Afeware j
discriminatory against Japan inthesense thattherestriction j
ismaintained only against Japan , i ' "-"
■· · -Γ
C.There are anumber ofinformal arrangements restricting . ?
•» 11"J""" 1 /" 1'■rT1 ■1" \_
• ■imports byJapan ,tocertain regions ofthe CorruTranity .Some S
; »
ofthese ereineffect periodically renegotiated (generally,'
i-\ *. .. . s. ...... » Iannually ). ;Sometimes there isanimpression that Member j
■States grant increased access forJapanese items which are I
; s
subject toquantitative restrictions mreturn forJapanese J
'export .restraint onother items orforother advantages .
d.Requests aremade forArticle 115protection asavirtually
inevitable 'r.eflection oftheseparate national trade policic-s .
described above . • ._
Atable attached sets outdetails ofthediscriminatory quantitative
restrictions maintained byindividual Member States against Japan .
# . » •
5.Theprocess ofextending thfecommon liberalisation list ranoutof
steam intheearly seventies .Since then other attempts have been made
bytheCommission tomake progress toward acommon policy vis^i-vis Japan .
Progress wasmade inrelation totheelimination ofnational quantitative
restrictions inthetextiles sector following bilateral negotiations under -
theMultifibres Arrangement .Butingeneral wearestill along wayfrom
acommon commercial policy towards Japan .

o,thenegotiation ofabilateraltradeagreement (covering
bothresidualquantitative restrictions andcommunitarisation
oftheexistingnationalbilatoralsafeguardclauses)has'
beensuspendedfornearly.'adecade;,
b.thedifferences in1nationaltreatment areboundtoleadto
adistortion ofcompetition withintheCommunity :Article115
standsinthebackgroundpartitioning theCommonMarket.
c.aCommission noteof1976drewtheattentionofMemberStates
tothefactthatthenegotiation ofbilateralquantitative arrange-
ments^wasnot-compatiblewithArticle113andthatonlytheCommu-
nity'couldexerciserightsundernationalbilateralsafeguardclauses.
MemberStateswereinvitedtobripgtheirsectoralproblemstothe
Commission. * "'
d.MTNsafeguardsnegotiations covering aselectiveapplication
ofArticleXIXoftheGATTinwhichtheproblemofresidual
•»
quantitative restrictions couldhavebeen'"subsumed ".-(as
envisagedbytheSoames-Ohiro exchanges)havenotgotanywhere.
c.neithervhaveJapaneserequestsintheMTN-forastartbythe'
Communityinremovingdiscriminatory quantitative restrictions .
6.Unsatisfactory consequences ofthepresentsituation
Theresultofallthisisaconfusedmixtureofvaryingtypesof
nationalprotective arrangements againstJapan.Forthereasonsset
outearlierthis:
a.,standsinthewayofhavingacommonmarketinsignificant
sectorsofEuropean,industryandwillincreasingly damage
■ «
theinternational competitiveness ofthesesectors;
* '
b.isnotthebestdealthataunited.Community couldachieve
withJapan;•
c.willbe1asourceofgrowingfrictionwithJapan,affecting
thegeneraldevelopment ofrelationswithJapan...

-7-« 1»
\
d*will rnake ItIffiprscticflblo toonvisfl^o fifully sstisfdctopy
trade relationship wit^h Japan -with itohighly individual
and .close Government-industry andinter-industry links -
•without industrial cooperation os*amajor component .Indeed -
some ofthese major problems between usareonly superficially
•reflected intrade flows ;they aro inessence industrial .But
discussions onspecific industrial problems cannot effectively
takc ^place unless inthecontext ofanoverall Community strategy
towards Japan .
~ •r ' -:'-S ■\ • '
ACommunity .Strategy
a.Initsrelations with Japan ,the -Communi ty'8cim istoachieve a
agreater degree ofcooperation over thewhole range ofmatters
ofmutual concern .Thetwosides have major interests incor.mon ,
including interests relating tothefunctioning oftheworld
economic andtrading system ,inwhich theyboth have aprincipal
stake .Increasingly ,however ,those interests cannot besafe­
guarded unless acloser identity ofviews isestablished ,incl­
uding agreater readiness totake account ofeach other 'sposition .
Matters like investment and North-South relations are
amongst those which would beconsidered .
b.Efforts have tobemade onboth sides therefore ,within the
framework ofabroad strategy ,inthedirection ofremoving
theexisting level ofrestrictions ontrade .Inparticular
Japan needs tomake concessions ,e.g. asregards the inten sive
quantitative restrictions onleather goods andthehigh tariffs
onprocessed agricultural products andvarious other goods .
» - • *
c.'Onthepart oftheCommunity ,apert from theindispensable
.efforts ofrestructuring ,there should beapolitical read­
iness tophase out .thediscriminatory quantitative restri etiens , '
eliminating these progressively inthelight oftheresults
obtained bytheCommunity strategy ;this would alsq ofcourse
imply consideration ofthefuture oftheindividual safeguard ;
clauses applicable toJapan .Thesectors involved vary considerably
insensitivity ,andwhereas aconsiderable number ofthe .quantits - *
tive restrictions could beended quite "shortly ,inother cases the­
' industries concerned would need time inwhich toadapt themselves to
changes intheir competitive situation .Atleast three categories c.
thequantitative restrictions involved 'caninfactbebroadly
stinaui sh'ed : ■ .

those-thot conberemoved fairly easily ;
thosewWe progressive liberalisation may
be,feasible onab$sis ofreciprocity ;
.: • 1 (Hi ).those where wide and "important interests are
atstake ,andwhere Large adjustments (includino
1 .;' '.
greater specialisation orrestructuring onthe
ECside )would berequired .
. 'il . ■■■-
d.Inthecase ofmajor difficulties ,itmaybenecessary
to |seek between theCommunity andJapan agreement forthe
temporary restraint ofJapanese exports while European Industry
restructures .These exceptional-tases would only occur -inthe
following circumstances : ,
' • -when they concerned aproduct where serious
..►industrial and social difficulties would otherwise
occur asaresult ofJapanese competition ;
» •
"the restraint wasfor alimited period (normally 2
*. to4years ); -•
•thoprotection was accompanied byrestructurina
measures ofthe Communi ty 'sindustry as
determined inappropriate procedures ;
* »
theCommunity undertakes toproceed toliberalisation ,
onaEC-wide basis ,within aspecified period . v..
8.Anclement ofindustrial cooperation would form part ofthematters to
bediscussed with Japan ,including such aspects as ,contacts between
- . ;European andJapanese industry ,questions ofinvestment (both
Japanese inEurope andEuropean inJapan ),andpossibilities ofcollaboration

inthirdcountryprojects^Afurther-openingupoftheJopcnesemarketto.|
Communityexportswouldalsocontributetothestrengthening ofcommercial .i
andindustrialties.; *. I
.'v.: i
■•«. • ' [
" . '• '«•• I'10,Conclusions ' ■ I
.–.■ •, ;-M
, t
Astrategyontheselinesseemstheonlyonewhichwouldprevento \
growingexacerbation ofourtraderelationswithJapanoverthediscriminatory ;
quantitative'restrictions,offerachanceofincreasingaccesstothe f
Japanesemarket,adequatelyengagesto.thisend.thejointbargainingpower.j
oftheCommunity/andensuresacompetitivefutureforourkeyindustriesonj
worldmarketsinthe1990s,

RESIDUAL OUAf/TITATÏVE RESTRICTIONS flMNTAIN'l-0OYKI^F.RSTATES
CNlHPOHISfliC.1JAPAH
CCT ProductECimport*
•fronJapan
(1979/tlONL OXχαI»
IMiscel­
laneous
02.01
04.06
22.09
40.12
50.09
57.10
56.0?
62.03
6'..01
64.02
66.01
66.03
73.01
85.23
85.25Heat
Hortey
Spirits'
f'Iiarnaceutical artlclos
V.'ovensilk
Jutefabrics
Carpets ,.
Sacks
footwear
Footwear
Uff.brellas
U.v.brellaparts•
Pigiron
Electriccable
Insulators0
•0
293,000
1m.
2.3n.
428,000
470,000
510,000
471,000
3.5m.
918,000
1.8.H.
0
9.2n.
2.0m.
(Totalï15)* (S23.4rs.>(6)(9X.(2)(1)(1)
IISecteral
itens
16.04
52.05
57.02
40.11
69.07/C3
69.11/12
73.02/15
73.32
52.09/14
84.41
84.62
85.01
85.03/24
90.12
90.28
91.01/02/
03/0?/
09/11
97.03Cornedfish
Oycstuffs
Films
Tyres
Tiles
Tablevare
SteeI
Doits
Cutlery
Sewingmachines
Bailbearinçs
Generators
Batteries
Opticalmicroscopes
Elec.nces.initr.
Ustches,clocks
Toys•33.9s.
22.4n.
40n,
66n.
19.4n.
40.7s.
142.9a.
1C,In,
82.5*.
104.8 .1.
61n.
31.5.1.
13.4n.
65m.
1&4n.
56.7ra.2
2
1
2
1
1
6
(Total:27) «1-034n.)(16)(17)(7)(2)(2>(i;

/
CCTt
ProductECImports
fromJapan
^.(1979,2>XF.BNLD
i0KIRLI
I
UK
IIIConnu'ncr
clcctrenics
85.15
85.21T.V.>radio
T.V.tubesV
951.An,
302.9m.•
1
1.1I
ji
I
ï
|(Totalî2),<21,25'./m.)<2>!
I<1>i
j
IVHotorveh-
Tcle'send
relatcditc.'is
.84.06
87.02/0;/
05/06
67.09/12j•'
Kotervehicles
andports
Motorcyclesandparts2,£16.7m.
617.3m.S
2■
••
CTotals7);<83,434n.>!
i(7)!
TOTAL 51>:''i■! 3127'!
.]9
i322
Explanatory Note- . ".
1.Thetableshowstheresidualquantitativerestrictions uaiptainedbyindividual
KesibcrStatesonir.cortsfroflJcoanwhicharediscriminatory innature,i.e.whichare
notapplicabletothirdstates ■GenerallyortoallGATTparties.Thelistisbase-;;r<
theinformationavailabletotheConmission;insonecasesthisinformationisir.presisi
andtherenayhavebeenchangeswhichhavenotbeennotifiedtotheCommission.
2.Theitsrr.shavebeengroupedinfourcategories :IMiscellaneous (ite^.swhose
importvalueisbelowI10million,andinmanycasesbelowS1million);;i.Iteis3f
sectoralir.portar.ee (i/r.oortvalueaboveS10million);IIIConsumerelectronics;a~3
IVf.otorvehiclesandrelateditems.
3.ThethirdcolumnwhichshowsthevalueofCommunityinpor-tsfro*Japanofthe"zzzi
concernedprovidesanindicationoftherelativeimportanceofthetradeandsector .
involved.Thefiguresquoted,whicharebasedonEurostatstatisticsfor1979,are
forfulltariffpositions (fourdigits)either:(a)ineaseswherethequantitative
restrictionappliestothefullposition;or(b)where'itisnotpossibleto
theexactequivalence betweenEurostattariffsub-positions andthesuo-oositions
theMemberStateorStates1applyrestrictions .Whereithasbeenpossibletoalign,fs
Eurostatsub-positions morecloselywiththerestrictedsub-positions thishasbeenc:*;
4.Inadditiontothequantitativerestrictionslisted,therearecertain'voluntary
restraintarrangements whicharegivensupportbyGovernments,notablyinthe
electronics andmotorvehiclesectors."