COMMISSION OF THE EUROPEAN COMMUNITIES 
C0M(92) 219 final 
Brussels, 21 May 1992 
f«fc' 
A CONSISTENT AND GLOBAL APPROACH 
A review of the Community's relations with Japan 
(Communication of the Commission to the Council) 
A CONSISTENT AND GLOBAL APPROACH 
A review of the Community's relations with Japan 
(Communication of the Commission to the Council) 
A. INTRODUCTION 
1. The Council last debated relations between the Community and Japan in 
April 1988. It adopted on that occasion guidelines for the Community's 
policy towards Japan which called for the further opening of markets and 
the development of cooperation and strengthening of dialogue. This balanced 
approach was an important new turning in policy; in the four years which 
followed, significant progress has been made on both the economic and the 
cooperative fronts, although the relationship between the two has still to 
reach equiIibr ium. 
2. It is now time to review the situation in particular in the light of 
five new elements: 
- the EC-Japan Joint Declaration issued in the Hague in July 1991. 
This introduced a political dimension into the relationship, 
defined objectives for cooperation on political and security issues 
and on global challenges. It confirmed cooperation on 
international economic and trade questions and on access to each 
other's markets, on the principle of equitable access based on 
comparable opportunities. The intensification of dialogue in this 
new framework has already allowed the identification of promising 
new fields of cooperation between the Community and Japan. It has 
also shown a possible convergence of positions on global problems 
of common interest, such as those of development and the 
environment. This convergence is helped by the perception of both 
sides that problems of society are a central element in a general 
view of economic progress. 
- in bilateral trade, the reversal of recent trends and the future 
outlook justifies concern about the possibility of reducing the 
serious imbalances between the Community and Japan. After a modest 
improvement in the late 1980s, the Community's exports to Japan 
fell in 1991 and the deficit in manufactured goods worsened 
sharply, showing that the base of our exports remains narrow and 
vulnerable to cyclical fluctuations. The essential diversification 
of exports is hindered by remaining difficulties of access to 
Japanese markets, of different types. Moreover, the opening of the 
markets of the Community and of the European Economic Area, and 
their accessibility to Japanese direct investment, will probably 
lead to an increased Japanese presence in Europe. It could well 
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happen that, over the next ten years, the European market will 
become as important to Japanese industry as the American, in 
contrast, there remain considerable barriers to the Japanese 
market, including structural obstacles. 
- the growing tendency of the United States and Japan to seek 
immediate solutions to bilateral trade problems through 
arrangements which tend to be discriminatory; 
- the strategic importance for the development and competitiveness of 
European industry not only of Japanese but also of South East Asian 
markets, which will grow exceptionally rapidly in the coming years; 
- finally, the opportunities that the Common Foreign and Security 
Policy offers for closer concertation of national foreign and 
security policies as regards Japan, and for improving their 
coherence with the external dimension of Community policies. 
B. A CONSISTENT AND GLOBAL APPROACH 
3. The emergence of Japan over the last two decades as a great economic 
and financial power is a challenge to the international community. Even if 
growth rates turn out lower, Japan is likely to maintain a certain economic 
momentum relative to Europe and the United States in the 1990s. There will 
probably not be radical changes in values, even though more emphasis may be 
put on the quality of life and the environment. The full impact of the 
radical ageing of the population will not be felt until the next century, 
though its effects are already being felt in the labour market (labour 
shortages, increased employment of women), in the pattern of savings and 
investment and in the cautious stance of budgetary policy. 
4. The challenge facing the Community will be to maintain and develop 
its technical and industrial strength, while participating fully in an open 
multilateral economic system. The response must come from both industry and 
government. The capacity of industry, especially manufacturing, to innovate 
and restructure will primarily determine the Community's place in the 
industrialised world. Public authorities at Community and national levels 
must create the conditions for greater competitiveness and encourage the 
efforts of industry, both through the Single Market and through 
accompany i ng poIi c i es. 
5. With regard to Japan, the aim should be the full integration of Japan 
into the international system by making it as open to foreign trade and 
investment as other advanced economies. Greater penetration of the Japanese 
market is vital, not only for the direct economic benefits, but also to 
give Community industry the opportunity of competing under equal 
conditions in the most advanced market of the world's fastest growing 
region (Asia Pacific), of gaining direct experience of advanced technology 
and management practices, and of building lasting relationships with 
Japanese companies. 
Inversely, the efforts that European companies are making to face up to the 
opening of their markets should be taken into account by their Japanese 
counterparts, which should modify their own structures to reduce the 
obstacles to Japanese markets. 
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6. The Community has achieved considerable success in eliminating formal 
barriers in specific sectors in Japan. Some of these remain, but the most 
important obstacles now are structural in nature. There are no miracle 
solutions in tackling these; eroding them will take time. Indeed open ing 
the Japanese market needs a steady haul, in which Member States and the 
Community together follow a consistent and global approach. This approach, 
which will be described in more detail in the following sections, should be 
based on appropriate macroeconomic and exchange rate policies and strong 
implementation of anti-trust laws in Japan; industrial cooperation; and 
trade promotion. Machinery should be set up to compare the EC's performance 
on the Japanese market with that on other markets. This should lead to a 
results-oriented dialogue with Japan. 
7a Eschewing threats, the Community and Japan must continue to build up 
a more mature relationship. Both are in many ways at a similar stage of 
taking up their responsibilities on the world stage, Japan because it is 
searching for ways of translating its economic power into political 
influence, the Community because it is adopting through the European Union 
institutions and mechanisms to enable it to play a stronger foreign policy 
role. The time is ripe for a strengthened political dialogue, which must 
show a qualitative difference from the arrangements currently in force. 
7b The Community's relations with Japan represent a vital challenge. 
They justify a specific effort to coordinate national policies. As soon as 
the Maastricht treaties are ratified, the Commission will launch 
appropriate initiatives in the framework of the Common Foreign and Security 
Pol icy. 
8. Nor must dialogue be confined to foreign policy questions. The 
encouraging recent developments in cooperation on science and technology, 
social affairs, the environment, and development assistance should be built 
on and reinforced. Moreover, the development of the Community's own 
financial and monetary personality in the course of this decade will 
require a closer working relationship in these areas. 
C. RECENT ECONOMIC DEVELOPMENTS 
Japan's economic policy 
9. In late 1986 and 1987, the Japanese authorities introduced 
stimulatory measures in response to calls from trading partners that Japan 
reduce dependence on exports and evolve towards an economy led by domestic 
demand. The period 1989-90 was one of particularly rapid growth, led by 
domestic rather than external demand as in earlier periods. This caused a 
substantial rise in imports, to which the "bubble economy" (the massive 
rise in the price of assets - in particular land, property and financial 
securities - experienced with a dramatic acceleration towards the end of 
the 1980's) also contributed: between 1986 and 1990 Japan's current account 
surplus fell by 60% to $35.8 billion, and its visible trade surplus by 34% 
to $63.5 bill ion. 
10. From late 1989 onwards, the Japanese authorities tightened monetary 
policy to control inflation, in particular of asset prices. The consequence 
was a fall in the growth rate, the bursting of the "bubble" and a doubling 
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of the current account surplus in 1991 to $72.6 billion. Growth is expected 
to remain relatively slow, and Japan's current account and trade surpluses 
to rise. A further deterioration is therefore to be feared in the 
Community's trade position with Japan. 
11. Along with variations in domestic demand and the adaptability of 
production, price competitiveness (the exchange rate relative to 
production costs) determines Japan's trade performance compared to other 
industrialised countries. Japan's price competitiveness declined from 
1986 to 1988 with the rise in the yen, contributing to the fall in its 
surplus. It then improved in 1989 and 1990 pushing up exports. Despite 
some deterioration in 1991, it is still better than in 1986, suggesting 
that the yen is now on the weak side. In the long run the yen should 
appreciate relative to the European currencies. 
12. In the Commission's view, Japan has more room for manoeuvre for 
sustaining demand in the short term than most industrialised countries 
because of low inflation and a general government surplus. The Japanese 
authorities should follow policies that allow a return to growth led by 
domestic demand and thus a reduction in external imbalances. The Community 
and the Member States should urge this approach on the Japanese in the 
relevant fora. Further structural reform would also foster growth, as 
increased competition inside and from abroad would reduce inflationary 
pressures, while deregulation would induce the development of new products. 
Trade and investment 
13. The Community's visible trade position with Japan changed for the 
worse in 1991 after having improved modestly for several years. Between 
1987 and 1990, its exports grew by around 25% a year and imports by around 
10%, although from a higher base, with the result that the level of the 
deficit did not change greatly over the period. The situation deteriorated 
abruptly in 1991. Exports fell by 4%, while imports from Japan grew 
substantially partly because of the demand boom in Germany; the deficit 
consequently Jumped by 25% to around 29.5 billion ECU. The underlying 
problem is that a large part of the Community's exports are especially 
vulnerable to economic downturns. Our exports have not been able to 
diversify sufficiently, although Community companies have proved their 
competitiveness on markets other than Japan. 
14. These trends reflect the bias of the Community's visible exports to 
luxury goods (motor vehicles, textiles and alcoholic beverages). The bias 
increased between 1987 and 1990, as these products accounted for nearly 
half the growth of exports. In 1991 the growth of the Japanese economy 
slowed and the "bubble economy" collapsed, causing spectacular falls in the 
Community's exports of luxury goods, and hence a drop in its total exports. 
15. Trade in services partially changes the picture. In 1989 Japan's 
deficit on service trade with the Community roughly doubled, mainly because 
of increased returns from European financial investments in Japan. This 
meant that by FY 1990 Japan's current account surplus with the Community 
had fallen to one third of its level in 1986-87 and was around half the 
trade surplus ($6.2 compared with $16.3 billion). 
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16. The counterpart to Japan's surplus on current account with the rest 
of the world has been investment abroad on a large scale, the greater part 
in financial assets. As for direct investment (productive assets), this 
trebled between 1986 and 1990 to reach $57 billion in the latter year, but 
is not on the same scale in the Community ($13 billion) as in the United 
States ($26 billion). Direct investment by Community companies in Japan 
remains at a low level ($1.1 billion). 
D. THE COMPONENTS OF AN APPROACH 
Sectoral Issues 
17. The Council's conclusions of April 1988 provided for action by the 
Community to remove barriers to trade in a number of sectoral markets. The 
Commission therefore conducted negotiations in sectors such as motor 
vehicles, pharmaceuticals, cosmetics, medical equipment, alcoholic 
beverages, leather and leather footwear, and the control of counterfeits. 
These negotiations have been largely, although not wholly, successful. 
Exports in many of the sectors rose sharply. 
18. However, the Community still has requests on the table on which 
little progress has been made, of which agricultural products are among the 
most significant (annex 1). Most of the issues are under negotiation in 
the Uruguay Round. If the results of the Round prove inadequate, or a 
conclusion unreasonably delayed, the Community should resume direct 
negotiations, in the spirit of the Joint Declaration. The list of requests 
should be kept under permanent review between the Commission, industry, and 
the Member States. 
19. The Japanese market for services is particularly important; but 
European companies only enjoy a modest share of it. If the conditions for 
business were more favourable, it could offer European firms significant 
opportunities, which in turn would allow fuller support for other Community 
companies operating in Japan. A priority is the liberalisation of 
financial services. Japan grants national treatment to Community banks as 
regards establishment and operation but there are a number of market 
features which, added to the rigidities in the laws and regulations, make 
it difficult for Community banks to compete. Competition in the insurance 
field and entry to the investment trust market remain difficult. Japan is 
in the process of overhauling its financial regulations. The Community 
should maintain its efforts to secure a further opening of the market for 
serv ices. 
Structural obstacles 
20. Important though sectoral issues are to certain sectors and regions 
of the Community, they are not determining in the overall economic 
relationship. The concessions requested should continue to be sought, but 
obtaining them will not have an major impact on trade, nor tackle the heart 
of the problem. This lies in the structural obstacles which are currently 
the main barriers to doing business in Japan, whether by exporting or by 
investing there. Although some progress has been made through increases in 
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infrastructure expenditure, more vigorous enforcement of anti-trust 
legislation, and some liberalisation of distribution, the pace of 
structural reform remains frustratingIy slow, despite declarations of 
intention by successive governments. 
21. The fundamental problem is the failure of competition and market 
mechanisms in many spheres: ineffective competition policy, exclusive 
business practices, close and often obscure relations between the public 
authorities and the private sector, the inflation of land prices by tax and 
land-use law, and the over-regulation of certain sectors. (These issues 
have been exhaustively analysed in the Structural Impediments Initiative of 
the United States and Japan. The Community shares much of that analysis 
despite its concern about the instruments chosen by the United States to 
pursue its objectives). 
22. The EC-Japan Joint Declaration recognises the need to tackle 
structural among other barriers to markets and provides a framework for 
consultation and cooperation. The Community must build an effective 
dialogue with Japan, concentrating on structural problems of specific 
interest to it. Foremost among these are the remaining weaknesses in 
competition policy. The enforcement of anti-trust law is inadequate and 
should be carefully followed to ensure that it has a sufficiently deterrent 
effect; the exemption of certain sectors from the anti-monopoly act should 
be eliminated; and the Fair Trade Commission should investigate problems of 
concern to Japan's trading partners (the Commission intends to propose 
certain areas for study in the near future). 
23. The distribution systems also remain a cause for concern, 
particularly as the Community is a major exporter of consumer goods. 
Although some liberalisation of large-scale retailing is under way, 
problems remain of tied distribution and anti-competitive practices. Wi th 
the help of industry, the Community should identify specific obstacles to 
the freer distribution of EC goods and invite the Japanese authorities to 
pay special attention to these. 
Industrial cooperation 
24. The second main thrust of the Community's approach to Japan, after 
the competition component, should be industrial cooperation. It is 
unrealistic to assume that the result of structural reform in Japan will be 
to create a society identical with that of the United States or the 
European Community. The structural obstacles mentioned above are different 
from the basic social values and the organization of society which have 
contributed to Japan's economic success. Successful penetration of the 
Japanese market will in the long run depend on not working against the 
grain of Japanese society. Long term relations between companies are 
central to business life in Japan. This is particularly the case for those 
products, other than luxury consumer goods, in which the Community industry 
is competitive but has not yet made a breakthrough on the Japanese market 
(as witnessed by the trade figures). 
25. This is a lesson which has already been learnt by the United States. 
The arrangement on semi-conductors and that on autos and auto-parts, the 
discriminatory aspects of which will : be discussed later, will operate 
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successfully to the extent that they reflect genuine industrial cooperation 
between the private sectors. The United States and the Japanese governments 
are setting up structures to encourage this development. The Community 
cannot afford to lag behind. 
26. Community industry is in a relatively favourable position to make a 
success of the approach outlined above. Increasing Japanese manufacturing 
investment in the Community gives EC suppliers an opportunity to form 
business relationships based on meeting Japanese requirements on quality, 
reliability of delivery, and price, while Japanese companies should play 
their part by being open to new suppliers, assisting them to meet 
requirements, and involving them at the design stage. With companies from 
both sides, the Commission and the Japanese authorities are considering 
launching a pilot programme to improve the supply of components used in the 
production of consumer electronics by Japanese firms notably in the 
Community. If successful, it might serve as a model for other sectors. 
27. It is also open to EC and Japanese firms to conclude strategic 
alliances on the development of and production of new products. Both may 
need partners to share the cost and risk of new investments and to engage 
research, faced with strong competition on their domestic markets. There is 
also the interest of access to new technologies and markets. Recently 
examples of such alliances have increased. 
28. Both these approaches presuppose a greater knowledge and understanding 
of Japan and the Japanese economy on the part of Community industry. It is 
not unreasonable to expect that any businessman dealing with Japan on a 
regular basis should have a comprehensive knowledge of these matters. This 
requirement applies not only to the big firms, but also to small and medium 
sized enterprises. There is, moreover, a wider problem of very little 
learning of Japanese before entry into professional life. 
29. It is no part of the duties of government to take decisions on behalf 
of industry. Instead, both Member States and the Community should work to 
create a favourable climate in which industrial cooperation can thrive. In 
particular, the Community should: 
- in cooperation with the Japanese government, seek ways of 
facilitating industry's participation in mutually beneficial 
cooper at ion-. 
- further examine possibilities of facilitating the adaption by 
European parts suppliers to the requirements both of the Japanese 
market and of Japanese companies in Europe; 
- maintain and extend its Executive Training Programme (ETP) to 
broaden and deepen industry's understanding of Japanese and the 
Japanese industrial economy: 
- together with the Japanese government, strengthen the EC-Japan 
Centre for Industrial Cooperation: 
- advocate the establishment by the Japanese, government of new, 
coordinated business faciIities for Community industrial newcomers 
to the Japanese market, especially small and medium sized 
enterpr ises. 
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Investment 
30. Direct investment in Japan is often essential to penetrate markets, 
but that by Community companies remains low, hindered both by real and 
perceived structural obstacles. Industrial cooperation on the lines 
suggested above should ease the situation over time. In the meanwhile, the 
Japanese authorities could more effectively improve the climate for foreign 
investment, particularly by encouraging interest in careers in foreign 
companies operating on the Japanese market among Japanese manage r s_ _ and 
students. in order to obviate current difficulties in local recruitment; by 
clarifying and advising on tax liabilities and other regulatory 
requirements: and by liberalising the market for support services support. 
such as financial and legal services. The Centre for Industrial Cooperation 
provides a useful forum for activities of this type. As for financial 
incentives for investment, the Commission welcomes the measures recently 
taken by the Japanese authorities, but counts on them making sufficient 
funds available and on raising the value of the incentives if that proves 
necessary. There remains a major obstacle to investment, however, the 
difficulty of carrying out merger and acquisitions in Japan. Cross 
shareholdings and general business culture largely block investment by this 
channel. This should be looked into more closely. 
31. For its part, the Community welcomes Japanese direct investment, 
which can make a contribution to industrial development and renewal 
throughout the Community, provided it is sufficiently integrated into the 
economic fabric. It should be the object of all concerned to ensure that 
Japanese investment remains as welcome in the Community as US investment 
has proved to be in the past, after initial doubts of a similar nature. To 
this end, the Community and its Member States should follow a common line 
towards the issue, namely that Japanese investment should result in the 
creation of new lobs, be fully integrated into the Community's economic 
fabric through the use of European suppliers, and lead to the transfer of 
research and development and ultimately of management functions to Europe. 
Export Promotion 
32. The third main thrust of the Community's approach to Japan, after 
competition and industrial cooperation, is export promotion. A growing 
number of Member States is embarking on important initiatives to encourage 
the promotion of their exports to Japan. This is an example which should 
be followed by all. For its part, the Commission intends to build on the 
experience of its activities for the promotion of exports to Japan (EXPROM) 
over the last ten years. The ETP programme has already been discussed. For 
the rest, the Commission intends to continue to follow a coherent policy, 
complementary to that of the Member States. Within these parameters, it 
will develop its policy in two new directions. 
32a. First, j_t_ will attempt to build synergies between the export 
promotion programmes of the Community and those of the Member States. This 
could eventually allow the identification of projects to be Jointly 
undertaken by the Community and the Member States and the provision of 
seed-money by the Community for new ones. A promising area, where the 
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Commission is faced with rising demand, is Joint European participation in 
trade fairs which are important to business in Asia. The Commission 
intends to respond favourably to the co-financing requests of European 
industry. 
33. Secondly, the export promotion programmes of the Community and of the 
Member States and Japanese import promotion schemes could be made more 
complementary. This should be discussed in a more structured dialogue with 
the MITI. Similarly, the Community needs to ensure that industry exploits 
to the full the commitments to increase imports and local procurement from 
foreign companies contained in the Business Global Partnership Initiative. 
A higher degree of coordination at Community level would considerably 
improve the chances of European companies benefiting from Japanese 
promotional measures, like their United States competitors. 
Public procurement 
34. The opening of the Community market, through the introduction of the 
Single Market, and the abolition of remaining national restrictions, 
entitles the Community to expect that public procurement in Japan and 
procurement by private companies under governmental guidance will be 
equally open to foreign competition. The Community has proved competitive 
in world markets, public works, railways, aeronautics, satellites, and 
telecommunications but has not made a commensurate breakthrough on Japanese 
markets. In all these areas, the Community will continue to seek non­
discriminatory opening of the Japanese market. together with the 
application of GATT rules to comprehensive lists of procuring entities and 
of public works and other services, greater transparency in tendering and 
in the criteria for selection. 
Discriminatory solutions to bilateral trade problems 
35. This transparency and equality of treatment is particularly important 
in the light of the recent trend to negotiate deals between the United 
States and Japan which are discriminatory in intention or effect. The 
provisions on autos and auto-parts contained in the Global Partnership Plan 
of Action are the latest of these. This trend is unacceptable in the 
context of the new relationship symbolised by the Hague Declaration, as it 
leads in practice to discrimination between trading partners and the 
distortion of trade. 
36. The Community should insist with Japan that contracts should only be 
awarded for commercial reasons; that bilateral arrangements should be made 
transparent by the provision of full information on their working and 
results, in terms of sales and contracts; and that third countries, 
including the Community, should take part in the joint review committees 
set up with the United States (for example on semiconductors and the public 
procurement of computers). The Community will closely review the evolution 
of trade between the Community and Japan and between the United States and 
Japan in the products covered by bilateral arrangements to identify 
possible discriminatory effects. Moreover, in this and other fields, the 
Community should continue to assert its rights under GATT, with recourse to 
the new commercial instrument when appropriate. 
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E. INFORMATION TECHNOLOGY. TELECOMMUNICATIONS. AND HDTV 
37. In the process of market unification, standardisation in 
telecommunications and information technology is essential to improving the 
competitiveness of Community producers. A major element in the Community's 
approach to standardisation is compatibility with international norms. In 
Japan a significant reorganisation of standardisation activities has been 
gradually implemented, with an emphasis on full participation in 
international exercises in which Japan intends to play a leading role in 
the future. The reorganisation also implies that proprietary Japanese 
standards be progressively aligned with international ones. The Commission 
will continue to insist that Japan strictly applies international standards 
and that Japanese standards are transparent, a condition for making 
markets more accessible to European suppliers of equipment and services. 
38. In information technology, a significant achievement has been Japan's 
commitment to the introduction of open systems; a sign of this is the 
specification of open systems standards in public procurement. While a 
group on standardisation was established by the Commission and the Japanese 
authorities to exchange information on respective policies, this has been 
superseded by the active participation of both sides in international 
bodies. 
39. In telecommunications, less progress has been made and the Commission 
constantly presses the Japanese authorities to make the standardisation 
process more transparent. The Commission has regular discussions with the 
Japanese authorities, and encourages European representatives, preferably 
from industry, actively to participate in fora initiated by the Japanese 
authorities. Moreover, an interconnection experiment is currently being 
prepared to test the compatibility of equipment and to identify divergences 
in standards (and proprietary ones). 
40. No significant progress has been made in defining a harmonised 
transmission standard for High Definition Television. The Community 
supports a standard that would respect the gradual introduction of new 
technology, while Japan maintains its original proposal which implied the 
early de facto adoption of its norm. Both sides are now promoting their 
standards both on their domestic and on international markets. As for a 
production standard, no progress has been made since the meeting of the 
CCIR, in 1990. 
41. In the field of information technology and telecommunications, 
cooperation is gaining in importance because of the significance of the 
global market, including Japan. In telecommunications, where the Community 
is competitive and has leading-edge technology to offer, a growing number 
of European firms are becoming attractive industrial partners for major 
Japanese companies. Cooperation in semiconductors is weak compared with 
the efforts made by United States industry. The Commission has initiated a 
dialogue with the Community's semiconductor industry to encourage a greater 
European presence in Japan. In the software sector, the relative strength 
of European industry offers opportunities which have not been fully 
exploited to date. 
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F. COOPERATION 
Achivements since 1988 
42. The Community has succeeded in giving considerable substance to the 
Council's expressed desire in its conclusions of 1988 to strengthen the 
cooperative relationship with Japan. This is particularly the case with 
science and technology. More recently, encouraging progress has been made 
on development aid, the environment, and social questions. Developments in 
these sectors will be set out below. 
Poli t ical dialogue 
43. Progress on political dialogue has so far fallen short of 
expectations. There has been difficulty for reasons of timing in keeping to 
the schedule of meetings, and when they have taken place they have shown 
that the dialogue between the Community and Japan falls behind that between 
the Community and the United States in intensity, whereas the two should be 
more nearly on the same level. The Community, the United States and Japan, 
although sometimes in competition, are nevertheless facing largely the same 
challenges in to-day's economically and politically interdependent world; 
it would make sense to reflect on structures to improve the chances of 
facing them together. The attitude which the industrialised world takes to 
Russia and the other Republics of the former Soviet Union will be an early 
test of this. The Commission and the Member States, in the framework of a 
global approach, intend to pay special attention to this aspect of the 
relat ionsh ip. 
44. The G24 experience has shown that this sort of cooperation is 
feasible. The Commission welcomes Japan's increasing involvement in the 
programme of economic assistance to the countries of Central and Eastern 
Europe, although an increase in grants would be desirable. An effort to 
improve the rate of private investment would also be helpful. 
Science and technology 
45. Science and technology in Japan have traditionally been dominated by 
research directed towards industrial applications. In contrast, basic 
research has tended to be on a minor scale. This approach, together with 
the particular concept of what is precompet i t i ve that follows, is being 
carefully considered in the debate on the redirection of research policy in 
Europe, where basic research still plays a major role. This is an important 
field of dialogue and cooperation between the Community and Japan, in 
particular as the latter has shown a growing interest in basic research. 
The challenge for the Community is to identify the areas where 
collaboration is in its interest and to ensure that benefits flow in both 
directions to an adequate extent. 
46. One area where strong potential for mutually beneficial research has 
clearly been established is nuclear energy. The Community and Japan have 
already signed agreements on thermo-nuclear fusion, nuclear materials 
safeguard and protection against radiation. 
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47. The new openness of Japanese research laboratories is welcome. 
Better opportunities are thus offered for many European scientists and 
engineers to carry out long-term research activities in leading Japanese 
institutions. In the long run, this will increase the number of Japan 
experts and will strengthen the human network between the European and 
Japanese scientific worlds. The Commission runs its own fellowship 
programme and nominates candidates for a similar Japanese programme. The 
efforts made by the Community, and its Member States, to develop such links 
with Japan need to be matched by private sector initiatives. 
48. In recent years, Japan has proposed several international projects 
whose results would come in the long term. Typically they would involve 
Joint research projects, technological as well as scientific, carried out 
by private sector, governmental and academic laboratories in Europe, Japan 
and North America. The pilot phase of the Human Frontier Science 
Programme, which involves basic research to elucidate the complex 
mechanisms of living organisms, was completed in March 1992; the programme 
is now entering its next phase. The Intelligent Manufacturing System 
programme, covering advanced manufacturing technology, was originally 
launched by Japan but has become a truly trans-regional exercise. On the 
basis of a two-year feasibility study, the Community will decide on its 
participation in the full ten-year programme. The importance of IMS lies 
in the attempt to establish a model for trans-regional cooperation in an 
applications-orientated domain. There are other initiatives launched and 
led by Japan, such as the Real World Computing programme*1), with which 
Japan seeks to associate foreign researchers and laboratories. While 
generally favourable to these initiatives, the Community is defining with 
care the nature and organisation of its participation to ensure balanced 
advantages. 
49. Finally, the Community does not have a formal channel to handle 
science and technology cooperation with Japan and has to proceed on a case-
by-case basis, an approach whose limitations are clear. The Community is 
currently studying, with support from the European Parliament, a Japanese 
proposal for a forum in which to consider major issues of cooperation in 
science and technology. 
50. The localisation of R and D activities is becoming relevant to the 
general investment questions mentioned earlier. An increasing number of 
Japanese R and D centres are being set up in the Community; these should be 
well integrated so as to contribute effectively to the development of the 
Community's R and D fabric. On the other hand, there are only a few 
examples of Community firms establishing R and D activities in Japan. They 
should demonstrate their commitment to a long term presence in Japan by 
increasing their R and D activities there. 
Env i ronment 
51. The Joint Declaration explicitly identifies the environment as an 
area where cooperation should be developed. This has been given a clear 
impetus by the first high level consultations on the environment held 
recently between the Commission and the Japanese authorities, which helped 
(1) covering advanced computing, formerly called the New Information 
Processing Technology programme. 
13 
identify specific areas of cooperation. On global issues such as the 
environment and development, climate change and biodiversity, the positions 
of the Community and Japan in international fora are often close; i t wou I d 
be advantageous further to coordinate them, with a view to building up the 
leading role they could Jointly play in this area. 
52. Concrete actions were also identified: Joint act iv i t ies on problems 
such as acid rain and emissions of C02 and other greenhouse gases, and in 
programmes on the ground like those concerning tropical forests in Brazil 
and Sarawak. The two sides also agreed to exchange information on 
environmental developments and policy in the Community and Japan, including 
the use of economic and fiscal instruments, waste management, the 
classification of dangerous chemicals, the regulation of biotechnology and 
the situation in Central and Eastern Europe. Views have been exchanged on 
preparations for the Rio Conference. 
Development Assistance 
53. A coordinated approach by all donors is required to make effective 
the policy reforms adopted by many developing countries. Until 1991, 
relations with Japan in the development field hardly existed, despite 
attempts to begin a dialogue. These were relaunched however,during 
President Delors' visit to Japan in 1991 and by the Joint Declaration. Such 
cooperation is of importance because of the major part the Community and 
Japan play in development assistance; the role of the EC will be further 
reinforced by Political Union. As for Japan, it should make a greater 
contribution to the international aid effort, so that a fair sharing of the 
financial burden is achieved. It would also be desirable for Japan to 
devote a greater part of its aid to the least developed countries. 
54. Moreover, there is a certain complementarity between the policies of 
Japan and the Community. The Community has a strong and well-established 
presence in Africa, Middle-East and Central and South America whereas Japan 
has tended to concentrate on Asia. Therefore, they could benefit from each 
other's expertise, including possibly on Southern Africa. A series of 
meetings between the Commission and the Japanese authorities have begun, to 
define in the first place the common ground between each side's policy. A 
considerable level of agreement has emerged and the basis laid for a 
fruitful dialogue and for strengthening collaboration in the future, which 
could lead rapidly to more operational cooperation, possibly including co-
f inaneIng. 
Social Affairs 
55. Greater understanding of the organisation and conditions of work, of 
industrial relations and of social legislation would benefit the business 
community and trade unions in both the Community and Japan. The Commission 
and the Japanese authorities intend to contribute to this, by facilitating 
exchanges of information and the develoment of a broad dialogue between a I I 
parties concerned. A Joint programme has been started to promote the 
exchange of experts, from government and from both sides of industry, and 
joint studies on employment, training industrial relations and labour 
affa i rs. 
- 14 
Energy 
56. The Community and Japan, as important consumers and importers of 
energy, share interests in the energy field, among which is the rational 
use of energy and the development of renewable resources. The development 
and utilisation of new, innovative technologies in these fields could be a 
fruitful area for cooperation between the Community and Japan. Where the 
Community has a technological lead, for instance in wind energy and 
photovoltaics, biogas and energy efficiency in buildings, it could provide 
benefits for the Community's industry. Recently, energy issues having a 
major impact on the environment, such as the relation between emissions 
from energy use and global warming, have been discussed. 
Culture and mutual understanding 
57. In view of Japan's place in the world, a greater understanding of its 
society, values, tradition and culture is urgently needed in the Community, 
where real knowledge of Japan is rare. While Japanese comprehension of 
Europe is probably greater and more widely spread, it can be based on 
antiquated stereotypes and ignore the Community dimension or adopt a 
sceptical attitude towards it. For these reasons, the Commission is 
seeking with the Japanese authorities ways of promoting mutual 
understanding, and proposes the encouragement of exchanges of different 
kinds. It is also considering the possibility of coordinating European 
cultural activities in Japan, to maximise their impact and create awareness 
of European culture in general. 
G. TOWARDS A MORE EFFECTIVE DIALOGUE 
58. The EC-Japan Joint Declaration sets out the framework for dialogue 
with Japan, reinforcing the mechanisms for consultation and cooperation. 
These should be used to follow the implementation of the declaration and to 
give an impetus to cooperation and the solution of problems. This 
communication has attempted to identify the main thrust of what should be 
the Community's approach. Throughout the communication, the principle 
conclusions under each heading have been emphasized. It is proposed that 
the Council should adopt these conclusions as the operational basis of the 
Community's policy towards Japan. A draft text is appended (Annex 2). 
59. Progress in the implementation of this policy will need to be reviewed 
at regular intervals, to ensure that concrete results are achieved. As 
regards the cooperative dialogue, the occasions foreseen in the EC-Japan 
Joint Declaration should be used to review progress and to identify new 
fields. As far as the economic relationship is concerned,the Commission 
proposes the following new method in line with the EC-Japan Declaration. 
60. The Commission will regularly carry out a statistical analysis of 
developments in the trade of goods and services, of the necessary degree of 
sophistication. To set this in context, a comparison will be made with the 
Community's performance on the markets of its other comparable trading 
partners, and the performance of Japan's partners on the Japanese market. 
This process will help the timely identification of obstacles to the normal 
development of sales by Community firms on the Japanese market. The results 
of this analysis will be submitted to the Member States for their comments. 
15 -
The Commission will then proceed to a regular and systematic evaluation 
with the Japanese authorities of the results of the analysis. This analysis 
should lead to recommendations on the mesures required to advance the 
penetration of Japanese markets by Community firms. The process would be 
conducted in the framework of the Joint Declaration, which provides for 
consultation on market barriers, including structural obstacles. The 
recommendations would be presented for discussion to the annual High Level 
Consultations. A general review of the situation would be undertaken by the 
annual ministerial meetings. The Member States would be associated with 
this process through appropriate procedures. 
It should be emphasized that the purpose of this process will not be to set 
quantified objectives for trade, but to identify problems, to establish 
their causes, and to propose action for their timely resolution. 
61. The Commission believes that the approach it suggests combines an 
improvement of its own activities, (respecting the principle of 
subsidiarity, particularly regarding initiation to Japanese language and 
culture) with the necessary cooperation with Member States. The 
orientations it lays before the Council, together with the procedures 
foreseen for regular review with the Japanese side, will enable the 
Community to continue to build up its relationship with Japan on a mutally 
satisfactory basis, and thus enable them together to play the role each is 
called upon to assume in the world. 
ANNEX 1 
SECTORAL OBSTACLES TO JAPANESE MARKET 
As far as the access to the Japanese market is concerned, the main following 
obstacles can be identified regarding foodstuff products, industrial 
products, services or rules of general application. 
I) Industrial products 
A) Tariffs 
inter alia, level of tariffs on leather and leather shoes (primary 
and secondary tariffs), synthetic menthol, ferro-nickel and 
refined and unrefined copper. 
B) Standards and certification 
* motor vehicles: issues open in the domains of safety and 
pollut ion. 
* pharmaceuticals and medical equipment: unnecessary delays in 
registration and not great enough acceptance of international 
standards and test procedures. 
C) Taxat ion 
level of consumption tax on cars. 
D) Trade measures 
quotas on leather and leather footwear. 
E) Label Iing 
confusing linen labels. 
II) Services 
A) Restrictions for the access to the profession of lawyers 
* counting of experience for qualifying as a foreign lawyer. 
* use of home firm name. 
* arbitrat ion. 
B) Financial services 
inter alia 
* openness and transparency of the financial markets. 
* conditions of the insurance market. 
* regulation affecting the management of pension funds by investment 
managers. 
* procedure for the award of investment trust management licences. 
III) Foodstuff products 
A) Tariffs 
* level: high tariffs specially on cheese, processed pork, beef, 
sugar confectionary, bottled wine, brandy and whisky, corn 
starch and potato starch. 
* calculation of duties: discriminatory calculation of custom value 
for coffee f iIters. 
B) Phytosanitary measures 
* import ban on EC fruits (citrus, apples and pears) and vegetables 
(Med fly). 
* zero tolerance of insects on cut flowers and live plants. 
* non-acceptance of on-board cold treatment procedures for fruit. 
* pre-inspect ion of cut flowers shipments. 
* gassing treatment requirement for tomatoes, apples and pears. 
C) Veterinary measures 
prohibition of imports of chilled or frozen pork from EC except 
IRL. Northern Ireland, DK. 
.*£ 
D) Sanitary measures 
* radioactivity checks on imported EC foodstuffs. 
* ban on dairy products additives (nisin). 
* zero tolerance on residues in livestock products. 
* processed meat: approval of processors and veterinary 
certification system. 
* additive rules for pastry. 
* prior registration: tomato juice and sauces, fruit juices. 
E) Prohibitive standards for processed meats 
* import ban on Parma ham. 
* coli forms. 
* zero tolerance on bacterial activity for dried ham and sausages. 
* out-dated heat treatment rules for meat. 
F) Trade-related measures 
* QR's on certain fish products and allocation of the quotas. 
* QR's on milk and cream and on starch and inulin. 
* import tenders for skim milk powder and butter 
* fraudulous imports of pork from Taiwan. 
* low quotas for cheese. 
* processed meat, fruit juices: monopoly of distribution; import 
licences subject to local lobby. 
G) Administrative guidance 
restrictive prenotation administrative guidance for butter mix. 
H) Taxat ion 
* liquor tax differentials. 
* unfair taxation of imitation whiskies. 
* commodity tax on fruit Juices. 
I) Label Iing 
"date of manufacturing" or "date of importation" markings. 
J) Def ini t ion/classi f icat ion 
* restrictive definition of fondue cheese. 
* tariff classification of ice cream powder. 
* minimum protein content of skimmed milk powder. 
,v) Rules of general application 
A) Distr ibut ion 
* restrictive provisions of the Large Scale Retail Stores law. 
* absence of liquor licences for most supermarkets. 
* captive retail outlets. 
* restriction of opening of dealership/repair shops for automobiles. 
B) Compet i t ion 
* effective enforcement of competition law to create sufficient 
deterrent effect. 
* elimination of areas exempt from scope of Anti-Monopoly Act. 
* conditions for foreign sole import agent contracts. 
C) Intellectual property 
too mild custom procedures and penalties against counterfeiting 
(f.i. in the field of liquor). 
D) Government procurement 
* closed specification process. 
* lodging of complaints. 
* pre-bid qualification process and registration procedures. 
* duration of the bidding period. 
* non-transparent criteria to evaluating bids. 
E) Administrative obstacles 
conditions for custom clearance. 
ANNEX 2 
DRAFT COUNCIL CONCLUSIONS 
1. The Council confirms the need for a balanced approach in relations 
with Japan based, on the one hand, on policies to further the 
penetration of Japanese markets by Community firms and, on the other, 
on the strengthening of dialogue and the development of cooperation 
in areas of mutual interest. It believes that the EC- Japan 
Declaration issued in July 1991 provides an appropriate framework for 
consultation and cooperation and that both sides must make every 
effort to give substance to the goals it sets. 
2. The Council welcomes the steps that the Japanese government has taken 
in recent years to improve access to certain sectoral markets. It is 
concerned, however, by the recent deterioration in the Community's 
trade position with Japan, by the return to growth led by export 
rather than domestic demand, by the lack of progress in opening 
specific sectoral markets, by the slow pace of structural reform, and 
by the growing tendency of the United States and Japan to seek 
solutions to bilateral trade problems through arrangements that 
appear discriminatory. It believes that the Member States and the 
Community together must follow a consistent and global approach 
towards economic and commercial issues, attaching particular 
importance to the removal of structural obstacles. 
ECONOMIC POLICY 
3. The Council calls on the Japanese authorities to resolve the above 
issues, and in particular: 
Macro-economic questions 
- to follow policies that allow a return to growth led by domestic 
demand, and furthered by structural reform, and a reduction in 
external imbalances; the Community and the Member States should 
pursue this approach also in the relevant international fora; 
- to follow a policy which in the long run will permit the yen to 
appreciate relative to the European currencies; 
Sectoral issues 
to remove barriers to trade in sectoral markets important to the 
Community, accepting the resumption of direct negotiations if the 
results of the Uruguay Round prove inadequate or a conclusion is 
nnrpacnnahlv r!p>lav*»H-unreasonably delayed; 
if 
- 2 -
Structural obstacles 
further to strengthen competition policy and, in particular, to 
enforce competition law so that it has sufficient deterrent 
effect, to eliminate the exemption of certain sectors from the 
anti-monopoly act and to study competition issues of concern to 
the Community; 
to remove specific obstacles to the free distribution of Community 
goods and services. 
Industrial cooperation 
4. The Council underlines the importance of industrial cooperation in 
the EC-Japan relationship. The Community should: 
cooperate with the Japanese government in seeking ways of 
facilitating industry's participation in mutually beneficial 
cooperat ion; 
further examine possibilities of facilitating the adaptation by 
European parts suppliers to the requirements both of the Japanese 
market and of Japanese companies in Europe; 
- maintain and extend its Executive Training Programme (ETP) in 
order to broaden and deepen industry's understanding of Japanese 
and of Japan's industrial economy; 
together with the Japanese government, strengthen the EC-Japan 
Centre for Industrial Cooperation; 
advocate the establishment by the Japanese government of new, 
coordinated business facilities for Community industrial newcomers 
to the Japanese market, especially small and medium sized 
enterprises. 
Investment 
5. The Council welcomes Japanese direct investment in the Community, 
provided it is sufficiently integrated into the Community's economic 
fabric so as to make a full contribution to industrial development 
and renewal throughout the Community. To this end, the Community and 
the Member States should follow a common line towards the issue, 
namely that Japanese investment should result in the creation of new 
jobs, be fully integrated into the Community's economic fabric 
through the use of European suppliers and lead to the transfer of 
research and development and ultimately of management functions to 
Europe. 
6. The Council calls on the Japanese authorities to improve the climate 
for foreign investment in Japan, particularly by encouraging interest 
in careers in foreign companies among Japanese managers and students; 
by clarifying and advising on tax liabilities and other regulatory 
requirements; and by liberalising the market for support services, 
such as financial and legal services. 
- 3 
Export promotion 
7. The Council supports the Comission's intention to build synergies 
between the Community's Export Promotion Programme and those of the 
member states and to develop complementarity between Community export 
promotion programmes and Japanese import promotion schemes. 
Public procurement and bilateral arrangements 
8. The Council calls on the Japanese authorities: 
to open public procurement further and to avoid discrimination in 
the awarding of contracts, with greater transparency in tendering 
and in the criteria for selection; 
to ensure that, in the context of bilateral arrangements and 
otherwise, contracts are awarded for purely commercial reasons and 
there is full transparency on the working of these arrangements; 
in information technology and telecommunications, to strengthen 
cooperation in strategic sectors and to ensure that Japan strictly 
applies international standards and that Japanese standards are 
transparent, a condition for making markets more accessible to 
Community suppliers of equipment and services. 
POLITICAL DIALOGUE 
9. In the framework of a comprehensive political dialogue between the 
Community and Japan, based on the Joint Declaration of July 1991 and 
on a regular political assessment, the Council should make a 
continuous effort to strengthen relations between the Community and 
Japan in all fields and to define possible common actions, taking 
full advantage of the common interests which link the Community and 
Japan in many areas. At the same time, the Community and its Member 
States should make every effort to coordinate their positions and to 
improve cooperation in order to develop a common stance. 
COOPERATION 
10. The Council fully supports the intention of the Commission to develop 
cooperation in the following fields and with the following aims in 
v iew: 
in science and technology, to strengthen cooperation in strategic 
sectors, to define areas where collaboration is in the Community's 
interest, to ensure that benefits flow in both directions to an 
adequate extent and to explore a Japanese proposal for a forum in 
which to consider further cooperation in this field; 
as regards the environment, further to coordinate positions on 
global issues and to participate jointly in specific programmes 
and in projects on the ground; 
lb 
4 -
in development assistance, to better share the financial burden, 
to strengthen coordination so as to make effective the policy 
reforms adopted by many developing countries, and to develop 
further collaboration leading rapidly to more operational 
cooperation, possibly including co-financing; 
in social affairs, to faciliate exchanges of information and the 
development of a broad dialogue; 
in energy, to discuss cooperation, particularly in areas such as 
clean technology which have potential industrial benefit for the 
Commun i t y; 
to discuss ways of promoting cultural exchange and mutual 
understanding. 
METHODS 
11. To ensure that the Community's policy towards Japan gives concrete 
results, the Council approves the methods proposed by the Commission, 
namely: 
- as regards the cooperative dialogue, to use the occasions foreseen 
in the EC-Japan Joint Declaration to review progress and identify 
new fields; 
- as far as the economic relationship is concerned, the Commission 
will regularly carry out a statistical analysis of developments in 
the trade of goods and services, in comparison with the 
Community's performance on the markets of its other comparable 
trading partners, and the performance of Japan's partners on the 
Japanese market. After the results of this analysis have been 
submitted to member States for their comments, the Commission will 
proceed regularly to a systematic evaluation with the Japanese 
authorities, using the Community's performance with other advanced 
trading partners as a reference. Resulting recommendations will 
be presented to the Annual High Level Consultations. A general 
review will be undertaken by the Annual Ministerial Meetings. The 
Member States will be associated with this process through 
appropriate procedures. The purpose of the process will not be to 
set quantified objectives for trade, but to identify problems, to 
establish their causes, and to propose action for their timely 
resolution. 
A CONSISTENT AND GLOBAL APPROACH 
12. The Council recognises that the success of these policies will depend 
on the adoption of a consistent and global approach. It calls on the 
Member States and the Commission to achieve this together, on the 
basis of what precedes. 
ISSN 0254-1475 
COM(92) 219 final 
DOCUMENTS 
EN 11 
Catalogue number: CB-CO-92-240-EN-C 
ISBN 92-77-44611-0 
Office for Official Publications of the European Communities 
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