No C 328/30 Official Journal of the European Communities 22. 12. 86 
Opinion on relations between the European Community, Japan and the United States of 
America 
(86/C 328/12) 
The Economic and Social Committee decided on 18 December 1985, under the fourth 
paragraph of Article 20 of its Rules of Procedure, to draw up an opinion on relations between 
the European Community, Japan and the United States. 
The Section for External Relations, which was responsible for preparing the Committee's 
work on the subject, adopted its opinion on 9 September 1986 in the light of the report by 
Mr Curlis and Mr Staratzke. 
At its 239th plenary session (meeting of 18 September 1986) the Economic and Social 
Committee adopted the following opinion unanimously: 
EEC - Japan - USA relations 
1. The European Community, the USA and Japan 
are the world's most important trading partners. As 
such they have a very great responsibility for the world 
economy as a whole — a responsibility that is made 
even greater by the close economic and political interde­
pendence that exists between them and the countries 
of Europe, Africa, Asia and America which are very 
important in terms of population, resources and econ­
omic development potential. The present opinion deals 
in particular with the economic problems arising in this 
sphere. 
2. Together accounting for some 55% of world, 
trade, the three partners have a common interest in (a) 
creating the right conditions for the expansion of world 
trade, and (b) helping to ensure a more balanced devel­
opment of the world economy. 
3. As far as trade in industrial products and services 
is concerned, the EEC, the USA and Japan must of 
course continue to play their part in pursuing the goal 
of trade liberalization within the multilateral frame­
work of GATT. In this context the Committee would 
refer to its opinion of 22 May 1986 on future GATT 
negotiations and the renewal of the Multifibre Arrange­
ment (!). Japan's increasing trade surpluses with the 
USA and the European Community over recent years 
are seriously threatening to upset the balance of world 
trade. 
4. As far as the agricultural sector is concerned, the 
three partners need to show greater solidarity to resolve 
the difficulties arising from the supply of farm produce 
outstripping effective demand. Surplus production in 
the USA and the EEC has not only led to trading 
difficulties between them but has contributed materially 
to lower world prices for an important range of com­
modities. This in turn has reduced the purchasing power 
of primary producing countries. Japan is far from self-
sufficient in its food and feed requirements but is 
(!) OJ No C 207, 18. 8. 1986. planning significant increases in domestic production 
which, given the country's importance as an importer, 
will further weaken world prices. The Committee feels 
that the three partners ought to do everything in their 
power to make better use of the complementarity in 
their production and to strive for common solutions 
through coordination of their different agricultural 
policies. With greater medium and long-term coordi­
nation between themselves as well as with third 
countries the way should be open for more rational 
organization of production, which should lead to a 
progressive reduction in the cost of implementing agri­
cultural support policies. The USA, the European Com­
munity and Japan should coordinate their farm policies 
through consultation within the framework of a new 
agricultural system under GATT. During the forth­
coming round, production targets, subsidies and other 
aid measures should be dealt with, account being taken 
of the need for an international division of labour. 
5. In the monetary field, the Committee notes with 
satisfaction the more realistic trends in the exchange 
rates between the yen and the dollar, and between the 
Community currencies and the dollar. Even so, the 
liberalization of capital movements in Japan would 
result in exchange rates reflecting real differences in 
purchasing power more accurately, with the yen rising 
accordingly. There is a similar more realistic trend 
in interest rates, which is making it possible for the 
European economy to pick up again as a result of the 
lower cost of money. These trends are also easing 
developing countries' debt burdens (debt servicing) and 
reducing the cost of their energy imports (lower value 
of the dollar). 
6. The Consultation machinery agreed recently in 
Tokyo to prevent excessive fluctuations in exchange 
rates will be able to play all the more positive a role in 
this context if major domestic economic measures are 
coordinated as far as possible. It is becoming more and 
more necessary to hold regular consultations before 
decisions are taken on major economic issues so that 
22. 12. 86 Official Journal of the European Communities No C 328/31 
national measures can take account of any reper­
cussions on external relations and on partners. This is 
all the more important as imports from newly industri­
alizing countries are playing an increasing role in the 
US and European Community economies. 
EEC-Japan relations 
7. The Committee notes that after centuries of iso­
lation Japan has over the last 40 years or so made great 
efforts to open up to the outside world. For some years 
now a certain internationalization of Japanese society 
has been in.progress and there has been a more pro­
nounced interest in the western way of life, thereby 
creating challenges and opportunities for the Com­
munity's economic operators. 
8. Certain specific features of Japanese culture as 
reflected, for example, in the capacity of the Japanese 
for extremely hard work, their perfectionism and their 
constant striving to improve the quality of their prod­
ucts, play an important part in the Japanese economy. 
In addition, Japan has for decades been organizing 
its productive apparatus on the basis of a strategic 
evaluation and penetration of the international market, 
and combining this with a concentration of its export 
effort on specific products and technologies. Japan also 
traditionally has a very low level of consumption and 
a very high savings ratio. 
9. This interest in the international market has not, 
however, fundamentally changed the behaviour of 
Japanese consumers, who continue to prefer Japanese 
products. Moreover, the extremely high degree of verti­
cal integration in Japanese production and distribution 
and the very close links between large companies, banks 
and government make the Japanese market almost 
impenetrable for foreign manufactures. The still inad­
equate presence of European entrepreneurs on the 
Japanese market—which is only partly due to linguistic 
problems—is another reason for the excessive Japanese 
trade surplus—a disquieting phenomenon. There are of 
course other factors which play a role here, not least 
of which is the undervalued yen. 
10. In short, the cultural and economic factors 
described above, together with the fact that Japanese 
exports are centrally 'managed' through a complex, 
rather opaque but well-organized administrative system 
(industrial targetting, laser beaming) give rise to the 
justifiable conviction in the European Community that 
GATT rules do not operate as far as Japan is concerned. 
11. In the policy Japan pursues in procuring supplies 
there are numerous examples of trading practices (two-
tier price systems for non-ferrous metals, restrictions 
on imports of food products, discriminatory taxes on 
wine and spirits) which, while seeming to comply with the letter of GATT, actually go against its spirit by 
severely affecting the economies of Japan's trading 
partners. 
12. The Committee urges that these questions be 
tackled in the next GATT round. 
13. In the meantime, to restore balance to the present 
situation and to prevent the Community having to 
take protective measures, the Committee considers that 
Japan should back up its undertakings to open up its 
markets—admittedly well-intentioned and undoubt­
edly effective in the long term—with quantitative 
import commitments so as to reduce the disproportion 
between imports and exports. If Japan does not increase 
its imports from the European Community, the latter 
will be obliged to take the necessary measures to curb 
Japanese exports, including the introduction of a special 
tariff or other appropriate trade sanctions. 
14. Furthermore, Japan has now reached a stage 
of technological, economic and financial development 
where it must assume more responsibilities in the inter­
national monetary system and vis-a-vis developing 
countries. 
15. The Committee considers that Japan must take 
all necessary steps to bring about a more extensive 
opening-up of its markets to manufactures, services and 
investments, within the shortest possible time; to do 
this it must eliminate all existing obstacles, notably in 
the fields of public procurement and the establishment 
of firms (European investments in Japan). The Commit­
tee also calls for further progress towards more stable, 
realistic exchange rates between the yen and European 
currencies and urges a systematic liberalization of 
Japan's financial system (banks, insurance). Japan 
should also immediately remove the restrictions on 
imports of certain sensitive consumer products. For 
its part the Community should tighten its procedures 
regarding the application of safeguard clauses and 
should ensure that Japanese investments in EEC Mem­
ber States are subject to conditions comparable with 
those imposed by the Japanese on Community invest­
ments in Japan. In short, the Committee endorses the 
recommendations made by the European Parliament. 
EEC-USA relations 
16. The European Community and the USA must 
always be aware of their mutual responsibilities when 
taking domestic or foreign policy decisions. As far as 
the USA is concerned, it is only in recent years that this 
country has become more integrated into the world 
economy. Although foreign trade exerts an increasingly 
powerful influence on the US economy as a whole, the 
USA has not yet fully recognized the need to take 
into account the effects of its own domestic economic 
No C 328/32 Official Journal of the European Communities 22. 12. 86 
measures on the economies of other countries. As far as 
relations between the EEC and the USA are concerned, 
many tensions stem from the fact that the USA disre­
gards the international context when framing its dom­
estic economic policy. The cause and effect chain of 
'budget deficit-capital imports-dollar exchange rate-
reduction in US competitiveness' has been ignored for 
a long time. 
17. The USA is currently trying to solve its trade 
problems by pursuing a policy of dollar depreciation. 
Growing competition on the US market from both 
industrialized and newly industrializing countries has 
led to a wave of protectionism in the United States. 
The US Administration has so far largely managed to 
resist the protectionist pressures emanating from the 
hundreds of bills submitted in Congress and from the 
large number of applications for protection against 
imports submitted by firms and trade organizations 
under existing trade laws. The US Administration has 
thus stood by its trade policy principle of opposing 
import restrictions, encouraging the opening-up of 
foreign markets to American exports, and taking retali­
atory action only when the governments of trading 
partners show bad faith. 
18. In accordance with this principle, the USA sub­
mitted at the end of 1985 a list of trade restrictions 
which it felt significantly hampered American exports. 
The list covers 33 individual countries (with Japan the 
most important), whilst the Community is treated as a 
single entity. The EEC has in turn submitted its own 
list of complaints about unfair US trade practices. The 
Committee feels that the problems are now easier to 
identify and that there is a basis for finding solutions 
for each individual case. 
19. In view of the shrinking world market in agricul­
tural products, the growing production surpluses in the 
EEC and the USA, coming on top of higher production 
in developing countries, are becoming an increasingly 
disruptive factor in international trade, and the danger 
of a trade war between the USA and the EEC over 
domestic and third-country markets is looming larger. 
20. Closely connected with this problem is the dis­
pute that has arisen as a result of the entry of Spain 
and Portugal into the European Community. The 
Americans must have known that the accession of Spain 
and Portugal was going to affect agricultural import 
regimes in the countries concerned. At the same time, 
the reduction of Spanish duties to the levels of the 
Community's Common Customs Tariff (CCT) facili­
tates US exports of industrial goods. The recent pro­
visional agreement between the Commission and the 
US Administration should pave the way for a mutually 
acceptable, definitive solution to this problem. The 
Committee considers, however, that the basic problem, namely the need to deal with the repercussions of the 
enlargement of a customs union within the framework 
of GATT, has still not been tackled. 
21. Restrictions on the transfer of technology are 
another basic problem area in EEC-USA relations. An 
increasing proportion of new technologies in areas such 
as micro-electronics, data-processing, automation, 
biotechnology, aerospace and telecommunications can 
be put to both civil and military uses. Because of this, 
the USA believes that control over military technology 
can only be secured by extending control over civil 
technologies. In practice European Community exports 
to Eastern-bloc countries are particularly hard hit by 
American efforts to impose an embargo. The US rules 
in question represent an unjustified claim to extraterri­
torial application of US laws. And since all components 
and technologies originating in the USA fall under these 
laws, Europeans can very easily lose lucrative business 
deals with the Eastern bloc. The Committee therefore 
believes that the USA must revise the provisions in 
question. 
22. With regard to imports of certain industrial prod­
ucts (machine tools being a recent example), the US 
Administration justifies its call for voluntary restraint 
by claiming that national security would be threatened 
should the USA become dependent on such imports. 
The Committee expressly warns against using the argu­
ment of a 'threat to national security' as a pretext for 
trade restrictions. 
23. The 'Omnibus Trade Bill" adopted by the House 
of Representatives in May 1986 could be a very danger­
ous development from the point of view of world trade. 
If it came into force, the Bill would give US industry 
an instrument affording protection against virtually all 
imports. The Reagan Administration has come out 
strongly against the Bill, but should it get through the 
Senate, even in a diluted form, then the Committee 
believes the European Community should condemn it 
with the utmost vigour and take steps to protect its 
own trade interests. 
24. Many members of the US Congress have reser­
vations about GATT. They regard it as an ineffective 
instrument from the point of view of defending the 
'legitimate claims' of the USA and take the view that 
the new multilateral trade negotiations must make a 
concrete contribution to helping the USA solve its trade-
deficit problem. The Committee would point out, how­
ever, that as far as the opening-up of markets is con­
cerned, world trade is based on the principle of recipro­
city. Greater liberalization must not be aimed at solving 
the trade problems of just one partner. 
25. There is a danger that relations between the 
European Community and the USA will deteriorate 
22. 12. 86 Official Journal of the European Communities No C 328/33 
because of an accumulation of sectoral problems. Agri­
culture is a particular problem area, as are iron and 
steel, high-technology products, machine tools, etc. The 
US Congress often interprets international trade rules 
in the light of short-term national interests, although it 
would be to the USA's advantage to solve problems 
jointly with the EEC. If this is not possible through 
direct dialogue, then the problems should be referred 
to a neutral body. GATT has the appropriate machin­
ery for this. Both partners should nevertheless make 
efforts to improve the efficiency of the dispute settle­
ment procedure. 
26. Given the unstable world economic climate, their 
interdependent economies and their common interests, 
the USA and the European Community have no alterna­
tive but to engage—on a basis of trust—in dialogue and 
cooperation on trade and on economic and monetary 
policy. 
Conclusions 
27. Given the growing trade imbalance which is a 
feature of EEC-Japan and US-Japan relations, Japan 
should (a) assume greater responsibility for the world 
economy and world trade in general, and (b) take the 
domestic economic and monetary measures needed to 
correct this imbalance, thereby obviating retaliatory 
measures by Japan's trading partners. The Japanese 
economy should be integrated more fully into the world 
economy as regards not only imports of manufactures, 
services (the inclusion of services in the GATT nego­
tiations should put Japan under increasing pressure to 
open up its markets in, for example, the banking and 
insurance sector) and certain raw materials, but also 
transfers of technology and capital movements. 
28. Each country must take into account the effects 
its domestic economic policy decisions have on its exter­
nal economic relations. This applies particularly to 
agricultural policy but it also holds good for budget, 
regional, credit and industrial policy. The USA, Japan 
and the European Community must together face up 
Done at Brussels, 18 September 1986. to the fact that because of their economic strength 
they have a responsibility for the operation of the 
international monetary and trading system, for employ­
ment, and for the growth of the world economy. The 
Committee considers that results in these areas have so 
far been rather disappointing. 
29. All members of the world's trading community 
have an interest in maintaining and strengthening the 
legal framework of GATT, in preventing the creation 
of new trade barriers and in avoiding recourse to unilat­
eral or bilateral solutions. In this context the agreements 
concluded between the USA and Japan on trade liberal­
ization or restraint in specific areas (semi-conductors, 
telecommunications, medical equipment, pharmaceu­
ticals and electronic products) must not be allowed to 
work to the disadvantage of the Community. Bilateral 
trade agreements of any kind have a tendency to distort 
trade flows to the detriment of third countries not party 
to the agreement in question. 
30. Bilateralism and the sectoral approach to world 
trade undermine multilateralism and the most-favour­
ed-nation principle, the twin pillars of a world trade 
system designed to promote prosperity. Although bilat­
eralism and the sectoral approach have not so far been 
regulated by international agreements (grey areas), they 
are at variance with an efficient international division 
of labour on the basis of the most favourable locations 
for production. 
31. The Committee considers that the Community 
must implement the common trade policy provided for 
in the EEC Treaty as rapidly as possible. 
32. Together with its partners, the Community 
should take initiatives aimed at bringing about a more 
functional, more effective international monetary 
system. 
33. The Committee would reiterate its conviction 
that consultation procedures should be set up between 
the European Community, the USA and Japan at all 
levels, including the socio-economic organizations. The 
Committee should itself take the necessary initiatives 
in this connection. Such consultations should of course 
take into account not just the true interests of the 
European Community, the USA and Japan but also the 
interests of other trading partners and the developing 
countries, particularly the Mediterranean and ACP 
countries, for which the Community has a special 
responsibility. 
The Chairman 
of the Economic and Social Committee 
Gerd MUHR