No C 139/50 Official Journal of the European Communities 5. 6. 89 
APPENDIX 
to the Opinion of the Economic and Social Committee 
The following amendments, which received at least one-quarter of the total votes cast, were defeated in the 
course of the discussions: 
Point 2.2, on Article 3 
Delete the second paragraph. 
Reasons 
To make it clear that access to information is not confined solely to those who have a personal or direct 
interest therein. 
Voting 
For: 18, against: 24, abstentions: 2. 
Point 2.6.3 
Delete. 
Reasons 
Respect of confidentiality is already covered in the Commission proposal. The 'effectiveness of measures by 
the authorities' is a vague concept in the context of this proposal. 
Voting 
For: 16, against: 28, abstentions: 4. 
Opinion on relations between the European Community and the newly industrializing 
countries (NIC) of South-East Asia 
(89/C 139/14) 
On 7 July 1988 the Economic and Social Committee (ESC) decided, under the fourth 
paragraph of Article 20 of the Rules of Procedure, to issue an Opinion on relations between 
the European Community and the newly industrializing countries (NIC) of South-East Asia. 
The Section for External Relations, Trade and Development Policy, which was responsible 
for preparing the Committee's work on the subject, adopted its Opinion on 10 March 1989. 
The rapporteur was Mr Collas. 
At its 264th plenary session (meeting of 31 March 1989) the Economic and Social Committee 
adopted the following Opinion with no votes against and four abstentions. 
1. The situation 
1.1. Spectacular economic growth has occurred in 
most countries of South-East Asia [i.e. the countries of 
the Association of South-East Asian Nations (ASEAN): 
Brunei, Indonesia, Malaysia, the Philippines, Singapore 
and Thailand, plus South Korea, Hong Kong and Tai­
wan]. Over the last two decades the annual growth rate in terms of gross national product (GNP) per capita 
has averaged 2,3% for the Philippines and 7,6% for 
Singapore. The overall average has been 4-5 %. 
The per capita GNP of a number of SE Asian countries 
and territories—South Korea, Taiwan, Singapore and 
Hong Kong—has overtaken that of the poorer countries 
of the Organization for Economic Cooperation and 
Development (OECD) and even EEC countries. The 
5. 6. 89 Official Journal of the European Communities No C 139/51 
'newly industrializing countries' (NIC) or 'newly indu­
strializing economies' is quite apt for these countries 
and territories. Thailand seems about to join this group. 
While this development may be a matter of interest and 
hope for the Community, it does have a worrying side 
too. 
In 1986 the ESC issued an Opinion and a report on 
relations with the ASEAN countries. A new report, 
accompanying the present Opinion, completes these 
documents with three chapters on South Korea, Taiwan 
and Hong Kong. 
1.2. In principle, the Committee welcomes the econ­
omic growth achieved by SE Asian countries, which 
cannot but be admired and—subject to reservations, 
some of which are set out below—forms an example 
for the other developing countries. 
This growth is without doubt highly desirable from a 
human and political point of view. As long as this 
growth comes about in accordance with the spirit of 
the existing and future rules of the General Agreement 
on Tariffs and Trade (GATT) and provided the GATT 
rules are applied increasingly strictly, it can only further 
the development of international trade and the econ­
omic growth of the developed countries. 
1.3. Provided they avoid prestige investment projects 
matching neither their natural resources nor their needs, 
progress in the industrial and services sectors of the 
South-East Asian countries as a direct result of econ­
omic growth cannot but have a positive impact on 
the developed countries' economies, even if the new 
production squeezes out some of the latter's exports. 
This industrialization creates resources which can be 
used to buy increasingly sophisticated products and 
services from the developed countries. 
It gives rise to a certain accentuation of the international 
division of labour (though we shall see that this has its 
limits), which should bring down costs all round, thus 
raising living standards generally, i.e. in the developed 
countries as well. If properly utilized this reduction in 
costs can create jobs. 
2. The problems 
2.1. Unfortunately, the industrialization of South-
East Asian countries is sometimes associated with prac­
tices which are worrying for the Community. 2.2. Firstly, there are the large and growing trade 
and current account surpluses of a number of SE Asian 
countries, especially South Korea and Taiwan. More­
over these surpluses are tending to shift away from the 
USA and towards the Community. 
2.2.1. In 1987 the total current account surplus of 
the four 'Dragons' (i.e. South Korea, Taiwan, Singapore 
and Hong Kong) reached 30 billion dollars, half that 
of Japan, and contributed to a large extent to the US 
trade deficit. 
2.2.2. The Committee is concerned that large current 
account surpluses and corresponding deficits can con­
tribute to the disruption of international trade, as the 
US trade deficit problem shows, and give rise to protec­
tionism and bilateralism. 
Such large surpluses can of course be justified by the 
need to repay heavy debts, as in the case of some Latin 
American countries. But this certainly does not apply 
to South Korea, which is a net external creditor, and 
even less to Taiwan, which has the third largest foreign 
exchange reserves in the world. 
Japan, despite undoubted efforts, is still the main source 
of these imbalances. It would be very unfortunate if 
other countries joined it. 
The Committee notes that the Community as a whole 
(the EC forming a single entity for trade policy pur­
poses) is exemplary in this respect, as its external trade 
is balanced to within a very small percentage of its 
GNP. 
2.2.3. The Committee feels that the tendency to 
regard huge trade surpluses as a kind of victory or the 
hallmark of economic superiority must be avoided. It 
should be clearly understood that the correct approach 
is to seek equilibrium at the highest possible volume of 
foreign trade. The Community, working closely on this 
with the United States, should use all its influence to 
secure compliance with this code of conduct. 
2.2.4. According to economic theory (although this 
idea is now more disputed), equilibrium should be 
achieved, at least in the long term, if currencies are 
allowed to float freely. (The appreciation of the cur­
rencies of trade-surplus countries should bring this 
about.) 
The Committee can only reiterate its wish to see the 
problem of parities dealt with in international agree­
ments which are an essential complement to the GATT 
trade agreements. 
This raises two points: 
2.2.5. A country should not keep its exchange rate 
artificially low. Governments have several ways of pur-
No C 139/52 Official Journal of the European Communities 5. 6. 89 
suing such a low-exchange rate policy, e.g. they can opt 
for a managed currency instead of free convertibility. 
All the countries surveyed in this Opinion have at 
present managed currencies. 
It is regrettable that for a fairly long period these 
countries have kept their currencies non-convertible and 
pegged to the dollar, resulting in artificial depreciation. 
Their economic situation has been quite different from 
the USA's, and therefore their currencies should not 
have followed the dollar downwards. The depreciation 
of these currencies has made it much harder to eliminate 
the US trade deficit, and it is the OECD countries that 
have had to bear the cost. 
Fortunately, the under-valuation of the major South-
East Asian currencies seems now to have been largely 
corrected, particularly as a result of pressure from the 
USA, rightly backed by the Community. The adjust­
ment process should continue and be expanded; the 
richest NIC should make their currencies freely convert­
ible. This should result in a higher standard of living in 
the countries concerned which, apart from encouraging 
imports, is in all respects desirable. 
2.2.6. A properly operating monetary system should 
get the balance of payments back into equilibrium, but 
not the trade or the current account balances, which 
may remain out of kilter in the long term. 
A large current account imbalance, combined with dis­
equilibrium in the balance of payments, implies massive 
transfers of capital abroad. It is neither desirable nor 
practicable in the long term for these transfers to be 
made solely in the form of loans, as considerable sums 
are involved. Nor can they be confined to purchases of 
works of art or property investment. If this situation 
continues, surpluses will inevitably be channelled into 
investment in the production and services sectors. 
It is vital that such investment (which in small doses can 
be beneficial) does not assume excessive proportions as 
this could provoke regrettable reactions from the host 
countries. 
2.3. Some SE Asian countries, whether or not they 
have trade surpluses, have been guilty of a practice the 
Committee condemns: unfair targeting. 
This practice, first challenged by the United States 
several years ago, involves singling out an industry with 
good prospects, especially for exports. The government 
then lavishes support on it. 2.3.1. Subsidies and aids for investment and running 
costs; state-backed research and training; export aids; 
relatively authoritarian coordination of the activities of 
national firms (possibly setting up nationalized and 
mixed-ownership companies); steps to hold down dom­
estic prices for raw materials, semi-manufactures (e.g. 
steel) and components; dejure and de facto import bans 
(or prohibitively high customs duties) on competing 
products. 
2.3.2. In a developing country which opts for target­
ing, the industrial sector as a whole will not develop 
gradually and smoothly; instead, one or more well-
equipped firms will suddenly emerge in a given sector. 
These firms will use the best available technology but 
will have the advantage of very low wage costs, due to 
the country's general industrial backwardness. They 
will be giants among dwarfs. The capacity of the firms 
in question, or all the firms in the sector, will of course 
be far in excess of the internal needs of the country 
and its consumption capacity, so that a considerable 
percentage of output will be exported. 
(These exports will normally be targeted too, firstly 
towards countries with little protection, then to more 
protected countries, often using local screwdriver 
plants.) 
2.3.3. Of course, it is very difficult for firms in the 
developed countries (e.g. in the EEC) to compete here. 
Labour accounts for more than 20-30% of their pro­
duction costs. 
Assuming that wage costs in NIC are one-fifth of those 
in the major industrialized countries of the EEC (often 
they are much less), all other things being equal, the 
cost handicap will be 16-24%. Targeting, deplorable in 
itself, is thus based on social dumping, which slows 
down the rise in the NIC standard of living. 
2.3.4. Targeting has already cost Europe most of its 
motorcycle industry (beneficiary: Japan), shipbuilding 
(beneficiaries: Japan and South Korea) and part of the 
optical engineering industry (in particular the manufac­
ture of cameras). The Section report shows that Taiwan 
and, to a greater extent, South Korea are now concen­
trating their attack on cars and electronics, high-quality 
electronic components in particular. Certain services, 
5. 6. 89 Official Journal of the European Communities No C 139/53 
such as shipping, are also the subject of targeting. 
Subsidies, low wages and a low level of social protection 
have enabled South Korea and Taiwan to take up 
positions which are extremely detrimental to Com­
munity shipping. 
The Committee stresses that the international division 
of labour has its limits. In no way can Europe allow its 
steel, car and electronics industries, so fundamental for 
jobs, to be seriously jeopardized, let alone be destroyed, 
especially since the methods being used to attack these 
industries are so open to criticism. 
3. The solutions proposed 
The Committee considered how best to react. 
There seems to be three basis approaches: 
3.1. Cooperation 
Where competition from SE Asian countries is economi­
cally healthy and fair, cooperation with these countries 
is called for. 
3.1.1. It is pointed out above that industrialized 
countries ought normally to benefit from the develop­
ment of the NIC, provided the latter compete fairly. 
Transfers of production to low-wage countries may 
be expedient in very labour-intensive sectors where 
mechanization is difficult and expensive (and such 
transfers will help raise wage levels and develop social 
protection in the NIC). 
In such circumstances, the Section feels that European-
Asian joint ventures, manufacturing under licence, 
transfers of know-how and relocating European pro­
duction to South-East Asia may be appropriate. 
Not all European industry should be relocated, of 
course. It is neither realistic nor wise to think that 
Europe can live off services alone. The Community 
must obviously retain a strong and competitive indus­
trial sector in order to preserve jobs and absorb unem­
ployment. 
There are other forms of association which would not 
endanger jobs in the Community, such as cooperation 
in the local production of goods designed to meet local 
needs created or increased by a rising standard of living. 
3.1.2. Subject to the above qualifications, the part­
ners can only gain from such exchanges. Japan, which 
undoubtedly has a special Asian cooperation zone in 
mind, should not be allowed to monopolize joint ven­
tures with SE Asian countries. 3.1.3. It is therefore vital to consider ways of devel­
oping cooperation between Community and NIC firms. 
Many suggestions were made on this subject in the 
Committee's Opinion of 3 July 1986 on ASEAN. 
These suggestions are still valid, and the Committee's 
greatest wish is that they should be implemented. 
This is of course a difficult question. 
The Commission, assisted by the local organizations of 
the Member States, could of course play a major role in 
this cooperation. Community aid, which is apparently 
focussed too much on agriculture, should to a large 
extent be reoriented towards industry and services so 
as to link up better with the development of the 
countries in question. 
One line of action that would not cost very much and 
would be quite effective would be to support existing 
university cooperation (German in Bangkok, French in 
Singapore, etc.) and to develop university twinning and 
arrangements for trainees. 
3.1.4. But if Community sales in the countries in 
question are to be expanded it is also essential that 
these countries should gradually open up their markets 
as they develop and that in particular they should 
be able to bring their current-account balances into 
equilibrium and, where appropriate, repay their foreign 
debt. 
They should also be encouraged to stimulate their econ­
omies and increase their domestic consumption, which 
their policies have tended to restrict (the saving rate in 
South Korea is 38%!). The standard of living of the 
people should benefit in full from the economic pro­
gress. 
A number of points made in the Maekawa report 
(which proposes solutions for the problems connected 
with the boosting of consumption in Japan) apply to 
the countries in question. 
All this is one of the aspects of 'graduation' within 
the GATT context: the NIC that reach the level of 
development of the OECD countries should gradually 
accept all the GATT constraints. 
This is all the more important since the example of 
South Korea (admirable though it may be in many 
respects) is tending to be followed by other Asian 
developing countries, which are noting that South-
Korean-type export-led growth gives faster results than 
growth geared to satisfaction of domestic needs (the 
Latin American pattern). The economies of the Com­
munity and the USA would not be able to withstand in 
No C 139/54 Official Journal of the European Communities 5. 6. 89 
the long term a proliferation of trade surpluses and 
targeted offensives of the South Korean type. 
In this connection the Committee considers it regret­
table that the problem of 'graduation' could not be 
discussed at the mid-term review in Montreal. It must 
be dealt with during the forthcoming discussions. 
3.2. Competition 
In other cases, Europe must take up the challenge. 
3.2.1. One way to do this is to automate wherever 
possible. General Motors is—not without some prob­
lems—currently spending over 3 billion dollars on its 
'Saturn' project, setting up an almost entirely auto­
mated car factory. European firms have less grandiose 
plans of a similar nature. 
3.2.2. Europe could also step up its efforts to keep 
a technical and aesthetic lead in product design. Pro­
duction should be even more geared to the market so 
as to ensure optimum satisfaction of customer needs, 
particularly as regards quality, safety, availability and 
ancillary services. That will be easier in the case of non-
durables, such as clothing. 
But it is also to be hoped that a lead can be secured for 
electronics and cars. The 'cars of the future' projects 
of European manufacturers could give Europe the edge. 
All of this highlights the vital need for Europe to expand 
its research effort in order to forge ahead of its competi­
tors, and to coordinate research more closely in order 
to reap the benefit of its huge domestic market. The 
Committee reiterates the need to encourage the Com­
mission's efforts in this area; the paltry funds available 
must be greatly increased. Education, initial and con­
tinuing training must also be developed. Europe must 
not allow itself to be overtaken in this area, particularly 
by the Far East countries where progress has been 
spectacular. The Committee would refer to its numer­
ous Opinions on the subject. 
3.3. Defence measures where the letter or the spirit of the GATT rules is not 
respected, so that serious injury is caused or is liable to 
be caused to Community industries, i.e. in a very limited 
number of cases. 
3.3.1. First of all, countries which are well on the 
way to becoming 'developed' countries should no longer 
be treated as developing countries: 
— South Korea, Hong Kong and Singapore, for exam­
ple, should be excluded from the Generalized Sys­
tem of Preferences (GSP). After all, their living 
standards are equal to or higher than those in the 
poorest EEC Member States. This exclusion should 
apply in particular to sectors where these countries 
are extremely competitive—at present South 
Korean cars normally qualify for GSP treatment, 
although such treatment has been suspended at the 
moment. The GSP quotas that become available as 
a result of this action could be given to the least 
advanced countries, which really need them. 
— Countries like South Korea, Hong Kong and Singa­
pore should be required to apply GATT rules more 
and more extensively. 
We are confronted here with the problem of 'gradu­
ation' referred to above. 
— The countries in question should be required to stop 
improperly manipulating their currencies (this goal 
has, it is true, largely been achieved). 
— These countries (and in general all GATT member 
countries that attain developed country status) 
should be required to adopt and effectively apply 
the provisions deemed to be essential in any effort 
to speed up social progress, and in particular the 
standards of the International Labour Organization 
(ILO) (the numbers quoted below refer to ILO 
conventions): freedom of association (87), right to 
organize and engage in collective bargaining (98), 
equal remuneration for men and women (100), 
employment discrimination (111), occupational 
safety and health (155), employment policy (122) 
and termination of employment (158). These rights 
should be guaranteed, for example under the head­
ing of 'minimum social standards', through the 
inclusion of a social clause in GATT. These rights 
should also be covered in trade agreements between 
the Community and parties that are not yet signa­
tories of the ILO conventions and recommen­
dations. The Community ought then to make sure 
that these rights are respected. 
Europe must also defend itself. It should be clearly 
understood that what is said below applies only in cases 3.3.2. Wherever possible, the retaliatory -measures 
allowed under GATT should be applied, especially 
5. 6. 89 Official Journal of the European Communities No C 139/55 
against subsidies. Unfair targeting should be fought by 
further improving the 'New Community instrument' to 
make it at least as effective as Article 301 of the US 
Trade Act, while respecting the GATT rules. 
3.3.3. To put such a policy into practice, the Com­
mission needs more resources. The 70 or so staff dealing 
with such matters at present and the financial resources 
available should be increased as quickly as possible to 
the level necessary for full effectiveness. (The Com­
mittee would point out that the US administration has 
a staff of 400-500 working in this area.) The cost would 
be negligible compared with the savings. 
National governments could be called upon to make a 
contribution, especially since some of their staff will 
become superfluous when intra-Community barriers 
are removed. 
Where this targeting, along with other unfair practices, 
threatens certain Community industries, the Committee 
deems it perfectly in order to negotiate voluntary 
restraint agreements since the GATT rules have not 
been respected. Among other things, this would prevent 
a welter of legal proceedings against the countries con­
cerned. (There would not be any question of selective 
application of the safeguard clause, since this clause is 
intended to be applied to partners complying with the 
rules. Because of its general applicability and temporary 
and degressive character, the safeguard clause does not 
provide an adequate response to the problems faced.) 
The excessively high trade surpluses of the countries 
concerned provide yet another justification, if one were 
needed, for negotiating voluntary restraint agreements. 
It will be necessary to examine on a case-by-case basis 
whether a voluntary restraint agreement is the best 
solution for threatened Community industries. These 
agreements have the drawback of boosting the profit 
margins of the signatories and directing them towards 
the most lucrative market segments (see in this connec­
tion the OECD note of 29 May 1985). They also encour­
age bilateralism, which is not in principle desirable. 
Done at Brussels, 31 March 1989. These agreements will nonetheless remain necessary in 
a large number of cases, particularly on account of the 
threat posed, but they should be used judiciously. 
3.3.4. It is to be hoped that the trade policy reviews 
which GATT has to carry out among its members will 
encourage the countries concerned to pursue policies 
more in keeping with GATT rules. 
Voluntary restraint agreements can also encourage the 
exporter to set up manufacturing facilities in the Com­
munity; but this is not a drawback—quite the contrary, 
provided it is ensured that the Community content of 
the product is sufficiently high and these manufacturing 
facilities do not benefit from abnormal subsidies. 
3.4. Finally, it is vital that the Community adminis­
tration should have all the necessary resources for 
studying the policy of Far Eastern countries, which are 
becoming increasingly important in the world, and for 
framing Community policy towards them. 
There is a severe lack of staff, for historical reasons, 
and many more should be recruited; there is also poor 
coordination between the departments in question. 
Japan, China, South Korea, Taiwan and Hong Kong 
come under one commissioner, the rest of Asia (notably 
ASEAN) under another, and the African, Caribbean 
and Pacific States (ACP) (P standing for Pacific, of 
course) under yet another. 
In these circumstances it is not easy to make an overall 
study of the countries on the Asian seaboard of the 
Pacific. Coordination measures appear to be indispens­
able. An in-depth study of Community policy towards 
the countries in question is called for. The Committee 
would like the Commission to equip itself with the 
means to carry out this task. In this way the Community 
will be in a position to act with the necessary speed 
and coherence in an area which can only increase in 
importance. 
The Chairman 
of the Economic and Social Committee 
Alberto MASPRONE