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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(80)303final
Brussels,29thMay1980
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RELATIONS WITHTHEINDUSTRIALISED COUNTRIES
(Communication fromtheCommissiontotheEuropeanCouncil)
C0M(80)303final

RELATIONS WITHINDUSTRIALISED COUNTRIES
Introduction
1.ThisnotediscussestheproblemstobefacedafterLast
year'ssuccessfulconclusions ofthe6ATTTokyoRoundnegotiations,
theprospectsfortraderelationsbetweenthemajorindustrialised
countries,andtenprincipalcurrentissuesintheCommunity'sre­
lationswiththeUnitedStatesandJapan.
ProgresssincetheTokyoSummit
2.TheTokyoSummitwasabletonotetheeffectiveconclusionof
thesenegotiations inApriloflastyear.Thusthereferencetotradepolicyin
theCommunique wasthat"theagreementsreachedintheTokyoRoundare
animportantachievement .Wearecommittedtotheirearlyandfaithful
implementation .Werenewourdetermination tofightprotectionism .We
wanttostrengthentheGATT,bothtomonitortheagreementsreachedin
theMTNsandasaninstrumentforfuturepolicyinmaintaining the
openworldtradingsystem.Wewillwelcomethefullparticipation ofas
manycountriesaspossibleintheseagreements andinthesystemas
awhole."
3.TheTokyoRoundagreements wereformallysignedinGenevain
December.Thetariffconcessions begantobeimplemented instageson
1January1980amongthemajorparticipants .AwiderangeofMTNnon-
tariffbarriercodes(thoseonsubsidiesandcountervailing ,technical
barrierstotrade,civilaircraft,antidumping,licensing,andmeat
anddairyarrangments cameintoeffectatthebeginningofthisyear).
Itisplannedthatthecodeoncustomsvaluationwillenterintoforce
on1Julythisyearandthatongovernmentprocurement atthebeginning
of1981.
4.Theseagreementshaveplayedamajorpartinpreventing,sofar,
anysignificant outburstofprotectionism .Theyhaveconsolidated the
multilateraltradingsystemembodiedinGATTasthebasicrelationship,
notablybetweentheentrepreneurial economiesofWesternEurope,North
AmericaandJapan.Buttheeconomicoutlookandtheprospectsforthe
maintenance ofaworldopentradingsystemarenotencouraging .
.12

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Outlookfortraderelationsbetweenindustrialised countries
5.Theoutlookfor1980inparticularisnotencouraging .The
volumeofworldtradegrewbynearly7%in1979,followinga6%increase
in1978,moreorlessinparallelwiththegrowthofproductioninOECD
countriesfromover47.in1978toabout5%in1979.GDPgrowthinthe
Communityisnowexpectedtobeapproximately 1^2%in1980.Thetwo
immediateproblemsrelatetoinflationandthegenerallevelofeconomic
activityovertheremainderofthisyear.Fortheindustrialcountries
asawholetherateofincreaseinconsumerpriceshasbeenaccelerating
forthepasteighteenmonthswithverylittleprospectofanyrelief.
Thereturnoftwo-digitinflationratesinseverallargeindustrial
countriesandthereversalofthedownwardtrendofpriceincreases
inothersrepresented,astheGATTSecretariatpointedoutinFebruary
ofthisyear,amajorpolicysetback.
6.TheeconomicoutlookforJapanismuchbetterthanforeither
EuropeortheUS,whereinflationandrisingunemployment aremuch
greaterproblems.Japanhasgonefromaverybigsurplusin1978to
deficit(currentaccount)in1979.TheAmericandeficithasbeenre­
duced.TheCommunityisalsoincurrentaccountdeficit;butit
additionally hadin1979largebilateraltradedeficitswithboththe
US(2b.)andJapan(27b.).Japanpercontrahaslargebilateralsur­
pluseswithboththeU.S.andtheEC.
ECandUSbilateraltradewithJapan
7.Whileno-onewouldarguethatbilateraltradingbalancesshould
bethecentralpreoccupation ofeitherUS-JapanorEC-Japanrelations,
theyloomverylargeinpost-MTNthinking,beingpolitically "visible".
ThatiswhyboththeCommission andtheUSAdministration ,separately,
pressJapanstronglytosecurearealopeningoftheJapanesemarket
totradeandinvestment .In1979theUSbilateraltradedeficitwas
halvedwhilethatoftheCommunitygrew.Inthefirst4monthsof1980
thetradegapoftheECwithJapanwaslargerthanthatoftheUS-and
thiswasonamuchsmallervolumeoftwo-waytrade.Theoutlookforus
isgloomysincetheEChaslostalotofitscompetitive edge(mainly
becauseofcurrencymovements)andtheprospectisnowzerogrowthfor
totalJapaneseimportsofmanufactures,andtheU.S.marketshrouded
inuncertainty .
Currentproblems
8.Againstthisbackground,protectionist pressureshavestrengthened
generallyoverthelastyear.Lowgrowth,higherinflation,largebudgetary
deficits,interestratesoftenatacripplinglevel,andgeneraluncertainty,
havemadefar-rangingstructuraladjustmentinparticularextremelydifficult.
Thisisnottosaythatabreakdownoftheopenworldtradingsystemis
imminentorinevitable.Indeed,itisremarkabletestimonytothestrength
inparticularoftheGATTmechanismsandtheimpactofcloseconsultation
overthelastdecadeamongthemajorindustrialized countriesthattheline
against"beggar-my-neighbour"policieshasbyandlargebeenheld.But
thesituationremainsadangerousone.

9.ThecurrentrangeoftradeissuesthattheCommunityfaces
withtheU.S.andwithJapancanbeexemplified asrfollows.
WiththeU.S.:
Steel
ECsteelexportstotheU.S.could,intheory,bevirtuallybroughttoa
haltbythepresentantidumpingactionagainstCommunityproducers.
TheCommission haswarnedtheU.S.Administration abouttheconsequences
ofsuchanunacceptable development .TheAdministration itselfis
undervariouslegalandotherconstraints inseekinganacceptable
wayout,anditisstilltooearlytosayhowbesttosolvethis
problemwhichaffectst11/2billionofCommunityexports.
'MaterialInjury".
OneoftheCommunity'sachievements intheTokyoRoundwastheinsertion
ofa"materialinjury"criterionintoU.S.countervailing-dutylaw.The
firstdeterminations of"materialinjury"underthenewlawwillbemade
inJuneandwillcoveranumberofsensitiveCommunityitemssuchascanned
hams(E.C.exports:2200million).TheCommissionhasmadeitclearto
theAdministration thatafailuretogiverealmeaningtothe"material
injury"testwouldunderminethecredibility ofU.S.implementation
ofthenewGATTrules.
Energyandfeedstock"dualpricing";and U.S.exportsofchemicalfibres
AlthoughastarthasbeenmadeinphasingoutdualpricingintheU.S.,
theCommunityhashadtotakesafeguards andantidumping actionagainst
certainAmericanexportsbecauseofthedistortions ofcompetition al­
readyexperienced,andthedamagecausedtoCommunityproducers.
WithJapan:
Japaneseimportsofmanufactures
Toachieveahealthierrelationship withtheE.C.,Japanmuststepup
itsimportsofmanufactures andprocessedagricultural products.There
remainanumberoftechnicalandadministrative difficulties inexporting
toJapan,aswellasprotectionist quotasortariffsforcertainagri­
culturalitemsandforfootwear.
Residualquantitative restrictions intheCommunity
Japanwishesthesetobeterminated .Certainlyitistimelytoconsider
whatsta*tcouldbemade,forpolitical,tradepolicyandindeedindustrial
strategyreasons,tobringtheformalbasisofthebilateralrelationship
moreupto<date.

_L-
Cars
10. AcurrenttradeissuewhichLinksEurope,NorthAmericaand
JapanisthepressureintheU.S.tointroduceimportrestrictions
oncars,primarilyagainstJapanbutpossiblyalsoagainsttheCom­
munity.TheU.S.Administration hastakenafirmstandagainstpro­
tectionistmeasures.Toencouragethis,Japanrecentlymadeanumber
ofmovestofacilitateimportstoJapanofcertainautomomotive parts
andcomponents .ThismovecouldbenefitsomeCommunityexportersto
Japan.
Conclusion
11,Themaintenance oftheopenworldtradingsystemofthepost-war
yearsdependsofcourseonthepoliticalwilloftheGovernments ofthe
majortradingnations.Thepoliticalwilltofightprotectionism and
pursueliberaltradepolicieswassuccessfully manifestedinthecon­
clusionsoftheTokyoRound-thebiggestandthemostcomplexinternational
tradenegotiation everheld-andheldatatimeofsevereeconomic
recession.Moreover,itisaxiomaticthattheeconomicsystemofthefree
worldissupportedbytheUS/EC/Japantripod.Eachmaintainscloseand
variedcontactsbilaterally withtheothertwo(thoughtheEC/Japan
sideofthetriangleistheweakestone).Thereisonallsidesa
willingness totrytomaketheTokyoRoundaccomplishments workand
topreservethepresenttradingsystemagainsttheforcesofprotectionism .
But"crisis-management "-includingdealingeffectively withthekind
ofproblemsthatarenomorethanexemplified inparagraph9above-
willrequirealotofdetermination ,andhardwork,inanAmerican
electionyearwhichisalsoayearofrecessionfortheU.S.andEurope.