Source: EURLEX
Language: en
Format: md

1 B 6 9 1 Cofficial]ournal of the European communities ^ o C h ! 5 9 ^

lnpresentcircumtances,atleastthefollowingclanfi mother methods can he used provided that their
cation should he added^ equivalence has heen demonstrated hy the manufac
turer to the satisfaction of theLechnicalSer^iceB

POone at Brussels, 25 April 1991.

Opinion on relations between die United States and Japan and between the European

community and Japan

(91^Cf59^20)

On 2B^ starch 1990 the Economic and Social committee, acting under the fourth paragraph
of Article 20 of itsRules of Procedure,decidedto draw upanOwninitiati^eOpimonon
Relations between the United States andjapan and between the European Commumtyand
Japan.

^PheSection forE^ternal Relations, which was responsiblefor preparing theCommittee^s
worl^ on the subject, adopted its Opinion o n 9 A p n l l 9 9 P L h e Rapporteur was Air Romoh.

At its 286th plenary session (meeting of 25Apnl 1991),the Economic and Social Committee
unanimously adopted the following Opinion.

in this Opinion theEconomic andSocial Committee
considers the development of economic relations
between the United States andjapan and between the
European Community andjapan.

LheOpmionbegins by recalling that recently feelings
of distrust, frustration and hostility towards Japan ha^e
developed in the United States, in tandem with the
increase in the US trade deficit, the penetration of
Japanese products and the acquisition b^ Japanese
firms of US industry and real estate (see point 1.1).

Japanhasreacted withequal bitterness,pointmgout
(pointl.2) that the deterioration inthe United States^
economicsituation was essentiall^due to thelacl^of

competitiveness ofUS exports,an apparently dwindling
entrepreneurial spirit and inadequate domestic savings,
aggravated by the impact of deficits in the US balance
of payments and federal budget and long penodsdunng
which the dollar was o^er^Balued.

tn!990,withthe aim of removing the main causes of
the economic friction which had developed, the US and
Japanese governments concluded an agreement entitled
the^Structural impediments mitiati^(SH) which con
stitutes an unprecedented experiment in bilateral
relations (pointlm^.

Under the SH, each partner undertakes to tal^e economic
and social measures designed to improve thechmate
and conditions governing relations between the two
countries. If successful, the SH may also improve
relations with third countries.

On EC^Japan relations, the Opinion examines the situ
anon of imbalance which de^elopedmthe^Os and ^80s
asaresult of the sharp growth injapanese exports and
the closedjapanese market combined with the lacl^ of
interest shown by EO firms in exporting to Japan
(point 2.1).

Lhe Community^ trade policy ^ ^ ^ B ^ Japan
developed mainly throughthe application of the anti
dumping rules drawn up b^ the general Agreement on
LanffsandLrade(C^ALL)(point22)

No C 159/64 Official Journal of the European Communities 17. 6. 91

For Japanese firms, the arrival of the Community-wide
single market by the end of 1992 continues to awaken
fears that they will be hit by discriminatory protectionist measures (point 2.3).

On the other hand, they are aware of the attractions
of a large homogenous market (320 million people)
open to cooperation with the countries of Central and
Eastern Europe.

The increase in direct investments by Japanese firms in
productive plant in Europe is a response to these new
prospects (point 2.4) and gives some indication of their
desire to play an active part in the development of the
European economy.

Special problems have arisen in the motor vehicle and
other sensitive industries concerning the proportion of
components and parts supplied by EC firms contained
in the final products (point 2.5).

In January 1990 meetings were held between the
Japanese Prime Minister and representatives of the EC
Commission, followed by meetings at technical level.
The two sides declared their wish to strengthen mutual
cooperation and establish close relations on a permanent basis (point 2.5).

The final part of the Opinion sets out conclusions and
puts forward recommendations for the improvement of
EC-Japan relations.

The need to deepen understanding of each other's cultural and social aspects is stressed (point 3.4).

Japan's socio-economic structures are changing: the
efforts of the Japanese authorities to open up the
internal market, boost domestic demand and public
investment and improve its population's quality of life
must be followed with interest (points 2.2.5, 3.2, and
3.10).

EC entrepreneurs should step up their own efforts to
establish themselves permanently on the Japanese market (points 3.5 and 3.6). The rise in direct Japanese
investment in Europe should be welcomed, since it
involves transfers of technological know-how and
organizational methods, and a growth in new jobs
(point 3.8).

Finally, the Opinion points out that the world's three
main centres of political and economic power—the

United States, the European Community and Japan—
should cooperate more closely in order to solve the
problems of the international economy (point 3.11).

The world scene against which this Opinion is set

From the end of the Second World War up to the mid1980s the world stage was dominated by two countries
exercising virtually absolute power: the United States
and the Soviet Union.

The United States enjoyed clear superiority in the political, military, industrial, financial and scientific spheres.
In contrast, the Soviet Union's ideological, military and
economic leadership prevailed in extensive areas of the
less developed world.

In the space of five years, between 1985 and 1990, this
situation radically changed. The Soviet Union saw a
rapid decline in its political power on the world stage
and is currently torn by dramatic economic and structural upheavals. Nonetheless, its massive military force
is still a factor to be reckoned with.

Today the international scene is dominated by three
centres of power, each with its broad area of influence:
The United States, Japan and the European Community.

The United States is now the only superpower to exercise international military, political and economic influence. However, its leadership is constrained by
domestic economic and financial problems and the need
to coordinate any international political action with its
allies, within the responsible political institution
(United Nations).

Community Europe, reinvigorated by the pending Single Market and reinforced by the reunification of Germany, faces an exciting future with the opening up of
Eastern Europe and possibly the Soviet Union too.
However, it still lacks political clout.

Japan, which has become a world economic and financial power, is in a similar situation to the EC.

All three centres of economic power, the United States,
Japan and Europe, have market economies and already
bound by very close ties: 60% of international trade,
90% of world investment, an overwhelming share of
world Research and Development (R & D) capacity, a
virtually exclusive monopoly over new technology and
lastly, absolute pre-eminence in the financial and
monetary sectors.

Nonetheless, in terms of their economic and social
structures and cultural origins these three powers differ
substantially from each other. In the economic sector,

17. 6. 91 Official Journal of the European Communities No C 159/65

however, all three adhere to the principles of the free
market economy.

Relations between the three powers have had their ups
and downs, with phases of productive cooperation and
common objectives alternating with periods of friction
and sharp clashes of interests.

Nonetheless the partners are united by their increasing
interdependence and clear duty to draw up plans, within
the framework of the United Nations, for an international order counteracting international instability and
tensions and to frame new arrangements for
cooperation between the industrialized countries and
the less developed countries (LDCs).

The purpose of this Own-initiative Opinion is to shed
light on the state of US-Japan and EC-Japan economic
relations and to chart the way ahead for more effective
cooperation in future on a number of fronts.

1. Relations between the United States and Japan:
frictions between partners

1.1. _US anxieties_

1.1.1. In recent years a highly disquieting wave of
frustration, distrust and mutual hostility has emerged
in the two friendly partners.

In a recent US opinion survey, 68% of the respondents
mentioned Japan as an even greater threat to the United
States than the Soviet Union had been in the past.

Assailed by criticism and accusations, Japanese public
opinion reacted with resentment and intolerance reflected in a surge of nationalism.

1.1.2. The cause of the current unease in the United

States lies in the general public's frustration and anxiety
fuelled by the incomplete information provided by the
press and declarations by certain politicians who find
it easy to blame Japan for being the main cause of the
woes of the US economy, the persistent trade deficit ( []] )
and the difficulties faced by US exports.

The US mass media also tend to highlight the acquisition by the Japanese investors of major sectors of US
industry and the property market.

(') In 1987 the US ran a US$ 52 000 million trade deficit with
Japan; this dropped to US$ 45 000 million in 1989 and US$
38 000 million in 1990.

In addition, the Japanese economy is spared the burden
of heavy military expenditure ( [2] ).

1.1.3. In addition, US economic experts and politicians find the Treasury's increasing dependence on
financing from Tokyo (which is now vital to cover the
federal budget deficit) particularly disquieting.

Within a short space, as a result of the cumulative effect
of these financial movements, the United States has slid
into a state of heavy debt to international financial
sources, particularly Japan.

Underlying the above developments is the vague fear
current among public opinion, politicians and economists that the United States is gradually losing its traditional technological leadership and hence its 'status' as
a world economic superpower.

1.1.4. Prompted by these anxieties, US moves have
been in progress for some time to tackle the problem
of economic relations with Japan by resorting to all
manner of bilateral trade instruments and 'managed
trade' arrangements, even if these breach commitments
under GATT multilateral agreements.

Consequently, during the 70s and '80s a large number
of general and specific agreements were framed which
contained increasingly precise demands by the United
States for Japan to liberalize certain categories of products or types of operations in order to give US exports
preferential access to the Japanese market. Again and
again the Tokyo Government was asked to give voluntary restraint undertakings as regards the export of
particular products (cars, steel, semi-conductors, etc.).

The tangible results of these operations proved disappointing and fuelled further mutual recrimination and
heated disputes.

1.1.5. Some groups within Congress and Washington
intellectual circles have become increasingly convinced
that it is wrong to harbour any illusions: the Japanese
would never change their attitudes, their industrial
policies or their desire to conquer world markets. The
only way to fight back and curb such expansionist
tendencies is direct, unilateral retaliation in the shape
of appropriate legislation.

This line of argument led the US Congress to draft and
approve the protectionist Trade Act of 1979, reinforced
10 years later by the Omnibus Trade and Competitiveness Act of 1988, which President Reagan signed in
July that year.

( [2] ) Japan points out that it has stepped up its aid to the LDCs
and now heads the list of donor countries (at over US$ 10 000
million per annum). In addition, Japan provides substantial
aid to Eastern Europe.

No C 159/66 Official Journal of the European Communities 17. 6. 91

The Economic and Social Council (ESC) has had
occasion to express its views on these laws, which are
inconsistent with the multilateral undertakings given
by the United States in international forums and in
particular undermined the Uruguay Round of GATT
negotiations ( [!] ).

In July 1989 the Bush Administration took the initiative
of proposing to the new Japanese Government headed
by Prime Minister Toshiki Kaifu that it made a fresh
effort on the bilateral front to get trade relations between the two countries off to a new start and improve
the climate of mutual relations. This proposal, known
as the 'Structural Impediments Initiative-SH' will be
discussed below (point 1.3).

1.2. _Japanese_ _response_

1.2.1. The wave of criticism and recrimination in the

United States, which does not seem to have abated now
that the Gulf War has ended, has directly affected
Japanese political and economic circles, which remain
highly sensitive to US arguments, and triggered heated
and conflicting reactions.

Japanese public opinion is still largely favourable to
the United States. The assistance provided during the
difficult years of post-war occupation and the aid received during the period of reconstruction have not been
forgotten.

However, such feelings have recently been marred by
bitterness, disillusionment, pessimism for the future and
certain symptoms of growing nationalism.

1.2.2. In the first place Japan refuses to accept the
argument that it is mainly to blame for US economic
difficulties.

Japan explicitly urges the United States to acknowledge
that the root cause for its economic problems is the
misguided economic policy pursued in the '80s. This
period was not only one of proud expansion (as the
official propaganda of the Reagan era has so often
repeated) but also one which laid the foundations for
the structural imbalances now becoming visible, which
indicate that the country has been living far too long
beyond its productive means.

The most obvious sign of this plight is the dwindling
competitiveness of US exports on international markets,
which in the past were further undermined by the policy
of an overvalued dollar.

1.2.3. Japanese observers hold that one of the key
reasons for this phenomenon is the psychological change that has recently taken place in US businesses, which
seem to have lost their traditional creative drive and

now focus solely on the mirage of short-term financial

(•) OJ No C 332, 31. 12. 1990, p. 151.

benefits and quick profit. ( [2] ) This approach _is_ argued
to have generated excessive faith in the idea of a 'postindustrial society' based virtually entirely on services,
at the expense of manufacturing industry and production of consumer goods, which today the United
States has to import on a large scale.

Japanese critics also claim that Japan cannot be blamed
if the United States has in the past invested far less in
plant and research than Japan and even Europe.

1.2.4. Further, the United States has had to fund its
own needs from borrowed capital (a substantial part
of which comes from Japan) since its own level of
domestic savings was inadequate. It has therefore had
to maintain high interest rates. This has sometimes led
to an overvalued dollar fluctuating sharply against
other currencies. This situation persists.

According to some Japanese (and even US) observers,
the declining standards of the US educational system
(especially at primary and secondary school level) may
also have contributed to the difficulties besetting the
country's economy.

1.2.5. However, the theories advanced by Japan were
not confined to a defence against US accusations but
included an analysis of the internal aspects of Japanese
economic policy. This new development is of some
importance.

Japan recognized, for instance, that its internal market
had effectively remained isolated and sealed off for far
too long and that the complaints of other countries
are at least partially justified. Japan could not have
continued to conduct a trade policy designed solely to
boost exports without making space for goods and
services imported from third countries.

Consequently urgent action was needed and the Uruguay Round of GATT negations are seen by Japanese
political protagonists as an opportunity for a general
reduction of non-tariff barriers by all contracting parties.

( [2] ) The President of Sony, Mr Akio Morita, in his much-discussed book 'The Japan that can say NO', co-authored with the
politician Mr Shintaro Ishihara, claims that something has
gone wrong with US business. Its only concern is fourmonthly balance sheets and share ratings rather than longterm investment. Apparently it has forgotten that the creation
of real wealth presupposes the creation of new value-added,
especially in manufacturing industries able to compete on the
international market.

17. 6. 91 Official Journal of the European Communities No C 159/67

1.2.6. A number of more recent Japanese studies
indicate that the time has come to move to a new phase
and away from a trade policy where national export
priorities were established and efficient plans as to how
targets were to be attained were drawn up by Japan's
Ministry for International Trade and Industry (MITI).

It is claimed that the MITI's activities in recent years
have been confined to identifying the long-term strategic objectives to be pursued by Japan.

Such claims are viewed with considerable caution in

the United States and EC.

Though the MITI has apparently scaled down its direct
efforts to guide and influence the various sectors of the
economy, close-knit cohesion continues to prevail in
Japan's systematic, consistent pursuit of long-term
goals, which are invariably attained.

In practice the 'Japan Inc." concept does not yet seem
to have been superseded. Japanese firms are able, now
as in the past, to make substantial profits on the domestic market, which is well-protected and allows the
maintenance of high prices. In this way they can 'subsidize' their exports and frame long-term expansion programmes, which even allow for sustained losses over a
lengthy period, for the ultimate aim of penetrating
specific markets (including both the industrialized
countries and LDCs) and establishing bridgeheads in
pre-targeted sectors. In this connection, firms can rely
on the direct support of government agencies and the
cooperation of a powerful financial system which provides them with long-term funding at interest rates well
below the rates prevailing on US and EC markets.

However, the Japanese economy seems to be undergoing major structural changes.

One important typical change is the climate of cutthroat competition between Japanese firms within one
and the same industrial sector. This very specific form
of competition is exclusively based on quality and innovation as opposed to prices (which remain very high
on the domestic market).

Such competition extends beyond national frontiers to
the markets of South East Asia, North America and
Europe.

The large Japanese industrial conglomerates, on
account of their size, financial authonomy and 'global'
approach to the world market, are now de facto 'multinational' and no longer heavily dependent on Japanese
economic policy.

1.2.7. Other observers and experts have also focused
attention on the far-reaching upheavals currently under
way in the very structures of Japanese society (*).

They have pointed out, for instance, that demographic
indicators augur a significant ageing of the population,
together with behavioral changes whereby individuals
and families will gradually turn away from the values
of sobriety, frugality and acceptance of spartan living
conditions towards a higher standard of living.

The rejection of traditional values is particularly marked in the younger generation.

It is even claimed that changes are discernible as regards
total dedication to work, loyalty to the group and the
company and the relinquishing of individuality, all of
which distinguished the Japanese worker in the decades
from the end of the war to the present day ( [2] ).

These trends will obviously move very slowly. But,
should they become established, could alleviate concern
over the continued, unstoppable growth of Japanese
economic power, entailing deficits and tensions with
both the United States and the rest of the world.

We should therefore ask ourselves about the future of

Japan as a country whose population wishes to model
itself more on the behaviour of the affluent societies of

the Western world and to derive more direct economic

and social advantages from Japan's extraordinary economic success. There is greater willingness to participate
and contribute to the world political and economic
order while still retaining distinctive Japanese cultural
characteristics.

With this in mind, even the large Japanese trade surplus ( [3] ) could ultimately be spontaneously reabsorbed
as a result of the above phenomena of an ageing population, increased quality of life and domestic consumption and the sharp rise in social welfare costs.

As already mentioned, this will be a slow process and
encounter much resistance but it seems reasonable to

hope that the western countries (first and foremost

(*) See 'The Sun also sets — the limits to Japan's economic
power' by Bill Emmott, _The Economist,_ London, which
received widespread circulation in Japan.
( [2] ) Western observers, however, point out that the Japanese
industrial workforce still work a far longer week/year than
its EC or US counterparts. In some instances, working hours
have actually increased if overtime is taken into account.
( [3] ) The appended Table 1 sets out statistics on Japan's overall
trade surplus, which was as high as US$ 82 700 million in
1986 (of which US$ 51 400 million _vis-a-vis_ the United States).
Other statistics indicate that the US ran a US$ 52 000 million
trade deficit with Japan in 1987; dropping to US$ 38 000
million in 1990.

No C 159/68 Official Journal of the European Communities 17. 6. 91

the United States and the EC) with which Japan has
substantial political, economic and cultural relations
will do everything possible to facilitate and encourage
the trend in Japanese society that currently seems discernible.

1.3. _The 'Structural Impediments Initiative': An agree-_
_ment 'sui generis' between the United States and_
_Japan_

1.3.1. The SII talks, launched in July 1989 by President Bush, are unique. Though their stated aim is to
remedy imbalances in trade between the United States
and Japan, they focus on the root causes of the two
countries [1] economic and social policies and take a new
approach to matters previously considered to be the
exclusive preserve of the individual governments.

The SII is less a traditional trade agreement than a
reciprocal commitment autonomously given by each
party on points suggested by the other.

This 'sui generis' agreement is therefore an attempt
which, if successful, could influence relations between
Japan and the entire community of Western countries.
As devised, it is an innovatory model which the United
States could also propose (or impose) in respect of other
countries.

1.3.2. In April 1990 two 'ad interim' reports were
signed in Washington which separately list the measures
that the Japanese and US governments agree to take at
the request of the other party, the following June the
two provisional reports were consolidated in a single
final document setting out in detail the aims which the
two parties undertook to pursue.

During the talks, the United States presented an extensive set of proposals and suggestions, which were largely accepted by Japan.

The Japanese Government's undertakings can be summed up as follows:

— acknowledgement of the need to reduce Japan's
current trade surplus by adopting economic policies
aimed at stimulating non-inflationist growth generated by domestic demand;

— substantial increase in public investment (increase
of YEN 430 trillion over ten years — approx. 10 %
of GDP) with priority emphasis on urban infrastructure, housing, construction, airports and ports,
environmental protection and conservation of the
natural heritage. The stated aim is enhancement of
the popuation's quality of life and the absorption
of a substantial part of the capital constituted in
Japan, thereby giving a sharp boost to domestic
demand and imports and benefiting the national
economy as a whole;

— alleviation of urban land cost discrepancies which
are a major obstacle to the siting of foreign firms'
offices and production units, by making more publicly-owned land available for building purposes;

— liberalization of the distribution sector which is

now a de facto obstacle to other countries' exports
reaching the end consumer in Japan;

— streamlining of import procedures;

— more stringent application of Japanese legislation
protecting market competition from illegal intercompany deals, restrictive practices, cartels, monopolies, barriers to market access and providing for
measures to check preferential agreements between
large concerns designed to keep out foreign entrepreneurs (Keiretsu relationships);

— gradual alignment of the Japanese working week
with practices in Western countries;

— more active and systematic curbs on price differentials between Japanese goods sold on the domestic
marekt and the very low prices at which the same
products are sold on external markets.

Lastly, the US negotiators explicitly requested preferential access for specific US industrial and agricultural
exports and services (forestry products, satellites, aircraft, supercomputers).

1.3.3. Here it is clear that tradional trade clauses

go hand in hand with measures relating to national
economic and social policy which are unprecedented in
the history of bilateral economic agreements. Some
Japanese circles have condemned them as intolerable
interference, infringing Japans's sovereignty.

Interestingly, however, many of the US demands are
based on proposals which had already been tabled and
discussed by Japanese politicians and economists in
favour of opening up the country to the outside world
(cf. the 1986 Mekawa report). This partly explains the
favourable reaction of Japanese public opinion to this
initiative.

1.3.4. The proposals addressed by Japan to the US
Administration and accepted by the latter, also contain
a number of new and somewhat surprising features.

Washington is asked to take decisive action to remedy
the structural problems inherent in the federal budget
deficit, the low US family savings ratio, the failure of

17. 6. 91 Official Journal of the European Communities No C 159/69

US products to compete successfully on the international market, the emphasis placed by US firms on
short-term management, the low commitment to
R&cD and, lastly, the poor standard of schooling and
vocational training.

Nor are the unduly tough discretionary regulations
impeding Japanese imports into the United States overlooked.

These requests largely relate to US domestic policy and
have already been identified by the Bush Administration
as priority aims for the near future. However, they have
been adopted as bilateral commitments _vis-a-vis_ Japan,
almost as if they exclusively concerned the two partners
as opposed to exercising an undoubted influence on
the balance of relations between the world's largest
economic power and the rest of the world. From this
angle, the SII agreement has been criticized by Community observers.

1.3.5. Cooperation within the SII framework has
only recently got under way and a number of difficulties
and delays are already on the horizon.

Regardless of this undertaking, US-Japan relations are
bound to become increasingly close in the near future,
especially if the predicted expansion of the 'Pacific
Area' (which is far more dynamic than the North Atlantic area) becomes a reality.

2. EC-Japan relations

2.1. _From initial indifference to the flood of Japanese_
_exports in the '70s and '80s_

2.1.1. Immediately after the war, up to the late '60s,
relations between Japan and the individual European
countries (grouped within the European Communities
since 1959) were far from close.

Community businessmen saw no particular reason to
take an interest in Japan, which they regarded as a
remote, unfamiliar country, grappling with serious
economic difficulties.

On the Japanese side, Europe was seen as a region
with great cultural traditions, capable of substantial
economic growth but of no immediate interest. Attention was focused primarily on South East Asia and on
bilateral relations with the United States, which became
very close after 1950, as a result of the Korean War.

2.1.2. It was not until 1970 that trade relations

between the two areas rapidly gathered momentum,
triggered by Japan's impressive industrial and trade
potential.

During the decade 1970 to 1980 trade between the
partners shot up from US$ 30 000 million to
US$ 250 000. However, the balance was heavily in
favour of Japan, which quickly accumulated a large
export surplus. European exports offset only 34% of
imports from Japan and found it difficult to penetrate
the Japanese market.

The Japanese 'economic miracle' therefore became a
reality for Europeans as well as the United States.

2.1.3. European concern was soon translated into
pressures for the adoption of protectionist-type
measures to curb the flood of Japanese products. Several of the Member States' governments took the step
of reactivating the large number of quota restrictions
left over from the immediate post-war period. Others
adopted new ones.

Such action was demanded by industry and the trade
unions, enraged at aggressive Japanese export tactics.
Such exports were sold at rock bottom prices (justified
only partly by low labour costs) and targeted dangerously on specific sectors and segments of the market,
jeopardizing national industrial firms and even forcing
their closure.

The EC Commission—which only received full powers
to conduct a common trade policy in 1970—initially
stood by passively while the Member States tried to
defend themselves in a period of serious economic crisis,
inflation and growing unemployment, generated by the
1973 and 1979 oil shocks.

On its side, Japan seemed unperturbed by the absence
of a uniform Community-wide trade policy and continued to step up contacts and talks with the governments of the individual Member States, offering pragmatic solutions in the shape of partial voluntary export
restraint agreements. For a long time little notice was
taken of the EC authorities in Brussels, despite the
latter's right to discuss relations affecting the EC in its
entirety on a global basis.

2.1.4. This disjointed state of affairs hindered EC
trade relations with Japan from taking coherent shape
so that for a long time they continued to be fragmented,
with reactions varying from country to country. Hardly
surprising in the circumstances that frictions and trade
disputes proliferated.

No C 159/70 Official Journal of the European Communities 17. 6. 91

The sectors worst hit by the first wave of Japanese
exports were shipbuilding, electronic goods, audiovisual and photographic equipment, cars and motorcycles.
In some sectors, the very survival of EC firms was
threatened.

2.2. _Dynamic phase of EC trade policy_

2.2.1. In the '80s the EC Commission started to

frame its own trade policy _vis-a-vis_ third countries.

The starting point was effective application of the
GATT multilateral anti-dumping agreements. With
increasing frequency, procedures were instigated to stop
third countries exporting goods at prices below those
obtaining on their home markets. While this policy is
not specifically directed against Japanese exports, the
fact remains that Japanese products are frequently
affected.

2.2.2. In 1982 the French Government took the con
troversial step of concentrating customs clearance operations for Japanese video recorders in a single regional
customs office, at Poitiers, (a decision which was subsequently revised following EC intervention) ( [1] ).

In 1984 the EC instigated an anti-dumping procedure
in respect of imports of electronic typewriters. In 1985
it was the turn of photocopiers and, in 1986 microwave
ovens, printers and microconductors.

2.2.3. The purpose of these much publicized initiatives was primarily to impress on Japan that the EC
would not stand by idly while its traditional or new
technology industries were destroyed as a result of trade
practices deemed to be unfair. Concurrently, Brussels
explored the feasibility of adopting, within the framework of GATT, safeguard measures selectively targeted
on specific countries.

The EC Commission has also focused attention on the

expediency of supporting the US attempt to give legal
substance to the idea that advantages must be equitably
balanced in relations between the GATT contracting
parties. Legal action and safeguard measures would
then have been justified in the event of persistent
Japanese structural trade surpluses. (This attempt as
we know, was unsuccessful.)

With a view to improving its relations with Japan, the
EC launched a number of positive measures, including
training schemes enabling young business executives

(') In Japan the Poitiers episode triggered fierce indignation and
for a long time was seen as symbolizing the EC countries'
protectionist attitude.

from the Twelve to spend extended periods in Japan
for the purpose of studying, working and learning
Japanese ( [2] ).

The Commission also made approaches to the Japanese
authorities in an attempt to improve market access for
EC goods and services.

2.2.4. In 1984, after lengthy debate, the EC approved
a regulation (commonly known as the 'New Instrument') designed to strengthen EC trade policy to curb
illegal trade practices by third parties that were not
covered by anti-dumping legislation (Regulation 2641/
84). These provisions came as a response to the US
Congress measures reinforcing US unilateral trade safeguard powers (Section 301 of the Trade Act of 1979).
The 'New Instrument', however, was of limited scope
and was never applied _vis-a-vis_ Japan ( [3] ).

Lastly, in 1987 the EC instigated a procedure (subsequently upheld) under GATT against discrimination
in the Japanese system of levying duties on imported
wines and alcoholic beverages. Here the EC started to
turn its attention to the opening-up of Japan's internal
market, a matter in which the United States alone had
previously been interested.

2.2.5. The Japanese authorities reacted strongly,
accusing the EC Commission of interpreting the GATT
anti-dumping rules in an arbitrary manner applying
devious and discriminatory procedures and introducing
new protectionist instruments into its trade legislation.

In addition, the Tokyo Government drew the attention
of the Community and the governments of the individual EC Member States to the changes effected in the
mid-'80s in Japanese trade policy, reflected in substantial cuts in, and even abolition of, many customs duties,
the scrapping of many import quotas and the improvement and streamlining of certification systems and
import procedures.

Japan seems seriously committed to assuming a new
profile, no longer anxious to push its own exports at

( [2] ) See European Community Export Programme 'Exprom' and,
in particular, one of its key elements: the Executive Training
Programme.
( [3] ) The Commission is currently examining, in accordance with
this Regulation, an official complaint submitted to it by the
European Community Shipowners Association concerning
the Japanese Harbour Management Fund. (The alleged illicit
practices consist of contributions by the shipowners to a
Harbour Fund on the basis of an agreement concluded under
the threat of non-handling of containerships in Japanese ports
if it was not signed.)

17. 6. 91 Official Journal of the European Communities No C 159/71

all costs but ready to meet US and EC demands for
easier access to its internal market. At the same time

however, the Tokyo authorities insist that low EC
exports to Japan are not due solely to market access
difficulties but first and foremost to the indifference

and disinterest of Community businessmen, who fail to
make the requisite effort.

The EC partners are also asked to bear in mind that
Japan's strategies are currently undergoing rapid
changes so as to allow considerable scope for direct
investment in new manufacturing plant, as is occurring
in the United States. Japan wishes the EC to take
account of this new desire for cooperation.

2.3. _Japan's position in the run-up to the_ _Community-_
_wide single market in 1992_

2.3.1. The Community's announcement, in June
1985, that it intended to achieve complete unification
of the markets of the Twelve by 1992 spurred Japan to
review its policies _vis-a-vis_ the 'old continent', which it
had hitherto regarded as a conglomeration of widely
disparate national economies.

Japan became keenly interested in the prospect of a
large, economically and legally unified, market of
320 million consumers, once the last barriers to internal
circulation of goods and services came down. There
was growing realization of the potential advantages of
uniform EC rules for imports from non-EC countries,
accompanied by the phased dismantling of quota
restrictions which, in some Member States, have restricted, and even totally blocked, some Japanese exports.

However, in Japanese eyes, completion of the large
Community-wide single market and gradual progress
towards greater political union were of even greater
importance because they laid the foundations for a
pooling of resources that could trigger, throughout the
Community area, a surge of growth with huge potential. Commission reports on the general and sectoral
impact of economic union are carefully scrutinized by
the Japanese Government's economic departments and
by the large Japanese multinational concerns, which
now regard Europe as an integral part of their global
strategies.

2.3.2. Events in Europe since 1985 have increasingly
assumed the proportions of a historic change. The EC
is the focus of international interest, after a long and
troubled period, and is exerting a pull on many
countries, both near and further away. Undoubtedly
this process is influenced, among other things, by the

current upheavals in Eastern Europe, and indeed in the
Soviet Union.

Since then, spurred by fears that any new protectionist
trends ('Fortress Europe', to quote the expression used
in certain US circles) could create further problems for
Japanese exports, Japan has recognized the need for a
more active presence including the siting of industrial
plant in the Community ( [1] ).

2.3.3. During this period, when the Uruguay Round
of GATT negotiations got under way, the EC undertook to look harder at its own trade policy _vis-a-vis_
non-EC countries.

The official stance of the EC Council and Commission

(enshrined in the December 1988 Rhodes declaration)
is firmly in favour of general multilateral free trade
rules based on a substantial reinforcement of GATT.

On the 1992 single market, the Community authorities
stated categorically that the benefits of Community
liberalization could not be extended automatically to
non-EC countries unless accompanied by negotiations
on reciprocal concessions to give Community firms
similar access to non-EC markets, preferably within the
multilateral framework of GATT, which specifically
provides for efforts to achieve mutually balanced
advantages ( [2] ).

2.3.4. The Community's position _vis-a-vis_ Japan is
set out in its Communication of 15 March 1988 ( [3] ),
the Commission states its intention of constructing 'a
balanced relationship' safeguarding reciprocal interests
as part of closer cooperation in the fields of trade,
industry, services and science and technology.

However, the Commission stressed the need for a 'consistent and firm approach' to secure results from discussions with Japan, particularly to convince Japan to

_i_ _[1]_ _)_ A number of surveys carried out by Japanese government
bodies and industrial associations highlight persistent fears
that the Community's 1992 target conceals future discrimination against Japanese exports.
( [2] ) 'Europe 1992: Europe World Partner' — Commission information memorandum on statements made by Lord Cockfield
and Mr De Clerck, Members of the Commission, at a debate
on the external dimensions of the Single Market — 19 October 1988.
( [3] ) 'Relations between the Community and Japan' — Commission Communication — 15 March 1988.

No C 159/72 Official Journal of the European Communities 17. 6. 91

place less emphasis on exports and take serious steps
to liberalize and reform its economic structures, while
opening up its market to Community firms ( [1] ).

2.4. _Problems_ _connected_ _with direct investment_ _by_
_Japanese firms in the Community:_ _the car industry_

2.4.1. The Commission's cautious and measured lan
guage regarding trade relations with Japan was
prompted by the wide trade gap and differences of
opinion between the two parties on the scope of GATT
anti-dumping rules.

The Commission was inclined to interpret these rules
broadly and adopted appropriate regulations to tackle
a new aspect: the practices deployed by Japanese firms
for the purpose of circumventing anti-dumping duties
(parts and components are imported and then pur
together at assembly plants) ( [2] ).

The concept of a 'minimum local content' entitling a
product to be considered as being of Community origin
(i.e. exempt from the quota restrictions still applied by
some Member States to Japanese imports) sparked off
an impassioned debate.

However, standpoints differed significantly from one
industrial sector to another. Some high technology sectors (e.g. the chemical industry) rejected even the principle of 'local content', which was deemed incompatible
with GATT rules.

The industrial sectors most directly affected by the allout onslaught by Japanese firms to conquer market
segments are at the opposite extreme. In the motor
vehicle sector, in particular, there is much heated discussion about cars assembled at UK plants but which
are in fact of Japanese origin and hence subject to quota
restrictions limiting sale in some Member States.

Attention gradually shifted to the percentage of ECmanufactured components and parts (60-80%) needed
if such products were to qualify for Community origin.

f [1] ) In this connection, Japan pointed out that its GDP growth
had for several years been based on increased domestic
demand and not on export trends.
_(_ _[l]_ _)_ The parent regulation setting out EC policy on anti-dumping
dates back to 1984 [Regulation (EEC) No 2176/84]. These
provisions were later supplemented by Regulation (EEC)
No 1761/87, which dealt with 'screwdriver plants'. In 1988
the Council adopted a consolidated anti-dumping regulation

[Regulation (EEC) No 2423 88] incorporating the previous
regulations.

In addition, the Commission pointed with concern to
a dangerous trend emerging in Member States,
prompted by a wave of competition to attract Japanese
investment in certain manufacturing sectors.

2.4.2. Given the Community's hesitancy and internal
dissension, Japan took action on two separate fronts.

Firstly, - the Tokyo Government formally invoked
GATT to challenge the legality of Community regulations on the circumvention of anti-dumping duties via
the device of 'screwdriver' assembly plants.

After an investigation lasting several months, an arbitration panel supported the Japanese complaint and
declared the EC provisions incompatible with
Articles III and XXX(d) of the General Agreement.
The Commission appealed against the procedure and
validity of the panel's conclusions. The entire matter
has now come within the scope of the Uruguay Round
since the new anti-dumping code being framed should
encompass the problem of circumvention of anti-dumping duties.

Secondly, Japanese car producers in the Community
are tackling the roots of the problem. In an effort to
enhance their image, they accept the substance of the
arguments advanced by Community manufacturers and
are losing no time in launching programmes for
revamping their industrial plant sited in the Community
in order to step up the proportion of EC-manufactured
components and parts.

These decisions show that Japanese firms are anxious
to reappraise their role and become 'good corporate
citizens of Europe'.

2.5. _Top-level EC-Japan meetings in January 1990 her-_
_ald the dawn of a new phase in cooperation_

2.5.1. In January 1990 a Japanese Government delegation, led by Prime Minister Toshiki Kaifu, held a
meeting with the responsible Commission officials.

The cordial and constructive atmosphere of these talks
highlighted both parties' willingness to achieve a quantum jump in their joint relationship, putting narrow
clashes of short-term commercial interests behind them

and espousing a broader, more farsighted approach.

Institutional cooperation between the Community and
Japan entered a new phase. Official statements stressed

17. 6. 91 Official Journal of the European Communities No C 159/73

the need to establish close relations on a permanent
basis, on a par with longstanding Japan-US and Community-US relations.

2.5.2. These talks were not confined to (often controversial) aspects of trade relations but embraced other
broader issues such as the upheavals in Eastern Europe,
EC economic and political union, North-South relations
and relations with the US.

On behalf of his Government Prime Minister Toshiki

Kaifu wholeheartedly welcomed the completion of
plans for EC economic and political union as conducive
to the progress and development of trade relations and
to international stability.

Japan acknowledged the key role played by the Twelve
within the 'Group of 24', whose task is to provide
practical aid and assistance to the fledgling democracies
of Eastern Europe. Japan was already an active contributor to the group's programmes and stated its intention of coordinating its projects in Eastern Europe with
Community operations.

Further, as regards relations with the developing
countries (LDCs), the Community and Japan proposed
to coordinate implementation of their development aid
and technical assistance policies more closely ( [1] ).

2.5.3. As to the future, the meeting in January culminated in the decision to place EC-Japan bilateral
relations on a permanent footing operating at three
levels: (a) meetings, at a personal level, between the
Commission President and the Japanese Prime Minister, (b) regular annual meetings at ministerial level and
(c) at a technical level, closer liaison and consultations
in the economic, science and technology, environment,
cultural and social sectors.

A ministerial-level meeting took place in Brussels in
May 1990 and addressed key aspects of bilateral ECJapan relations. A 'standing working group on trade
questions' was set up with the task of identifying
impediments to satisfactory two-way trade and discussing possible action and solutions in the individual
sectors concerned.

The Japanese delegation confirmed that the measures
envisaged in the US-Japanese 'Structural Impediments
Initiative' would not be exclusively bilateral but applied
_erga otnnes_ so that thev could also be extended to the
EC.

( [J] ) Japan now tops the development aid league table to the LDCs

($... in...).

In response to Japanese anxieties the Commission representatives gave assurances that the future Community-wide Single Market would be open to non-EC
partners (i.e. including Japan).

2.5.4. On removal of the remaining barriers to the
Japanese market, the Commission announced a Community export drive to go hand in hand with a Japanese
Government programme to promote Community
imports.

Both delegations were particularly exercised by the
matter of direct investment by Community firms in
Japan, which is still very small. Proposals and suggestions for action will be framed in the near future.

An agreement was signed on cooperation in the field
of nuclear safety and protection. Other joint schemes
are planned to step up future cooperation in the fields
of science and technology, the environment, social
affairs and cultural exchanges.

2.5.5. The vexed issue of imports and Japanese
investment in the car industry in the Community was
not broached directly at the ministerial meeting in
Brussels but discussed at separate talks both before and
after the meeting.

The discussions, which are still going on, focus on the
following points:

1) Definition of a 'transition period', running at least
until 1991, to enable the Community car industry
to restructure and boost its competitiveness in preparation for an entirely open Community car market.

2) During this period Japanese industry will restrict
and monitor the number of vehicles exported to the
Community; cars manufactured within the EC will
also be included.

3) The quota restrictions on Japanese cars in a number
of Member States will be phased out.

In a more general context, global trade reciprocity is
another discussion topic.

2.5.6. High-level meetings between the Community
and Japan will continue in 1991.

At the end of May, Commission President Jacques
Delors will pay an official visit to Tokyo.

No C 159/74 Official Journal of the European Communities 17. 6. 91

The Committee understands that the matter of a future

joint declaration on EC-Japan relations is currently
under discussion both in the Commission and in the

Council.

A further ministerial-level meeting between EC representatives and the Japanese Government is planned
in the autumn for the purpose of re-examining matters
that are still unresolved and stepping up economic and
political cooperation.

Additional bilateral contacts are scheduled in order

to break the deadlock in the GATT Uruguay Round
negotiations, which are of vital importance to both the
EC and Japan.

3. ESC conclusions and recommendations on EC
Japan relations

3.1. In the light of the Committee's studies and deliberations on EC-Japan relations over the past years, a
number of conclusions can usefully be drawn, in the
shape of recommendations addressed to the Community authorities with a view to bringing about a
speedy and substantial qualitative improvement in this
relationship and translating hopes for closer cooperation into reality.

3.2. First, implementation of the decisions already
taken or announced by the Japanese Government for
an overhaul of Japan's economic and trade policy and
structures will clearly require much time and effort.

However, it is encouraging to note that there have
already been tangible signs of a change in direction.
We will have to wait for these trends to be consolidated.

Increased Japanese domestic demand, due to greater
public investment and a rise in personal consumption
has become the key factor in national economic growth
and is pushing up imports generally, and manufactured
imports in particular.

For the first time for many years, the overall picture is
one of Japanese imports rising faster than exports in
terms of both value and volume, i.e. the overall Japanese trade surplus is contracting.

This welcome trend is reflected in the reduction of
Japan's trade surplus vis-a-vis the US and EC. Although

it is difficult to compare EC and Japanese statistics,
they would seem to bear out this downward curve ( [J] ).

Japanese commentators take for granted that Japan's
external trade patterns are becoming more mature
(increased room for imports from the West of finished
manufactures and consumer goods and from SouthEast Asia of semi-finished products and components
for use in Japanese industry, plus of course continuing
imports of raw materials and energy) ( [2] ).

Trade relations between Japan and its Western partners
could improve rapidly if, as is hoped, this trend is
consolidated in the near future. The US, Japan and the
EC could then focus their attention and efforts on a

substantial expansion of cooperation in all areas.

3.3. The Committee warmly welcomes the outcome
of the latest meeting between Japanese Government
and EC Commission representatives, which culminated
in a joint decision to achieve a quantum jump in their
joint relationship and espouse a broader, more farsighted approach.

The Committee would welcome the issuing of the mooted joint declaration on EC-Japan relations, especially
if it reinforces high level institutional contacts.

This new phase will have to be underpinned by institutional cooperation at top level between the Japanese
Government and the Commission, and at technical
level. But there must also be regular liaison and consultation in the economic, scientific, cultural and social

sectors.

The Committee fears that this second facet of cooperation may progress too slowly or that unexpected difficulties may arise when it comes to implementing the
requisite projects, with the risk that official declarations
will ultimately prove no more than empty words. That
would be most unfortunate since the hoped-for
improvement in EC-Japan cooperation cannot conceivably be reduced to a formal list of dates.

The Committee calls for immediate steps to establish
the planned contacts at all levels and in particular
stresses the importance of determining arrangements to

(') Official Japanese statistics indicate that Japan's trade surplus
_vis-a-vis_ the EC dropped to US$ 19 700 million in 1989
compared with US$ 22 800 million in 1988. EUROSTAT
figures show an EC deficit of 21 200 million ECU for the first
ten months of 1989, as against 24 500 million ECU in 1988.
It is unfortunate, however, that the two parties cannot agree
on a uniform method for quantifying such important data.
( [2] ) See 'A l'Ecoute du Japon', 10. 12. 1990.

17. 6. 91 Official Journal of the European Communities No C 159/75

bring the socio-economic groups together in order to
study their problems and compare notes.

With this in mind, the Economic and Social Committee
could play a key role and assume significant responsibilities.

3.4. Appraisal of Japan-EC relations highlighted several cases where mutual ignorance of the other's cultural and social values proved a serious obstacle.

Europeans in particular are ignorant about Japanese
society, which is rooted in spiritual and practical values
that differ radically from European traditions.

In Japan, a considerable effort has been made for many
years to study and understand the European (and US)
past and present, with particular reference to economic
and cultural (and, perhaps, to a lesser extent, social
and political) aspects ( [!] ).

Europe therefore has to be better briefed about the
distinctive characteristics of the Japanese population as
a whole (including its culture, history and institutions),
and the detailed workings of Japan's economic, manufacturing, financial and services sectors.

The Committee hopes that immediate plans will be
made for constructive schemes on all fronts, starting at
school and university, with the emphasis on direct
contacts between EC and Japanese businessmen and
ordinary citizens and stressing the value of meetings,
visits and seminars facilitating a wide-ranging interchange of experience at all levels.

For instance, it would be useful to explore ways of
exploiting fully the presence of thousands of families
of Japanese businessmen and officials working in EC
Member States. Similarly, ways should be found of
awakening the interest of the waves of Japanese tourists
and encouraging them to play their part in promoting
two-way information.

_3.5._ EC-Japan economic and trade relations continue
to be dominated by the need to boost the volume of
EC exports to the Japanese domestic market.

Here it must be remembered that Japanese rules and
regulations are changing fast: many formal obstacles
and constraints have already been scrapped while the

(') It has been pointed out that one reason for successful Japanese
penetration of ECU and US markets is the meticulous research
carried out by Japanese entrepreneurs into Western consumers' requirements and preferences. EC firms by no means
have a comparable insight into the Japanese consumer
market.

most obstructive non-tariff barriers are slowly being
relaxed.

The Committee feels that the EC Commission must

play a dynamic role in pinpointing the remaining direct
or indirect obstacles and reach agreement with its
Japanese counterpart on what action is required.

That does not mean that the Japanese market will be
easily accessible to EC industrial firms. On the contrary,
in the immediate future it will become increasingly clear
that the main hurdles stem from the highly competitive
Japanese domestic market, cut-throat competition both
between local firms and against newcomers, strict rules
and local practices and the psychological inhibitions of
Japanese customers vis-a-vis foreign products.

Following the example of those Community firms
which have already gained a foothold in the Japanese
market, all Community businessmen eager to succeed
in Japan will have to make a special effort to tailor
their products and sales tactics to the dictates of an
economic and social climate that differs in many
respects from the situation in the Member States.

The EC Commission must give its backing and assistance to such drives which, over the next few years, will
have to focus on improving the EC-Japan trade balance.

3.6. The dearth of EC manufacturing plants in Japan
is clearly a source of concern.

Past explanations for this state of affairs are now wellknown. However, as already mentioned in the case of
EC exports to Japan, the situation is rapidly improving,
partly as a result of the steps being taken by the Japanese government to liberalize trade, both on its own
initiative and in connection with the Structural Impediments Initiative.

The Committee urges the Commission to conclude with
its Japanese counterpart a set of rules and specific
incentives to encourage the establishment of EC firms
in Japan ( [2] ) and to flesh out the concept of 'reciprocity',
which has so long been the subject of discussion.

Concurrently, the Commission should endeavour to
persuade Community businessmen to try harder to

( [2] ) The Commission has already started to study the matter: see
the recent publication—Guide to EC investment in Japan.

No C 159/76 Official Journal of the European Communities 17. 6. 91

export to Japan's large and fast-expanding domestic
market.

3.7. The Committee is concerned by the virtual
absence of joint EC-Japanese business ventures in third
countries, particularly the LDCs, which cater for these
countries' development needs.

The increasing competitiveness of Japanese products
on such markets, undermining long-established EC
exports, highlights another weak link in the Member
States' economies.

The EC authorities should keep a keen eye on the
question of industrial cooperation in third countries at
future talks with their Japanese counterpart and press
for studies, seminars and practical proposals.

3.8. Particular attention should be focused on the

problems associated with direct investment in Japanese
manufacturing plant set up in the Community, partly
because of the sharp increase in the number and size of
such plants.

In principle the Committee would stress that direct
Japanese investment in the Community must be welcomed, especially when it means a boost in 'technological value-added of Community origin ( [!] ) and the creation of new jobs.

Similarly, cooperation agreements and joint EC-Japanese business ventures, which are frequently accompanied
by technological innovation and modern business leaderschip and management practices, should be encouraged.

Japanese manufacturing plant set up recently in the
Community has frequently led to extensive transfers of
know-how and organizational methods to the small
and medium-sized EC sub-contractors who provide
parts and components meeting the buyers' strict quality
control rules ( [2] ).

(*) 'Technological value-added of Community origin' seems a
more relevant criterion than 'minimum local content'.
( [2] ) The Japanese government agency JETRO's International
Economic and Trade Information Center undertakes periodical in-depth surveys of direct investment by Japanese
manufacturing firms in the Community, the reasons
prompting such investment and problems that have arisen.
Its 6th Report 'Current situation of business operations of
Japanese manufacturing enterprises in Europe', was published
in March 1990. In this connection, the moves by Japanese
businesses to set up Research and Development centres and
'Design Centres' in Europe are of interest; these centres seek to
pinpoint the actual requirements of the Community market.

However, careful Commission supervision will be needed to avoid distortion of competition caused by Member
States trying to outbid each other in offering incentives.
In addition, the Commission should ensure overall
'cohesion' between non-EC plants and Communityaided regional development schemes.

3.9. On the agricultural front, the EC and Japanese
stances have many points in common. Both are under
pressure from the US (whose agricultural policy is
strongly protectionist) and other food producer
countries to open their borders and cut farm-subsidies.

The EC and Japanese replies to such pressures have
much in common. They can be summed up as follows:

— agreement to an all-round, but gradual, balanced
and reciprocal reduction in subsidies,

— agreement in principle to the framing of multilateral
rules governing international agricultural trade,

— willingness to review existing agricultural policies,
while protecting the basic principles that underpin
them. In both cases, these policies safeguard principles unrelated to the trade negotiations, such as
preservation of the traditional rural values, regional
and environmental protection and prevention of
excessive dependence on food imports (particularly
acute in Japan where the immediate post-war period
is still a vivid memory).

Both the EC and Japan are convinced that the way
ahead lies in strengthening the multilateral instruments
concluded within GATT; both disapprove of the proliferation of calls for bilateral partial agreements on
trade in specific agricultural products.

3.10. The Committee observes that EC and Japanese
socio-economic problems in the long run have vital
points in common.

For instance, the Ministry of International Trade and
Industry (MITI), in presenting its internal reform programme to be implemented in the 1990s ( [3] ), listed
among its key concerns improvement of quality of life,
consumer protection, the emerging needs of an ageing
society and protection of women.

These matters also receive considerable attention in the

Community. The two parties could therefore profitably

( [3] ) Ministry of International Trade and Industry, international
Trade and Industrial Policy in the 1990s ... Creating Human
Values in the Global Age'. 5 July 1990.

17. 6. 91 Official Journal of the European Communities No C 159/77

cooperate closely in organizing a continuous two-way
flow of experiences and monitoring the effectiveness of
the chosen solutions.

The same holds good for the long-term development
of the Japanese economy, flexible industrial structures,
promotion of small and medium-sized businesses and
energy and environmental policies.

In the Committee's view, exchanges of views and
experiences in these fields could be accompanied by
joint research and projects.

Done at Brussels, 25 April 1991.

3.11. On the broader issue of economic relations
and international policies, the Committee calls for a
deepening and widening of EC-Japan relations to place
them on a par with current EC-US and US-Japan
relations.

The world's three main centres of political and economic power should also embark on a strategy of cooperation and coordination aimed at achieving the 'new
international order'—on which the security, harmony
and prosperity of all peoples hinge.

_The_ _Chairman_

_of the Economic and Social_ _Committee_

Francois STAEDELIN

_APPENDIX_

to the Opinion of the Economic and Social Committee

TABLE 1

JAPAN'S MERCHANDISE TRADE BY AREAS

(1977-89)

_(USSM-Customs clearance basis)_

```
Total

```

```
with USA

```

```
with EC

```

```
Exports

19 717

31367

42 829

80 456

93 188

```

```
Exports

 8 736

16 650

18 523

30 675

47 908

```

```
Imports

 70 809

140 528

126 393

126 408

210 847

```

```
balance

 9 686

(10 721)

20 534

82 743

64 561

```

```
Imports

12 396

24 408

24 647

29 054

48 246

```

```
balance

 7 321

 6 959

18 182

51402

44 942

```

```
Imports

 4 195

 7 842

 8 120

13 989

28 146

```

```
balance

 4 541

 8 802

10 403

16 685

19 762

```

```
1977

1980

1983

1986

1989

```

```
Exports

 80 495

129 807

146 927

209 151

275 175

```

_Source:_ Japan Institute for Social and Economic Affairs, Keizai Koho Center, Japan 1990—An international comparison,
Tokyo 1990, page 36.

No C 159/78 Official Journal of the European Communities 17. 6. 91

TABLE 2

DIRECT INVESTMENT: EUR 12

_(Unit:_ _million ECU)_

Year

Partner
Country

1984 1985 1986 1987 1988

Outward Flows

USA -11650 - 1 0 063 - 1 7 662 - 2 3 901 - 2 0 074

Japan -295 - 3 6 -116 - 1 8 -187

EFTA -929 -760 9 - 1 8 2 6 - 2 306

Total World (^ - 1 7 395 - 1 5 349 - 2 2 164 - 3 0 780 - 3 0 711

Inward Flows

2 484

445

3 267

6 840

2 356

1502

3 543

12 578

1766

646

1666

5 637

606

1461

9 021

14 278

USA

Japan

EFTA
Total World f [1] )

2 919

390

1661

6 177

{') Excluding intra EUR 12 investments.
_Source:_ EUROSTAT, Unit C3, Direct Investment of the European Community 1984 to 1988, Luxembourg 1990, pages 73
and 75 (UEROSTAT estimates).

Outward flows:
A positive figure indicates a net disinvestment,
A negative figure indicates a net investment,
Excluding reinvested profits.

Inward Flows:
A positive figure indicates a net investment,
A negative figure indicates a net disinvestment,
Excluding reinvested profits.

TABLE 3

DIRECT INVESTMENT: EUR 12—USA—JAPAN

_(Unit:_ _million ECU)_

1985

- 1 5 349

1233

 - 8 455

5 637

26 733

841

 - 9 712

27 966

 - 7 614

1986

- 2 2 164

 - 8 796

- 1 4 713

6 840

36 969

230

- 1 5 324

28 173

- 1 4 483

1987

- 3 0 780

 - 8 605

- 16 916

12 578

39 357

1010

- 1 8 202

30 752

- 1 5 906

1988

- 3 0 711

 - 1 9 9 7

- 2 8 931

14 278

43 870

-410

- 1 6 433

41 873

- 2 9 341

made by:

EUR 12

USA
Japan ( [l] )

received by:

EUR 12

USA
Japan ( [!] )

net investment by:

EUR 12

USA

Japan(^

1984

 - 1 7 395

7 128

 - 7 558

6 177

28 460

    - 1 3

 - 1 1 218

35 588

 - 7 571

_0)_ These data are investments recorded in the Balance of Payments by the Bank of Japan, and not investments 'notified'

to the Ministry of Finance.
_Source:_ EUROSTAT, Direct Investment of the European Community 1984 to 1988, Luxembourg 1990, page 11