EU calls on Japan to let up its guard

Date: 19/06/1997

By Mark Turner

ACCORDING to the famous Japanese strategist Miyamoto Musashi, “the warrior's way is the twofold way of the pen and the sword, and he should have a taste for both ways”.

The Japanese government would do well to heed its medieval knight's advice if it is to make a strong alliance with Europe.

Although penning great swathes of information on its much-touted deregulation programme, Tokyo has in practice consistently failed to cut away the obstacles that stand in the way of European imports and investment.

Such complaints will feature high on the agenda of next week's EU-Japan summit in The Hague, the sixth since 1991 in a series of efforts to invigorate political and economic ties between the world's second and third most powerful trading powers.

While the EU and the United States are getting on famously, and the US and Japan are in regular and close contact, the third leg of the so-called global triangle remains weak, even after the launch of the Europe-Asia dialogue last year.

Next to the Union's 1996 'action plan' with Canada and its 1995 New Transatlantic Agenda with the US, the 1991 agreement on which it bases relations with Japan is looking rather outdated.

Officials insist that its age is not a problem in practice, as the document was advanced for its time and remains a viable basis for cooperation. “I admire the wisdom of the person who drew it up,” said one Tokyo source, praising its flexibility.

But in symbolic terms, the agreement - drafted just as the Cold War ended and before the new world trading order began to emerge - is a fitting demonstration of the lack of intensity in Euro-Japanese relations.

As if to underline the point, the EU-Japan summit will be a pale reflection of Clinton's visit a month ago.

That does not mean, however, that the encounter will be devoid of meaning or importance. Europe's push towards eastern markets is one of its highest priorities at the end of the 20th century, while Japan is keen to shore up its European investments and increase its political presence on the world stage.

Although essentially a trade summit, the meeting will mark a year of 'enhanced' political cooperation between the two sides and address issues such as China, Korea and former Yugoslavia.

There will be no grand declaration on the future of the world, à la Clinton, but in his own way, Japanese Prime Minister Ryutaharo Hashimoto may make some interesting comments on monetary union and the need for stability in Europe.

Similarly, the EU is likely to boast of its increasing interest in Asian regional politics, as shown by its recent agreement to join the US and Japan in a controversial North Korean nuclear energy project, and statements on human rights in Burma.

Nevertheless, it is clear that Europe's major aim will be to elicit some high-level commitments to structural reform in, and market access to, Japan's difficult markets.

The country's surplus with Europe is still way too large for the Union's taste, and despite a reduction of 50&percent; from 1993-1996, it has started to rise again quite dramatically this year. While Japan exported goods worth 47.5 billion ecu to the EU in 1996, it only imported 37.2 billion ecu's worth, according to Tokyo figures.

This, says the European Commission, is largely due to the maze of obstacles confronting European exporters, compared to the relatively easy access for Japanese businesses to EU markets.

At April's annual high-level consultation in Brussels, the Commission “expressed disappointment” at a revision of Japan's deregulation programme a month earlier, adding that “while there were some new developments, overall progress was limited”.

Japanese diplomats and business leaders, while admitting that there are fewer overt complaints from their side about access to European markets than vice versa, reply that the Union is far from free of obstacles itself, pointing to its anti-dumping mechanisms.

They also claim that European products are often simply not sufficiently competitive, or marketed well enough, to make inroads into their country.

Furthermore, they argue, since the figures point to a steady rise in total EU-Japan trade and a falling trade imbalance for the past four years, the seriousness of the obstacles should not be overestimated.

Still, there is no doubt that doing business in Japan can be an uphill struggle. Japan's discriminatory distribution laws can make it extremely difficult for European products to find their way into Japan's shops, even when they reach its shores.

The battle between the US' Eastman Kodak (supported by the EU) and Japan's Fujifilm in the World Trade Organisation is a clear demonstration of the animosity these rules have engendered, adding to the already considerable logistical and cultural problems faced by European companies trying to do business in Japan. “Finding the right partners to break into Japan's market is a difficult task”, says Yutaka Harada from UK consultancy Japan-Europe Business Support Limited.

One high point of next week's summit could be the opening of a 'reciprocal dialogue on distri-bution', which would aim to dismantle some of the most obvious legislative barricades. There may also be a push towards a mutual recognition agreement, and cooperation on customs and the control of drug precursors.

But overall, the encounter is unlikely to produce much more than handshakes, smiles and statements of mutual support. The EU and Japan are talking, but it will be some time before their wariness towards one another disappears.