EU to press Japan for swift deregulation

Date: 13/05/1999

By Gareth Harding

THE EU will press its case for Tokyo to open up its markets to foreign firms at a summit with Japanese Prime Minister Keizo Obuchi in Bonn next month.

Union officials say relations between the EU and Japan are at their healthiest for years, but continue to be soured by Tokyo's failure to deregulate its markets.

Trade disputes are at an all-time low, the two sides see eye to eye on the forthcoming round of World Trade Organisation talks and Tokyo has welcomed the launch of the euro as a counterbalance to the strength of the dollar. However, the Union continues to be riled by Japan's slowness in opening up its markets to foreign firms.

There is seven times more Japanese investment in the Union than EU investment in Japan, and European Commission officials put the blame squarely at Tokyo's door for failing to dismantle barriers to outside companies.

At a high-level meeting last month, the Commission proposed holding annual ministerial-level deregulation talks, but Japan rejected the idea out of hand.

Both sides are hoping to sign a long-awaited Mutual Recognition Agreement at next month's summit meeting which would boost trade by enabling them to recognise each other's testing and certification standards for certain products.

The Union is, however, also expected to present a list of 200 areas where it believes Tokyo is failing to make fast enough progress on deregulation.

Amongst these are the country's closed telecommunications market, its complex distribution systems and feeble enforcement of competition rules.

In March, Japan adopted a deregulation programme which went some way towards addressing these concerns, particularly in the fields of public procurement and pharmaceuticals. It also signed an 'enhanced deregulation initiative' with the US last week which was broadly welcomed by Commission officials. "America's deregulation agenda is similar to ours," said one, "but it is a question of constant pressure and effort to move Japan in the right direction."

The Commission insists that deregulation is in Japan's interests as well as the Union's. "If it does not open up its markets and carry out structural reforms, it is not going to improve its economy," said one official.

This view has been echoed by the Organisation for Economic Cooperation and Development (OECD), which warned in a recent report that Japan faced the prospect of "prolonged economic stagnation and persistently high unemployment" if it failed to reform.

Tokyo's willingness to let in foreign firms is being put to the test after UK telecommunications giant Cable and Wireless put in a rival bid for Japanese international telecoms operator IDC. The British firm trumped the offer tabled by the partly state-owned company NTT, but shareholders opted for the national bid, sparking howls of protest in London.