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CHEMETRON CORPORATION Catalysts Division /CHEMETRON/ 30 C&EN NOV. 16, 1970
By E A R L A N D E R S O N Senior Editor
Those other Japanese trade talks Most trade-conscious Americans have followed the on-again, off-again talks that Japanese and American officials have sweated through in an effort to come up with voluntary limitations on Japanese textile exports to the U.S. Very few, however, have paid much attention to the other trade negotiations that the Japanese now have under way. These are taking place across the Atlantic Ocean and the negotiators on the other side of the table are representatives of the European Economic Com munity, or Common Market. The goal of these Japanese-EEC negotiations, which could take a year to wrap up, is a comprehensive, nonpreferential trade pact between the two trading blocs. Although both parties want such an agreement, there is no guarantee that the talks will be successful because there are many ticklish issues involved. Nevertheless, should a trade pact between Japan and the EEC be worked out, the U.S. is bound to benefit. Japan and the EEC are two of the world's largest trading blocs, but their trade with each other is pitifully small compared to, say, their trade with the U.S. The Common Market imported $7.3 billion from the U.S. last year and only $889 million from Japan. Excluding trade among member countries, these figures represent 19% and 2%, respec tively, of EEC imports. Japanese imports reveal the same pattern: 27% from the U.S. ($4 billion) and only 5% ($820 million) from the EEC. On the export side of the ledger, the imbalance is just as great. Only 6% of EEC's external exports goes to Japan; only 2% of Japan's exports ends up in the Common Market. A trade pact between Japan and the Common Market would go a long way toward correcting this imbalance. Certainly, the EEC wants the talks to be successful. It sees Japan, with its rapidly expanding economy, as an attractive export market and the economy of EEC coun tries depends a lot on exports. Japan, if its industrial growth is to con tinue, will need imported raw materials to feed it, and to pay for these imports, she must export. Right now, fully a third of Japan's exports goes to the U.S. and, with the protectionist sentiments reflected in the trade bill now pending in Congress, Japan is understandably worried that future growth in its major export market will be stunted. The EEC is the only other export market for Japan with comparable potential. But wanting the bilateral talks to succeed and making them succeed are two different things. Tariffs are not an issue, but quotas and other nontariff barriers are. This means that Japan will have to liberalize many of its formidable trade restrictions. The problem facing the EEC Commission is a little more com plex. Present restrictions on Japanese imports vary from country to country. They are most restrictive in Italy and most liberal in West Germany, with France and the Benelux countries in the middle. The commission must come up with a package that satisfies everybody. Pre sumably, the EEC Commission wants the final agreement to be closer to the more liberal German pact than the Italian. But any compromise necessarily means that Japanese imports into Germany will face tighter restrictions. These and other thorny issues (what products will be involved; how fast restrictions will be eased) indicate that agreement will not be reached overnight. Already,* European companies are voic ing fears that the EEC will become a sump for cheap Japanese imports— the same fears, ironically, that they can't condone when American com panies express them. If the EEC and Japan are able to overcome these problems and reach a trade agreement, the U.S. will benefit in two ways. It will receive whatever trade benefits the two blocs accord each other because of the most-favored-nation principle. It will also feel less pressure from Japanese imports as more of them are diverted to Europe.