THE PURPOSE OF this report is to describe the history of the economic relations between Japan and the EC from the commercial controversy to industrial and technological cooperation, and to point out the influences of the development of industrial and technological cooperation on Japanese direct investment in the EC.

THE PAST AND PRESENT OF THE COMMERCIAL CONTROVERSY BETWEEN JAPAN AND THE EC

Lessons of the past

As is commonly assumed, at the official level, there have been four culminations in the commercial controversy between Japan and the EC: in 1976–77, 1980, 1982–83 and 1985, although the controversy itself has never been interrupted since the beginning of the 1970s.

The first conflict of 1976–77 is symbolized by the ‘Doko-Shock’. In 1980, the second conflict occurred immediately after the second oil crisis, and so-called voluntary restrictions on exports to West Germany were introduced by the Japanese car and TV industries. The third conflict of 1982–83 rapidly compelled the new government of Mr Nakasone to place restrictions on exports in several industries.

At present, tension is so high that we can find ourselves at the fourth and perhaps highest culmination of controversy. The EC requires from the Japanese government ‘a clearly verifiable commitment to a significant, sustained increase in imports into Japan of manufactured and processed agricultural products’. The Japanese government thinks that it is endeavoring to increase imports and wishes its endeavor to be recognized enough by the EC. There is a great gap between them.

It is beyond the scope of this report to describe the details of the history of these conflicts. Here I would like to confirm only one point: After the second oil crisis, the European economies, including the West German economy, have been suffering secular stagnation and high unemployment rates. Trade inbalances with Japan are persistent. Consequently, in 1982–83 and 1985, the attitude of the EC toward Japan has become stronger than before. But both sides have learnt from experience in the history of commercial controversies and are now exploring a new phase of industrial and technological cooperation.