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Japan Western Europe
Japan's trade with Western Europe grew steadily but had
been
relatively small well into the 1980s considering the size
of this
market. In 1980 Western Europe supplied only 7.4 percent
of Japan's
imports and took 16.6 percent of its exports. However, the
relationship began to change very rapidly after 1985. West
European exports to Japan increased two and one-half times
in just
the three years from 1985 to 1988 and rose as a share of
all
Japanese imports to 16 percent. (Much of this increase
came from
growing Japanese interest in West European consumer items,
including luxury automobiles.) Likewise, Japan's exports
to Western
Europe rose rapidly after 1985, more than doubling by 1988
and
accounting for 21 percent of all Japan's exports. By 1990
Western
Europe's share of Japan's imports had risen to 18 percent
and the
share of Japan's exports that it received had risen to 22
percent.
In 1990 the major European buyers of Japanese exports
were West
Germany (US$17.7 billion) and Britain (US$10.7 billion).
The
largest European suppliers to Japan were West Germany
(US$11.5
billion), France (US$7.6 billion), and Britain (US$5.2
billion).
Traditionally, West European countries had trade deficits
with
Japan, and this continued to be the case in 1988, despite
the surge
in Japan's imports from them after 1985. From 1980 to
1988, the
deficit of the West European countries as a whole expanded
from
US$11 billion to US$25 billion, with much of the increase
coming
after 1985. That diminished somewhat to US$20.7 billion in
1990,
before rising sharply to US$34 billion in 1992.
Trade relations with Western Europe were strained
during the
1980s. Policies varied among the individual countries, but
many
imposed restrictions on Japanese imports. Late in the
decade, as
discussions proceeded on the trade and investment policies
that
were expected to prevail with European economic
integration in
1992, many Japanese officials and business people became
concerned
that protectionism directed against Japan would increase.
Domestic
content requirements (specifying the share of local
products and
value added in a product) and requirements on the location
of
research and development facilities and manufacturing
investments
appeared likely.
Fear of a protectionist Western Europe accelerated
Japanese
direct investment in the second half of the 1980s. Total
accumulated Japanese direct investments in the region grew
from
US$4.5 billion in 1980 to over US$30 billion in 1988, from
12.2
percent to more than 16 percent of such Japanese
investments.
Rather than being discouraged by protectionist signals
from Europe,
Japanese businesses appeared to be determined to play a
significant
role in what promises to be a large, vigorous, and
integrated
market. Investment offered the surest means of
circumventing
protectionism, and Japanese business appeared to be
willing to
comply with whatever domestic content or other performance
requirements the European Union might impose.
Data as of January 1994
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