Section 4. Western Europe

1. Western Europe speaking in "One Voice"

 Western Europe stepped up its move to integrate itself both politically and economically in recent years, and noticeable movements were observed from 1987 through the first half of 1988.

(1) Completion of the EC's Internal Market

In July 1987, "The Single European Act" came into effect. This act is aimed at realizing by the end of 1992 a territory without internal frontiers in its area, by securing free movements of goods, persons, service and capital. The economic plan envisages accelerating policy formulation by adopting a qualified majority concerning a number of items, instead of the conventional unanimous vote system.

The completion of the integrated EC market means emergence of a huge unified market with a population of 320 million. The following table shows a comparison of three markets of the EC, Japan and the United States. 

Scale of EC (1987): 12 Member States

According to a report of the EC, the completion of the projected integration will bring about great economic effects due to unification and rationalization of its markets stemming from abolition and integration of various regulations as well as promotion of competition, with growth the rate of the EC expected to increase by at least 4.5%. Vitalization of the EC economy will lead to strengthening of the whole of the free economy.

When the actual state of the integration is examined, integration has almost been completed in the fields of agriculture, fishery and commercial policies, but little progress has been made in other areas. The EC has the following schedules for work relating to about 300 items.

On the progress of this work, a report issued by the EC Commission and news reports say that the EC Commission submitted to the EC Ministerial Council proposals on about 200 of some 300 items by June 1988, and the Council adopted 91 of the submitted items. At one time, a considerable delay from the initial program was reported in the work, but at present the work seems to be making good progress.

Major tasks of the EC can be narrowed down to the three points of (1) overproduction stemming from the Common Agricultural Policy and farming aid policy, (2) related fiscal discipline (about two-thirds of EC's total budget is for agricultural spending, and (3) correction of "North-South" gap inside the EC. The EC summit meeting held in February 1988, through a marathon session lasting nearly 40 hours on these issues, reached an agreement on the EC fiscal reform calling for expansion of independent revenue sources, a curb on agricultural budgets and an increase in the amount of a structural fund for correcting regional economic differentials. The accord was a product of compromise reached after each nation faced with its individual domestic issues made great efforts, and is believed to be an expression of strong political will intended for the integration of the EC member states.

(2) European Political Cooperation

In parallel with efforts for integration in the economic field, cooperation among the EC members is being intensified in the political field. The earlier-mentioned "The Single European Act" codified matters concerning the EC's political cooperation which had been virtually conducted so far without substantive enactments. Although political integration gets into many difficulties as it always involves the issue of national sovereignty, political cooperation is making progress in the aspect of diplomatic policies through concerted actions and other steps. For instance, in 1987, the 12 EC nations issued a statement on Middle East peace problem and the Foreign Minister of Belgium, then assuming presidency, visited the Middle East as the representative of the EC, thus clearly showing its position on a regional dispute. Later, the EC issued joint statements on East-West relations, the Middle East, Afghanistan, South Africa, Central America and other matters, demonstrating the EC's common position on these issues. Not only major West European nations but also the 12 EC nations will speak in "one voice" in an increasing number of opportunities concerning major global issues in the future, along with the United States and Japan.

(3) "European Pillar" in NATO

Western European nations are increasing "voices of Western Europe" also in the field of security. The following are concrete moves involved, the background of which will be mentioned later.

These movements are greatly indebted to the initiative of France which does not belong to military machineries of NATO despite its NATO membership in order to maintain a free hand as much as possible under political tradition since the ages of former President de Gaulle. This reportedly caused the apprehension at one time among the United Kingdom and some other NATO members that it might damage the solidarity of NATO. But, at present it is welcomed as a factor for supplementing NATO and stepping up security of Western Europe.

2. East-West Relations in Europe

(1) Conclusion of the INF Treaty and Western Europe

The INF problem has remained the biggest security issue in Europe for the past several years. Dual-track decisions made by NATO in December 1979, were followed by the start of INF negotiations between the United States and the Soviet Union in November 1981. The INF Treaty was signed in December 1987, after the INF negotiations were resumed in March 1985, following deployment of INF missiles in Western Europe at the end of 1983 and subsequent suspension of the INF negotiations. The treaty came into effect in June 1988. During the process, heated debate on security was seen in Western Europe.

In major related developments since 1987, the Soviet Union came to accept, July 1987, a proposal on a total global abolition of INF which the United States has made since the start of negotiations in 1981. Debate on Security in Western Europe was then focused on handling of short-range INF Pershing Ia missiles which are possessed by the Federal Republic of Germany and whose nuclear warheads are under U.S. control. After domestic debate in the Federal Republic of Germany (FRG), FRG Chancellor Kohl issued in August a statement to the effect that his country will abandon Pershing Ia missiles without modernizing them.

After the signature of the INF Treaty in December, attention was focused on handling of short-range nuclear weapons which are not covered by the INF Treaty, and debate was made on advisability of their modernization and handling them at negotiations on arms control. Differences of views were reported on this issue among NATO countries, but views were adjusted before the start of a NATO summit in March 1988, and the NATO members displayed their solidarity at the summit which was held for the first time in six years.

(2) NATO's Security after a Total Abolition of INF Missiles

Today when a total abolition of INF missiles has become a reality, the problem of how security should be is becoming a major issue again in NATO.

(a) How NATO's Nucelear Forces Should Be

NATO's strategy of deterrence is basically a "flexible response," namely a stand to prevent occurrence of the chance of resorting to military power by keeping a position capable of coping with an emergency by using conventional military power and nuclear forces. NATO member nations are highly evaluating the effectiveness of the "flexible response" for maintaining peace in Europe for the 40-odd years after the end of World War II. Serious debate is now being made on nuclear forces effective for maintaining the "flexible response" after the total elimination of INF.

(b) Strengthening of Conventional Forces

NATO is imagining the first use of nuclear forces in case it finds it unable to cope with a possible attack by Warsaw Pact with conventional weapons. On the other hand, it has taken steps to beef up and improve its conventional forces in order to lower the level of dependence on nuclear forces in such a manner. It can be said that the total INF abolition does not work to decrease the necessity for conventional forces, but rather underlines the need for capability of countering a threat by conventional forces by using conventional forces as much as possible. And, NATO countries recognize the necessity of strengthening conventional war potential much more than they did.

(c) Basic Policy of Arms Control and Disarmament in Future

As a treaty on a total abolition of INF missiles took effect, debate is being made anew in NATO on the problem of how the future arms control and disarmament should be. At Foreign Ministerial Council in June 1987, NATO reached an accord on a study of the comprehensive concept of arms control and disarmament. This concept involves (1) a 50% reduction in the strategic offensive nuclear weapons of the U.S. and the Soviet Union, (2) a global elimination of chemical weapons, (3) establishment of stable and secure level of conventional forces in the whole of Europe, and (4) reduction of American and Soviet short range nuclear missiles in conjunction with (2) and (3). It is aimed at finding a guiding principle for the scale and the method of conducting arms control negotiations for enhancing security by making a study of grasping individual arms control negotiations in the framework of the whole arms control.

(3) Facts of East-West Dialogue

(a) Active Exchanges of Visits by Influential Persons

Exchanges of visits by influential persons between West-European and Soviet-bloc nations became active recently against the background of improved U.S.-Soviet relations stemming from the signing of the INF Treaty. Conspicuous in this trend were movements of the Federal Republic of Germany (FRG) and the Soviet Union. FRG President Weizsaecker visited the Soviet Union in July 1987, followed by a visit to Moscow by Premier Strauss of FRG's Bavarian State in December, and Soviet Foreign Minister Schevardnadze's visit to FRG in January 1988. In October 1988, FRG Chancellor Kohl visited the Soviet Union, and Soviet General Secretary Gorbachev is scheduled to visit FRG in the first half of 1989. Also drawing attention was the first visit to the FRG by Chairman Honecker of the State Council of the German Democratic Republic (GDR) in September 1987.

(b) Conference on Security and Cooperation in Europe

The Conference on Security and Cooperation in Europe (CSCE) is an arena for multilateral dialogue in Europe. Since 1977, various follow-up meetings have been held to review the Helsinki final act adopted in 1975 (which stipulates Questions relating to Security in Europe, Cooperation in the Field of Economics, of Science and Technology and of the Environment, as well as Cooperation in Humanitarian and other Fields.) Conference on Disarmament in Europe (CDE) held as part of such a follow-up study adopted documents on Confidence and Security-building Measures in September 1986. The third follow-up meeting opened in Vienna in November 1986, and work to prepare the concluding document is now being made. But, little progress is being made in the work for lack of a flexible Soviet stance in the field of human rights. Western European nations are taking part in the negotiations based on its policy of achieving concrete results which are well balanced in each field.

(c) Negotiations on Arms Control of Conventional Forces

As for arms control in the area of conventional forces in Europe, a total of 45 meetings have been held since 1974 in MBFR (Mutual and Balanced Force Reductions) aimed at reducing conventional armed forces in Central Europe (nations covered are FRG and the three Benelux nations in the Western camp, and GDR, Czechoslovakia and Poland in the Eastern camp). But, no concrete accord was reached due to deep-rooted confrontation over verification and other issues. Under the circumstances, the 23 member nations of NATO and Warsaw Pact have held preliminary meetings in Vienna since February 1987, for negotiations on arms control of conventional forces in the whole Europe (from the Atlantic and to Urals) and debate is being made on such issues as purposes of negotiations, timing for starting talks, venue, participating countries and weapons to be reduced.

(4) Western Europe's Own Move to Strengthen Security

It was mentioned earlier in this book that Western European nations are emphasizing "the voice of Western Europe" also in the aspect of security. And, the origin of this move is related also with the INF issue. Before deployment of INF missiles (Pershing II and ground-launched cruise missiles) in Western Europe at the end of 1983, movements against the missile deployment intensified in the Federal Republic of Germany and other countries. And, this movement is believed to have led France to step up its cooperation for defense of Western Europe because of its fear that such campaigns against NATO's basic policy might undermine the very foundation of defense of Western Europe. Under its basic policy of not belonging to NATO's military structure, France has intensified the degree of its participation in defense of Western Europe in the form of bilateral cooperation with FRG and vitalization of the West European Union (to which France, FRG, U.K., Italy and the Benelux nations belong.)

Furthermore, a U.S. proposal on total abolition of ballistic missiles made at the U.S.-Soviet summit meeting in Reykjavik in October 1986, caused fear that it might deny the importance of nuclear forces in West European countries, and leading them to become more conscious of the questions relating to security of their own than before. And, this is believed to have intensified Western Europe's own move for stepping up its security. On the other hand, the United States has growing hopes of its allies for their increased defense burden because of its tight financial situation. The United States now seems to be hailing West European nations' efforts to strengthen "European Pillar" in NATO.

3. Situations in Major Countries

(1) United Kingdom - Prime Minister Thatcher's Election to the Third Term of Office

On the basis of favorable economic situations in the United Kingdom, Prime Minister Thatcher called for a general election in June 1987 and won a landslide victory, which brought her to a third term of office. On the other hand, Neil Kinnock the Leader of the Labour Party, which suffered the third consecutive defeat in general elections, launched a campaign for dialogue with the people in a bid to review its policies thoroughly, while the Liberal Party and the Social Democratic Party merged into the Social Liberal Democratic Party in March 1988, in a move to rebuild the alliance which also suffered a crushing defeat in the election. In the local elections held in May, the Labour Party, encroaching on the Social Liberal Democratic Party, greatly increased its local council seats, whereas the Conservative and Unionist Party could barely maintain the status quo.

The British economy has maintained a tendency of expansion since 1982 owing to the effective implementation of the economic policies often referred to as "Thatcherism" such as the relaxation of government regulations and the thorough introduction of the competition principle. The growth rate of GDP in 1987 reached 4.5%, and the unemployment rate stood at 8.4% as of June 1988, showing a declining trend for two consecutive years. On the other hand, an inflationary trend has begun to appear due to the economic boom and the base rate was raised to 10.5% in July 1988. The expanding economy also increased imports, and the current account deficit, which amounted to ��1.68 billion in 1987, is expected to increase further in 1988.

(2) France - Dissolution of Government of Conservative and Progressive Party Coexistence

The conservative-progressive coexistence regime (cohabitation) set up in March 1986, had been appreciated to some extent due to such factors as its efforts to vitalize the economy through privatization of state-run enterprises and other steps as well as improved domestic public order. In a presidential election in April and May 1988, President Mitterrand was reelected, defeating Prime Minister Chirac, and the conservative-progressive party coexistence regime was dissolved with the establishment of the Rocard Cabinet. However, in a general election in June, the ruling Socialist Party failed to win a majority.

In the economy in 1987, the rate of commodity price increase stood at 3.1% despite price liberalization, but no major improvement was seen in the unemployment rate topping 10%. The trade balance posted a deficit of FR 31.4 billion due to brisk domestic demand. And, the stock market plunge in New York in October temporarily halted efforts for privatization.

(3) Federal Republic of Germany - Chancellor Kohl Elected to the Third Term of Office

In the federal parliament election in January 1987, the ruling party alliance of the Kohl Administration won a majority, and Chancellor Kohl was reelected to his third term of office in March. Chancellor Kohl's Administration has since managed to secure his office despite impediments such as differences of views among ruling parties forming an alliance and poor showing or defeats of the Christian Democratic Union in state elections.

The economy of FRG has enjoyed stable growth since 1983, but export ran in low gear in 1987 compared with that of the previous year. The growth rate of the German economy that depends considerably on trade has been slowing down since the latter half of 1986 with the growth rate of 1987 standing at 1.7%. Commodity prices remained stable in 1987 with the consumer price increase rate posting 0.6%, but the employment situation remained severe with the relevant rate standing at 8.9%. The trade balance chalked up a record surplus. As part of a tax system reform and to further increase domestic demand for economic growth, the Kohl Administration is to carry out a tax cut, of about 14 billion marks in 1988 and a cut of some 20 billion marks in 1990, following a tax reduction (10.9 billion marks) in 1986.

(4) Italy - Satisfactory Economy

In Italian politics which had enjoyed political stability under the Craxi Cabinet (a coalition led by the Socialists) which established a postwar record for the longest-lived administration, the domestic politics began to move busily with the resignation en bloc of the cabinet in March 1987. After a general election in June, the Goria Cabinet (a coalition led by the Christian Democratic Party) was formed in July, but resigned en masse in March 1989, due to disarray in the ruling coalition, leading to formation in April of the De Mita Cabinet (a coalition led by the Christian Democratic Party).

The Italian economy in 1987 showed a good performance as it did in the previous year despite such unstable factors as fluctuation of share prices and foreign exchange rates. Its real-term GDP marked an increase rate of 3.1% (2.7% in 1986), posting the second highest rate after the United Kingdom among major West European nations. The inflation rate stood at 4.6% (6.1% in 1986), nearing a government-targeted 4%. The trade balance deteriorated compared with the previous year with a deficit of 11.1 trillion lira, but the overall balance marked a surplus of 1.6 trillion lira: The unemployment rate rose to 12% from 11.1% in 1986, showing deterioration of the employment situation involving mainly people of younger age brackets and women and in southern Italy.

4. Relations with Japan - "Opening a New Era in Japan-Europe Relations"

(1) Trilateral Cooperation among Japan, U.S. & Europe and Japan-Europe Relations

West European countries share basic values, such as freedom and democracy, with Japan, the United States and other developed nations. They also share interest in the maintenance and development of the free trade system and the market economy. Under the current international situation where there are major developments centering on the East-West relations and international economic issues, the trilateral cooperation among Japan, the United States and Europe has become all the more important as Japan strives for a greater international role for peace and prosperity in the world. It is also essential for Japan to strengthen its relationship with Europe, while maintaining its strong unity with the United States, in order to promote balanced trilateral partnerships. Based on this perception, the Takeshita Cabinet considers the cooperation with West Europe as one of the central pillars in Japan's diplomacy and is trying to expand bilateral relations in the political economic, cultural and other areas. In West European countries, increased expectations for Japan's international roles and interests in their relationship with Japan are observed, and reflecting these developments, Japan and Europe have been strengthening their cooperation in recent years.

There has been a marked increase in the number of Japanese leaders visiting West Europe and European leaders Japan. Prior to the Venice Summit Meeting, Italian Prime Minister Fanfani paid a visit to Japan in May 1987, as the first destination of his tour to study the positions of the participating countries. Former French President Valery Giscard d'Estaing also came to Japan in May. In autumn, the heads of state and other leaders of five northern European countries visited Japan in connection with the "Scandinavia Today" fair. British Foreign Secretary Howe flew to Japan for a regular foreign ministerial meeting. From Japan, then Prime Minister Nakasone visited Spain in June 1988 following his attendance at the Venice Summit, the first visit to Spain by a Japanese Prime Minister. Prime Minister Takeshita visited Italy, the Holy See, the United Kingdom and the Federal Republic of Germany from late April through early May 1988. In June, Takeshita visited the Netherlands, France, Belgium and the EC Commission. He also met Lord Carrington, NATO Secretary-General, in Brussels. In November 1987, His Imperial Highness Prince Naruhito paid a visit to the Federal Republic of Germany to attend the opening ceremony of the Japanese-German Center in Berlin. Other Japanese leaders had frequent meeting with their West European counterparts on such occasions as the Seven-nation Summit, U.N. General Assembly and OECD (Organization for Economic Cooperation and Development) Ministerial Council in order to expand dialogues between Japan and Europe.

1987 Trade Relations Between Japan, U.S. and EC

(2) Improvement in Japan-Europe Economic Relations

The EC initially took a tough line with Japan in 1987 through the first half of 1988 due to the huge imbalance of bilateral trade. The EC appeared to take the view that Japan's contribution to the world economic system was small and that the Japanese market was closed. The EC also expressed its concern that Japan's exports to the Community tend to center on automobiles and some other selected products and that Japan will increase sales to the European market to make up for a drop in exports to the U.S. market as the yen's appreciation vis-a-vis European currencies is not so large as that against the dollar.

In June 1987, the Council of Foreign Ministers approved the new anti-dumping regulations for parts and components. The EC Commission has filed complaints with GATT (General Agreement on Tariffs and Trade) against Japan's measures on its liquor tax and the Japan-U.S. semiconductor trade agreement. On the other hand, it also sent experts missions twice to Japan for talks with relevant Japanese authorities on standards and certification on automobiles, medical equipment and cosmetics.

At Japan-EC High-Level Consultations in Tokyo in July 1987, the EC expressed its concern anew about the huge imbalance in bilateral trade and Japan's possible shift of exports from the U.S. market to the European market. And EC delegates called on Japan to give European companies greater access to the Japanese market and treat foreign firms equally in the government procurement of foreign products worth $1 billion. Japan explained in detail its efforts to improve trade relations, including the Emergency Economic Measures. It also pointed out that EC's exports to Japan were growing faster than Japan's exports to the EC.

In addition to these constructive talks, favorable developments in the bilateral trade relations since the spring of 1987 have helped the EC somewhat ease its tough stance on Japan, although their trade imbalance remains large even after the same period. Among such developments, the EC's exports to Japan have been growing at a rate much faster than Japan's exports to the EC. Besides, the two sides have made actual progress in sectoral talks in the automobile and two other sectors, while Japan's direct investments in the EC have been growing steadily. Willy de Clercq, EC Commissioner, who visited Japan in September 1987, said that although it was necessary to ascertain whether the expansion of Japan's imports would take hold, he saw positive aspects of Japan-EC trade. Also, he said that Japan and the EC should strengthen their cooperation to achieve the balanced expansion of their trade.

In December, Mr. de Clercq and Mr. Narjes, Vice President of the EC Commissions, visited Japan for talks with Prime Minister Takeshita. Foreign Minister Uno and other Japanese Government leaders. Through the series of talks, the EC called on Japan to promptly carry out the GATT recommendations on Japan's liquor tax law and give EC companies greater access to the Kansai International Airport project and the Japanese Government program to procure $1 billion worth of foreign products. On the other hand, the Commission appreciated Japan's cooperative stance in sectoral talks on automobiles and two other products. Japan replied that it would reveal its plan for liquor tax reform at an early date (The cabinet decided on the "Fiscal 1988 Tax Reform Outline" in January 1988 and the "Tax Reform Outline" in June as specific measures to take) and that fair and non-discriminatory access to the Kansai International Airport project and the government procurement would be guaranteed. The Japanese government reaffirmed that Japan and the EC should make cooperative efforts to strengthen their ties.

In 1988, Japan's import from the EC continues growing at a faster rate. Reflecting this and other favorable development in Japan-EC economic relations, both the public and private sectors in the EC have become more aware of the importance of the Japanese market. On the occasion of the visit of Lord Young, British Minister for Trade and Industry, to Japan in March, for example, the United Kingdom launched the "Opportunity Japan Campaign" with the aim of doubling its exports to Japan. The Council of Foreign Ministers in April adopted a report which highly rated Japan's strong macroeconomic performance (growth led by domestic demand and structural adjustments) and an increase in Japan's imports from the EC. The report, which noted that such developments help improve Japan-EC economic relations, is another example of the change in the EC's recognition of the positive aspect of Japan-EC relations.

(3) Prime Minister Takeshita Visits West Europe Twice

Symbolizing the trend toward strengthening the relationship between Japan and Europe, Prime Minister Takeshita visited West Europe on two occasions between late April and early June 1988. The purposes and achievement of his official visit are as follows:

(a) To Strengthen Relationship between Japan and Europe

Leaders of West European countries positively responded to Prime Minister Takeshita's intention to expand the relationship between Japan and Europe, which clearly reflected the eagerness of European countries to strengthen their ties with Japan.

(b) To Establish Personal Ties with European Leaders

Prime Minister Takeshita frequently found himself in tune with West European leaders, and the talks between them were held in an extremely amicable atmosphere. Prime Minister Takeshita achieved his objective to establish strong friendship and personal relationships of trust with West European leaders in preparation for the Toronto Summit Meeting.

(c) To Explain Takeshita Government's Foreign Policy

In order to realize a "Japan Contributing to the World," Prime Minister Takeshita put forward his comprehensive "International Cooperation Initiative," which consists of (1) the strengthening of cooperation to achieve peace, (2) the promotion of international cultural exchanges, and (3) the expansion of Official Development Assistance. This new initiative was welcomed by other countries. Takesbita's address in the luncheon hosted by the Lord Mayor of London on May 4, which outlined the basic stance of the Takeshita diplomacy, received a favorable response.

(d) To Exchange General Views on International Political and Economic Problems

Prime Minister Takeshita and West European leaders confirmed that they share a common perception on many issues of mutual interest. They also confirmed that the EC is making earnest efforts to create an integrated market in 1992. Welcoming the EC's move, Prime Minister Takeshita expressed Japan's basic position that the new market should be open to non-EC countries.

(e) To Stress the Importance of Cultural and "Heart-to-heart" Exchanges

Prime Minister Takeshita proposed his "Cultural Exchange Programme to Bridge Japanese and European Minds" (see the following boxed account) and received a favorable response.

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