The European Community and Japan: Bi(tri)lateral Trade in World Context By:

This paper addresses the central issue of Europe's economic relations, past and future, with the rest of the world. It concentrates on the trilateral relationship between the EC, the USA, and Japan. The formerly communist countries of Eastern and Central Europe, including the independent states which have replaced the old Soviet Union, play a small role in world trade, and partly because of their low income levels, partly because the economic system under which they operated until a few years ago discouraged international trade. EFTA is small by comparison with the EC, and its trade patterns are in any case very similar to those of the Community. 1 From 1 January 1993, furthermore, the EC and EFTA were linked together in the "European Economic Area " (EEA), which formalized and extended the de facto free trade regime that has governed trade between the two areas for many years. In using the EC as a proxy for Europe, then, we make a useful and reasonable simplification. The grounds for focusing on the relationships of the EC with the two other industrial giants are obvious: those relationships account for the bulk of the Community's extra-European trade, just as the three sides of the triangle account for the bulk of total world trade. EC trade with the developing world is quantitatively on a fairly small scale. But it is immensely important for a number of reasons. The basic facts of Europe's present position in world trade are set out in Tables 1 t