White Paper on International Trade 1997: Europe

The EU economy had been slowing since the middle of 1995, but began recovering in the second half of 1996. Spring 1997 Economic Forecasts of the European Commission predicted that the real growth rate of the EU GDP would grow from the 1.6 percent of 1996 to 2.4 percent in 1997 and 2.8 percent in 1998 and that the recovery would therefore be firm. The reasons given for the recovery were the favorable overseas demand, stable prices and exchange rates, and falling interest rates. EUROSTAT (EU statistical office) reported that the EU exported a total of 1,674.9 billion ECU in 1996 (up 5.5% from the previous year) and imported a total of 1,580.5 billion ECU (up 4%) giving it a higher trade surplus of 94.4 billion ECU (up 39%). This shows that the economy is being supported by overseas demand.
The member states of the EU have been working to achieve the conditions for economic convergence required for participation in the Economic Monetary Union (EMU), but they have had to maintain a balance among business recovery, job creation, and fiscal balance when steering their economies.

The EU adopted a New Treaty on European Union (Amsterdam Treaty), amending the Maastricht Treaty at the Amsterdam Ministerial Meeting of June 1997, in which the groundwork was laid for expansion of the EU and launching of the EMU from January 1999. In July, the EU Commission announced "Agenda 2000" in which it designated Poland, Hungary, the Czech Republic, Estonia, Slovenia, and Cyprus as candidates for negotiations in expansion of the EU and gave notice of revisions of its common agricultural policy, cutbacks in subsidies for regional development, and other changes accompanying expansion, in its common budget. While the EU is looking to expand eastward, it is also stressing stronger relations with Asia. The leaders of Asia and Europe gathered together under one roof in March 1996 in Bangkok at the historic 1st ASEM meeting. In September 1997, the 1st ASEM Economic Ministers Meeting was held at Makuhari in Chiba, Japan where regional dialogs were held to increase economic exchanges between Asia and Europe.

With Asia being stressed more and more, the EU started its "Gateway to Japan 2" program - the second shot in its campaign to boost exports to Japan - scheduled to run for four years starting January 1997. Ten individual European countries are also engaged in campaigns to export to Japan. This has led to growing exports to Japan and a rapid improvement in the trade imbalance. EUROSTAT reports that the EU trade deficit with Japan shrank for the sixth straight year in 1996 and that the deficit in 1996 had dropped 21.3 percent from the previous year. Japanese statistics (MOF statistics) show that Japan actually was running a deficit in trade with six of the 15 EU countries: Denmark, France, Ireland, Italy, Finland, and Sweden.

(2) CIS and Eastern Europe: Growing Eastern European Trade Deficit and Russian Trade Surplus

The real GDP growth rate of Central and Eastern Europe declined from that of the previous year in 1996, but still came in at an average 4.0 percent. With the exception of a handful of countries suffering from rampant inflation, such as Bulgaria, Central and Eastern Europe are becoming stable under their new market economic systems. Central and Eastern Europe, however, have been increasing their imports due to their reliance on suppliers outside of the region for their energy and shortages of machinery and equipment. At the same time, they have not been able to increase exports to their biggest trade partner, the EU, due to the economic slowdown there. The trade deficit consequently ballooned from the US$19.9 billion of 1995 to US$31.6 billion in 1996.
Russia saw its GDP drop by 6 percent in 1996 or even more than the previous year, but inflation calmed considerably, to annual rate of 21.8 percent. In 1997, there were signs of a recovery in some production in the mining and manufacturing sectors. Looking at trade in 1996, exports grew from 1995, while imports shrank, causing the trade surplus to grow from the US$21.6 billion of the previous year to US$29.1 billion. Trade outside of the region by CIS countries other than Russia nearly balanced, with exports totaling US$16.5296 billion and imports US$16.5269 billion.

The six countries of Poland, Hungary, the Czech Republic, Slovakia (The Slovak Republic), Romania, and Bulgaria have been working to meet the conditions for membership in the EU under the Europe Agreement and have been consequently lowering tariffs on trade with the EU in stages. The Central European Free Trade Agreement (CEFTA), on the other hand, was augmented in July 1997 with the membership of Romania and is working to expand regional trade. Russia received support for membership in the WTO at the Denver Summit and is further strengthening its ties with the global economy.

Trade between Japan and Central and Eastern Europe reached a total of US$1.446 billion (MOF statistics) in 1996. Japan exported US$937 million to the region (up 18.1% from the previous year) and imported US$509 million (up 7.2%) - giving Japan a surplus. Trade with Central and Eastern Europe accounts for only 0.2 percent of Japan's total trade, but increased capital investment in the region in the future should lead to more exports of production goods from Japan.
Trade between Japan and Russia was, according to Russian statistics, US$1.94 billion in Russia's favor in 1996. With the Russian law on production sharing being applied to the Sakhalin continental shelf, however, the "Sakhalin 1" and "Sakhalin 2" oil and gas development projects will soon get under way and Japan expects to export much of the equipment for the projects.

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White Paper on International Trade 1997

4. Europe

(1) Western Europe: Economy Recovering From Slowdown

(2) CIS and Eastern Europe: Growing Eastern European Trade Deficit and Russian Trade Surplus