TNAG-1258-FCO40-1591-Third-countries-and-the-future-of-Hong-Kong-1984 — Page 162

CONFIDENTIAL

Japan/EC Relations

5.

Mr Matsunaga agreed (after an exposition by Mr Hannay) that the situation was serious. The Japanese had had hard talks with the US before the Reagan visit but had been unable for example to resolve the NTT procurement question. The situation with regard to the EC was worse than with the US because of the high level of unemployment in Europe (although this had not been caused directly by the Japanese trade surplus). The Japanese Government was encouraging imports of manufactures but it would take time to alter the pattern of dependence on exports which had

obtained for a century. Meanwhile the only hope of avoiding economic collapse was to pursue the roll- back and other initiatives agreed at the Williamsburg Summit. During the recent visit to Japan by Davignon Japan had agreed to a number of measures so as to avoid worse trouble with the EC and facilitate European recovery, but these measures were essentially temporary. Some European countries were unfortunately still protectionist and Mr Matsunaga questioned the proposal to increase tariffs on DADs.

Middle East

6.

Mr Matsunaga said that the situation in Lebanon at present made it inopportune to discuss the Reagan proposals. The Lebanese Government should aim to include some of the opposing elements. The ultimate aim should be reconciliation and with- drawal, and escalation should be avoided at any price. On Iran/ Iraq, the Japanese thought that the Iraqis were more realistic than the Iranians.

Grenada

The Japanese regretted but understood the reasons for the US action. Shultz had described it as a just intervention, and the situation was admittedly much better now.

7.

UK/Japan Relations

8.

Mr Matsunaga mentioned the likely plans of the Crown Prince and Princess to call in at London in February, to visit their son, on the way back from Zaire and Senegal. He also reiterated the Japanese wish that the UK should support Mr Oda, the Japanese candidate for election to the ICJ.

25 November 1983

Markéhisht

M Elliott

Far Eastern Department

Distribution:

Sir J Bullard

HKO

Mr Giffard

Mr Hannay

FED

Soviet Dept

SEAD ECD (E) NENAD

MED

UND WIAD

Chancery, Tokyo

CONFIDENTIAL