TNAG-1880-FCO40-2671-Student-demonstrations-and-internal-political-situation-in-C-1989 — Page 52

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2.

-

as far as possible

-

Pursue

an open market policy towards the NIE's by relying on structural adjustment in

Europe.

This policy line has to be taken, because trade restrictions:

3.

are not solving the surplus problem but rather diverting

it to others,

tend to push the Asian producers into more advanced technological areas,

don't help European industry to adapt to the varied

challenges of the new international economic environment,

cannot serve as a guideline for further integration of

the NIES into the world economy.

The NIES' adjustment question cannot be addressed

independently of the American trade deficits and the relati-

vely closed Japanese and European domestic manufacturing mar-

kets.

Prospective cuts in the American budget and, simultaneously, a

broader exposure of the European and Japanese domestic markets to NIEs imports seem capable of eliminating some of the poli-

tical friction linked to growing economic imbalances. As ex-

pansionary (European and Japanese) measures are easier to im- plement than restrictive (American) budget cuts, the former

steps should be taken independently of American action.

In Japan, this process has started vigorously since the appreciation of the Yen in 1985. After years of a nearly closed domestic market for manufacturing imports from the

NIES, several expansionary policy packages directed towards a

stimulation of the domestic Japanese market have allowed a steep surge of imports from the NIES.