Europe worries Japanese cars now may flood its auto market

When the United States and Japan concluded their deal to limit Japanese automobile shipments to the American market May 1, they ignited an outburst of concern throughout Europe.

The essence of the European declarations is that government officials and the auto industry are deeply worried about the possibility of Japanese auto exports being diverted to the European market unless Europe gets a similar agreement.

Despite a swift Japanese government declaration that its auto industry was being asked to show "moderation" in its exports to Europe, there is a near-panic about the consequences for the hard-pressed European car manufacturers. There is a widespread feeling that the only way Europe can obtain restraint from Japan is through a unified approach. But there is also suspicion some European automakers will break ranks and make their own deals with Japan.

As an example of this disunity, there were reports at the same time the US-Japanese accord was being announced that West Germany's Volkswagen was near a pact with Nissan for joint production of VW "Passat" cars in Japan for sale there.

"The warning for Europe is clear," noted the leading French daily, Le Monde; "it has become the preferred targed. It's hard to visualize Japan not trying to increase its automobile sales on the old continent to compensate for the limit in exports to the other side of the Atlantic."

The latest figures indicate that exports of Japanese cars to the European Community (EC) countries increased by 18 percent in the first quarter of the year over the same period in 1980 to reach nearly 240,000. Shipments of EC-made cars dropped by 22.7 percent to under 10,000 during the same period.

Prominence was also given in the European press last week to statements by Japanese Prime Minister Zenko Suzuki that Europe could not expect the same kind of favorable treatment as the United States because the European car industry had failed to make efforts to modernize or penetrate the Japanese market.

The inroads made by Japanese cars on European markets, where they do not encounter import quotas, are smaller than their share of the American market, but they have been the most aggravating part of the $10 billion annual EC trade deficit with Japan.

The problem came up when US Secretary of State Alexander M. Haig Jr. was here recently. EC Commission President Gaston Thorn reportedly told him it was important all three economic powers "share burdens equally."

The EC Commission has decided to seek authorization for negotiations with japan aiming at an accord "analogous" to the US-Japan pact. The subject was also expected to come up during the informal EC foreign ministers meeting May 9 and 10 in the Netherlands and again here later this month. And it is sure to figure in talks when Bill Brock, the American special trade representative, and Malcolm Baldrige, US secretary of commerce, visit EC headquarters here later in the month and Japanese Prime Minister Suzuki tour s Europe early in June.