ABSTRACT
Most of the residual import restrictions against Japanese textiles had been abolished by a bilateral agreement concluded in December 1975.8 As Shepherd notes,9 this was not because textiles had ceased to be a sensitive trade issue for Europe, nor was it because Japan was no longer an important exporter, but rather it reflected Japan's sudden loss of comparative advantage in the more labourintensive, standardised end of the product spectrum and its increasing strength in more sophisticated products. Indeed the situation was such that the European Community was running a bilateral trade surplus with Japan by the early 1970s. A more clear-cut example of Hanabusa's assertion that Japanese industry was not immune from the working of economic laws would be hard to find. Indeed, countries such as Hong Kong, Taiwan and South Korea began to feel the competitive pressure from a new generation of lowcost textile producers - Malaysia, Indonesia and Thailand - in the late 1980s.
