EC Approves Limiting Japan Car Imports for 7 Years : Trade: Tokyo must approve the deal, which is aimed at giving European auto makers time to make the changes they need to better compete.

The European Community gave a green light Friday to a plan to limit car imports from Japan until the year 2000, but Tokyo has to approve it, diplomats said.

The plan, approved at a special meeting of the ambassadors of the EC’s 12 member states, would allow Japanese penetration of the lucrative EC market to rise to 16% by the end of 1999 from the current 11%.

The deal is aimed at giving the European car industry a breathing space before facing unfettered Japanese competition.

But the agreement, after 18 months of tortuous negotiations, hinges on final approval by Tokyo.

Under the plan, Japan’s direct exports to the EC would be limited to 1.2 million cars until 1999, a virtual freeze on existing levels. The EC market would be thrown open at the end of the seven-year waiting period.

This level of sales is less than Japan’s current annual exports to the EC, which surged more than 12% to nearly 770,000 in the first six months of this year, mainly because of strong demand in Germany.

However, the direct sales entitlement was calculated in the expectation that Japanese companies operating in the EC would be turning out about 1.2 million so-called transplant cars annually by the end of 1999, a five-fold increase on present levels.

Transplants are Japanese cars built in Europe.

The combined figure of 2.4 million direct exports and transports would give Japan about 16% of the EC car market against 11% now, according to European Commission projections that the EC car market will reach about 15 million cars by 1999.

Auto analysts said the deal is good news for European car and component manufacturers.

“This means Japan will probably only be taking about 30% of the growth that we’re anticipating in the European car market,” said James Capel analyst Bob Barber in London.

“Bearing in mind that European manufacturers will also benefit from Eastern European markets opening up, this (plan) seems as favorable as could have been expected for the Europeans,” he said.

The agreement is aimed primarily at helping those EC national markets--notably France and Italy--that place the toughest restrictions on Japanese car sales.