What was the essence of the disagreement between the United States and the Soviet Union in Europe?

Section 2. Securing Global Prosperity

1. Current Situation and Challenges in the World Economy

The world economy is faced with diverse problems amid the turbulent international scene, characterized by the dramatic changes in the Soviet Union and Central and Eastern Europe and the Gulf Crisis. It has become all the more urgent to build a global partnership based on a strengthened international order and the trilateral coordination between the United States, Europe and Japan.

First, as one looks at the current situation of the world economy, it has experienced the longest expansionary phase since 1983, but some countries are experiencing a recession since 1990 and the world economy as a whole is decelerating considerably. Real economic growth of the world economy in 1990 slowed down to 2.1 percent from 3.3 percent recorded in 1989, and its outlook for 1991 is 1.2 percent (source: IMF). The general forecast is that in the latter half of 1991 the world economy will see a recovery in growth led by the United States, but the timing and the strength of recovery remain uncertain.

Moreover, although the external imbalances among the major countries diminished in 1990, the imbalances still persist and growth in the volume of world trade in 1991 is expected to be the lowest since 1985 (the outlook for 1991 is 2.4 percent according to the IMF).

Under such circumstances, protectionist sentiments in some countries continue to be strong. These movements are becoming increasingly significant toward regional economic integration in various parts of the world, including the integration of the European Community and the North American Free Trade Agreement, and some countries have expressed concern that these trends could lead to the emergence of blocs in the world economy. In order to avoid such protectionist moves and to ensure that regional integrations will not lead to closed economic blocs, it is indispensable to maintain and reinforce the multilateral trading system. In this respect, successful conclusion of the Uruguay Round of trade negotiations, which has been on the agenda since 1990, deserves top priority for the world economy. The dramatic political changes in the Central and Eastern European countries brought about, in the economic sphere, a shift to a market economy. Achieving the economic prosperity of these countries has become an important task for the Western countries. This will be attained by integrating these countries into the world economy through the provision of assistance, improvements for a greater market access and an expansion of trade and investment.

Moreover, many of the developing countries continue to face serious economic difficulties and, thus, solving the external debt problem is another task of extreme importance.

On the other hand, in addition to domestic investment demand in the industrialized countries being on an increasing trend, investment demand resulting from events such as the unification of Germany and economic reforms in the Soviet Union and the Central and Eastern European countries has added to the likelihood of expanding demands for funds in the future, and there is concern for a worldwide capital shortage.

2. Policy Coordination among Industrialized Countries and Japan's Policy Efforts

2-1. Policy Coordination among Industrialized Countries

 In order to cope with various problems mentioned above and to strengthen the international order, the industrialized countries need to continue policy coordinations in various fields, while making structural adjustment efforts respectively. In particular, the role of the trilateral, namely the United States, Europe and Japan, which account for more than 60 percent of the world's GNP, is extremely important and the close trilateral policy coordinations are vital in order to solve the various problems confronting the international community. Policy coordinations have already been undertaken in such multilateral fora as the Economic Summit of the seven industrialized countries (G-7), the meeting of the seven Finance Ministers and Central Bank Governors (Group of Seven) and the Organization for Economic Cooperation and Development (OECD). Nevertheless, there is still a need today for the trilateral parties to closely and mutually cooperate from a broader viewpoint and to undertake coordinated efforts when the world economic growth is decelerating. Maintaining and strengthening of the multilateral free trading system is of imminent necessity and development and prosperity of the Soviet Union, the Central and Eastern European countries and developing countries should be ensured, as the periphery of the world economy is expanding to encompass these regions.

Real GNP Growth Rates of Major Countries

Japan's Real GNP Growth Rates

Japan's Trade Balance and Current Account Balance

Under such recognition, in a series of meetings including the OECD Ministerial Council and the London Summit in 1991, it was agreed to maintain macro-economic policy coordinations to ensure a sustainable recovery of the economy and stability of the prices and, at the same time, to successfully conclude the Uruguay Round before the end of 1991 so as to maintain and strengthen the multilateral free trading system.

2-2. Japan's Policy Efforts

 Japan must transform its economic structure to harmonize it with the world economy and continue to endeavor to ensure sustainable growth without inflation, which is led by domestic demand.

In this recognition, Japan set forth the correction of external imbalances as a "national policy target" and has been steadily implementing measures for domestic demand-led economic management, improvement of market access and deregulations (concrete examples being deregulation which includes the revisions of the Large-Scale Retail Store Law and Antimonopoly Act), steady implementation of comprehensive import expansion policy, promotion of Comprehensive Land Policy such as the creation of a Land Value Tax and implementation of the "Basic Plan for Public Investment." Through these measures, Japan's current account surplus diminished to $33.7 billion in fiscal 1990 from its peak of $94.1 billion in 1986. Nevertheless, with a rapid increase in exports in 1991, attention needs to be paid to the fact that the current account surplus might increase again. With regard to the series of irregularities in the financial markets, some foreign media have criticized these events, linking it with the unique characteristics of the Japanese social system as a whole.

Japan must continue to promote its structural adjustments toward a more internationally cooperative economic structure and pursue economic management respecting such economic principles as free and fair competition and transparent market mechanisms, so as to avert international criticism. Through these efforts, Japan can fulfill its responsibilities commensurate with its role in the world economy and attain a living standard that truly convinces its people of actual affluence.

3. Strengthening the Multilateral Free Trade System

3-1. Overview

 The driving force for dynamic growth of the post-war world economy has been the free trade system founded on the market economy. The General Agreement on Tariffs and Trade (GATT), since its establishment in 1947, has contributed greatly to the expansion of trade and world economic growth as the agency to promote free trade.

On the ground of several new developments in the international economy, including the expansion of the trade in services, the need for maintaining and reinforcing the free trade system is rising. Thus, the Uruguay Round of trade negotiations (Note) started, but as conflicts had not been solved in principal areas, including agriculture, at the ministerial meeting held in Brussels at the end of December 1990, the negotiations failed to reach an agreement by the end of 1990 which had been set as the deadline at the beginning. So, the negotiations were carried over to 1991. It is now the greatest task in the international trade area to conclude the negotiations as early and as successfully as possible.

For Japan to maintain and reinforce the free trade system not only brings benefit for itself, but also it is a responsibility of Japan as the world's major trading country. A strong commitment to trade and prevention of protectionism forms the basis of Japan's trade policy. Should the Uruguay Round of negotiations fail to reach a final agreement, it will be extremely difficult to fend off any moves toward protectionism, including the unilateralism, bilateralism, closed regionalism and inclination to managed trade. Based on such recognition, the Government of Japan places the successful conclusion of the Uruguay Round of negotiations as one of the most important goals for Japan's foreign policy and has made positive contributions toward this goal.

3-2. Status of the Uruguay Round Negotiations

(1) The Brussels Ministerial Meeting

The Uruguay Round of negotiations was scheduled to conclude at the Ministerial Meeting in Brussels on December 3-7, 1990, but mainly due to the disagreement between the United States and the Cairns countries (Note) on the one side, and the European Community (EC) on the other over the agricultural issues, the negotiations failed to reach an agreement and were carried over. On the other hand, substantive progress and virtual agreements were made in several areas, such as rules of origin, in the meeting. In addition to Foreign Minister Taro Nakayama, the Minister of Agriculture, Forestry and Fishery, Tomio Yamamoto and the Minister of International Trade and Industry, Kabun Muto, attended the meeting.

(2) Moves toward Resumption of Negotiations

Even after the Ministerial Meeting in Brussels, disagreement between the United States and the Cairns countries, which demanded a commitment for an unconditional reduction in three areas - domestic support, border measures and export subsidies - and the EC, which did not accept these conditions, was not settled. In 1991, efforts, led by GATT Director-General Authur Dunkel, were made to resume the negotiations. Although coordination between the United States and the EC proved difficult, finally at the agricultural meeting held on February 20, Director-General Dunkel announced on his own responsibility that be confirmed the existence of an agreement to reach individual pledges in the three areas. Since the United States and other countries including the EC did not object to the statement, an official decision to resume negotiations was made at the Trade Negotiating Committee meeting of February 26.

(3) Moves after Resumption of Negotiations

In the negotiations resumed in March, with the U.S. Congress debating the extension of the first track procedure (Note), the reviews focused mainly on technical issues centering on agriculture, services and market access, which still require additional work. In the April Trade Negotiation Committee meeting, it was agreed that the negotiations would be resumed after reorganizing the 15 negotiating areas into seven groups as the future negotiating system.

As regards the environment surrounding the negotiations, the momentum for full-fledged negotiations was brought about by the decision of the extension of the first track procedure in the U.S. Congress at the end of May and the confirmation by the participating countries of the Ministerial Meeting of the Organization for Economic Cooperation and Development (OECD) in early June and the London Summit in mid-July to make further efforts for a conclusion of the Uruguay Round within 1991. Hence, the Trade Negotiating Committee meeting was convened at the end of July, and Chairman Dunkel announced that the negotiations would enter the crucial stage immediately after the summer vacation, and that work must be accelerated after September and October or November would be the "deal-making stage."

3-3. Developments in Principal Areas after the Resumption of Negotiations

(1) Market Access (tariffs, non-tariffs, tropical products, natural-resource based products)

Negotiations aim to reduce tariffs for industrial products by more than 33 percent in trade-weighted average and to reduce or eliminate non-tariff barriers. Toward these goals, each country exchanges requests and makes offers to other participants, based on which bilateral negotiations are conducted. Particularly as for tariffs, negotiations between the major countries and some of the developing countries are in progress with a view to achieving mutual elimination of customs duties in several sectors. With regard to the field of tropical products where developing countries have strong interests, Japan submitted a comprehensive offer in November 1990, as a result of which customs duties of tropical products would be reduced, in principle, by 50 percent and it was a significant improvement over previous Japanese offers.

(2) Agriculture

Negotiations are proceeding on three areas for the reduction of domestic support, border measures and export subsidies. The main agenda on domestic support is the management of indicators, an aggregate measure of support (AMS) for the reduction of agricultural support; on border measures, the tariffication and minimum access opportunities; and on export subsidies, the modalities of reduction. At the end of June 1991, an option paper summarizing the position of respective countries was submitted by Authur Dunkel, Chairman of the Agricultural Negotiating Group. Negotiations after the autumn are expected to narrow down the options presented in the paper. Japan, from the standpoint of the largest net-food importing country in the world, has emphasized the need to take into consideration the Non-trade Concerns, including the concept of food security, and has asked for the understanding of the other countries.

(3) Services

The main tasks of the ongoing negotiations are the framework agreement or the General Agreement on Trade in Services, the sectoral annexes consisting of rules on specific sectors and initial commitments to liberalize regulatory measures. As this field requires drafting of a totally new set of international rules, much remains to be done.

(4) Textiles and Clothing

 Negotiations are now underway to integrate into the GATT the existing Multifiber Arrangement (MFA), in which the GATT authorizes some exceptional measures to the free trade rules and the trade restrictive measures under the MFA. Textiles and clothing are traditionally major export items of the developing countries and the interest of the developing countries in accomplishing the liberalization in this sector is extremely high.

New Framework of the Uruguay Round Negotiations

(5) Rules and Trade-related Investment Measures (TRIMs)

Negotiations are under way to set up new rules concerning investment measures related to trade, such as local content rules, in addition to the clarification and reinforcement of such existing rules as the anti-dumping, subsidies, approval standard, safeguards, GATT provision, and local production rules. Japan, from the standpoint that reinforcing rules in this sector will lead to the establishment of "rule of law" in international trade with the GATT as its core, attaches importance on this sector and is positively contributing to progress in the negotiations.

(6) Trade-related Aspects of Intellectual Property Rights (TRIPs)

In view of the growing importance of protecting the intellectual property rights related to trade, negotiations are under way to formulate new rules on the protection standards and enforcement on intellectual property rights. In this sector, the need for further work remains on such issues as follows: the coordination with the developing countries which argue that the protection standards be handled by the World Intellectual Property Rights Organization (WIPO); and the coordination mainly among the industrialized countries on the principles regarding patent availability, first-to-file or first-to-invent, the protection of computer programs and the protection of geographical indications.

(7) Institutional Problems (solving disputes, strengthening the functions of the GATT, etc.)

Against the background of the increasing number of disputes in recent years, negotiations are under way to strengthen the functions of the GATT to settle these disputes. On the agenda are, among others, introduction of the appellate system, the way to panel reports and a ban of unilateral measures.

3-4. Other Developments

Amid the increasing importance of the environmental problem, the GATT began to take up the problem of trade and environment in 1991, and active discussions have been taking place on how to deal with environmental measures within the context of the GATT.

4. Coping with the Energy Problem

4-1. The Gulf Crisis

Economic sanctions taken at the time of the Gulf Crisis in August 1990 caused oil prices to rise, as Iraqi and Kuwaiti oil (Note) became unavailable at international oil markets and mainly due to psychological factors oil prices temporarily exceeded $40 per barrel. However, a tightness in the oil market did not emerge mainly because of: (1) a swift increase in production by oil producing countries including Saudi Arabia; (2) the abundant stocks in both the producing and consuming countries; (3) sluggish oil demand as a result of decelerated growth in the world economy and (4) the coordinated energy contingency plan implemented by the International Energy Agency (IEA).

The total Japanese crude oil imports from Iraq and Kuwait in the first half of 1990 was 440,000 barrels per day, accounting for 12 percent of the aggregate import volume. Moreover, Japanese imports of petroleum products from Kuwait were 120,000 barrels per day, accounting for 14 percent of the aggregate imports.

To supplement the shortage resulting from the suspension of oil imports from both countries, the Government of Japan, on the one hand, increased the crude oil imports from other oil producing countries, as well as the quantity of domestic refining and, on the other hand, presented a guideline to prevent price hikes that were made by taking advantage of the situation, and pushed energy conservation. As a result, Japan was able to overcome the shortage without experiencing a tight demand and supply balance of oil.

With the start of the use of force by the multinational forces on January 17, 1991, the IEA's coordinated energy contingency plan was simultaneously invoked (Note).

Japan, in order to fulfill its responsibility on its part, took measures to reduce the compulsory stock level of the private sector by four days from the past 82 days equivalent of consumption, so as to supply 350,000 barrels of oil per day to the domestic market.

Through this measure, the Japanese private sector stock level diminished by about four days equivalent (approximately 16.49 million barrels) in February from more than 88 days, an amount at the end of January which had exceeded the compulsory volume. Thus, Japan fulfilled its international obligation as a member of the IEA and contributed to the stability of the international oil market.

4-2. Governing Board at the Ministerial Level of the IEA

At the meeting of the Governing Board at the Ministerial Level of the IEA held in June 1991, against the background of changes in the Soviet Union and the Central and Eastern European countries, as well as the occurrence of the Gulf Crisis, discussions concentrated, among others, on major tasks of the future energy policy, including the emergency response scheme, nuclear power and relations with the non-IEA member countries.

As for the emergency response scheme, it was agreed to further enhance the scheme by strengthening oil reserves of the member countries in the future, based on the high evaluation of the emergency measures taken at the time of the Gulf Crisis. Japan has been making efforts to increase its oil reserve as an effective and dependable measure to cope with emergency situations (Note). This is in line with the conclusion reached at the Ministerial meeting.

The Government of Japan regards nuclear power to be a core alternative energy to oil as a stable and clean source of energy. The Ministerial meeting, while giving heed to securing the safety of nuclear power, granted a recognition of the IEA as a whole to the importance of nuclear energy from the perspective of securing energy supply, as well as stabilizing greenhouse gas emissions. This is a significant and unprecedented progress.

As regards relationships with non-IEA member countries, the IEA recognized the unstable energy production of the Soviet Union and has decided to monitor its energy situation. Concerning the "European Energy Charter" initiative of the EC with the objective to promote the appropriate development and use of energy resources of the region, including the Soviet Union and Central Eastern European countries, it was agreed, based on strong arguments expressed by the non-European countries including Japan, that there be no discrimination against non-European countries. In July, the first discussion concerning this initiative was held, to which Japan participated.

As regards contacts between the oil producing and the consuming countries, it was agreed that such contacts be promoted based on the principle of respecting the market mechanisms under non-official and wide-ranged participation. Various opportunities to promote such contacts are being provided, and the Government of Japan, from the standpoint of placing importance on strengthening the market's function through exchange of information, is participating in these endeavors.

4-3. Future Measures for Energy Security

The share of oil in Japan's primary energy consumption in 1989 was 56 percent and its oil import reliance 99.7 percent (reliance on Middle East 71 percent and on OPEC 76.5 percent). Moreover, energy demand in Japan for the next 10 years is expected to rise on an annual average of about 1.6 percent.

Therefore, ensuring a stable supply of oil is extremely important for Japan. As measures in this direction, the following, in particular, can be cited: (1) the promotion of oil development by Japanese companies (Note); (2) the diversification of oil supply sources and strengthening favorable relations with the oil producing countries and (3) the increase of reserves. On the other hand, on the demand side, it is important to promote energy conservation and efficient use of energy, as well as to further promote the use of alternative energies, such as nuclear.

5. East-West Economic Relations

Developments are being made to review East-West relations also in the economic field, which were triggered by the changes in the Soviet and Central and Eastern European situations. It is now a common recognition of the major industrialized countries that steps to introduce pluralistic democracy and the market economic system in the Soviet Union and the Central and Eastern European countries should be supported because they will contribute in the long run to the political stability and economic development of the world, thus benefiting Western countries. Based on this thinking, efforts are being made to support the economic reforms in the Soviet Union and the Central and Eastern European countries.

On the other hand, in terms of actual economic activity, economic ties between the Soviet Union and the Central and Eastern European countries with the Western countries have originally been weak and have not expanded substantially. The total trade of 24 member countries of the Organization for Economic Cooperation and Development (OECD) with the Soviet Union and the Central and Eastern European countries in 1990 was approximately $98.8 billion (of which trade with the Soviet Union was about $55.3 billion and with the Central and Eastern European countries about $43.5 billion), accounting for merely 2 percent of the aggregate trade of the 24 OECD member countries for that year (about $5.34 trillion) (OECD statistics). Japan's trade with the Soviet Union in 1989 was about $6 billion, and that with the Central and Eastern European countries about $1.4 billion, together accounting for 1.5 percent of total Japanese trade for that year (IMF statistics).

However, on certain products, such as crude oil and natural gas, the Soviet Union is the world's largest producer (Note). Its production trends can have a major impact on the international energy situation. The Soviet export of oil to the 24 OECD member countries in 1990 was approximately 1.6 million barrels per day, accounting for about 4 percent of the total oil consumption of the 24 OECD member countries. Moreover, the Soviet export of natural gas to the Western countries in the same year was approximately 1.24 million barrels per day in oil equivalence, accounting for about 38 percent of the total natural gas consumption of the Western countries. Germany and France, in particular, depend around 40-50 percent of their natural gas consumption of imports from the Soviet Union (according to statistics of the IEA and the British Petroleum).

For long-term economic development of the Soviet Union and the Central and Eastern European countries, it is necessary to push the economic reforms of these countries. As an important means to achieve this goal, it is essential to integrate their economies into the world economy by expanding their relations with the world economy, particularly with the Western economies, through such means as promotion of trade.

Amid such a trend, if constraints in economic exchanges between the East and the West are removed and the world economy is integrated into one, the phrase "East-West economic relations" will gradually lose its meaning.

5-1. Support for Economic Reforms of the Soviet Union and the Central and Eastern European Countries

Successful economic reforms of the Soviet Union and the Central and Eastern European countries have the potential of bringing about enhanced prosperity and development of the world economy. However, such a large-scale transition from the socialist economy to the market economy is unprecedented in history. In addition, these countries lack not only the knowledge of the principles and systems of the market economy, but also the understanding of the values and behaviors which form the basis of the market economy. Therefore, in order to make the economic reforms of the Soviet Union and the Central and Eastern European countries a success, it is natural that self-help efforts of these countries are primarily essential, but it is also important for Western countries to provide appropriate support in accordance with the respective situation of each country.

 As regards the Central and Eastern European countries, both the Political Declaration and Economic Declaration of the London Summit confirmed the overall support toward their reforms. As for the Soviet Union, an agreement was reached among the G-7 countries to support its efforts for democratization and introduction of a market economy through the discussions at the Houston and London Summits. The reforms in the Central and Eastern European countries are implemented in accordance with clear and feasible economic programs, to which positive support both technical and financial is effective and necessary. On the other hand, as for the Soviet Union, which has not introduced such an economic program, it is clear even from an economic angle alone that technical support to help the country transform into a market economy should be the central form of assistance. On this point, the report on the Soviet economy issued in December 1990 by the four international institutions, the International Monetary Fund (IMF), the World Bank, the Organization for Economic Cooperation and Development (OECD) and the European Bank for Reconstruction and Development (EBRD), concluded that what is necessary for the Soviet economic reform is not a large-scale financial assistance but rather technical assistance.

Japan is actively providing both technical and financial support to the Central and Eastern European countries, giving priority to such sectors as agriculture, job training, investment promotion, environmental preservation, energy, market access improvement and international balance of payment supports. As a means of technical assistance to the Soviet Union, the furnishing of market economy know-how through exchanges of economic experts is particularly important. Japan has already received Soviet survey missions and has dispatched experts to the Soviet Union, and signed an agreement on technical assistance during President Gorbachev's visit to Japan in April 1991. Moreover, it is necessary for the Soviet Union to divert its resources channeled into the military sector to the private sector. The importance of such a conversion from military to civilian demand was referred to in the Economic Declaration of the London Summit. In relation to this point, Japan dispatched in July 1991 a survey mission on the conversion issue with the participation of the United States.

Frameworks to discuss and coordinate bilateral cooperation on the economic reforms of the Soviet Union and the Central and Eastern European countries have been established, a specific case being the Group of 24 countries on coordinated economic assistance to the countries of Central and Eastern Europe (G-24) which was agreed to be set up at the Arche Summit in 1989. Currently, the scope of the support of the G-24 has been extended to all the Central and Eastern European countries. A multilateral institution, namely EBRD to support the Soviet Union and the Central and Eastern European countries, has also been established. The scope of the support of the EBRD includes the Soviet Union and the Central and Eastern European countries, and its functions are to promote private sector activity, mobilize domestic and foreign capital, foster productive investment and nurture capital markets. The EBRD was formally launched in April 1991 and started its activities.

The OECD provides cooperation using its know-how on economic management and structural adjustment to the Soviet Union and the Central and Eastern European countries. Specifically, it established in March 1990 a "Center for Cooperation with the European Economies in Transition," which hosts seminars and symposia, as well as provides technical assistance and trains experts. In addition, from fiscal 1991, the OECD has begun a "Partners in Transition" program for Poland, Hungary and Czechoslovakia. The program provides reviews of the general economic situation and prospects of each country, invitation to participate in meetings of selected OECD subsidiary bodies, reviews of issues and policies in specific areas and technical assistance in the implementation of policies and others.

5-2. Integration of the Soviet Union and the Central and Eastern European Countries into the International Economic System

In order to promote economic reforms of the Soviet Union and the Central and Eastern European countries, the expansion of trade is extremely important. From this viewpoint, the Economic Declaration of the London Summit expressed a determination that, on the Central and Eastern European countries, "We renew our commitment...to encourage their integration into the international economic system," and that "We...are ready to assist the integration of the Soviet Union into the world economy." In attempting to integrate the Soviet and the Central and Eastern European economies into the international economic system, their relations with international institutions, such as the General Agreement on Tariffs and Trade (GATT), the International Monetary Fund (IMF) and the World Bank, have significance and the following developments have been seen regarding this point.

Of the Central and Eastern European countries, Czechoslovakia, Yugoslavia, Poland, Romania and Hungary are members of the GATT and Bulgaria is currently applying for its membership. The Central and Eastern European countries are making efforts to formulate open trade policy through dialogue with the GATT. As for the Soviet Union, in view of the progress in perestroika, the Soviet participation in the GATT as an observer was approved in May 1990.

Of the Central and Eastern European countries, Yugoslavia, Poland, Hungary and Romania are already members of the IMF and the World Bank and in September 1990, Bulgaria and Czechoslovakia became new members. The IMF and the World Bank, through their lending activities to the Central and Eastern European countries and their formulation of macro-economic stabilization programs which ensure the effectiveness of such loans, play leading roles in the financial support to these countries. The Soviet Union has applied for membership in the IMF and the World Bank, but conditions are not yet considered to have been met for the admission to these institutions. On the other hand, a consensus has been reached among the major Western countries to support the establishment of a special association between the Soviet Union and the IMF and the World Bank which will make it possible for the Soviet Union to receive technical assistance from the two institutions.

In addition to the above, as regards the Central and Eastern European countries, moves to integrate their economies into the world economy are seen in practical terms. One example is the negotiation by the EC to conclude Association Agreements with Poland, Hungary and Czechoslovakia. These agreements aim at the liberalization of trade and investment and are expected to contribute to economic vitalization of the three countries. Naturally, this kind of agreement must be compatible with and complementary to the multilateral free trading system. Another example is the improvement in access to the Western markets by the Central and Eastern European countries. In July 1991, the United States announced the Presidential Trade Enhancement Initiative and expressed to proceed with the application of the preferential tariff treatment to the Central and Eastern European countries. Japan applied the most-favored-nation status to the Soviet Union and the Central and Eastern European countries (excluding Albania), and the preferential tariff treatment to Poland, Hungary, Bulgaria, Romania and Yugoslavia. In relation to these points, the Economic Declaration of the London Summit spelled out that "Expanding markets for their exports are vital for the Central and Eastern European countries. We welcome the substantial increases already made in exports to market economies and we undertake to improve further their access to our markets for their products and services, including in areas such as steel, textiles and agricultural produce. In this context, we welcome the progress made in negotiating Association Agreements between the European Community and Poland, Hungary and Czechoslovakia, as well as the Presidential Trade Enhancement Initiative announced by the United States, all of which will be in accordance with GATT principles.

5-3. Review of the Coordinating Committee for Multilateral Strategic Export Controls (COCOM) Regulations

As illustrated above, the changes in the Soviet Union and the Central and Eastern European situations brought about a policy to economically support these countries among Western countries. At the same time, a change has been brought about in the traditional policy of the West toward these countries. One example is the Coordinating Committee for Multilateral Strategic Export Controls (COCOM). At the COCOM, the task to formulate a new Industrial List (core list), which limits the restriction controls to truly strategic items, was made over a one-year period. As a result, at the seventh COCOM High-Level Meeting held in Paris in May 1991, a new Industrial List which rearranged the conventional list of 80 items into nine categories, including electronics, computers and telecommunications, was adopted, achieving a large-scale deregulation. This was the first major revision of the list since the COCOM was established in 1949 and bears a historical significance. With a further change in the Soviet Union and the Central and Eastern European countries in the future, the COCOM will continue to pursue its necessary operations, which include the revision of the International Munitions List and the International Atomic Energy List, the removal of certain countries from the list of prescribed countries and the review of the new International Industrial List.

6. Economies of the Developing Countries

6-1. Current Trends in the Developing Economies

The real term economic growth rate of the developing countries, which remained stable at 2 to 4 percent throughout the 1980s, dropped to 1.3 percent in 1990 (IMF source). It is estimated that this was largely influenced by the Gulf Crisis. Many developing countries in the Middle East and Asia have suffered from sluggish market prices for primary commodities, in addition to the surge in crude oil prices, decreased revenues from tourism and diminished remittances from emigrant workers. On the other hand, oil producing countries outside the Middle East were favorably influenced by soaring oil prices, although some of them were hit by the economic recession of the United States.

Economic growth of Asian countries continued to be high at 5 percent, while that of African countries dropped from 3.3 percent in 1989 to 1.9 percent in 1990, and all other regions showed negative growth. Among the Asian countries, the Dynamic Asian Economies (DAEs) - which consist of the Newly Industrializing Economies (NIEs) of the Republic of Korea, Taiwan, Hong Kong and Singapore, plus Thailand and Malaysia - showed particularly sound economic performances, further enlarging the disparities among the developing economies. It has, therefore, become increasingly important for the industrialized countries, including Japan, to provide well-coordinated assistance in accordance with the respective conditions of each developing country.

6-2. The Debt Accumulation Problem

(1) Current Situation

The accumulated external debts still pose a serious problem to the sound development of the international economic and financial system. The outstanding external debts of the developing countries were about $1.34 trillion at the end of 1990, representing about 40 percent of these countries' aggregate GNP and 1.8 fold over their aggregate exports (World Bank estimate). Many debtor countries have not yet fully restored repayment capability. Furthermore, due to the reluctance of private banks to provide loans, since 1984 the amount of money flowing out of the developing countries to repay their debts has been exceeding the amount flowing into them as new loans (the capital flowback phenomenon).

(2) International Efforts toward the Solution of the Problem

In order to solve the debt accumulation problem, the industrialized countries, debtor countries and international institutions have been making concerted efforts.

For the debtor countries with relatively high income levels which are heavily indebted to private banks, such as Latin American countries, the basic measure is the "Strengthened Debt Strategy" (the so-called "Brady Plan"). This strategy emphasizes debt and debt service reductions of private bank debts in addition to the traditional new loan measure. The plan has been repeatedly endorsed by the international community at various occasions such as the G-7 Summit and other meetings and has already been applied to various countries including Mexico, Venezuela and the Philippines.

On the other hand, for the economically fragile poorest countries, especially those in Sub-Saharan Africa, a specific framework for debt relief, including partial cancellation of bilateral official debts (the so-called "Toronto-terms") has been successively applied since October 1988. Furthermore, in response to the agreement at the Houston Summit, a revision of the terms is under way, taking into account the persistent serious economic conditions of the poorest countries.

For those debtor countries whose income levels are higher than those of the poorest countries but also rely heavily on bilateral official loans, relief measures centering on longer repayment terms have been successively implemented since September 1990. Moreover, since the beginning of 1991, special debt relief measures were applied exceptionally to Poland and Egypt.

(3) Japan's Basic Position

The fundamental solution to the debt accumulation problem requires economic reconstruction of the debtor countries. To this end, it is important that both the debtor and industrialized countries work together to build a required environment. In order to do so, first of all, the debtor countries must steadily implement sound economic policies and structural adjustment programs based on agreements with international institutions. Within this scope, it is particularly important that they make efforts to induce capital inflows through improving the investment environment for the recycling of capital flight. On the other hand, the industrialized countries should take appropriate measures in accordance with the debtor countries' situations, such as the ratio of public debts and private debts and income levels. By cooperating with international institutions, financial assistance, as well as more comprehensive measures, such as to sustain growth of the world economy and to improve access to markets should be implemented in order to support self-help efforts made by the debtor countries.

(4) Japan's Contribution

On the basis of the abovementioned thinking, the Government of Japan has contributed positively to the solution of this problem by assisting self-help efforts of the debtor countries in cooperation with other Western industrialized countries and international institutions, such as the IMF and World Bank, through the following specific measures.

As for Official Development Assistance (ODA), quantitative expansion and qualitative improvements are being pursued under the 4th Medium-Term Target. Furthermore, in order to increase the flow of completely untied funds to the developing countries, Japan has been steadily implementing measures to realize its capital recycling scheme of "more than $65 billion" in five years by 1992. As of end of June 1991, already over 70 percent has been committed. Japan also intends to provide more than $10 billion of the $65 billion to the countries to which the Strengthened Debt Strategy would be applied. It has already extended loans to Mexico, the Philippines and Venezuela. In addition, taxation measures have been implemented since 1990 in order to facilitate Japanese commercial banks to respond to the Strengthened Debt Strategy.

On the other hand, as to bilateral official debts, Japan has been applying debt relief schemes with due consideration of the fund required by the debtor countries' economic reconstruction, within the international framework and based on agreements such as the Toronto-terms to the poorest countries. Moreover, Japan is providing grant aid to the Least Developed Countries (LDCs) for debt relief.

These contributions have been highly evaluated by both the industrialized and developing countries, as well as by international institutions including the IMF and World Bank.

6-3. Dialogue with the DAEs

 While diversification in the stages of the developing countries have been taking place in the world economy, some Asian countries or regions, which continued to show particularly high growth throughout the 1980s by active induction of overseas direct investment and trade expansion, have become an element that cannot be ignored when discussing the management of the world economy.

Since around 1987, the Western industrialized countries have sharply criticized the trade surpluses accumulated by the Asian NIEs and have requested that they take responsibilities similar to those of the industrialized countries. Against these arguments, Japan has insisted that while it is important for the Asian NIEs to play a role that is commensurate with their growing economic strength in the world economy, their dynamism which helps revitalize the world economy should be appreciated. Also on this premise, it is important for the Asian NIEs to gradually increase their involvement in the management of the world economy in such issues as international trade without decelerating their own growth rates.

Japan takes a view that in order to attain this objective, it is necessary first to promote dialogues between the industrialized countries and the Asian NIEs and to deepen mutual understanding. It has, thus, been making efforts to build such fora. As a result, a dialogue between the member countries of the Organization for Economic Cooperation and Development (OECD) and the Asian NIEs started in January 1989 under the auspices of the OECD. Eventually, the dialogue was expanded to one with DAEs, including Thailand and Malaysia and now shows steady progress.

In this dialogue, active exchange of information and views was made with participants from the industrial and academic circles in addition to government officials. Mutual understanding on DAEs' economic situation and trade and economic policies was promoted, thus showing marked achievements.

The significance of such dialogue is now commonly recognized by all participating countries, and it is intended to further promote constructive dialogues through workshops on specific themes such as trade or investment. The Government of Japan is ready to actively contribute to mutual understanding between the OECD countries and DAEs and to strengthen their cooperative relations.

7. Expansion and Improvement of the Official Development Assistance (ODA)

7-1. Overview

(1) A New Guideline for ODA

Amid the search for a new international order with the collapse of the Cold War structure, the Japanese public has become increasingly interested in what is the ideal form of Japan's assistance to the world. Namely, the changes in Central and Eastern Europe and the Soviet Union, as well as the Gulf Crisis, led to attracting much attention to the importance of democratization and economic reforms, military expenditure in the developing countries and the necessity of further efforts of the international community in the field of arms control and disarmament. In this context, discussions on how ODA, which is the main pillar of Japan's foreign policy, should be used for those issues were actively held. With this background, Prime Minister Toshiki Kaifu announced in the Diet in April 1991 that Japan will pay full attention in the implementation of ODA to the following points of the recipient countries: (1) trend in military expenditure; (2) trend in development, production, etc. of weapons of mass destruction such as atomic weapons and missiles; (3) trend in the export and import of weapons and (4) efforts for promoting democratization and introduction of a market-oriented economy and the situation on securing basic human rights and freedom.

While Japan's stance of maintaining its basic principles of humanitarian considerations and the recognition of interdependence in the international community will remain unchanged in the future, those four points should be considered guidelines for future ODA implementation. Arms control and disarmament are, in essence, issues which cannot be realized by Japan alone or simply through economic assistance. However, Japan's repeated mentioning and reminding of its concern to the developing countries is meaningful in enhancing the awareness for the problem among them, and in promoting efforts of the international community as a whole.

(2) Further Enhancement of ODA

Many of the developing countries are still facing serious economic difficulties such as stagnant economic growth, accumulated external debts, poverty and the reverse capital flow phenomenon, all of which make ODA's role more crucial.

Japan's ODA, which in 1989 was the world's largest, remained among the world's largest in 1990, second only to the United States on a net disbursement basis. However, its GNP ratio continues to be below the world average (0.31 percent in 1990 compared with the DAC average of 0.35 percent). Given this situation, Japan is currently keeping on with its efforts to expand, both qualitatively and quantitatively, its ODA under the Fourth Medium-Term Target. Under this scheme, Japan is to provide more than $50 billion in five years from 1988, and to try to make a steady improvement in the GNP ratio of ODA.

(3) ODA Budget in 1991

In fiscal 1991, which fell on the fourth year of the Fourth Medium-Term Target, \883.1 billion was allocated to ODA in the general account budget, an 8.0 percent increase over the previous fiscal year, to secure the implementation of measures set forth in the target. The total amount of ODA budget - which consists of ODA budget in the general account, loans from the Government Investment and Loans Program and Government bonds for contribution to international organizations, etc. - showed a 5.5 percent increase from the previous year to reach \1,529.5 billion.

(4) Improvement in the Implementation System

A simple increase in the amount is not sufficient to enhance ODA. It is equally important to make its implementation as effective and efficient as possible in order to promote economic and social development of the recipient countries through ODA. This means that, with the quantitative expansion of aid, improvement of the aid implementation system or the expansion of the personnel engaged in ODA activities, becomes increasingly necessary. Although Japan is one of the world's largest aid donor countries today, its implementation structure, particularly the number of personnel involved such as the staffs of the Japan International Cooperation Agency (JICA) and the Overseas Economic Cooperation Fund (OECF) and the ministries concerned, including the Ministry of Foreign Affairs, is far from sufficient compared with other major aid donors. The shortage of personnel who are actually stationed in the developing countries, in particular, is critical. Amid the expansion of ODA to Africa and Latin America, which have been less familiar to Japan, the expansion of personnel, especially those to be stationed in these regions, is becoming the most urgent task from now. At the same time, further efforts should be made to foster researchers and aid experts who are involved in identifying aid policies and plans.

(5) Improvement of Aid Quality

Improvement of aid quality would remain to be an essential task. For example, Japan's grant element and the grant share are less satisfactory in comparison with other aid donors, as more than 40 percent of Japan's ODA consists of loans. The Government of Japan is making efforts to increase grant aid and technical assistance. The ratio of the untied aid (the procurement ratio of goods and services not restricted to those from the donor country) is at world's highest level as a result of consistent efforts, but further qualitative improvement should be made in the future.

(6) For Better Public Understanding and Support for ODA

In order to further expand and enhance ODA in the future, public understanding and support are necessary. For this reason, it is essential to heighten the transparency of ODA. The Government of Japan has endeavored to promote public understanding of ODA through various methods, such as distribution of public relations materials on ODA and intends to strengthen this effort in the future. At the same time, there is a need to foster a social environment so as to encourage the people to directly participate in development assistance activities. In this regard, the Government intends to make further efforts for development education, in addition to promoting public relations activity.

(7) Assistance to Developing Countries in the Global Environment Field

Japan gives priority to assistance in the environmental field. In coping with the global environment problem, which is attracting international attention recently, it is necessary particularly to support efforts of the developing countries in environmental preservation. Moreover, Japan takes full consideration in implementing ODA so that its development projects do not adversely affect the surrounding environment.

The Government of Japan announced at the Arche Summit in 1989 intentions to strengthen its assistance in the environment area, amounting to \300 billion in three years and this target was nearly achieved during the two fiscal years of 1989 and 1990 (\129.4 billion in fiscal 1989 and \165.4 billion in fiscal 1990 excluding technical assistance). At the London Summit of 1991, Japan announced plans to enhance assistance particularly in the priority areas on the global environmental problem, such as forest preservation and pollution prevention, and asserted that environmental considerations in extending assistance should be embodied in the improved research capability on impacts of development assistance programs on the environment.

(8) Other New Tasks

There is a need to cooperate with and support non-governmental organizations (NGOs), which can extend assistance directly to the grassroots level and respond to urgent needs swiftly and flexibly. It is also important to promote assistance with due consideration for the benefit and the participation of women, which is expressed in the idea of "Women in Development" (WID). In order to respond specifically to wide-ranging development needs and different situations of the developing countries, diverse wisdom and undertakings are required.

7-2. Operation of Japan's ODA Programs

(1) Technical Cooperation

Technical cooperation has an aspect, on the one hand, of training human resources who will assume nation building in the developing countries and, on the other, an aspect of deepening mutual understanding and goodwill between Japan and the recipient countries through human contacts. Technical cooperation is an area in which further improvement is anticipated in the future, as a means of cooperation using the abundant technologies of Japan.

Official technical cooperation is provided mainly through the Japan International Cooperation Agency (JICA) in various forms: acceptance of trainees to meet the diverse needs of the developing countries, dispatch of experts, provision of equipment, development studies (Note 1), project-type technical cooperation (Note 2), development cooperation (Note 3), dispatch of Japan Overseas Cooperation Volunteers, Youth Invitation Program (Friendship Plan for the 21st Century) and dispatch of Japan Disaster Relief Teams in international emergency cases.

Japan's technical cooperation in 1990 amounted to $1,645 million. An international comparison of Japan's technical cooperation by the documents of the Development Assistance Committee (DAC) shows that although Japan's record in the amount of $1,137 million (\156.8 billion excluding administrative expenses) in 1989 ranked fourth among the 18 DAC member countries after France, the United States and Germany, the ratio of technical cooperation within its ODA was 12.7 percent, about half of the DAC average of 22.0 percent, which ranked Japan 12th among the 18 members. In order to improve the content of the overall ODA, there is a need to expand the volume of technical cooperation. Toward that goal, it is necessary to strengthen the implementation system that can respond to the quantitative enhancement of technical cooperation, as well as to enhance the training of personnel engaged in assistance.

(2) Grant Aid

(a) Overview

Grant aid involves the provision of funds to a developing country without the imposition of a repayment obligation. It provides a means of responding to a variety of needs in developing countries centering on basic human needs and human resource development. Grant aid includes grant aid for general projects, grant aid for fishery projects, emergency disaster relief, grant aid for cultural projects, food aid (Note 1)and increased food production aid (Note 2).

The expansion of Japan's grant aid is a reflection of the rising expectations of developing countries and other major aid donors toward this type of aid. The total budget for grant aid (initial budget) in fiscal 1991 is approximately \212.5 billion. This is approximately 1.7 times higher than the amount provided a decade ago.

Since the achievement of both quantitative and qualitative improvement of aid activities has become a major priority for Japan, grant aid will play an extremely important role in this context.

(b) Measures to Cope with Displaced Persons in the Gulf Crisis

Japan extended emergency aid amounting to $60 million (about \8.1 billion) in fiscal 1990 through the United Nations Disaster Relief Organization (UNDRO) as a remedy for the displaced persons in the Gulf Crisis. This allowed relief activities in the refugee camps and provided chartered planes to repatriate them to their home countries.

(c) Grant Aid to Support Economic Structural Adjustment Efforts

Japan is extending non-project grant assistance to support economic structural adjustment efforts of the recipient countries, and \61.7 billion or approximately $500 million was provided to African countries during the three-year period from fiscal 1987 to 1989. In fiscal 1990, Japan decided to provide about $600 million over the ensuing three years for the grant aid program to support economic structural adjustment efforts. The number of recipient countries was enlarged to include countries other than Africa such as Nicaragua, Peru, the Philippines and others and Japan provided them a total of \24 billion in fiscal 1990.

(d) Expansion of the Small-scale Grant Assistance System

The small-scale grant assistance system was introduced in fiscal 1989 to promptly and appropriately finance relatively small-scale projects that were not suitable for assistance under the existing system of general grant aid. In fiscal 1989, 95 grants totaling approximately \294 million were provided in 32 countries and in fiscal 1990, 92 grants totaling approximately \296 million in 44 countries. This flexible approach to aid has earned high praise in a number of fields as a means to reach the grassroots level. Thus, in fiscal 1991, the budget for this aid program was increased to \500 million, to further develop the system.

(e) Efficient and Effective Implementation of Grant Aid

In order to implement grant aid more efficiently and effectively, the following measures have been taken: (1) the enhancement of preliminary studies; (2) the strengthening of coordination with technical assistance; (3) the strengthening of coordination with other donor countries, international organizations and non-governmental organizations; (4) the enhancement of follow-ups (implementation of follow-up cooperation which provides additional contingency parts of equipment and machines already furnished and the rehabilitation assistance which improves and reinforces the existing projects).

(3) ODA Loans (Yen Loans)

(a) Overview

Direct government loans (ODA loans) provide funds to developing countries at low interest rates and over long repayment periods. The average interest rate in fiscal 1990 was 2.5 percent with a repayment term of 25-30 years and a grace period of 7-10 years. ODA loans can meet demands for large-scale development funds, however the recipient countries are required to repay the principal amount and service interest and debt burden is created. Therefore, yen loans are provided to those projects for improvement of social and economic infrastructure which has relatively high returns and which can directly contribute to the social and economic development of the developing countries. Thus, yen loans with such features have played an important role in contributing to the economic growth of countries which have relatively high demands for development funds, such as the Association of Southeast Asian Nations (ASEAN) member countries. Moreover, Japan has recently increased extension of non-project type loans to those countries which are faced with immediate difficulties in the international balance of payments.

The ODA loans extended in fiscal 1990 based on the Exchange of Notes, including rescheduling, totaled \1,070.5 billion, exceeding the \1 trillion level for three consecutive years since fiscal 1988, or up 5.9 percent over the previous fiscal year. Rescheduling of debts through the Paris Club totaled \6.5 billion.

As regards the procurement conditions of the ODA loans, taking into consideration the requests of the developing countries and from the standpoint of attempting efficient management of development funds, general untying of loans is being promoted. As a result, the general untied ratio in fiscal 1990 on the Exchange of Notes basis was 84.4 percent, up 3.9 basis points over the previous fiscal year. In terms of the actual procurement record, the procurement rate from Japanese corporations is on a decreasing trend annually and this rate was 27 percent in fiscal 1990, 11 basis points lower than in fiscal 1989. The procurement rate from other industrialized countries (OECD member countries other than Japan) and the developing countries were 21 percent and 52 percent respectively, making the rise in procurement rate of the developing countries particularly notable.

(b) Recent Trends

The recent notable trends in the ODA loans is exemplified by the emergency project loans or commodity loans with a high grant element to the Middle East countries (Egypt, Jordan and Turkey) to support them in overcoming economic difficulties resulting from the Gulf Crisis. Moreover, the Government of Japan provided similar assistance to Syria, the Philippines, India and Sri Lanka.

(4) Aid through Multilateral Organizations

Japan, in addition to bilateral aid, provides aid through international organizations. The total multilateral aid provided through international organizations in 1990 was $2,282 million (up 4.4 percent over the previous year), and this amount accounted for 24.7 percent of Japan's total ODA. This figure in fiscal 1989 was 24.4 percent.

The advantages of multilateral aid include: (1) access to the sophisticated and specialized knowledge and experience of various organizations; (2) the ability to secure political neutrality in furnishing aid and (3) access to global aid networks. The range of aid can be expanded by the interactive linkage (multi-bi cooperation) of this type of aid and bilateral aid, which enables Japan to extend assistance flexibly and carefully, targeted in line with its foreign policy objectives and which is useful to improve relations with recipient countries.

As for the international development financial institutions, Japan has traditionally cooperated with the International Bank for Reconstruction and Development (World Bank/IBRD), International Development Association (IDA), in addition to regional financial institutions, including the Asian Development Bank (ADB), the Inter-American Development Bank (IDB) and the African Development Bank (AfDB). Japan has also begun to positively cooperate with the newly established European Bank for Reconstruction and Development (EBRD) in April 1991, whose objective is to support the political and economic reforms of the Central and Eastern European countries. Japan also makes contributions to the International Fund for Agricultural Development (IFAD), whose objective is agricultural development.

Furthermore, Japan has positively cooperated with the activities of the U.N. aid agencies, such as the United Nations Development Programme (UNDP) which is the mainstay of technical assistance in the U.N. system, the United Nations International Children's Emergency Fund (UNICEF) and the U.N. Relief and Works Agency for Palestine Refugees in the Near East (UNRWA). Japan's contribution to these U.N. aid agencies totaled about $500 million in 1990.

8. Cooperation on Science and Technology

8-1. Development of Industrial and Scientific Technology

Japan is considered today one of the most advanced countries in the area of science and technology. Accordingly, expectations and requests from other countries for cooperation in this field are rapidly growing and responding to them is now an important foreign policy objective. In addition, coping with global problems, such as the environment, utilizing science and technology is becoming an increasingly important international task. As a responsible member of the international community, Japan must endeavor to solve these problems through making contributions that are commensurate with its scientific and technological strength. To this end, Japan must concentrate its efforts particularly on the following.

The first is the enhancement of basic research activities in Japan. Japan has been highly evaluated for applied research that leads to product development. But, it can hardly be said that its international contribution in the area of basic research, the outcome of which is an intellectual asset common to mankind, is compatible with its economic and scientific strength. Examples are cited such as the extremely few Japanese Nobel Prize laureates in the field of natural science in comparison with major Western countries, or the fact that products such as automobiles, semiconductors, VTRs, industrial robots, etc. in which Japan has a leading competitiveness resulting from its sophisticated production technology, were first invented and developed in the Western countries.

In order to strengthen basic research in Japan, it is necessary to consolidate an environment where inventive and innovative spurts of research and development in the public sector, which should play a major role, are stimulated. In particular, upgrading research bases and improving research systems in universities are urgent tasks.

Second, there is a disequilibrium in international exchange of researchers. The number of Japanese researchers going abroad to the Western countries is overwhelmingly higher than the number of researchers visiting Japan from these countries. This is one of the factors inviting such criticism as Japan being a "free-rider of basic research." Therefore, it is important to make Japanese research institutions more attractive and at the same time more open to foreign researchers, as well as to further enlarge hosting systems for them. From this viewpoint, the Government of Japan is gradually enhancing its program to invite foreign researchers. In the United States, the Government of Japan has contributed \600 million in March 1988 to the National Science Foundation (NSF) to invite American researchers to Japan. Moreover, in April 1991, the Japan Foundation Center for Global Partnership was created, and part of the foundation's income from fund management will be utilized to invite American researchers and students in cooperation with the NSF. Besides, an increasing number of foreign researchers are participating in basic research programs undertaken by government-run research institutes. In order to increase the number of foreign researchers visiting Japan, it is necessary not only to expand invitation programs, but also to improve living conditions for the visiting researchers, and to exert more efforts in disseminating information abroad about research projects conducted in Japan.

Along with the progress in scientific and technological research, the areas requiring a massive amount of investment for research such as outer space, nuclear fusion and high energy physics are increasing. In these disciplines, international cooperation is necessary in sharing the cost as well as in coordinating the substance of research and feedback to the international community from the results of these research endeavors are also called for. This type of cooperation should also promote visiting researchers from abroad as well. As described in the following, Japan has already actively contributed in this sphere, but further contribution will be required in the future.

Production technologies, which are the subject of applied and development research, are the area in which Japan excels. In this area, competition often overpowers cooperation. Excessive competition should be avoided since it can lead to techno-nationalism which restricts transfers of advanced technology or unnecessarily reinforces the protection of intellectual property rights. At least in the field of the so-called common basic technology, research cooperation that is open to foreign countries to the extent possible should be extended.

8-2. International Cooperation in Science and Technology

Based on the above perception, the Government of Japan pursues international cooperation in science and technology as follows.

(1) Bilateral and Multilateral Cooperation in Science and Technology

Japan signed science and technology cooperation agreements with the United States and 17 other countries and cooperation is actively pursued through joint committees and the like with each partner country. In the area of multilateral cooperation, also, Japan is very actively involved with many programs, including the Human Frontier Science Program (HFSP), which was proposed by Japan.

(a) Japan-U.S. Science and Technology Cooperation

Based on the Japan-U.S. Agreement on Cooperation in Research and Development in Science and Technology, signed in June 1988, the third Joint High Level Advisory Panel meeting was held in Hakone in April 1991, followed by the fourth Joint Working Level Committee meeting in July. These meetings enabled both countries to agree on specific joint projects and to exchange views to further promote the exchange of researchers and scientific and technical information between the two countries.

(b) Japan-France Cooperation in Science and Technology

In June 1991, the new Japan-France Agreement on Cooperation in Science and Technology was signed in Paris between Foreign Ministers Taro Nakayama and Roland Dumas. This agreement was the revision of the old agreement signed in 1974, based on the recent developments in science and technology in both countries. It offers new opportunities in strengthening the cooperative relations between France and Japan.

(c) Human Frontier Science Program (HFSP)

The HFSP is a basic research project designed to bring to light sophisticated mechanism of living organisms (brain functions, biological functions, etc.), which was proposed by Japan at the Venice Summit in 1987. In October 1989, the International HFSP Organization was established in Strasbourg, France, which has been giving research grants and fellowships to scientists and supporting international workshops.

The HFSP is scheduled to complete its initial phase in March 1993 and launches on the next phase.

(d) International Thermo-nuclear Fusion Experimental Reactor (ITER)

From April 1988 to the end of 1990, Japan participated in the conceptual design activity of ITER, jointly with the United States, the European Community (EC) and the Soviet Union. The four participating parties are currently discussing the next phase of the plan, which will be the engineering design activity. It was virtually agreed that centers for researchers involved in the engineering design activity would be established in Naka in Ibaraki Prefecture, San Diego in the United States and Garching in Germany, and the early launching of research activities is anticipated.

(e) Space

Since May 1985, Japan has been taking part in the preliminary designing of a manned space station jointly with the United States, the European Space Agency (ESA) member countries and Canada. In September 1988, the participating countries signed an intergovernmental agreement on cooperation in the space station to establish a framework of cooperation in detailed design, development, operation and utilization phases, which Japan accepted in September 1989. Currently, cooperation is under way among the participating countries for the detailed design and development stages.

(f) The Antarctic

Between the Autumn of 1990 and the Summer of 1991, the Antarctic Treaty Special Consultative Meetings were held to negotiate the adoption of a protocol for stipulating comprehensive measures to protect the Antarctic environment. The Protocol aims at reinforcing the Antarctic Treaty system from the environmental aspect and stipulates the procedure of environmental impact assessment, the prohibition of mineral resource activities, the prevention of marine pollution, the conservation of Antarctic Fauna and Flora and waste disposal and management. Preparations are under way for its adoption in October 1991.

(g) Pacific International Council for Exploration of the Sea (PICES)

In the areas of oceanography, meteorology and maritime biology in the North Pacific, promotion of cooperation including the exchange of information and data has been discussed. Upon the recognition that creation of an organization with the above competence is appropriate, an agreement on the establishment of PICES was adopted in December 1990 by Japan, the United States, Canada, the Soviet Union and China. The agreement was opened for signature until the end of 1991.

(h) Discussions at the Organization for Economic Cooperation and Development (OECD)

The OECD has been implementing the Technology Economy Programme (TEP) whose role is to comprehensively analyze socioeconomic influence of science and technology. This has been done upon the recognition that the socio-economic influence of science and technology is becoming more complex and diversified, thus making it necessary to clarify the roles of governments and the areas for international cooperation in order to smoothly respond to the various changes attributed to technological innovations. Its final results were reported to the Council at Ministerial Level of the OECD in June 1991.

It was decided that promotion of international cooperation in major areas of science and technology would be further discussed at the Meeting of CSTP (Committee for Scientific and Technological Policy) at Ministerial Level of the OECD scheduled for March 1992.

(2) Peaceful Uses of Nuclear Energy

(a) Importance of Nuclear Energy for Japan

Japan is today the fourth largest country in terms of nuclear power generation volume (Note 1) after the United States, France and the Soviet Union. Thus, nuclear power has already been served as a key energy source for Japan. Yet, the Japanese nuclear energy industry depends heavily on foreign sources (Note 2) for nuclear fuel supply. Therefore, it can be said that it is of vital importance for Japan, a country with little energy resources, to establish an autonomous nuclear fuel cycle to raise self-sufficiency in nuclear fuel, thereby reducing energy dependency on foreign sources and securing a stable supply of energy.

The nuclear materials used for nuclear fuel can be diverted to produce nuclear weapons and a nuclear accident can cause serious damages beyond national borders, as was evidenced in the Chernobyl accident. Thus, nuclear energy requires careful consideration on nuclear non-proliferation and safety, unlike any other energy sources. To this end, various international rules and criteria for handling nuclear power have been established and nuclear energy-related operations in Japan are carried out in accordance with such rules and regulations.

(b) International Cooperation on Nuclear Safety

As part of international cooperation for ensuring nuclear safety, various activities have been undertaken by the International Atomic Energy Agency (IAEA) and the Nuclear Energy Agency of the Organization for Economic Cooperation and Development (OECD/NEA), to which Japan has been actively participating. At the same time, Japan considers cooperation with neighboring countries to be extremely important. In April 1991, Japan has signed with the Soviet Union the Agreement on Cooperation for Peaceful Uses of Nuclear Energy. It is expected that, in the future, cooperation between both countries centering on safety will be further promoted within the framework of this agreement.

(c) Cooperation with Developing Countries on Peaceful Use of Nuclear Energy

Traditionally, Japan has been actively cooperating with developing countries in the field of peaceful uses of nuclear energy in order to contribute to their economic development by applying its high-level nuclear technology, while paying respect to nuclear non-proliferation and safety requirements. In the area of multilateral cooperation, Japan has contributed not only to the IAEA's Assessed Contribution but also to its Technical Assistance and Cooperation Fund, the total amount of which made Japan the third largest capital contributor to the IAEA, next to the United States and the Soviet Union. It has extended technical and financial cooperation for projects implemented under the IAEA's Asian Regional Cooperative Agreement (RCA) for research, development and training related to nuclear science and technology. As bilateral cooperation, Japan has been providing technical cooperation on a governmental basis through Japan International Cooperation Agency (JICA), including acceptance of trainees in Japan and dispatch of experts abroad.

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Note :The multilateral trade negotiations launched by the Punta Del Este Ministerial Declaration of September 1986 aimed at maintaining and reinforcing the multilateral free trading system as the basis of continued expansion of the world economy and trade. The negotiations encompass a total of 15 areas, which include not only the traditional trade of goods, but also the new area of services, trade-related intellectual property rights, and trade-related investment measures. At present 108 countries participate in the negotiations.

Note :A group consisting of agricultural product exporting countries - Canada, Australia, New Zealand, Thailand, the Philippines, Malaysia, Indonesia, Argentine, Chile and Brazil - insist on establishment of stricter discipline on agricultural trade.

Note :The first track procedure is the procedure in which any revision to bills on trade agreements, including the Uruguay Round agreement, are not allowed and are asked for only the approval or dissaproval of the adoption during the deliberation in the U.S. Congress. At the end of May, an extension of this procedure was decided and made effective until the end of May 1993.

Note :The total oil production volume of Iraq and Kuwait in July 1990 was about 4.8 million barrels a day.

Note :The IEA member countries as well as France, Finland and Iceland coordinated to make available 2.5 million barrels per day of oil to the market.

Note :As of July 1991, 139 days equivalent of consumption volume is reserved both by the Government and the private sector.

Note :The share of crude oil developed by Japanese companies in 1989 accounted for 13.2 percent of the total oil imports.

Note :The Soviet Union produces about 16 percent of the world's crude oil and about 37 percent of the world's natural gas.

Note1:In this scheme, research reports on development plans are produced by dispatching a research mission to assist improvement of infrastructures for socio-economic development in the developing countries.

Note2:A comprehensive technical cooperation package that combines three elements for dispatching experts, acceptance of trainees and provision of machines and equipment efficiently and organically.

Note3:Cooperation which combines soft-term funds and technical assistance (dispatching experts, accepting trainees and studies).

Note1:Financial assistance enabling developing countries with an acute food shortage to purchase grains (rice, wheat, maize, etc.) and transportation services.

Note2:Financial assistance to purchase fertilizers, pesticides, farming equipment, etc. required for increased production of food.

Note1:Nuclear energy accounted for approximately 26.3 percent (fiscal 1990) of the total power generation in Japan.

Note2:Japan imports nearly 100 percent of the uranium ore it needs, and 95 percent of uranium enrichment service is commissioned abroad. Around 95 percent of the reprocessing of spent nuclear fuels from Japanese nuclear power plants is done abroad.

What was the essential disagreement between the United States and the Soviet Union?

Why was there conflict between the United States and Soviet Union?

What did the United States and the Soviet Union disagree about after World War II quizlet?