Chapter 1. International Environment Surrounding Japan


1. Spreading Repercussions of the Oil Crisis


(1) Increased Difficulties of the International Economy

As a result of the oil strategy employed by the Arab oil-producing countries in the autumn of 1973 which resulted in reducing oil production and increasing oil prices, the international economy which was already suffering from inflation became even more unstable and its difficulties increased. Although the problem of oil supply restrictions was brought to an end with the lifting of the embargo against the United States in March, oil prices jumped almost four times at one stroke. This accelerated the so-called trilemma - the worsening of the oil-importing countries' balance of international payments, the aggravation of inflation, and the stagnation of economic growth. At the same time, it caused an influx of tremendous amounts of oil payments into the oil-exporting countries, creating a great disequilibrium in the international economy.


(2) Economic Slump in Advanced Western Countries and Promotion of Mutual Cooperation

The advanced Western countries plunged into a serious economic slump during 1974. According to a report of the OECD Secretariat, the rate of economic growth in real terms of its member countries as a whole in 1974 was minus 0.1 per cent against the preceding year, while the consumer price index rose about 14 per cent, and the deficit in the current accounts of these countries totaled $34,000 million. This was accompanied by mounting difficulties in the domestic affairs of these OECD countries.

To cope with their economic difficulties, the advanced Western countries implemented various domestic measures and, at the same time, strove for closer cooperation among themselves with a view to solving such urgent problems as oil and energy and also the recycling of oil money. As a result, considerable achievements were made, including the holding of the Washington Energy Conference in February, the Declaration on avoidance of trade restrictions at the OECD Ministerial Council in May, the formulation of an International Energy Program and the establishment of the International Energy Agency within the framework of the OECD in November and the basic agreement on the establishment of the Financial Support Fund of the OECD in January 1975.


(3) Greater Voice of the Developing Countries

In the international arena, the voice of the oil-producing countries, especially that of the Middle East countries, greatly increased, and the oil policies of these countries, centering on the Organization of Petroleum Exporting Countries (OPEC), came to exert a substantial influence on the world economy.

Against this background, the developing countries became more assertive in their views on the resources problem. Their moves to seek anew international economic order advantageous to the developing countries intensified at various international forums such as the Islamic Summit Conference in February, the Special Session of the U.N. General Assembly on Raw Materials and Development in April, and the Conference of Developing Countries on Raw Materials in March 1975.

Among the developing countries, those which do not produce oil and have no other effective economic means were faced with economic difficulties more serious than ever before in the severe international situation, and relief for such countries became a major international problem.


(4) Impact on Socialist Countries

The oil crisis considerably affected the socialist countries as well.

As an oil-exporting country, the Soviet Union benefited from the sharp rise in oil prices in terms of its balance of international payments and increased further its voice vis-a-vis the East European countries, which are export markets for its oil, as well as other countries. China in creased its exports of oil to Japan and other countries that had been buying its oil and, in addition, began exporting it to a few other countries. On the other hand, the economic slump in the Western countries and increased prices of Western products became hampering factors in the development of economic interchange between Western countries and China, North Korea and East European countries that had been strengthening their economic relations with the Western countries.


(5) New Developments in International Economic Relations

Under the circumstances mentioned above, new developments affecting the basic framework of the international economy came to the fore.

As for the problems of oil, energy, and the recycling of oil money which required urgent solutions, cooperation among the advanced Western countries mentioned above made progress. On the other hand, the oil-producing countries maintained their joint action through OPEC. In the meantime, there gradually emerged moves for a dialogue between the two groups.

As regards the food problem, the World Food Conference took place under the auspices of the United Nations and it reached agreement to a certain extent on ways to promote international cooperation in the future.

The attitudes and views taken by the developing countries in trying to strengthen their positions by advocating the establishment of a new international economic order resulted in the adoption of the Declaration on the Establishment of a New International Economic Order at the Special Session of the U.N. Assembly on Raw Materials and Development and of the Charter of Economic Rights and Duties of States at the 29th U.N. General Assembly. However, the accomodation of their demands with the positions of the developed countries still remains as a problem for the future.

The second session (starting late in June 1974) of the Third U.N. Conference on the Law of the Sea was held to seek a new order in international law. However it reached no concrete agreement.


2. Moves of Major Countries


(1) Developments in U.S.-Soviet Relations

Relations between the United States and the Soviet Union have a fundamental impact on developments in international politics in general. The United States and the Soviet Union, both of whom possess advanced nuclear weapons in great quantities, have a basic understanding that a direct military clash between them involves the danger of mutual destruction, and they have been trying to promote peaceful coexistence and stabilize their bilateral relations.

Moves for the so-called detente between the United States and the Soviet Union are not limited to the field of arms control. They cover economics, science, outer space and other fields as well. Although there may be twists and turns as these substantive relations progress, basically there will be no major change in the trend toward peaceful coexistence between the United States and the Soviet Union.

Needless to say, this does not mean the elimination of the basic difference in systems between the two countries. One still views the other as an adversary and in this context, it can be said that cooperation between them is of a limited nature. Within this basic framework of their relations, the United States and the Soviet Union continued their efforts to improve relations in 1974.

For example, President Nixon visited the Soviet Union late in June and signed Protocols to the Treaty on Limitations on Underground Nuclear Weapons Tests and the Treaty on Limitations of Anti-Balistic Missile Systems (ABM) with the Soviet Union. Under the Ford Administration which succeeded the Nixon Administration, the Ford-Brezhnev meeting was held in Vladivostok in November, following Secretary of State Kissinger's visit to the Soviet Union in October. As a result, the two countries reached agreement on guidelines to limit the numbers of Strategic Delivery Vehicles and of ICBMs and SLBMs equipped with Multiple Independently Targetable Re-entry Vehicles,  thereby showing progress in the second round of the Strategic Arms Limitation Talks (SALT-II).

As for their economic relations, which are an important element of U.S.-Soviet relations together with the Strategic Arms Limitation Talks ,the U.S. Congress enacted the Amendment of the Export-Import Bank Act, which restricts loans or financial guarantees to the Soviet Union, and the Trade Act of 1974 which links the problem of providing most-favored-nation treatment and extending credits to the Soviet Union with the " emigration problem" of Soviet Jews. The Soviet Union informed the United States in January 1975 that it would not put into force the 1972 U.S.-Soviet Trade Agreement because they could not accept a trading relationship based on the above legislation. This resulted in a certain stagnation in the development of their bilateral economic relations, including the extending of U.S. credits to the Soviet Union.


(2) Developments in Sino-American Relations

Although there was no substantial progress in Sino-American relations throughout 1974 after the establishment of their respective liaison offices in the preceding year, U.S. Secretary of State Kissinger visited China in November and both countries reconfirmed their intention to promote the normalization of bilateral relations on the basis of the Shanghai communique of 1972. They also agreed on U.S. President Ford's visit to China within 1975. Thus they made efforts to continue their dialogue.


(3) Developments in Sino-Soviet Relations

China and the Soviet Union maintained throughout 1974 a limited degree of working relations in such areas as trade or civil aviation. However, there were such events as the reciprocal expulsion of diplomats in January and the landing of a Soviet helicopter in Chinese territory in March, which led to a slight increase in tension between the two countries. They also continued their verbal attacks against each other on various matters. Observers noted, however that both countries exchanged congratulatory telegrams calling for an improvement in their relations on the occasion of the Anniversary of the Founding of the People's Republic of China in October and the Anniversary of the Soviet Revolution in November. However, China clearly indicated its anti-Soviet attitude in its new Constitution and in a Political Report approved by the Fourth National People's Congress in January 1975. The Soviet Union also continued to criticize China rather severely.

It is to be noted, moreover, that in recent Sino-Soviet polemics there has been an intensification of criticism of the other country's relations with Japan.


(4) Formation of the New Administration in the United States

The Watergate affair, which had been the focus of domestic politics in the United States since the summer of 1973, ultimately developed into the resignation of President Nixon, an event unprecedented in American history, and the inauguration of the Ford Administration in August.

While following the foreign policy of the former Administration, the Ford Administration took strong initiatives in trying to settle the Middle East question and also various problems of the world economy, such as energy, finance and food, and endeavored to strengthen American solidarity with its Western allies. On the other hand, there developed a growing tendency for the Administration to be restricted in its conduct of domestic and foreign policies by the will of Congress because of the influence of the Watergate affair and the major setback of the ruling Republican Party in the off-year elections in the autumn.


(5) Developments in Western Europe

In Western Europe, there were changes of leaders in such countries as Britain, France, the Federal Republic of Germany and Italy amid the severe economic situation.

Under these circumstances, efforts to form the European Economic and Monetary Union within the European Community faced difficulties, and moves toward integration slowed down partly because of the problem of renegotiating the terms for Britain's entry. However, the summit meeting in December reaffirmed the policy of promoting integration, and it was decided to promote cooperation among the member countries, including political matters such as the holding of periodic summit talks.

As regards the idea of making a U.S.-Europe declaration which had been under consideration since the spring of 1973 , it was realized in the NATO Declaration adopted in June 1974, reaffirming the alliance between the United States and Europe. On the other hand, there kindling of the Cyprus problem and the formation of a government that included Communists in Portugal raised new problems for the NATO system and for relationships within Western Europe.

As regards East-West relations in Europe, summit talks were held between the Federal Republic of Germany and the Soviet Union and also between France and the Soviet Union. Negotiations at the Conference on Security and Cooperation in Europe (CSCE) showed progress, but there was no significant development in negotiations for Mutually Balanced Force Reduction (MBFR) in Central Europe.


3. Development in Asia and the Pacific Area


(1) Asia lacks regional homogeneity as a whole and has various internal factors that lead to instability. Moreover, the moves of the three great powers, namely the United States, China and the Soviet Union, and the events transpiring in the international economy have affected the Asian countries in various ways so that Asia as a whole has taken on a complicated appearance. Japan's moves also exert not a little influence on the situation in this region.


(2) Against the background of their mutual relations explained in 2 above, the United States, China and the Soviet Union made the following moves.

Attaching importance to the self-help efforts of Asian countries under the so-called Nixon Doctrine, the United States maintained in particular the policy of gradually reducing its military presence in Southeast Asia. When the situation in Cambodia and South Vietnam suddenly changed from the end of 1974 and thereafter, the United States under the stringent limitations imposed by Congress refrained from direct military intervention and acted with caution. The United States stressed relations of friendship and cooperation with Japan and with the Republic of Korea on the occasion of Prime Minister Tanaka's visit to the United States in September and of President Ford's visit to Japan and the Republic of Korea in November.

Although China assumed a somewhat high posture in its foreign policy in the first half of 1974 in connection with the campaign to criticize Lin Piao and Confucius, it showed a comparatively moderate attitude later as was evident from the establishment of diplomatic relations with Malaysia in May, and the visits to China by Mme. Imelda Marcos, wife of President Marcos of the Philippines in September, and by the Foreign Minister of Singapore in February 1975.

Relations between Japan and China showed progress, including the conclusion of respective agreements on civil aviation, trade and shipping. In November 1974, the two countries started preliminary negotiations for the conclusion of a treaty of peace and friendship.

The Soviet Union tried to secure and increase its influence in the Indian subcontinent, and carried out wide-ranging activities, such as increased contact with Southeast Asian countries, inviting the Australian Prime Minister to the Soviet Union and intensifying its approaches to Japan.

In Japanese-Soviet relations, Foreign Minister Miyazawa visited the Soviet Union in January 1975 to continue negotiations for the conclusion of a peace treaty.


(3) In the Korean Peninsula, although talks were held for the resumption of the North-South dialogue suspended in 1973, there was no substantial progress. There was a series of events that strained relations between the two countries, such as the sinking of a South Korean fishing boat in February, the sinking of a South Korean patrol boat in March, the discovery of tunnels in the demilitarized zone in November 1974 and March 1975 and the sinking of a North Korean fishing boat in February 1975. Externally, the Republic of Korea and North Korea conducted brisk diplomatic activities, and, as in the preceding year, an increasing number of countries that already had diplomatic relations with the Republic of Korea established diplomatic relations with North Korea.

Friction developed in the relations between Japan and the Republic of Korea over such incidents as the arrest of Japanese citizens in connection with the National Democratic Student Federation case and the attempt on the life of President Park by a Korean residing in Japan. However, relations calmed following the visit of former Foreign Minister Etsusaburo Shiina as a special envoy to the Republic of Korea in September and the return home of the arrested Japanese in February 1975.


(4) As regards Indochina, the third coalition government was formed in Laos in April, but the hostilities continued in South Vietnam and Cambodia. The military offensive by the Communist forces intensified from the end of 1974 and thereafter, and the situation suddenly changed as the previous regimes in both countries fell in April 1975.


(5) In other Southeast Asian countries, there was no major turmoil despite many political and economic difficulties. There were moves toward establishing democratic systems, such as the shift to civil administration in Burma in March and general elections in Thailand in January 1975.

In relations between Japan and Southeast Asia, Prime Minister Tanaka visited the ASEAN countries in January and Burma in November and efforts were made to promote mutual cooperation.


(6) In Southwest Asia, there were moves to normalize relations among the various countries, including Pakistan's recognition of Bangladesh in February and the resumption of working relations, such as communications and trade between India and Pakistan. On the other hand, India's nuclear test in May caused a considerable reaction internationally.


(7) Australia and New Zealand attached importance to Asia and they continued efforts for promoting regional cooperation in Asia in line with their policy of diversifying their diplomatic relations. Canada also attached increasing importance to the strengthening of relations with Asian countries. As for their relations with Japan, Prime Minister Tanaka visited Australia and New Zealand in October through November, following his visit to the United States and Canada in September, and talks were held aimed at strengthening relations of friendship and cooperation over wide-ranging areas.


4. Developments in the Middle East, Africa and Central and South America


(1) As for the Middle East situation , moves for peace made progress with the Geneva Peace Conference toward the end of 1973, and the attainment of the first phase of disengagement of forces between Egypt and Israel and also between Syria and Israel due in part to the vigorous diplomatic efforts of the United States in the first half of 1974. The United States, advocating its "step-by-step formula," continued its efforts to mediate with the objective of a second-phase disengagement of forces between Egypt and Israel.

In the meantime, the Palestine Liberation Organization's (PLO) international status rose through the holding of an Arab summit conference in October and the U.N. debate on the Palestine question, and a settlement of the Palestine question became an increasingly important factor in achieving peace in the Middle East.


(2) In Africa, Guinea Bissau's independence was recognized in 1974 by its suzerain state, Portugal, while Mozambique and Angola, non-self-governing territories that played the role of buffer zones for the white regimes in southern Africa, were to become independent states. As a result, a significant change occurred toward opening the way for new developments in the Southern African Question.


(3) In Central and South America, domestic affairs in each country generally remained calm, although some fluidity was observed in the political situation in Argentina, Brazil and Peru. Progress in the " new dialogue" policy proposed by Secretary of State Kissinger in October 1973 provided grounds for the hope that cooperation would be promoted among the United States and the Central and South American countries. However, the new Trade Act of the United States enacted early in 1975 gave rise to objections from many countries of the region, and the Third Conference of Foreign Ministers of the Organization of American States was postponed indefinitely. Moves for the establishment of a Latin American Economic System by Central and South American countries themselves, separately from the Organization of American States which includes the United States, were noteworthy. As for relations with Japan, progress in deepening cooperative relationships was made as a result of Prime Minister Tanaka's visit to Mexico and Brazil in September.


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