Section 3. Contributions to the Solution of the North-South Problem


1. In 1975, the developing countries suffered a serious blow from the global recession and inflation started in 1974, the reduction in world trade, the sharp increase in oil prices, the international monetary instability and the food problem. The developing countries put forth a series of demands to the developed countries for solving problems in such areas as accumulated debts, primary products, industrialization and the transfer of technology, and called for the establishment of a new international economic order aimed at the radical reform of the existing international economic system. Against this background, the solution of the North-South problem became an increasingly urgent task for the international community.

Japan is an active participant in the affairs of the international community, and it has a deep interest in maintaining close relations with the developing countries in such areas as energy, food and raw materials. It is, there fore, necessary for Japan to make positive efforts to solve the North-South problem. Japan's basic position aims at inducing stability and prosperity for the international community by maintaining and developing a fair and equitable relationship on the basis of interdependence between the North and the South. To that end, it considers it necessary to take measures for gradual reform on the basis of dialogue and cooperation between the North and the South.


2. A brief description of the state of the North-South problem in 1975 follows. The average annual growth rate of the GNP of non-oil-producing developing countries has been 4 per cent over past years, and there has been little real gain in per capita income. It is estimated by the World Bank that their GNP grew 1.4 per cent in 1975 while their per capita income registered a negative growth of 1 per cent.

The non-oil-producing developing countries registered balance of payments deficits totalling $27,500 million in 1974 (on a current account basis, excluding official transfers) and reached $35,000 million in 1975. These huge deficits resulted in the reduction of foreign exchange reserves and imports, and in some cases forced the modification of development plans. Foreign loans obtained to cover the deficits made the problem of accumulated debts even more serious.

The total amount of outstanding debts of all developing countries as of the end of 1974 was estimated at $120,000million, and their debt repayments made in that year amounted to $15,000 million. Of that amount, $8,700 million was repaid to the OECD countries (comprising $1,300 million for ODA debts and $7,400 million for other debts). During the same year, the OECD countries made gross outlays amounting to $12,500 million in assistance. This means that the developing countries used at once 10 per cent of the total amount of aid they received (70 per cent when all debt repayments including private debts are included) to repay their debts. Because of the seriousness of the problem of accumulated debts, the developing countries urged in gradually stronger terms in 1975 an automatic and comprehensive debts relief, entailing the cancellation, moratorium or rescheduling of ODA debts and the rescheduling of commercial debts.

The role of trade in the economic development of the developing countries is substantial. The total amount of official aid extended by the OECD countries to the developing countries in 1974 was $9,400 million, while the total export earnings of the non-oil-producing developing countries were$91,000 million, or about 10 times the amount of such aid. Exports of primary commodities accounted for 63.5 per cent of all exports of the non-oil-producing developing countries in 1973 and their prices slumped in 1974 from the boom levels in1973, and they continued to decline in 1975.

Faced with this situation, the developing countries requested the stabilization of primary commodity prices for the stable expansion of their real export earnings. Further, they took a position that the traditional "commodity" approach was inadequate, and instead, proposed the idea of dealing with key primary commodities as a package, under a so-called "Integrated Program for Commodities." Thus, the problem of primary commodities, together with the problem of debts, became a high priority issue in the context of the North-South problem.

Industrialization and the transfer of technology are other important issues. They are prerequisites for a stable and expanding economic development of both developing and developed countries. The developing countries took a stronger position in making various demands in these areas, such as their share in world industrial production be increased to more than 25 per cent by the end of this century, a legally binding code be established for the transfer of technology from the developed to the developing countries, etc. Given this situation, it is likely that industrialization and the related question as to the industrial complementarity between the developed and developing countries will become major questions.

The basic demand of the developing countries is that it is inadequate to deal with these problems separately and that, basically, it is necessary to establish a new international economic order. Such demands were reflected in the Declaration and the Program of Action on the Establishment of a New International Economic Order adopted at the Sixth Special Session of the U.N. General Assembly in April 1974, the Charter of Economic Rights and Duties of States at the 29th Session of the U.N. General Assembly in September 1974 and the Declaration and Plan of Action on Industrial Development and Cooperation (the Lima Declaration) at the second General Assembly of the U.N. Industrial Development Organization in March 1975.

These demands of the developing countries are not acceptable in their entirety to the developed countries. However, the latter indicated their determination to pursue the North-South dialogue and in its context to solve specific problems, which were manifested in the OECD Declaration on Relations with the Developing Countries in May 1975 and also in the Joint Declaration of the summit meeting of seven developed countries in November. The developing countries came to recognize the interdependence in the world economy during the course of the current global recession, and have demonstrated their willingness to seek realistic solutions to the problems. A series of conferences, including the Seventh Special Session of the U.N. General Assembly in September and the Conference on International Economic Cooperation in December were held in a spirit of "dialogue and cooperation," which, it was expected, would contribute to creating favorable conditions for the solution of the North-South problem in the future.


3. In 1975, Japan continued to expand its cooperative efforts in solving the North-South problem following the principles mentioned earlier. Its efforts in the fields of trade and economic cooperation were as follows:

Regarding cooperation through trade, Japan contributed to the stabilization and growth of the export earnings of the developing countries through the reduction of tariffs on primary commodities and manufactured goods, import liberalization of more products, participation in commodity agreements, cooperation in marketing and other matters for the expansion of the exports of the developing countries, participation in international cooperation for the stabilization of export markets and the improvement of the Generalized System of Preferences.

In the field of economic cooperation, the total amount of Japan's economic cooperation with the developing countries (total flow of funds) was $2,890 million (on a net payment basis as hereonafter). It amounted to 0.59 per cent of the GNP which was a slight drop from the 0.65 per cent in 1974. Of the total flow of funds, official development assistance (ODA) was$1,148 million compared with $1,126 million in 1974, showing an increase of 1.9 per cent. However, the proportion of ODA to GNP was 0.24 per cent, or slightly less than the 0.25 per cent in the preceding year.

Japan took an active part in a series of conferences for the North-South dialogue, including the preparatory meetings for the dialogue between the oil-producing and consuming countries, the Seventh Special Session of the U.N. General Assembly and the Conference on International Economic Cooperation, in collaboration with other developed countries. These were some of its efforts to maintain and promote constructve cooperation between the developed and developing countries.


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