Section 2. Efforts to Solve Multilateral Issues, including Problems of the Global Economy




I. Contributions to the Harmonious Development of the World Economy



(1) The world economy in 1976 was faced with a number of problems. After having been plunged into the gravest recession since World War II by the sharp increase in oil prices by OPEC in 1973, the world economy finally began to recover in the spring of 1975, a recovery which continued into the spring of 1976. However, this recovery soon slowed down in the second half of 1976 with the sluggishness in personal consumption and equipment investment, little improvement in the employment situation, and no apparent improvements in such areas as inflation, currency instability, or the imbalance of international payments. Japan thus entered 1977 with dismal feelings of recession in some quarters. While the world economy as a whole was losing its recovery tempo, a polarization developed among the advanced industrial democracies, with Japan, the United States of America, and the Federal Republic of Germany in an economically stronger position on the one hand and other economies such as Great Britain, France, and Italy weak on the other.

The volume of world trade, which had turned down in 1975, began to grow in the second half with the stimulus of expanded imports by the industrialized nations following their recovery. However, it is true that though world trade was expanding, there emerged protectionist pressures in some nations confronted with high unemployment and other domestic difficulties. In some nations trade balances deteriorated because of the heavy burden of oil imports and of the different paces of economic recovery, and imports in certain sectors of these economies increased sharply. This situation, along with high unemployment, gave further impetus to movements for restricting imports.

The policy efforts begun in 1972 in the International Monetary Fund (IMF) and other forums for reform of the international monetary system were brought to conclusion at the November 1975 Rambouillet summit meeting intended to yield a comprehensive agreement for revision of the IMF Articles of Agreement at the January 1976 Jamaica meeting of the IMF Interim Committee. Although these developments were highly regarded as efforts to build a systematic framework responsive to the new era, a number of difficulties have been encountered in their implementation. The currency situation in Europe in 1976 was rather turbulent, reflecting the different national rates of inflation, balance of payments disparities, and other economic differences, as evidenced by the closure of Italian exchange markets in January, the disassociation of the French franc from the EC's joint float snake in March, and the later dissolution of the three-nation Benelux mini-snake.

The international energy situation in 1976 had been relatively calm until the decision to raise the oil price made by the OPEC meeting held in Qatar in December 1976. At this meeting, while Saudi Arabia and the United Arab Emirates objected to raising the oil price by more than 5%, the other eleven member countries of OPEC increased the price of oil they export by 10%. Thus an unprecedented two-tier price system has emerged, causing instability in the international energy situation.

The North-South problem is of increasing importance to the world economy, and this issue is dealt with below in Section 3.


(2) Most of the problems, including economic recovery, trade, energy, the North-South problem, and other issues facing the international economy, are such in nature that they defy solution by any one nation acting alone. Furthermore, expanded trade and capital interflow among nations has raised the interdependence of the international economic community more than before. Under these circumstances, all nations are becoming increasingly aware of the urgent need for close cooperation in order to deal effectively with the problems of the international economy, and efforts for its harmonious development were continued among the nations concerned on the basis of close international concert in 1976, with Japan contributing actively to these efforts.

Typical of such international cooperation was the Meeting of Heads of State and Government held on June 27 and 28 in Puerto Rico. Realizing the indispensability of cooperation among the main industrialized democracies of Japan, the United States of America, the United Kingdom of Great Britain and Northern Ireland, the Federal Republic of Germany, France, Italy, and Canada, which have major responsibility for managing the world economy for global prosperity, the leaders of these nations met together for a frank exchange of views on the issues facing the world economy. In this meeting, the leaders not only exchanged opinions on the recovery and sustained expansion of the world economy, currencies, trade, energy, North-South problems, and East-West problems, they also reaffirmed the need for continued cooperation among the advanced industrialized nations. Especially on the issue of recovery, the Joint Communique expressed the confidence of these nations that "economic recovery is well under way" and the assembled leaders agreed on the common goal of achieving sustained economic expansion without reviving inflation. That the leaders of these seven major nations set a common goal for the management of the world economy and agreed to make efforts for its attainment was valuable in having a major impact on the restoration of popular confidence in the future world economy, which has been in a state of increasing instability since the oil crisis. Japan also took an active part in this Puerto Rico meeting in view of its importance, and the meeting is believed to have deepened understanding among the leading nations and to have further strengthened cooperation among them.

In the area of trade, negotiations were continued in the forum of GATT in recognition of the fact that the formulation of new rules for international trade, including the lowering and dismantling of tariff and non-tariff barriers in the Tokyo Round of multilateral trade negotiations, is essential for the avoidance of protectionism and the maintenance and development of a liberal trade structure. Japan also has continued its efforts for their progress.

In May of 1976, the Ministerial-Level Council of the Organization for Economic Cooperation and Development (OECD) extended for one more year the Declaration adopted by Governments of OECD Member Countries on May 30, 1974, saying that all nations would refrain from imposing restrictions on trade and ordinary transactions. In the same vein, the Joint Communique of the Meeting of Heads of State and Government also expressed concern over protectionist moves.

Commendable efforts were also seen for cooperation among the international agencies and nations concerned in international financing, such as an increase of the size of the IMF credit tranches and the decision by Japan and eight other industrialized nations and the Bank for International Settlements (BIS) to extend credits in support of the pound.

In the field of energy, Japan played an active and important role by contributing to the energy dialogue between oil-producing and consuming countries in the framework of the Conference on International Economic Cooperation. Japan also played an important role in the International Energy Agency, where cooperation among oil-consuming developed countries has been actively promoted in such areas as conservation, development of alternative energy sources, and R & D of new energy.



II. Efforts to Ensure the Peaceful Use of Nuclear Energy



Japan ratified the Nuclear Non-Proliferation Treaty (NPT) on June 8, 1976, to further solidify its basis for the peaceful use of nuclear energy. In a Government statement issued at the time of the Treaty's ratification, it was stressed that Japan's peaceful utilization of nuclear energy should in no respect be discriminated against as regards the other states party to the NPT. Based upon the provisions of the NPT, Japan also signed the NPT Safeguards Agreement with the International Atomic Energy Agency (IAEA) on March 4, 1977.

Meanwhile, in October 1976, U.S. President Gerald Ford announced a strict policy stance regarding the peaceful use of nuclear energy, including exports of such know-how or facilities for the enrichment and reprocessing of spent fuels as might lead to the capacity to manufacture nuclear weapons. In response to this, the Government submitted in December 1976 a note to the U.S. Government seeking the latter's understanding on the Japanese position. Although President Carter has adopted an even stricter line than did the Ford Administration, the Government continued its efforts to gain the U.S.'s understanding by sending a special mission in February 1977 and using the opportunity of the Japan-U.S. summit talks in March 1977.

At the same time, the first round of talks for revising the Agreement between Japan and Canada for Cooperation in Atomic Energy was begun in Tokyo in January 1977 in response to Canadian wishes to strengthen the supplier country's control over the uranium it exports, and these efforts are being continued to find a compromise solution.



III. Adapting to International Maritime Developments



(1) From the perspective of seeking to protect Japanese interests as one of the world's leading deep-sea fishing nations, Japan feels it desirable that the establishment of 200-mile zones be done in accordance with an international agreement at the Law of the Sea Conference, and Japan has made every effort for an early conclusion to the Law of the Sea Conference. At the same time, Japan has repeatedly stated its view that the various national moves for unilateral legislation establishing expanded maritime zones should await the conclusion of the Law of the Sea Conference, and every diplomatic effort has been made to protect Japanese national interests.


(2) Nevertheless, the Law of the Sea Conference has not progressed as hoped for, and 200-mile zones have rapidly become internationally common with their establishment by the U.S., Canada, the EC nations, Norway, the Soviet Union, and others. Especially in view of the negotiations for the Japan-U.S.S.R. Fishery Agreement after the neighboring Soviet Union established a 200-mile fishery zone, Japan was left with no choice but to establish a 200-mile fishery zone of its own. Accordingly, the Cabinet meeting of March 29, 1977, agreed upon a policy of establishing a 200-mile fishery zone for proper conservation and management of marine resources around Japan's coast, and legislation to this effect was submitted to the 80th Session of the Diet.


(3) At the same time, the Government, responding to the pleas of coastal fishermen whose livelihoods have been threatened by the operations of foreign vessels and considering carefully the progress in the Law of the Sea Conference, made a thorough study of the implications of expanding the territorial sea to 12 miles, and submitted legislation to this effect to the Diet on March 29, 1977.


(4) The emerging era of 200-mile zones makes it imperative to hold negotiations to continue operations by foreign fishery vessels in the 200-mile zones of each country. Negotiations between Japan and the U.S. were conducted after U.S. enactment in April of the "Fishery Conservation and Management Act of 1976"(establishing the U.S, 200-mile zone), and led to the signing of an interim agreement in February 1977 and a long-term agreement in March 1977. As to the Soviet Union, after its December declaration announcing the establishment of its 200-mile zone, Minister of Agriculture and Forestry Suzuki visited the Soviet Union in February 1977 and negotiations with that nation were begun in March.


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