Section 3. Contribution to the Solution of North-South Problems




(1) The North-South problem is a most urgent and basic problem for international peace and stability. In addition to the long-term issue of widening disparities between North and South, the oil crisis has also given rise to heightenedawareness of the economic interdependence of all nations, developed and developing, and to new urgency about the question of how to alleviate the impact of higher oil prices on the non-oil-producing developing nations. Especially with the developing nations' politically strengthening their demands for concrete measures commensurate with a new international economic order, as in the Manila Declaration, the North-South problem has become increasingly complex and urgent.

In light of Japan's increasingly close involvement with the developing countries in trade, investment, and other aspects, including the fact that more than 50% of its overseas trade is with the developing nations, it is this country's basic stance to seek the maintenance and development of fair and equitable relations based upon interdependence for the stability and development of the international community.


(2) Given below is an outline of the situation affecting the developing nations as it forms the background for the North-South problem. Particular attention is given to events in 1976.


(a) Although the developing nations' GNPs showed some improvement in 1976, growth rate was only 5.7% on average from 1971 to 1976, thus falling short of the 6% target set by the U.N. Second Development Decade Strategy. In addition, the disparities among developing nations are considerable, the oil-producing nations achieving 7.5% growth while the non-oil-producing developing nations marked only 5.3% and the least developed countries showed a very low 3.3%.


As may be seen from these figures, long-term trends are for a developing nation's rate of growth to be lower the poorer it is, thus further aggravating the gap between North and South and even generating new structural problems as the differences widen among the developing nations themselves.


(b) The deficit in the non-oil-producing developing countries' current balances of payments hit a peak of $38 billion in 1975. In 1976 the deficit fell slightly to $28 billion as a result of improved prices for these nations' primary products. Nonetheless, the issue of rectifying these non-oil-producing developing nations' international balances of payments remains urgent. Because approximately half of their $28 billion deficit is met with borrowings on commercial finance markets, deterioration in the overall debt position of these nations has also taken place. As a consequence, the issue of their accumulated debts has become more serious. It has been estimated that the total outstanding debts of these nations at the end of 1976 were approximately $120 billion, with the principal and interest due annually coming to some $13 billion (approximately 10% of their current-account earnings).


Although fuel and other primary products account for a high 80% (1974 figures) of the export earnings from which the developing nations finance their development, the price index for all of these primary products except fuels fell sharply in 1975 after peaking out in 1973-74, and the 1976 recovery in prices was not even sufficient to restore them to 1974 levels.


(3) As may be seen from the above, the developing nations' economic situation is complex and difficult. It was under these circumstances that the Fourth U.N. Conference on Trade and Development was held in Nairobi in May 1976 to hold wide-ranging discussions on and to forge policies of international cooperation for the many facets of the North-South problem, including primary products, trade, aid, industrialization, and technology transfer. At this conference, the developing countries forcefully expressed the need for an Integrated Commodity Programme for the stabilization and real growth of commodity export earnings, with special stress being laid upon the "common fund" (a central fund to finance international buffer stocks and the like within the framework of separate commodity agreements) which is central to the Programme. The Programme was adopted after incorporating demands of the developing countries to some extent, and negotiations or discussions have come to be conducted on the common fund and separate commodities. The commodity issue constitutes an important part of the North-South problem, and in 1976 the international community may be said to have started moving toward its solution according to the prescription called the Integrated Commodity Programme Plan. However, there is a wide difference in the conception of it between the developed and developing nations. Therefore, many difficulties are expected to arise in the negotiations for the common fund.

Another important issue for the North-South problem is that of the developing countries' accumulated debt. Although the Conference on International Economic Cooperation is continuing its efforts to find a concrete solution to this issue, generalized debt relief as advocated by the developing countries is fraught with difficulties in that it embraces the concept of automatic transfer of resources.


(4) Based upon the spirit of the ground rules laid by the September 1975 Seventh Special U.N. General Assembly and the continuing "dialogue and cooperation" in the CIEC, confrontation on principles, such as previously seen, has been avoided and the time is believed right to search for concrete policies for their solution. However, with the developing countries advocating the establishment of a new international economic order as the basis for any study of concrete policies, the danger persists that events may come to an impasse and theoretical confrontation may surface once again. Intended to equalize the global distribution of income, this demand for the establishment of a new international economic order calls for such concrete policies as a larger-scale and automatic transfer of resources, as well as special advantageous measures and an expanded voice for the developing countries. Thus, while it may not be possible for the developed nations to accept these demands of the developing countries unmodified, there is a growing awareness of the interdependence of all nations in the global economy, and repeated efforts are being made to find a means of solving the North-South problem through dialogue and not diatribe, this spirit having also been reconfirmed at the San Juan Meeting of Heads of State and Government.


(5) From this basic stance, Japan continued to make all possible efforts in 1976 for harmony and active cooperation with other nations toward the settlement of the North-South problem.


(a) In regard to trade, Japan has been contributing to the stabilization and expansion of the developing nations' export earnings by lowering tariffs, liberalizing import restrictions on an increasing number of commodities, participating in commodity agreements, otherwise facilitating the sales of primary commodities and products as well as cooperating in marketing and other studies to increase exports by the developing countries, taking part in international cooperation to stabilize export markets, improving the generalized preferential system, etc.


For example, with the adoption of the generalized preferential system by Japan, the import of preferential tariff items from those nations accorded preferential treatment has risen to approximately $3,451 million, up approximately ninefold over the volume before preferences were instituted, and all imports from the preference-receiving nations have grown approximately fivefold. As a result, the preference-receiving nations' share of the Japanese import market has risen from 36.5% in the pre-preference days to 54.9% as of the end of FY 1976.


(b) The volume of Japan's official development aid has tended in recent years to stagnate. The 1976 figure of approximately \328 billion was down by 3.7% from the previous year's approximately \341 billion, and down similarly in the same period from 0.23% to 0.20% of the GNP. This decline maw be attributed primarily to the completion of Japan's payment of reparations and quasi-reparations, the decline in bilateral grant aid, and like factors, but it is nonetheless an entirely unsatisfactory record in light of Japan's basic stance vis-a-vis the North-South problem.


Determined to check and actively reverse this decline in Japan's ODA, the budget for FY 1977 provides an allocation of a total of approximately \550 billion for ODA, an increase of about 22% over FY 1976.

Japan has accepted the international target of reaching 0.7% in ODA/GNP ratio, and every effort is being made toward the achievement of this goal. Accordingly, an interim goal has also been set for raising Japan's ODA performance to the average of the advanced industrialized nations, i.e., 0.36% of GNP in 1975. The Government also announced at the CIEC its intention to more than double its assistance in five years.


(c) At the same time, Japan was also active, in close cooperation with other advanced countries, in discussions at the U.N. Conference on Trade and Development, CIEC, and other forums seeking solution to the issues of a common fund for primary products, debt settlement, and other questions of great importance to the developing countries.


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