Section 2. World Economic Trends and Contributions to Sustained Growth


1. Policy Coordination among Major Developed Countries


(1) Present State of World Economy

(a) The world economy continued to see a moderate expansion in 1987. The United States sustained economic expansion led by external demand, despite concern about the aftereffects of the stock market crash in October. In Europe, the economies of the Federal Republic of Germany, France and Italy lacked vigor, but the British economy achieved a comparatively higher growth rate through strong domestic demand.

Japan also experienced a relatively high growth powered by domestic demand.

Three remained, however, external imbalances among major developed countries at as high level as ever, though they are on the right track for corrections.

As for developing countries, on the other hand, there was a very large disparity in the economic growth among different regions. While Asian newly industrializing economies (Asian NIEs) in general continued to grow at about the same pace as in the previous year due to among other things, the sustained uptrend of exports, there were some economies affected by foreign exchange rate fluctuations.

And the rest of the developing countries on the whole continue to face difficulties arising from the accumulated external debts.

(i) Economies of Developed Countries

The U.S. economy continued to expand in 1987, achieving a 2.9% growth, the same level as that in the preceding year, increasingly due to external demand. Specifically, exports showed a considerable gain, which led to increases in output and employment in the manufacturing sector, and then to increases in plant and equipment investment in the latter half of the year, though the growth in household spending slowed down due to such factors as a drop in housing investment. As for the budget deficit, the Reagan Administration and the Congress came to agree on specific plans to solve the problem at the end of 1987. This was reflected in the budget which was adopted by the Congress later on.

Among European countries, the United Kingdom, scored a relatively fast economic growth led by domestic demand on the back of strong personal consumption and increased equipment investment. But the Federal Republic of Germany, France and Italy witnessed only moderate economic growth in general. The European economies as a whole registered a modest increase in terms of industrial output with their unemployment rates remaining at high levels and prices on an uptrend, albeit slightly.

The Japanese economy sustained an expansionary trend with the firm domestic demand and the further improvement in the employment situation.

The OECD countries as a whole recorded an average economic growth of 3.1%, according to the 1988 OECD statistics.

(ii) Economies of Developing Countries

The economies of developing countries as a whole turned in an average growth of 3.1% with a conspicuous disparity in the growth among different regions.

Asian NIEs had a double-digit growth as in 1986 because of the strong exports, whose effects rippled through domestic equipment investment, personal consumption and other areas. ASEAN countries also saw a sharp recovery in their economies due to a pickup of crude oil and primary commodity prices, growing exports of manufactured goods and increased direct investments from abroad.

Latin American countries registered a slow expansion in their economies due to a rebound in primary commodity prices despite the constraints of external debt burdens.

But oil-exporting countries suffered from minus economic growth in spite of a recovery in oil prices.

(b) External imbalances among major industrialized countries, which represent no small problem under the current conditions of the world economy, have begun to show a clear sign of improvement since the latter half of 1986, though they remain at high levels. On the other hand, the world has come to face new economic problems, including a rapid accumulation of Asian NIEs' trade surpluses.

(i) The U.S. trade deficit peaked in 1987 and turned to a slow process of reduction, primarily because of the effect of the depreciation of the dollar, which reinforced the uptrend and growth pace of exports.

(ii) As for Japan and the Federal Republic of Germany, on the other hand, their trade surpluses began shrinking in accordance with the appreciation of their currencies against the dollar and this trend still continues.

(iii) In the background of the slow pace of the improvement of the U.S. trade imbalance, there is the expansion of its trade deficits with Asian NIEs.

(c) (i) Following the meeting of the Finance Ministers and Central Bank Governors of the Group of Five (G5) maor industrialized countries at Plaza Hotel in New York in September 1985, the dollar plummeted with its weakening trend persisting almost uninterruptedly. In the first half of 1987, the dollar continued to depreciate though it remained stable by and large between April and mid-October following the "Louvre accord" reached among the Finance Ministers and central bank governors of the Group of Seven (G7) industrialized countries in February on the need to stabilize exchange rates. But the "Black Monday" stock market crash in New York on October 19 and the subsequent crash on the stock markets of other countries intensified concerns about the future course of the U.S. economy, which suffers from the twin deficits of the fiscal and trade deficits. The dollar tumbled to a record low of 120.45 yen momentarily and closed at 121.65 yen on Jan. 4, 1988. In other words, the yen appreciated by a sharp 99% in the course of two years and three months since just before the G5 meeting in New York in 1985, when the dollar stood at 242 yen.

(ii) Such an unprecedented fast appreciation of the yen struck a blow to the Japanese economy, especially to export-oriented enterprises. In these circumstances, Japan has been trying to stabilize foreign exchange rates and prevent the dollar's further slide by coordinating economic policies with other major industrialized countries at such forums as a series of summit meetings and gatherings of the finance ministers and central bank governors of major industrialized countries.


(2) Importance of Policy Coordination

The international economy in the post-World War II period has been managed by GATT in the area of trade and by the IMF and the World Bank in the financial area, which made no small contribution to the sustained growth of the world economy and the expansion of global trade. In the background of this regime, there has been the overwhelming predominance of the United States both in the political and economic arenas.

However, as a result of the economic growth of Europe and Japan, the American predominance has shown a relative decline. Moreover, the expansion of international trade, progress in financial liberalization, development of information and telecommunications technologies, etc. have led to the rapid progress in the globalization of economic activities, strengthened mutually dependent relations among different countries. Under such circumstances, it has become indispensable for major industrialized countries, including the United States, to pay due consideration to the external implications of their national economic policies and the coordination of these policies among them.

With this in mind, the seven major industrialized countries agreed to aim for the non-inflationary sustained growth of the world economy, the reduction of external imbalances and stable exchange rates. They formulated the framework of macroeconomic policy coordination at their Tokyo Summit Meeting in 1986 and strengthened such a framework at their Venice Summit Meeting in 1987. As for the reduction of external imbalances, which has become one of the single largest problem in the world economy, it was agreed that surplus countries will design their policies to strengthen boost domestic demand reduce and surplus, following fiscal and monetary policies within the framework of medium-term fiscal objectives designed. Deficit countries on the other hand will reduce the present fiscal and external imbalances, while following policies designed to encourage steady low-inflation growth (Venice Economic Declaration). The seven countries also agreed at the Toronto Summit in June on the need to continue policy coordination and strengthen it, if necessary, while admitting that such a policy coordination led to the emergence of signs of the present external imbalances being corrected. They also attached importance to the promotion of structural adjustment policies as part of international cooperation from the viewpoint of enhancing the effectiveness of macroeconomic policy coordination.

As stated above, the world economy has been in the very process of transition and adjustment. On the other hand, it appears that the prescriptions for solving various difficulties currently confronting the world economy and ensuring non-inflationary its sustained growth have been all but formulated. Therefore, the major industrialized countries are called upon to further pursue effective and consistent economic policies from the viewpoint of economic coordination.

We shall now introduce discussions at G7, OECD and Summit meetings.


(3) Direction of Industrialized Countries' Policy Coordination

(a) G7

At the Tokyo Summit Meeting in May 1986, agreements were reached on ways to reinforce the so-called "surveillance," or mutual monitoring of economic policies, including the use of various economic indicators, as well as the inauguration of a meeting of the Finance Ministers and Central Bank Governors of the Group of Seven (G7) major industrialized countries in order to beef up international economic policy coordination. The first meeting of the G7 finance ministers and central bank governors was held in September of that year followed by those in February, April and September 1987. In December of that year, they issued a statement without holding a meeting. They thus continued efforts to coordinate economic policies through multilateral surveillance, which were agreed on at the Tokyo Summit Meeting in 1986 and reinforced at the Venice Summit Meeting in 1987.

At a meeting in Paris in February 1987, the G7 finance ministers and central bank governors issued a statement specifying policies that should be taken by each G7 country, such as domestic demand expansion by surplus countries and reduction of domestic imbalances by deficit countries, in a move to ensure more balanced growth of the world economy and the correction of external imbalances. The statement said: "The Ministers and Governors agreed that the substantial exchange rate changes since the Plaza Agreement will increasingly contribute to reducing external imbalances and have now brought their currencies within ranges broadly consistent with underlying economic fundamentals. . . Further substantial exchange rate shifts among their currencies could damage growth and adjustment prospects in their countries." It added that "they agreed to cooperate closely to foster stability of exchange rates around current levels." (Louvre agreement). In the G7 meetings in April and September 1987, the goals of the Louvre accord were reaffirmed. Thanks to such policy coordination efforts among the seven countries, foreign exchange rates largelyu remained stable through mid-October 1987.

But the turmoil of the securities and financial markets triggered by the "Black Monday" stock market crash in New York demonstrated the necessity for the United States to further its economic policy efforts and for each advanced country to continue policy coordination. After close consultations, the G7 countries issued a statement, in which they reiterated policies for each country to follow in order to strengthen policy coordination efforts and agreed that they will continue cooperating closely to promote the stability of foreign exchange rates in the belief that the dollar's further drop or the dollar's rise to the extent that becomes destabilizing to the adjustment process could be counterproductive to the would economic growth.

(b) Organization for Economic Cooperation and Development (OECD)

At the annual ministerial council meeting of the OECD held on May 18-19 in 1988, participants shared the view that the world economy had been buoyant from the macroeconomic viewpoint and current account imbalances among major countries had been improving though the pace of the correction of external imbalances was sluggish, financial and foreign exchange markets were perceived to be somewhat unstable and concern about modest economic growth and high unemployment persisted in Europe. They then reaffirmed the importance of further macroeconomic policy coordination and cooperation in the area of structural adjustment policy.

As for specific policy objectives for each country, the United States was urged to cut its huge fiscal deficit, while European nations were called on to push forward structural adjustment in line with macroeconomic policy coordination. Japan, on the one side, won high acclaim for its recent economic growth led by domestic demand and the consequential partial correction of the external payments imbalance. On the other side, it was urged to continue with the current policy efforts alongside with further promotion of currently undertaken structural adjustments in such areas as agriculture, land use policy, taxation system and distribution.

(c) Toronto Summit Meeting

Leaders of the seven countries shared the perception that the "effectiveness and resilience" of the policy coordination developed at the Tokyo Summit and strengthened at the Venice Summit have been "proved" with a moderate non-inflationary growth being sustained, external imbalances showing signs of being corrected and the aftereffects of the "Black Monday" stock market crash in October 1987 having almost been overcome.

They welcomed the addition of commodity price indicators to the list of economic indicators for use in the multilateral surveillance and reaffirmed the need for deficit countries to reduce spending and for surplus countries to maintain the momentum of domestic demand expansion and strengthen it further, if necessary. They also endorsed the conclusion about foreign exchange rate changes drawn by the G7 finance ministers and central bank governors.

At the Toronto Summit, the heads of state and government emphasized the importance of effectively implementing structural policies from the viewpoint of supplementing macroeconomic policy coordination and enhancing its effectiveness. Moreover, priority tasks for each nation were clearly stated in the economic statement - on top of agricultural reform as the common task, deregulation in the areas of land use, distribution, etc. and tax reform in the case of Japan, and increased incentives for private-sector savings, strengthening of international industrial competitiveness, etc. in the case of the U.S.


(4) Japan's Policy Efforts

As the direction of international policy coordination has already been made clear at annual economic summit meetings and other forums, Japan has continued with policy coordination efforts as stated below in a move to make positive contributions to the sustained growth of the world economy as one of its major players.

(a) Achievement of Domestic Demand-led Economic Growth

Japan has implemented various policies in order to redress its huge external imbalance and turn its economic structure into the one that is in more harmony with the economies of other countries. A case in point is the decision in May 1987 of a package of Emergency Economic Measures that involves fiscal expenditure of more than 6 trillion yen, including additional public investment and income tax cuts. In July of that year, a supplementary budget designed to implement the package was speedily enacted.

Thanks to such policy efforts, domestic demand, expanded through expansion of personal consumption and housing investment, with equipment investment increasing steadily. On the other hand, exports marked time due to the yen's appreciation, while imports increased. As a result, Japan's trade surplus in fiscal 1987 plunged $13.6 billion to $76 billion with external demand making a negative contribution to the overall economic growth. This shows that the structure of the Japanese economy has been shifting steadily toward one led by domestic demand.


Trends of Real Economic Growth Rates


The ratio of Japan's current account surplus to its GNP fell to 3.3% in fiscal 1987 after peaking out at 4.5% in fiscal 1986.

Moreover, the government secured a sharp increase of about 20% in public works budget in FY1988, compared with that in the initial fiscal 1987 budget from the viewpoint of domestic demand expansion, a turnaround from the past practice of imposing a mandatory minus ceiling on spending increases.

Thus Japan's economic structure has been steadily shifting to one powered by domestic demand thanks to the yen's appreciation, and efforts on the part of the government and the private sector. But further policy efforts for structural adjustment is needed to ensure the vitality and prosperity of the Japanese economy as a whole and to achieve a better quality of life.

(b) "Economic Management within a Global Context" - Five-Year Economic Management Plan

In May 1988, the government decided on a five-year economic management plan that should serve as the guidelines for Japan's economic management in May 1988 on recommendations from the Economic Council. The plan cited three immediate issues Japan faces. First is that of reducing the external imbalance and contributing to a better world. Second is that of creating diverse lifestyles in which the people can enjoy a better quality of life. And third is that of promoting balanced economic and social development nationwide. In order to solve these three problems simultaneously, the government has been following a policy to promote economic restructuring more vigorously and to promote and consolidate the shift to a domestic demand-led economy. The government has decided to promote deregulation, in particular, because it forms the center of economic restructuring. It has also expressed its intent to carry out the policy for economic management with regard to every policy problem from the viewpoints of "Economic Management within a Global Context."

Through such policy efforts, the government aims to sustain the recent declining trend of the current account surplus-GNP ratio and reduce it to a level considered more harmonious with the international society over the period of the Plan.

During the five years, the government expects the real economic growth rate to hover around 3.75% with domestic demand making a contribution of about 4.25% and external demand continuing to make a negative contribution.


2. Strengthening Free Trading System


The free trading system in the post World War II period, designed to ensure indiscriminate treatment against any country in trade and establish open and multilateral trade relations through the reduction and elimination of tariff and non-tariff barriers, brought about an unprecedented expansion in global trade and the world economy. But in recent years, trade friction among major trading countries and areas like the United States, the European Community (EC) and Japan has intensified further againt the background of the relative decline of the U.S. economic power and its huge trade deficit, Japan's bulging trade surplus, and slow progress in the industrial restructuring and high unemployment rate in Europe. Japan, for example, has been forced to face difficulties in such specific problems as those related to high-tech equipment, agriculture and public works projects. Furthermore, such trade friction has given rise to doubts about the usefulness of the postwar multilateral trading system centering around GATT and intensified protectionist pressure as evidenced by the enactment of a sweeping omnibus trade bill.

In such circumstances, moves for regional economic integration have intensified as seen in the signing of the U.S.-Canada free trade agreement and progress toward the unification of internal markets within the EC in 1992. The multilateral trading system, revolving around GATT, is now faced with a major challenge.

Japan, which has depended on the free trading system for its prosperity and aimed to build multilateral trade relations with various foreign countries without depending on regional economic relations, believes it indispensable to strengthen the open and multilateral trading system in order to realize the expansion of trade and development of the world economy from now on.

With this in mind, it is necessary for Japan to actively participate in the Uruguay round of multilateral trade negotiations. Moreover, prompt resolution of disputes raised under the GATT is important to enhance the effectiveness and credibility of the free trading system. Regarding movement for regional economic integration as exemplified in the U.S.-Canada Free Trade Agreement and the unification of the EC' s internal markets, they are expected to contribute to energizing the economies of constituent countries and thus lead to the expansion of the world economy. But on the other hand, since it cannot be denied that such moves may have an adverse impact on trade with third countries that are not parties, and moreover, may lead to the formation of economic blocs, hence careful attention should be paid.


(1) Present State of the Uruguay Round

As for the Uruguay Round of multilateral trade negotiations which were officially declared open at a ministerial meeting in Punta del Este, Uruguay, in September 1986, the Group of Negotiations on Goods (GNG) in 14 areas and the Group on Negotiations on Services (GNS) proceeded with the initial stage of work, centering on the sorting out of problems and processing of proposals received from participating countries in each negotiation area (please refer to the attached table).


Framework of Uruguay Round Negotiations


The current round of multilateral trade negotiations is unprecedented in size both in terms of the number of participating countries (103 countries) and the scope of areas covered, including new areas such as services trade, intellectual properties and investment. They have made smooth progress so far. In some areas substantial negotiations have already started in 1988. In addition, as the ministerial-level Trade Negotiations Committee (TNC) is scheduled to take place in Montreal, Canada, in December for an interim review of the negotiations, the pace of the negotiations is expected to quicken so that a so-called "early result" (early settlement of negotiations and implementation of agreed matters) can be attained. At the mid-term review, progress in all the negotiation areas are expected to be confirmed and useful guidelines for the negotiations to be held in and after 1989 are envisaged.

Since 1987, Japan has advanced proposals as to what issues should be specifically covered by the negotiations and how they should be pursued. In particular, it proposed ways to work out new rules on agricultural trade at the end of that year. In 1988, it is hoped that specific responses will be made on the basis of proposals presented by each participating country in anticipation of how the outcome of the mid-term review, including the early result, will be. Currently, coordination of different views is being carried out as to what form the early result can be attained on the occasion of the mid-term review. For the moment, the early result is expected to cover tropical products, to which the trade ministers, taking into account the need of developing countries, agreed to give special consideration in terms of the timing of negotiations and the implementation of their outcome at the Punta del Este meeting, strengthening of the GATT system mainly through the introduction of new trade policy surveillance systems by each country, and strengthening of the dispute settlement mechanism by speeding up and making more efficient procedures.


(2) Present State of Negotiations at Major Negotiations Groups

(a) Agriculture

At the end of 1987, Japan advanced a proposal about the formulation of new rules in which due considerations on the unique nature of agriculture, and the need for stabilizing domestic production of "basic foodstuffs" in countries with low food self-sufficiency ratios are sought for, while upholding the agricultural negotiating objective of further liberalizing agricultural trade. But major difficulties are anticipated in the current negotiations as there remain wide differences between the Japanese proposal and those made by the United States and the Cairns Group, which comprises major exporters of farm products, including Australia and New Zealand. They are seeking drastic decontrol both in terms of subsidies and market access. On the other hand, the EC and Scandinavian countries are assuming a cautious stance toward radical liberalization measures as in the case of Japan.

(b) Safeguards

Safeguards are emergency import restriction measures taken to forestall serious damage to domestic industry as a result of an unforeseen sharp increase in imports as provided for in GATT Article XIX. A major problem which remained since the Tokyo Round Negotiations are whether to allow the selective application of the safeguard measures to limit imports only from certain countries and how to cope with the so-called "gray measures" such as voluntary import restrictions, that are widespread and are not in keeping with GATT Article XIX. But in light of wide differences of views among countries concerned, discussions have yet to be concluded.

(c) Tropical Products

As tropical products occupy an important place in trade of developing countries, special considerations are sought regarding the timing of negotiations and the implementation of the results, in line with the Punta del Este Declaration. Though agreements have yet to be reached on the method of negotiations - that is, whether to conduct negotiations on specific items for which requests have been made or to lower or cut tariffs under a certain formula, it is hoped that the negotiations will make substantial progress through the presentation of specific requests from each country.

(d) Intellectual Property Rights

As ways to protect intellectual property rights, such as patents and copyrights, differ from one country to another, they have given rise to various kinds of trade problems. Against this background, new rules on intellectual property rights are being formulated at the current round of global trade talks. But up until now, the United States and Japan, both of which are seeking to establish norms for protection for each intellectual property right, differ from those reluctant to dealing with intellectual property rights at GATT forums or the Uruguay Round trade talks, notably developing nations.

(e) Trade-Related Investment Measures

As agreements have yet to be reached on what kind of trade restrictive or distortion effects are involved in local content regulations, obligatory exports and other investment measures as well as on the scope of negotiations, it is hoped that each country will advance proposals to pave the way for agreements.

(f) Strengthening of GATT Functions

Negotiations have been under way in order to strengthen GATT's functions in terms of its surveillance functions, decision-making functions and cooperation with the IMF, the World Bank, etc. Of the three points, details of the trade policy surveillance system, aimed at periodic monitoring of the effects of each country's trade policy on the functions of the multilateral trading system, have been worked out to no small extent, becoming the leading candidate for the "early result." But there remain differences over the two other points of how to reinforce GATT's decision-making functions, centering on ways of ministerial involvement, and of how to beef up relations with the IMF, the World Bank, etc.

(g) Services

Though GATT is principally an agreement in which rules on trade in goods are specified, efforts are being made at the current global trade round to map out the framework of multilateral rules on services trade. Developed countries, in particular the United States, are trying to carry out liberalization of services trade per se, while developing countries, including India and Brazil, want the multilateral framework as a method for promoting the development of developing countries. Furthermore, agreements have yet to be mapped out on the whole picture of the multilateral framework and principles to be included in it, auguring no small difficulties for the future of the negotiations.


(3) GATT Disputes Referred to Settlement in which Japan Is Involved

From 1986 to 1988, the United States and the EC sought the establishment of a dispute settlement panel, claiming that Japan's trade-related measures pose problems in light of the GATT. Up until then, there was only one case of the establishment of a panel against a Japanese trade measure and the issue involved was settled. This was related to Japan's leather import quota system against which the United States took up issue in 1983. But in July 1986, the United States requested a panel on Japan's residual import restrictions, a long-standing Japan-U.S. trade problem, and the GATT Council subsequently decided on the establishment of a panel in October of that year. The EC also requested a panel, contending that Japan's liquor tax system and labeling practices run counter to the obligation set forth under the GATT with the result that a decision on setting up a panel was made a GATT Council meeting in February 1987. Moreover, the EC requested a panel, contending that the measures taken by Japan to monitor exports of semiconductors to third-country markets on the basis of the Japan-U.S. Semi-conductor Trade Arrangement pose problems in light of the obligation under the GATT. Subsequently, the GATT Council decided to set up a panel on the issue in April of that year.

As for the liquor tax problem, the GATT Council adopted a report at a meeting in October based on the recommendations worked out by the panel stating that though the labeling practices pose no problems as far as GATT is concerned, the liquor tax system runs counter to Article III of the GATT, which provided for national treatment. With regard to the residual import restrictions on the so-called 12 agricultural products, the panel came up with a report which concluded that the import restrictions on 10 out of the 12 items, excluding peanuts and miscellaneous beans, contravene Article XI of the GATT providing for the abolition of quantitative import restriction. At the session of Contracting Parties in December, Japan sought a partial adoption of the panel's report as it was taking exception to part of the report and faced with domestic difficulties in liberalizing some of the 10 items. However, since other GATT members refused to accept the Japanese position, the adoption of the report was postponed. Later at a GATT Council meeting in February 1988, Japan agreed to the adoption of the whole of the panel report after stating that it will reserve its position regarding the interpretations certain section of the report to which Japan objects and that it would be difficult to liberalize imports of milk products and starch.

Also in 1988, Canada demanded the establishment of a panel to discuss what it contends discriminatory Japanese tariffs on imports of spruce, pine and fur. The GATT Council granted Canada's request in March of that year.

A sharp increase in the number of cases involving Japan referred to the GATT panel is a result of the failure to resolve long-standing bilateral problems between Japan and its trading partners. However, it also reflects the severe attitude on the part of Japan's trading partners against Japan that maintains huge trade surpluses, showing the need for Japan to take appropriate response.


3. COCOM in East-West Economic Relations


The basic framework of the international politics of the post-World War II era has been the power balance between the Eastern and Western blocs. The Free World countries, including Japan, have been aware of the importance to control the export of strategic goods because unrestricted exports of such commodities to the communist bloc could have adverse effects on the security of the Free World countries. Such export controls would be more effective if they are implemented through coordinations among like-minded countries, based on common standards, rather than implemented independently on separate standards of each countries. On the basis of such a view, the activities of the Coordinating Committee for Multilateral Strategic Export Controls (COCOM) started in 1950. Japan joined COCOM in 1952.

Despite the recent developments in the East-West relations, such as Moscow's perestroika and the signing of the INF treaty, which is important to cautiously watch those developments. Japan and other Western countries continue to believe that the importance of COCOM remains unchanged.

COCOM is an informal intergovernmental coordinating body for the export controls of the strategic goods and its secretariat is based in Paris. Currently, it has 16 members-Belgium, Canada, Denmark, France, the Federal Republic of Germany, Greece, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Turkey, the United Kingdom, the United States and Japan. It is engaged mainly in the following activities:

 (i)    Establishment and updating of the lists of embargoed goods and technologies.

 (ii)   Exceptional approval of exports of embargoed goods.

 (iii)  Cooperation and coordination of the enforcement of export controls.

 (iv)   Cooperation with third countries in order to ensure the effectiveness of the COCOM controls.

As COCOM's activities cover controlling strategically important goods and technologies, which might contribute to the strengthening military capabilities of the prescribed countries, COCOM member countries are in agreement not to disclose the details of its activities.

It is indispensable for the Western world to maintain its edge over the communist countries in the fields of strategically important high technologies. On the other hand, it is also important to remove obsolete items from control lists reflecting technological changes so that we could assure more effective controls of truly strategically significant items.

Taking the illegal export to the Soviets by Toshiba Machine very seriously, Japan has taken major steps to strengthen its export control system and to improve its actual workings particularly since 1987, including the amendments of the Foreign Exchange and Foreign Trade Control Law.

Japan is determined to continue its enhanced efforts in this area, closely cooperating with other COCOM member countries.



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