Section 2. North America


1. The United States of America


(1) Internal and External Situation

(a) Domestic Politics

(i) Entering the latter half of its second term, the Reagan Administration faced a number of difficult issues such as the Iran-Contra affair which was revealed in late 1986 and the handling of a Democrat-controlled Congress. Furthermore, "Black Monday," the crash at the New York Stock Exchange on October 19, 1987, aroused feelings of anxiety among American people about the future of the nation.

The visit by General Secretary Gorbachev of the Soviet Union to the U.S. and the signing of the INF treaty in December 1987 was valued as a great accomplishment of the administration and gave a boost to the presidential popularity at the 60% level.

In spite of low unemployment and inflation rates and the longest period of economic expansion in peacetime, as widely pointed out, the American people were pessimistic, suspecting that such prosperity may not last long. Notably, some scholars and intellectuals voiced their serious concern over the relative decline of U.S. power and the decrease in its economic power, reflecting the continued federal budget and trade deficits as well as the change from a creditor to a debtor nation.

(ii) Relations between the Administration and Congress and the 1988 State of the Union Message

The Reagan Administration made its efforts to accomplish unfinished political goals, but was increasingly in conflict with the Congress over the issues such as reduction in the federal deficit, the appointment of the Supreme Court judge, the Contra aid, safe navigation in the Persian Gulf, which was entangled with consideration of both sides for the 1988 presidential election.

The Congress which strongly opposed the appointment of the conservative judge in the Supreme Court rejected twice the Administration's nomination and it was not approved by Congress until the third nominee was submitted. While the conference with Congress on the budget deficit had been dragging long, mainly due to the impact of "Black Monday," they finally reached a compromise to reduce the deficit by $79.2 billion in two years. However, this compromise included a tax increase to which the President was firmly opposed and the defense budget marked a net minus increase for the third consecutive year. The Contra aid bill met strong opposition in the Congress and only non-military assistance was approved. The administration policy of the reflagging of the Kuwaiti tankers as U.S.-owned vessels with U.S. naval escort caused a heated congressional discussion partly in relation to the War Powers Act, though it was finally implemented. The omnibus trade bill, adjusted between the two Houses, was passed by the Congress in April 1988 in exclusion of the Gephardt amendment (stipulating introduction of countermeasures against countries of excessive trade surplus), but was vetoed by the President. Later, on July 13, the new trade bill without the provisions the President opposed was passed by the Congress.

(b) The 1988 State of the Union address emphasized reducing the budget deficit along with recognition of the Reagan Administration's accomplishments and determination to continue and promote the Reagan lines and denunciated protectionism as destructionism. As to the foreign relations, the President urged an early ratification of the INF treaty and adovocated promotion of strategic arms reduction talks.

(iii) The Line-Up of the Reagan Administration

In addition to the assumption of the office of the Secretary of Commerce by Mr. Verity, businessman, due to the death of his predecessor Mr. Baldridge, toward the end of the Administration, the considerable number of senior officials, especially at Secretary-level, in the Administration left office and were replaced by new personnel. Secretary of Defense Weinberger was succeeded by Mr. Carlucci who was Assistant to the President for National Security affairs. His position was taken over by Mr. Powell who was formally deputy to Mr. Carlucci.

Mrs. Dole, Secretary of Transportation, and Mr. Brock, Secretary of Labor left their posts to give assistance to Senator Dole for his presidential campaign. Mr. Burnley, Deputy Secretary of Transportation, and Mrs. McLaughlin, former Under Secretary of the Interior, assumed the respective offices.

(iv) 1988 Presidential Election

(a) On the Republican side, the nomination race had been considered as a two-man fight, between Vice President Bush and Senate Minority Leader Dole. In contrast, on the Democratic side, many littleknowns were running for the election. After the only noted candidate, Mr. Hart, former Senator, withdrew from the race due to a scandal, the contest in the Democratic Party was expected to be in confusion.

(b) The primary election was held in every state and other areas from February through early June, 1988. In the Republican camp, Mr. Bush waged the primary election favorably with his notability, ample campaign funds and strong campaign organization and the high popularity of President Reagan, and won the nomination at the Republican national convention in August in New Orleans.

In the Democratic camp, although Reverend Jackson's stronger performance than it was in the election four years ago should be appraised, Mr. Dukakis, Governor of Massachusetts, steadily increased the number of his delegates by managing a stable campaign with better organization and abundant campaign finance and gained the Democratic nomination at the Democratic national convention in July in Atlanta.

(c) Mr. Bush asserted to basically follow the Reagan philosophy and policies and put emphasis upon his experience in foreign affairs. And Mr. Dukakis, based upon his successful record on the restoration of the Massachusetts' economy, adovocated rebuilding the U.S. economy. Both sides argued about issues such as competence, budget deficit, recovery of economic competitiveness and drugs.

Congressman Gephardt, another Democratic candidate, fared well in the early stage of the race by claiming a tough trade policy and appealing for protection of American workers, but the momentum did not last long and dropped out of the race midway.

(b) Diplomacy

What drew the most attention in American diplomacy in 1987 was diplomacy toward the Soviet Union.

An American-Soviet summit meeting was held in Washington in December 1987, following a 1985 summit in Geneva and a 1986 summit in Reykjavik. Besides the Washington summit, a total of 6 bilateral Foreign Ministers' meetings took place in the year, making 1987 a year which saw the closest-ever dialogue between the United States and the Soviet Union.

At the U.S.-Soviet summit meeting held in December, besides signing the treaty on a total elimination of INF, exchanges of candid views were made on a wide range of issues including arms control and disarmament, regional issues, human rights problems and bilateral issues. And, it was also agreed that President Reagan will visit the Soviet Union in the first half of 1988 for another summit meeting. Based on this agreement, the 4th U.S.-Soviet summit meeting was held in Moscow between President Reagan and General Secretary Gorbachev in May to June 1988. At the summit meeting, the instruments of ratification of the INF Treaty were exchanged, and both sides, highly evaluating the progress of U.S.-Soviet dialogue since 1985, agreed to continue the dialogue to seek its concrete results in the future. Although there were stages in the process of negotiations on the INF Treaty, a goal of "Global Zero" which the United States and its Western allies have advocated was finally achieved.

This was highly appreciated as a good result of the solidarity of Western countries and at the same time as an achievement of the Reagan Administration's Soviet diplomacy based on "deterrence and dialogue."

The United States and the Soviet Union are now continuing negotiations on a treaty aimed at reducing strategic weapons by 50%, which will draw the attention of the world on to what extent progress will be made in this negotiation as well as the negotiations in other fields between the two countries.

(c) Economy

The growth rate of the U.S. economy in 1987 stood at 2.9%, the same level as in the previous year. The economy has continued to expand gradually since autumn of 1982, marking the longest-ever peacetime record. During this period, the unemployment rate declined (6.1% in 1987) and the inflation rate remained low. However, the trade decicit marked a record high of $171.2 billion in 1987, and the government financial deficit remained at a high level, standing at $150.4 billion, though down by $70.8 billion from the previous year.


Results of U.S. Financial Balance and Its Estimate


U.S. Trade Statistics


Under such circumstances, stock prices of the New York Stock Exchange Market plummeted by $508 in October 1987, marking the largest-ever single day fall due to factors such as the uneasiness about the future of the U.S. economy in which little progress had been made in efforts to reduce the so-called "twin deficits" in trade and government finance, anticipated higher interest rates based upon fear of inflation and remarks by high-ranking U.S. officials to the effect that they would allow the value of the dollar to go down further. The sharp plunge of stock prices shocked not only the United States but also the global economy, making the issue of "twin deficits" again crucial for regaining the market's confidence.

On the budget deficit, the President and Congress reached an understanding immediately after the market crash to reduce the deficit by $79.2 billion in the coming two years with an inclusion of a tax increase and reduction in defense expenditure.

The U.S. trade deficit in 1987 marked a record high due to import increases led by the expansion of the U.S. economy, and by the so-called J-curve effect of the ongoing foreign exchange adjustment. Although the trade deficit showed an increase in nominal terms, the U.S. exports in real terms (volume) was expanding markedly due to a recovery in competitiveness of U.S. products with the dollar depreciation and U.S. businesses' efforts for an increase in exports. The trade balance has been improving as a trend since the second half of 1987.

The October market plunge caused fear that the U.S. economy might run into a recession due to a decline in personal consumption and other factors. However, personal consumption is making a steady recovery with its plus index figure in the first quarter, jumping back from a minus figure in the last quarter of 1987. Despite a slowdown in the economic growth pace recession for the coming months is seen less likely with robust capital investment and net exports.


(2) Relations with Japan

(a) Overview

(i) Japan and the United States, sharing the value of freedom and democracy, have strengthened the friendship and relations of cooperation in a wide range of areas involving politics, economy, culture, science and people-to-people contacts. Among them are the security cooperation under the Japan-U.S. Security Treaty and close economic relations symbolized by two-way trade exceeding $115 billion. The two countries have developed close interdependence, and have become indispensable partners to each other. Japan and the United States cooperate not only in the bilateral context, but have global partnership on such dealings as with East-West relations, Asia and other regions, international trade and finance, and policies for developing countries. It is increasingly important for the two countries to promote their cooperation based on a global perspective, given the size of their economies and the roles in the international community.

Reflecting the close relationship of interdependence, Japan and the United States face various frictions particularly in the economic and trade field. It is imperative to seek solutions to problems through mutual efforts lest the foundation of Japan-U.S. cooperative relations be undermined because of such frictions. This thought is shared by the governments of the two countries.

(ii) A visit to the United States paid by the Crown Prince and Crown Princess in October 1987 was an event symbolizing the close relationship between the two countries. During the visit made at the invitation of President and Mrs. Reagan, the Imperial couple visited Boston, Washington and New York, and met President and Mrs. Reagan, and many Americans from various walks of life. This was extremely significant for promotion of friendship and amicable relations between Japan and the United States.

The cooperation and exchange between top leaders have never been closer before, Prime Minister Nakasone, during the five years of his office, held a total of 12 summit meetings with President Reagan and developed their personal friendship and mutual trust.

(iii) Prime Minister Takeshita visited the United States in January 1988, for the first time after he assumed office. The visit was made under the recognition that the year was critical in that the Western community would face the two major challenges: building of stable East-West relations and management of the world economy. And that, as particularly Japan and the United States account for one-third of the world's total GNP, the maintenance of a firm relationship between the two countries to work toward their common goals would be important not only for themselves but also for the rest of the world.

Through their candid exchanges of views during the Japan-U.S. summit meeting, Prime Minister Takeshita and President Reagan confirmed the basic posture that the two countries would closely cooperate with each other from a global viewpoint and play their respective roles and fulfill their responsibilities, while seeking solutions to bilateral economic issues in the spirit of cooperation and joint endeavors, and with the aim of expanding and not contracting economic exchanges.

Thus, they established a basic tone for the management of bilateral relations. The establishment of personal relationship of trust between the two leaders was another major achievement of the summit.

(iv) Apart from bilateral economic issues, 1987 witnessed two incidents which developed into major bilateral issues, Toshiba Machinery's export to the communist-bloc and the question of safe navigation in the Persian Gulf triggered by the attack on U.S. naval ship Stark. These incidents led to the criticism characterized by the so-called "free-ride" theory in the Congress and elsewhere that Japan is not making enough contribution befilling its economic strength and is stealing a march while the United States is obligated to shoulder the large burden for ensuring the security.

As Japan has grown markedly in its economic strength the United States view with greater expectation that Japan will take responsible actions in the international community and make positive contribution to world peace and prosperity in a proper manner. At his speech at the National Press Club during his visit to the United States in January 1988, Prime Minister Takeshita announced Japan's future course in the international community as "Japan Contributing to the World." This presents the vision Japan should pursue as a responsible member of the international community and is an extremely important course in its efforts to expand and strengthen the global partnership of Japan and the United States.

(v) Maximum efforts are being made to facilitate close communication at high-level. In 1988, Japan-U.S. summit meetings took place in May (in London) and June (in Toronto) other than the January meeting, Foreign Ministers' meetings between Foreign Minister Uno and Secretary of State Shultz took place in June (in Toronto) and in July (in Tokyo), in addition to the January meeting. Substantively, positive developments are seen in the Japan-U.S. relationship. Major ending issues have been settled steadily, and other positive factors include the conversion of Japan's economic structure into a domestic demand-led one, Japan's further efforts in security, and the formulation of the "international cooperation initiative" which spells out concrete measures for making Japan "a country contributing to the world."

(b) Japan-U.S. Economic Relation

(i) The Bilateral economic relations are still largely affected by the large trade imbalance between the two countries.

(ii) With the huge trade deficit in the background, protectionist sentiment grew in the United States, and trade issues became a matter of great concern in the Congress where the Omnibus Trade Bill was vigorously deliberated.

The House of Representatives and the Senate passed their respective trade bills in April and July 1987. The House-Senate Conference worked for a compromise between the two versions of the bill, and reached virtual agreement at the end of March 1988. The compromise in the form of the Omnibus Trade Bill was adopted in the House on April 21 and in the Senate on April 27.

Tne so-called "Gephardt Amendment," which requires countries with large trade surpluses to reduce their surplus by 10% annually, and which was originally incorporated in the House trade bill was finally deleted in the Omnibus Trade Bill. However, the Omnibus Trade Bill still included many problematic provisions such as the "Super 301" provision and the provision on sanctions against Toshiba Corp. and other foreign companies. The "Super 301" makes it mandatory for the U.S. Trade Representative to hold negotiations with "priority foreign countries" to eliminate or reduce trade barriers on "priority practices." And, if such negotiations fail, the provision leads to unilateral retaliatory measures. The provisions on sanctions against Toshiba and other foreign companies imposed, for a period of three years, a prohibition on contracting with, and procurement of products and services from Toshiba Machine Company and Toshiba Corporation by the U.S. Government, and also a prohibition on the importation into the United States of all products produced by Toshiba Machine Company.

Besides these provisions the Omnibus Trade Bill also includes other controversial provisions such as the primary dealer provision, investment provisions on the review of certain mergers, acquisitions and takeovers, and an amendment to Section 337 on intellectual property rights.

Japan had on various occasions expressed its concern about the bill because it believes that the enactment of the protectionist bill with such problematic provisions would have a serious impact on bilateral and multilateral economic cooperation, thus hindering the development of the world economy.

The U.S. Administration expressed its position to oppose legislation of a protectionist trade bill and President Reagan on May 24 vetoed the Omnibus Trade Bill. The president said that although the trade bill approved by the U.S. Congress had improved in its content, the bill was undesirable for the United States as a whole since it included problematic clauses such as the advance notification provision for plant closings. The veto was maintained in the Senate. However, a revised Omnibus Trade Bill with the deletion of the provisions on plant closings and Alaskan oil was again introduced to the U.S. Congress. The revised bill was approved by the House on July 13, and by the Senate on August 3. President Reagan finally signed the revised bill on August 23, thus enacting the Omnibus Trade Act.

(iii) In the background of economic frictions between Japan and the United States there are structural imbalances in the two economies and the global economy. To correct these imbalances, macro-economic policy coordination among major countries including Japan and the United States is crucial.

With this recognition, Japan has made efforts to expand its domestic demand, increase imports, and improve market access, while requesting the United States to reduce its budget deficit, increase its industrial competitiveness, and contain protectionism.

Owing to such efforts by Japan and the accumulated currency adjustment, Japan's imports have increased tremendously, led by imports of manufactured goods. The decline of Japan's imbalances has become a stable trend.

This trend has been prominent also in Japan's trade with the United States since the beginning of 1988. Japan's trade balance vis-a-vis the United States during the first half of 1988 improved by 15% over the same period of the previous year. The U.S. trade deficit also has been following a declining trend after it peaked in the second half of 1987. To maintain these desirable trends in both economies, it is necessary for Japan and the United States to firmly continue their respective policy efforts.

(iv) In their meeting in January 1988, Prime Minister Takeshita and President Reagan reconfirmed the importance of macro-economic policy coordination for sustaining growth of the global economy and correcting the external imbalances, and also reaffirmed their commitment to continue close cooperation to stabilize foreign exchange markets.

Concerning various issues which naturally arise between the economies of the two countries which are deepening two deeply interdependent economies, the two leaders confirmed the basic stance to settle such issues in a spirit of cooperation and joint efforts, with the aim of achieving not a reduced balance but an expanded balance.

(v) On individual bilateral issues, the two countries have addressed these issues through joint efforts. In July 1987, "procedures for introducing supercomputers" were formulated following consultations with the United States, and in August, "the final report on MOSS discussions on transport machinery" was worked out as a result of consultations on the means of improving market access for automobile parts.

The issue of access to Japanese public works was substantively settled in March 1988, followed by an exchange of letters on May 25. The major points are as follows: (1) all major public works projects will be conducted in accordance with non-discriminatory procurement procedures, (2) the procurement procedures applying to Kansai International Airport projects decided in November 1987, are acceptable to the United States, (3) with the aim of getting foreign firms to become more familiar with Japan's public works procurement, special measures will be taken so that foreign firms may be designated as qualified bidders on any of the seven designated major public works projects without regard to their prior experience in Japan, (4) the government of Japan encourages nondiscriminatory procurement by the private and third sector entities on projects related to the designated seven major public works projects, and (5) the implementation of all the measures will be monitored and will be subject to review after two years.

(vi) On other pending issues between the two countries, efforts were made to resolve them through joint efforts. On the beef and citrus issue, Agriculture, Forestry and Fisheries Minister Sato visited the United States in April 1988, to discuss the issue with U.S. Trade Representative Yeutter in an effort to resolve the problem, but no settlement was reached. Consequently, in May, the GATT Council decided to establish a panel at the request of the U.S., Japan continued negotiations with the United States in an effort to resolve the issue through bilateral negotiations.

As a result, visiting Ambassador Yeutter and Minister Sato in June reached a substantive agreement to the effect that Japan will eliminate the import quota system for (1) beef and fresh oranges in April 1991, and for (2) orange juice in April 1992.

On the "GATT 12" agricultural items issue for which a GATT panel had been established at the request of the U.S., the GATT Council in February 1988, adopted the panel report which stated that Japan's import restrictions on 10 of the 12 items are inconsistent with the GATT rules, with Japan's view on the Council's record.

On the semiconductor issue, where the U.S. took unilateral measures to increase its tariffs on Japanese goods by a total of $300 million in April 1987, alleging Japan's violation of the bilateral semiconductor agreement, the U.S. Government lifted the dumping-related tariffs in June and November. However, the measure equivalent to $164 million relating to the market access issue is still in force. Japan is urging the U.S. to completely lift the measure at the earliest possible date on the grounds that it cannot be justified by any reason.

(vii) During Prime Minister Takeshita's visit to the United States in January 1988, Senate Majority Leader Byrd proposed a joint study between Japan and the United States on the U.S.-Japan Free Trade Area as a means of improving bilateral economic relations, which often is marred by sectoral issues.

Prime Minister Takeshita responded that Japan would first undertake a study on its own, and the Ministry of Foreign Affairs has initiated its internal study of this proposal.

The Free Trade Area concept will not be immediately reflected in Japan's external policies and will be studied from a mid- to long-term perspective. In the examination, it is necessary to give consideration to the interests of third countries which should not be hampered and consistency with the spirit and regulations of GATT.

(c) Japan-U.S. Security Relations

(i) Close Consultations and Cooperation

Nothing is more important to a nation than national security. In today's world, it is difficult for Japan to maintain its security by itself. Japan is ensuring its security by possessing minimum necessary defense capabilities and maintaining the Japan-U.S. Security Arrangements. These arrangements have enabled Japan to be free from any threat of armed aggression and to prosper in peace. It should be reconfirmed that the Japan-U.S. Security Arrangements contribute to maintaining peace and security of not only Japan but also the Far East.

Today, Japan-U.S. cooperation in the field of security and defense is extremely favorable.

(ii) Smooth Operation of Japan-U.S. Security Arrangements

a) Under the Japan-U.S. Security Treaty and the bilateral agreement on the status of U.S. forces in Japan, about 50-thousand U.S. personnel are being stationed in this country for preserving the security of Japan and international peace and security in the Far East. The Japanese government has taken various measures to ensure the effective operations of the U.S. forces in Japan. It continued its efforts in 1987 to improve facilities and areas for U.S. forces and to facilitate their activities. It is important for these measures to be implemented in harmony with economic and social activities in regions surrounding these facilities and areas.

b) The U.S. forces in Japan employ about 22,000 Japanese workers. Their employment needs to be stable to ensure the effective operations of U.S. forces. But the recent economic changes have forced the U.S. forces to greatly raise their expenses in dollars. Therefore, the government decided to further increase the amount of the costs of locally hired labor which Japan can bear. For the purpose, a protocol amending the existing special agreement on labor cost sharing (taking effect in June, 1987) was signed between Japan and the United States in January 1988, and came into effect in June of the year.

c) Japan and the United States continued their efforts to enhance reliability of deterrence based upon the bilateral security arrangements. Port calls of U.S. naval ships to Japan were made smoothly and various Japanese-American joint exercises took place.

(iii) Exchange of Technology in Security and Defense

a) The Strategic Defense Initiative (SDI) of the United States is a research program to study the feasibility of a system to render ballistic missiles ineffective by non-nuclear defense means and to pursue ultimate elimination of nuclear weapons. Following discussion between Japan and the U.S., the two governments signed an agreement on Japan's participation in the SDI research program in July 1987.

b) The Japan Defense Agency had continued work to select a new support fighter (FS-X) will supersede the Japanese Air Self-Defense Force's current support fighter F-1 which is to be phased out of active service in the latter half of the 1990's. At the end of 1987, the Japanese government made a decision on the Japan-U.S. cooperative development of the FS-X on the basis of American F-16. This is a significant example of Japan-U.S. technical cooperation for the development of equipment.

c) The agreement to facilitate interchange of patent rights and technical information for purposes of defense, which was concluded between Japan and the United States in 1956, lacked detailed procedures for its actual implementation. With the background of recent development of Japanese technology, the detailed procedures for the implementation of the agreement was arranged in April 1988, which is expected to further promote transfer of technical information for purposes of defense to Japan.

d) To counter the recent improvement of Soviet submarine capabilities, in June 1987, Japan and the United States decided to cooperate in enhancing the capability of the Anti-Submarine Warfare (ASW), by constructing a Twin Auxiliary Ocean Surveillance Ship and establishing the ASW Center.

iv) National security affairs need to be handled with all possible cautions. Japan, daily efforts to make the Japan-U.S. security arrangements function well constitute deterrent to aggression. The Japanese government is utmost efforts to improve Japan's defense capability and the Japan-U.S. security arrangements as such deterrence.


2. Canada


(1) Internal and External Situation

(a) The Progressive Conservative government led by Prime Minister Brian Mulroney has been tackling a range of issues since September 1984, when the party gained overwhelming majority in the House of Commons. Its policy priorities being the improvement of the relationship between the Federal and Provincial governments as well as the Canada-U.S. relationship, the government has made some major accomplishments including the participation of Quebec into the Canadian Constitution in April 1987 and the signing of the Canada-U.S. Free Trade Agreement in January 1988. What remains to be seen is when the Mulroney government is to call an election before its term becomes due in September 1989.

(b) One of the pillars in the foreign policy of the Conservative government is the furtherance of the relationship with the United States the trade of which accounts for approximately 70% of the total external trade of Canada. Annual summit meetings were started to be held since 1985 in addition to the quarterly Foreign Ministers' consultations. One of the most tangible results of this is the signing of the Canada-U.S. Free Trade Agreement in January 1988, which had been the prime policy priority for the Conservative government. The Agreement is scheduled to be enforced on January 1, 1989, after domestic legal procedures are completed in both countries.

(c) In the meantime, the Conservative government also played leading roles in some international arenas such as the Commonwealth Summit and the Francophone Summit in 1987 and the Toronto Economic Summit in 1988 all of which were hosted by the Canadian government.

(d) The Canadian Economy showed steady growth, sustained by the increase in external trade as well as domestic demand including buoyed individual consumption and housing starts. Main economic figures for 1987 were 3.9% for economic growth rate, 4.4% for inflation rate, and 8.9% for unemployment rate which is 0.7% down from the previous year. While tackling the financial deficit, the Conservative government announced in June 1987 the tax reform centered upon income tax reduction and reformation of sales tax. First phase of the reform has been currently implemented.


(2) Relations with Japan

(a) The relationship between Japan and Canada has been the favorable one as it was the previous year. In January 1988, Prime Minister Takeshita and Foreign Minister Uno paid a visit to Canada, and on the occasion of the seven-nation Economic Summit in Toronto in June, the Prime Ministers of the two nations met again for the pre-summit consultations. Subsequently in July the same year, Mr. Clark, the Secretary of State for External Affairs visited Japan for the annual Foreign Ministers' consultations. Japan and Canada share many common grounds; their characteristics as Western democracy, Pacific nation, and adherance to the free trading system. Thus, Canada has been becoming even more important partner for our country.

(b) Economic relations between the two countries have been generally good, and have shown steady growth in trade and investment. In 1986, the bilateral trade balance had changed to Japanese surplus, which raised some concern for possible expansion of trade imbalance. However, the trend has been reversed back to the Japanese deficit since 1987. One of the pending economic issues between the two countries is the tariff issue on spruce, pine and fir (S.P.F.) which has presently been disputed at the GATT. It is hoped that early settlement be reached on this issue.



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