Section 2. North America
1-1. Domestic Affairs
The Gulf Crisis affected the domestic situation in the United States in many ways. President George Bush, who is now about in the middle of his term, demonstrated his competence in coping with the Crisis, and confidence in his leadership among the American public has increased. However, whereas Kuwait was liberated and the Middle East situations gradually became calm, public attention in the United States returned to domestic problems since the mid-1990s, such as economic management, industrial competitiveness, education, crime and drug problems. In addition, racial and social issues, such as the controversy over the civil rights bill or disturbances involving Hispanic residents in Washington D.C., have been widely discussed.
In November 1990, the mid-term election was held for the members of the House of Representatives, the Senate, and 36 state governors. While the Democratic Party, the majority in Congress, made a moderate gain of seats in both houses, criticism of incumbent governors, irrespective of the party they belonged to, was strong among the voters mainly due to proposed tax increases, and in 15 states the party of the incumbent lost in the gubernatorial elections.
Given the widely shared view that the re-election of President Bush in the 1992 Presidential election is certain, what kind of strategy and tactics used by the Democratic Party is attracting attention.
(1) Recession and Rising Anxiety about the Future Economy
Since the spring of 1990, the American public has become more apprehensive about the future of the U.S. economy. It is considered to result from signs of a recession, the complication of such domestic issues as rescuing savings and loans institutions, the stalling "budget summit" between the Administration and the Congressional Democratic leadership, as well as tax increase questions. While President Bush maintained a high rate of support for his handling of the foreign policy, such as improving U.S.-Soviet relations, there was a view that he was not tackling appropriately the above domestic and economic problems.
(2) Coping with the Gulf Crisis and Demonstrating Presidential Leadership
The greatest issue for the Bush Administration, the U.S. Congress and the public alike from August 1990 to early 1991 was the Gulf Crisis.
When Iraq invaded Kuwait, President Bush secured public support by deciding to immediately dispatch U.S. forces to Saudi Arabia to defend that country. And he took a resolute stance toward the Iraqi invasion, taking it as a challenge to the creation of a new world order of the post-Cold War era. While some concern was raised among the U.S. public over the largest overseas deployment of American soldiers since the Vietnam War, antagonism against the Iraqi action was intense. Despite the fact that President Bush took such steps to solve the conflict as implementing economic sanctions, enacting U.N. Security Council Resolution 678 which approved the use of armed force, proposing direct negotiations with Iraq and cooperating with the Soviet Union, Iraq refused to withdraw from Kuwait, and this spread the feeling among the U.S. public that the use of force would be unavoidable.
On the other hand, the U.S. Congress, while basically supporting the action of the President, initially maintained a strong sense of caution as a result of the Vietnam War experiences and the Constitutional prerogative given to the Congress on the declaration of war. Against the Presidential decision of November 1990 to increase the deployment of forces, the strong view was expressed, led by the Democratic Party, that the United States should continue to wait until the effects of the economic sanctions would appear. Even some conservatives were skeptical about armed intervention. With the persuasion of the Administration, the U.S. Congress in January 1991 finally passed, by a small margin, a resolution to approve the use of military force.
The ground war brought a quick victory with very few allied casualties, since the Iraqi force had been first weakened through air attacks that lasted over a month. This suddenly raised the appraisal of President Bush's leadership and his support rate reached the historical high of 90 percent at one point (according to a Washington Post/ABC poll in March). The confidence of the American public was also restored by witnessing the overwhelming military and technological superiority of the United States.
(3) 1990 Mid-term Election - Voters' Dissatisfaction with Politicians
Despite the fact that the November 1990 mid-term election was held in the midst of the Gulf Crisis, the Middle East situation did not become a campaign issue. As generally anticipated, the Democratic Party modestly increased its seats in both houses (an increase of one seat in the Senate and eight seats in the Congress), making the Democratic majority even firmer. The Republican Party can be said to have held its losses to a minimum in light of the pessimistic forecasts made immediately before the election. But the sense of retreat was undeniable compared with the optimistic outlook the party had at the beginning of the year based on the great popularity of the President and the sustained economic growth.
In the Federal election, while there was no nationwide campaign issues and the usual pattern of incumbents having advantages was observed, the incumbents reduced the polling score. In the gubernatorial elections, the incumbents who had argued for a tax increase against the backdground of deteriorating state finances were defeated in 15 states. This result is interpreted as reflecting the voters' dissatisfaction with politicians, which had been found to be widespread among voters before the election.
The 1990 national census (which is implemented every decade) revealed that the population increase in the South and West is prominent. Redistribution of Congressional seats (435) and redistricting of Congressional districts reflecting the result will be applied to the 1992 election at the earliest.
(4) Shifting Interest to Domestic Affairs and Policy Issues
President Bush appealed to national unity in facing the Gulf Crisis in his State of the Union speech made at the end of January 1991 and pledged to use the same indomitable spirit in endeavoring for the revitalization of the United States. The domestic and economic policies of the Bush Administration consist of the three pillars of maintaining economic growth, investing in the future of the United States (strengthening competitiveness) and increasing opportunities for all Americans. In this regard, President Bush announced a series of major policy proposals, including the banking reform bill, the highway and mass transit bill, the strategy for the Year 2000 on U.S. education, the national energy strategy, the comprehensive anti-crime legislation, the third national anti-drug strategy and the civil rights bill. Then he began aggressive speaking tours throughout the nation in mid-April. These policies were announced under the severe fiscal constraint imposed on new expenditure items under the law on comprehensive fiscal deficit reduction enacted in the Autumn of 1990 to cope with the massive fiscal deficit.
After the Gulf Crisis, a recession became clear. Amid the atmosphere that domestic problems should be addressed with the same determination as was applied to the Gulf Crisis, concern for domestic problems has mounted. Many intellectuals expressed apprehension for the situation the United States is placed in, and some advocated that domestic problems should be addressed through reassessing policy priorities.
Ethnic and social problems also drew concern. Disturbances between African-American policemen and Hispanic Americans in Washington D.C. were reported as a confrontation among the minorities. In the U.S. Congress, the civil rights bill has been deliberated since the last Congress (January 1989 - January 1991), based on the argument that the 1989 Supreme Court decisions should be revised. For example, the court had ruled that the burden of proof of job discrimination rests not on employers but on employees. After the President criticized the Democratic proposal, saying it would lead to an increase in lawsuits and would mean the adoption of an employment quota system by corporations (employment and promotion of a certain proportion of minority races irrespective of job qualifications), the Democrats became more antagonistic. With the appointment by the President of Clarence Thomas, a conservative African-American, to the U.S. Supreme Court to succeed a liberal African-American, Justice Thurgood Marshall, how the Senate deliberated on confirming this appointment became one of the focuses of domestic issues in the Autumn of 1991.
(5) Presidential Election of 1992
President Bush has not declared publicly that he will run for re-election. However, with the backing of his strong leadership established in foreign affairs, he is expected to solidify preparations for re-election, overcoming the health concerns over his arrhythmia. The Democratic Party, on the other hand, made a slow start compared with the past presidential elections due to the Gulf Crisis and the high popularity of President Bush. As of August 1991, the only person who officially announced his candidacy was former Senator Paul Tsongas. What kind of election messages the Democratic Party will propose, along with the moves made after the summer by senators and governors who are regarded to be considering to run for the election, has also been watched with interest.
(6) Economy
The U.S. economy entered a recessionary phase in July 1990, ending the longest expansionary phase in peacetime, which began in 1982. The economic growth rate has recently been faltering. A growth rate of only about 1 percent continued from the second quarter of 1989, and a negative growth rate was recorded in the fourth quarter of 1990 after four and a half years of growth. The first quarter of 1991 also recorded a negative growth rate. As for the employment situation, the unemployment rate has been increasing due to the reduction in the number of those employed in the manufacturing and construction industries since August 1990, as well as to the sluggish increase in employment by the service sector. Prices, which rose substantially reflecting the soaring crude oil prices triggered by the Gulf Crisis, have subsided in 1991 as a result of stabilizing crude oil prices and other factors.
Of the "twin deficits," which have been the destabilizing factors on the world economy, the fiscal balance, which had shown some improvement since 1987, again shifted to yielding large deficits, reaching $220.5 billion in fiscal 1990, a level close to the peak in the past. Under this circumstance, President Bush called for a "Budget Summit" between the Administration and Congressional leaders in May 1990, launching an examination of radical measures to reduce the fiscal deficit. While the negotiations in the "Budget Summit" were extremely difficult, a comprehensive package to reduce the deficit by about $500 billion in five years was finally codified into law in November 1990. The Administration forecasts that the historically largest deficit of $282.2 billion will be recorded in fiscal 1991, and that it will increase even more to reach $348.3 billion in fiscal 1992. It will be necessary to carefully watch developments in this area.
The other deficit, the trade deficit, fell by $7.7 billion in 1990 to $101.7 billion, thanks to the sound growth of exports. This was despite the reversal in its declining trend, due to the rising crude oil import prices from August 1990 as a result of the Middle East situation. This marked the third consecutive year of improvement and was the lowest since the $52.4 billion recorded in 1983. The improving trend in the trade balance has been even more prominent in 1991, as the U.S. trade deficits with the European Community, Asian Newly Industrializing Economies and OPEC countries have been improving dramatically. Although the U.S. trade deficit with Japan has been also declining, the slow pace of improvement compared with other regions has led to an increase in the share Japan accounts for in the overall trade deficit of the United States.
1-2. Foreign Affairs
(1) Transformation of the East-West Relations and Constructing a New World Order
The storm of changes that swept through Central and Eastern Europe in 1989, accompanied by the collapse of the Berlin Wall and the changes in the Soviet domestic and foreign policies have completely transformed the Cold War structure characterized by East-West confrontations. From 1990 to 1991, the U.S. concentrated further efforts to construct a new international order based on these changes. For instance, the United States tried to firmly establish its dialogue and coordination with the Soviet Union. In Europe, it made efforts to keep unified Germany within the North Atlantic Treaty Organization (NATO) and to conclude the negotiations on Conventional Forces in Europe (CFE) Treaty.
Amid such efforts, the Iraqi invasion of Kuwait in August 1990 posed the greatest challenge for U.S. foreign policy. The United States, however, used to the maximum the favorable condition created by the changes in the East-West relations, and was able to take a joint step with the Soviet Union, with which it had tended to be confrontational over the Middle East. These developments made it easier for the U.S. to exercise its leadership in the adoption of the U.N. Security Council resolution which approved the use of force and in the actual exercise of force by the multinational forces deployed in accordance with the U.N. resolutions. In this sense, the reduction of East-West tension is creating a favorable condition for settling regional disputes.
(2) Foreign Policy on the Soviet Union
Basic nature of the U.S.-Soviet relationship is transforming from one of confrontation to cooperation, along the basic policy line announced by President Bush in May 1989 to bring the Soviet Union into the world, beyond the past policy of containment. In 1990 and 1991, U.S.-Soviet Summits were held four times: in Washington (May through June 1990), Helsinki (September 1990), Paris (CSCE Summit in November 1990), and Moscow (July 1991). On these occasions, several important treaties were signed, including the trade agreement to provide the Soviet Union with the most-favored nation (MFN) status, the Conventional Forces in Europe (CFE) Treaty, and the Strategic Arms Reduction Talks (START) Treaty which bad been negotiated for more than nine years.
What was notable in these meetings is that the two countries took the stance to cooperate in coping with regional conflicts. Particularly at the Helsinki conference, it was agreed to convey to President Saddam Hussein of Iraq the two leaders' intention to take joint actions to cope with the Gulf Crisis. During the Paris Summit, which was held on the occasion of the CSCE Summit, it is said that a large portion of their discussions was devoted to the Gulf Crisis. It was against such a background that President Bush emphasized in the Moscow Summit that the U.S.-Soviet relationship was transforming from a confrontational one to one of partnership. In the Moscow meeting, it was also agreed to hold a Middle East Conference in October 1991 under the joint sponsorship of the United States and the Soviet Union, aiming to bring peace and stability to the Middle East region after the Gulf Crisis.
Furthermore, the START Treaty was signed in the Moscow meeting in July 1991, in which a commitment was made to cut strategic nuclear weapons for the first time in history. The East-West relationship, thus, has also become more stable from a strategic point of view. On the other hand, during this summit meeting, many hours were spent on the economic problems in the Soviet Union. President Bush made several proposals to expand economic relations as part of a package to assist the Soviet Union, including the commencement of the Congressional procedure on the U.S.-Soviet Trade Agreement signed in 1990 and the removal of the ceiling on trade credits to the Soviet Union. As such, the Moscow meeting gave many indications that U.S.-Soviet relationship has entered a new era. Economic and political chaos in the Soviet Union, however, will probably continue to make the future of U.S.-Soviet relations unclear.
(3) Gulf Crisis
The salient features of the Bush Administration's response to the Gulf Crisis were the efforts made to form a broad anti-Iraq union, rallying not only the Western alliances but also Arab nations and the Soviet Union. It was done militarily through the formation of multinational forces centering on the U.S. forces and diplomatically through the efforts in the United Nations. As President Bush said in his speech he made at the commencement of the use of force against Iraq, "Saddam failed to turn this conflict to the Iraq vs U.S. formula. Tonight, 28 countries from five continents are fighting with Saddam Hussein." The formation of the anti-Iraq coalition succeeded and, together with the success of military tactics, enabled a quick victory.
Moreover, the Bush Administration began to construct a framework for perpetual peace in the Middle East with the same momentum as it did in rallying the Arab nations together against Iraq. As stated earlier, this initiative to jointly sponsor a regional conference in October was agreed upon by the United States and the Soviet Union in the Moscow Summit in July 1991. Right after this agreement, the announcement by Israel, which until then was opposed to holding such a conference, has made the initiative truly realistic. Efforts led by Secretary of State James Baker to coordinate the conference are continuing.
(4) Policy on Asia
The Bush Administration, while evaluating to a certain extent such developments in the Asia-Pacific region as the moves made by the Soviet Union and the Republic of Korea to establish diplomatic relations, maintains the posture that the continued U.S. military presence in the region is necessary in order to ensure regional stability and fulfill its responsibility to its allies. This stance is taken in view of the continued Soviet efforts to modernize its force in the Asia-Pacific region and the need for rapid deployment of U.S. forces in case of regional conflicts.
On U.S.-China relations, the U.S. Congress still takes a hard stance against human rights issues in China and its arms exports. Nevertheless, the U.S. Government, recognizing the importance of expanding its contacts with China, has been seeking ways to maintain dialogue and improve relations by dispatching high government officials to the country since the visit of Foreign Minister Qian Qichen to the United States in November 1990. As for the military bases in the Philippines, the lease for which expiring in September 1991, negotiations since September 1990 has resulted in agreements in July 1991 to return Clark Air Force Base in September 1992 and to continue to use Subic Naval Base for another 10 years. However, Philippine domestic procedures, including the ratification of the agreements, are yet to be undertaken.
1-3. Relations with Japan
(1) Overview
(a) Gulf Crisis and Japan-U.S. Relations
The Gulf Crisis and Japan's response to it had given an enormous impact on Japan-U.S. relations. The United States regarded the Iraqi invasion of Kuwait as a grave challenge to the rule of law in the international community and that a future international order of the post-Cold War era depended upon whether the international community could appropriately cope with the crisis. Based on this perception, the United States made a large-scale deployment of armed forces in the Gulf region and sought joint action and appropriate cooperation from other countries. Japan, from the viewpoint of cooperating as much as possible within the framework of the Constitution, decided on a series of measures to contribute to a resolution of the Crisis mainly through financial cooperation. Although the decision was implemented, the Japanese stance was perceived in the United States as Japan being hesitant to make a contribution using its human resources. At the same time, a feeling of disappointment spread that Japan was not willing to share the danger with the United States, and dissatisfaction mounted that Japan's initial financial cooperation was insufficient and came too late.
Nonetheless, in addition to the contribution equivalent to $2 billion made to the multinational forces within 1990, an additional contribution equivalent to $9 billion was decided on in January 1990, and was subsequently paid in March after the Diet approval on the necessary measures to secure the resources, including a tax increase. The financial contribution by Japan to the United States alone ultimately reached the magnitude of about $10 billion. Moreover, Japan dispatched Self-Defense Force minesweepers to the Persian Gulf in April. With these additional efforts by Japan, U.S. dissatisfaction with the Japanese contribution gradually subsided, as the Gulf Crisis came to an end.
(b) Restoring a Fully Cooperative Relationship
Even during the Gulf Crisis, steady progress was made in economic and security relations between Japan and the United States. On the other band, because the two countries had to spend much time coping with the Crisis, various adverse impacts of the Crisis were seen in the Japan-U.S. relations as a whole, including the failure to confirm the schedule of President Bush's visit to Japan. However, after the Gulf Crisis was resolved with the liberation of Kuwait, efforts were begun to restore fully cooperative relations as soon as possible and to enhance steady cooperation as global partners, based on the lessons both countries had learned from the Gulf Crisis. At the end of March, Foreign Minister Taro Nakayama visited the United States to discuss the Japan-U.S. relations after the Gulf Crisis and bilateral cooperation on international issues. On April 4, a Japan-U.S. Summit was held in Newport Beach, California.
In this Japan-U.S. Summit, it was confirmed that the fundamental conditions for the bilateral relationship are favorable against such backgrounds as the improving trend of the trade imbalance, the solutions being made on various pending issues and the conclusion of the new host nation support agreement. Moreover, in the joint press conference after the summit, the fact that President Bush stressed the importance of Japan-U.S. relationship and appealed for the need to strengthen it was extremely significant in ridding whatever emotional vexations that had existed between the two countries over their responses to the Gulf Crisis.
On July 11, immediately before the London Summit, Prime Minister Toshiki Kaifu visited the summer house of President Bush in Kennebunkport, Maine, at the President's invitation. They discussed the main agenda of the London Summit, centering on the issue of assisting the Soviet Union. On that occasion, the difference in the understanding between the two countries on whether or not the entire amount of the financial contribution equivalent to $9 billion promised to the United States alone was settled with the United States accepting the Japanese point of view. President Bush also clarified his intention to visit Japan as soon as possible. This indicates that Japan-U.S. relationship has overcome the adverse impacts of the Gulf Crisis and that both countries are ready to further pursue cooperation as global partners.
(c) Constructing Cooperative Relations toward the 21st Century
After the major challenge of the Gulf Crisis, both Japan and the United States have realized that the Japan-U.S. global partnership could not remain as an abstract concept and would have to have more substance. The two countries have already cooperated to secure peace and establish freedom and democracy in such vast regions as the Asia-Pacific region, Central and Eastern Europe and Latin America. It is becoming clear that beyond this cooperation, it would be very important for Japan in the context of Japan-U.S. relations to pursue international cooperation befitting to its national characteristics. In other words, it has become very important for Japan, which is trying to assume a major role in a new international order of the post-Cold War era, to have a clearer view on what kind of world it wants to create in cooperation with the United States and how it intends to cooperate toward such a goal. It would also be important for Japan to articulate, for instance, what kind of role the country intends to play in the area of human resource contribution, including participation in the U.N. Peace-keeping Operations, based on the experience of public confusion that delayed Japan's response to the Gulf Crisis, or how the country can specifically contribute to the successful conclusion of the Uruguay Round. Further efforts are required by both governments to obtain a broad public understanding in their respective countries on how they should construct cooperative and coordinated relations as the 21st century draws near. President Bush's visit to Japan, scheduled for the near future, is to provide an important opportunity for achieving that goal.
(2) Economic Relations
Economies of the two countries have become increasingly interwoven in recent years, and their interdependent relations have been deepening tremendously in such diverse fields as trade, direct investment, finance and technology. Specifically, about 27 percent of Japan's total value of trade in 1990 is with the United States and about 16 percent of the total value of trade of the United States is with Japan. Moreover, both Japan and the United States are direct investors of the largest scale in the other country. Of the total direct investment made in the two countries in 1990, about 24 percent of direct investment in Japan came from the United States and about 47 percent of direct investment in the United States came from Japan.
Furthermore, as the two countries together account for approximately 40 percent of the world GNP, the economic relationship between them is not confined to work merely in a bilateral context, but has come to have major impact on the world economy. Accordingly, the two countries bear major responsibilities for the stable growth of the world economy. With such recognition, the United States and Japan have been cooperating in the management of the world economy in various fora, including the G-7 summit, the OECD and the GATT. The cooperative relationship between the two countries has been gaining its importance toward constructing a new international economic order of the post-Cold War era.
From an overall perspective of the deepened interdependent relationship between Japan and the United States as well as the large weight the two economies carry in the world, the economic partnership of the two countries is fundamentally sound and it is important to further reinforce it.
To be sure, there have been various points of economic friction between the United States and Japan. However, this aspect must not cause one to lose sight of the strong fundamentals in the Japan-U.S. economic relations.
The bilateral economic relations are confronted with new challenges posed by the changes in the international situation and in the relative positions of the two countries. A sense of frustration is mounting inside the United States due to the relative erosion of the competitiveness of the U.S. economy, which once enjoyed absolute supremacy. The frustration has arisen in particular from: (1) the continuation of massive trade imbalance, albeit an improving trend, (2) the forecast of comparatively weak economic recovery in the United States despite the bottoming out of the recession and (3) the severe competition that U.S. corporations face with Japanese corporations, especially in the field of advanced technology. Various public opinion polls show that a sense of caution against the Japanese economic and technological strength has been mounting in the United States, in view of the fact that the military threat from the Soviet Union has declined. As a consequence, protectionist pressure to keep the U.S. market less open in order to protect American industries has been persistently strong in the United States. In response, the U.S. Government has made demands on a broader range of issues vis-a-vis Japan in the past several years.
Amid such a situation, the progress made between 1990 and 1991 in Japan-U.S. economic relations provided a little breathing space. The U.S. trade deficit in 1990 continued to decline to $41.1 billion from the 1987 peak of $56.3 billion, following the improvements made in 1988 and 1989. The first annual report on the follow-up of the Japan-U.S. Structural Impediment Initiative (SII) talks was published in May 1991. And major issues under discussion, such as construction, semiconductors, telecommunications and sea turtles, were settled. All of these helped soften the stern atmosphere in the United States.
On the other hand, there has been rising criticism in Japan that the United States has been laying the blame on others for its problems without solving the problem on its own, as shown in the further increase of the already enormous budget deficit.
In managing future Japan-U.S. relations, specific issues (issues of automobile parts and automobiles, foreign lawyers, computer procurements, etc. on the Japanese side), should be settled through talks in a manner that would not undermine the confidence in the overall Japan-U.S. relationship. Furthermore, it is important, with regard to the problems concerning the adequacy of the economic system or economic structure of Japan, to take the basic stance to reform and solve them as Japan's own problems, irrespective of whether or not the United States is making demands on Japan. At the same time, it will be necessary for Japan to point out more frankly to the United States the problems the United States should rectify; for example, restriction on log exports and on direct investment.
It was from such standpoint that the SII talks introduced a new perspective in Japan-U.S. consultations. In these talks, the two countries pointed out respective problems and consulted on the principle of two-way traffic, thereby taking a first step toward managing bilateral economic relations in a more balanced manner. From the Japanese perspective, raising U.S. competitiveness and reducing the budget deficit, as the United States committed in the SII talks, are indispensable for the United States in continuing to exercise global leadership. It is expected that this will also lead to the alleviation of the threat the U.S. public feels with regard to Japan. From the American perspective, it appears that Japan, coping more positively with problems that are rooted in the Japanese history and system, such as keiretsu and exclusionary business practices, would lead to a more open and fair Japanese economy. This kind of mechanism which enables Japan and the United States to improve themselves in a reciprocal fashion is important.
The above principle is appropriate not only in responding to current problems but also in dealing with medium- to long-term tasks. It is particularly important in this respect to improve the Japanese economic system to enhance fairness and transparency and to show convincingly that the Japanese economy is in line with international norms. At the same time, it is also necessary to publicize and inform broad segments of the American public about the Japanese economy with an even more objective and persuasive manner. Moreover, since instances of friction are in a sense a natural phenomenon consequent on the interdependent economic relations between the two countries, the posture to cope calmly with friction without overacting to it is required, not only of the government, but also of the public as a whole, including the mass media. It is through such efforts that we can develop economic relations of the two countries in a manner full of vitality based on sound competition and cooperation.
(3) Security Affairs
(a) Role Played by the Japan-U.S. Security Arrangements
More than 30 years have passed since the conclusion of the Japan-U.S. Security Treaty. History attests to the right decision Japan made to ensure the nation's peace and security through the security pact with the United States. In these three decades, Japan has grown into an economic power that can compare with the United States in terms of statistics, such as per capita national income and its share of world trade. This achievement was only possible by Japan's decision to be an ally of the United States, and to follow the path through which it could participate in the international order which the United States built as the leader of the free world. The explicit will of the United States to defend Japan as stipulated in the Japan-U.S. Security Treaty and the firm U.S. presence in the Asia-Pacific region that backs up the U.S. commitment have provided a peaceful and stable environment to Japan in the turbulent international community. Moreover, backed by the strong support given by the United States, Japan fully enjoyed the benefit brought on by the postwar international economic system and was able to quickly join the ranks of the Western industrialized nations. Such achievement was realized only through the fundamental stance Japan took as a member of the free world, symbolized by the Japan-U.S. Security Treaty. Without the existence of the alliance with the United States based on the Japan-U.S. Security Treaty, today's Japan as a major industrialized democratic nation would have never been realized.
(b) Host Nation Support
Based on the Japan-U.S. Security Treaty and the Status of U.S. Armed Forces Agreement, about 48,000 currently active duty military personnel of the U.S. forces are stationed in Japan for the security of Japan and the maintenance of international peace and security in the Far East. The U.S. forces in Japan (USFJ) constitute the core of the Japan-U.S. Security arrangements. The Government of Japan has voluntarily made utmost efforts to share the costs of stationing USFJ considering that it is extremely important to secure effective operations of USFJ and to ensure the smooth management of the security arrangements which is indispensable to Japan's security.
Specifically, the Government has constructed barracks and houses for USFJ in U.S. military facilities and areas in Japan since fiscal 1979. (The fiscal 1991 budget included about \95.7 billion for that purpose.) The Government has also shouldered part of the labor costs of the Japanese workers for USFJ (currently numbering around 22,000) since fiscal 1978. In 1987, the Government concluded the so-called Special Agreement with the United States providing for special measures in regard to Article 24 of the Status of U.S. Forces Agreement. Under this Agreement, aimed at dealing with the economic situation surrounding Japan and the U.S. in the 1980s, Japan shouldered part of eight categories of allowances, including the retirement allowance for Japanese workers. In 1988, the Special Agreement was revised, calling for Japan's fiscal 1990 budget to pay the costs of all the allowances included in the Special Agreement.
Furthermore, after reviewing the measures required for the Mid-term Defense Program from fiscal 1991, the Government in December 1990 decided to take new measures on host nation support for USFJ. Based on that decision, a new Special Agreement was signed between Foreign Minister Nakayama and Secretary of State Baker in January 1991. After its approval in the Diet, the Agreement became effective in April.
The new Special Agreement stipulates that Japan can pay up to 100 percent of the utilities costs for USFJ and the basic salaries of Japanese workers in U.S. bases in Japan over five years beginning in fiscal 1991. The United States is currently bearing these expenses. If Japan is to bear all of these costs at the end of fiscal 1995, Japan will be shouldering about 50 percent of the total cost of the USFJ (Note). Including the costs paid under this new arrangement, Japan pays in total approximately \477.1 billion (Note) for the cost of the USFJ in fiscal 1991.
The new Special Agreement not only contributes to effective implementation of the Japan-U.S. Security arrangements, but also is very significant for the Japan-U.S. relationship as a whole.
(c) Close Consultations and Coordinations
It is indispensable for the two countries to continue uninterrupted dialogue to ensure smooth implementation of the Japan-U.S. Security arrangements and enhance their credibility.
As a consultative mechanism between the two countries for such a dialogue, the Japan-U.S. Security Consultative Committee (SCC) was established through the exchange of letters between Prime Minister Nobusuke Kishi and Secretary of State Christian A. Herter at the time of the signing of the Japan-U.S. Security Treaty in January 1960. The two governments met 18 times under the Committee until January 1982. The exchange of letters defined the Japanese members of the SCC as the Foreign Minister and the Defense Agency Director-General and the U.S. members as the Ambassador to Japan and the Commander-in-Chief, U.S. Pacific Command. However, during the visit of Special Envoy Shintaro Abe to attend the 30th anniversary ceremony of the Japan-U.S. Security Treaty in June 1990, Secretary of State Baker suggested that the United States was prepared to upgrade the U.S. members of the SCC to the Cabinet level; namely, the Secretary of State and the Secretary of Defense. Responding to the proposal, notes were exchanged between the two governments in December 1990 to change the U.S. members of the SCC to the Secretary of State and the Secretary of Defense.
This exchange of notes have enabled consultations at the SCC by four Cabinet officials in charge of foreign and defense issues of the two countries. This has the major significance of revitalizing the SCC and further developing cooperative relations between the two countries in the field of security.
(d) The U.S. Force Adjustments in the Asia-Pacific Region
The United States is making adjustments in stages involving about 126,000 troops deployed in East Asia and the Pacific region (excluding Guam), faced with increasing fiscal deficits and the changing international situation. Specifically, in the report entitled "A Strategic Framework for the Asia-Pacific Rim," which the U.S. Administration submitted to the Congress in April 1990, the U.S. Government made it clear that the United States as a Pacific power, would continue to basically maintain its forward deployment strategy and bilateral security arrangements in the region, and that, while closely watching the strategic situation, would adjust the deployment of U.S. forces in three stages during the 1990s (1990-92, 1993-94, 1995-99).
In the first stage, the United States plans to reduce its forces by about 15,000 troops, which is about 10 percent of the total forces deployed in the Asia-Pacific region. This plan is partly being implemented. Of the reduction, about 4,800 troop cuts will be made from USFJ (concurrently about 7,000 from South Korea and about 3,500 from the Philippines).
At the same time, the United States has made it clear that its commitments to its allies remain unchanged and that the forward deployment policy would be maintained. In particular, the United States recognizes that the Japan-U.S. relationship is the pillar of its strategy in the Asia-Pacific region, and the above report specifies that except for some force reduction, the present deployment posture in Japan will not be changed.
(e) Technological Cooperation in the Security and Defense Areas
Under the Japan-U.S. Security arrangements, both Japan and the United States are to maintain and develop their respective defense capabilities through mutual cooperation, and Japan has received various technological assistance from the United States to consolidate its defense capability. Given the recent situation of Japan's technological improvement, it has become very important for Japan to increase mutual technological exchanges with the United States in the defense field in order to ensure effective implementation of the Japan-U.S. Security arrangements.
From this viewpoint, the Mid-term Defense Program beginning fiscal 1991, which the Government decided at the end of 1990, specifies the promotion of cooperative research and development with the United States. Major examples of the technological exchange between Japan and the United States are the joint development of the next support fighter (FS-X) for the Air Self-Defense Force and participation in research for the Strategic Defense Initiative (SDI).
Concerning the FS-X, the decision to transfer its related military technologies to the U.S. has ensured a smooth implementation of the joint development program, which have begun in full scale. The FS-X project, which combines outstanding technologies of Japan and the United States, has great significance for bilateral technology exchange projects, and should be implemented based on trust between the two countries. The Mid-term Defense Program from 1991 also specifies the promotion of the FS-X, project.
The SDI is a research and development program aimed at neutralizing ballistic missiles with non-nuclear defensive means and obtaining data for judging the feasibility of a system for ultimately abolishing nuclear weapons. Based on the U.S.-Japan agreement concerning Japan's participation in SDI researches concluded in July 1987, Japanese corporations participated in the research in the Western Pacific regional missile defense initiative, a part of SDI, initially planned for one year starting in November 1988. The period of the research project has since been extended, and is scheduled to end in April 1992.
2-1. Domestic Affairs
The Mulroney Government is faced with domestic difficulties such as controversies over a Constitutional amendment centering on Quebec's participation in the Canadian Constitution, introduction of a new consumption tax (Goods and Services Tax) and a deteriorating economic situation.
In particular, a solution is being sought on the question of Constitutional Amendment since the ratification of the agreement in June 1990 by the Federal Prime Minister and provincial premiers (the Meech Lake Accord), which was to bring the Province of Quebec into the Canadian constitutional system, failed. Various Commissions to deliberate the issue have been established both by the Federal Government and provincial governments. Interests and positions among the governments do not necessarily coincide, and there have arisen voices in Quebec calling for its separation and independence from the rest of Canada. Under these circumstances, it may not be easy to find a compromise on this issue.
In such a situation, the Mulroney Government made a major Cabinet reshuffle in April 1991, which included the appointment of Joe Clark, who had been Secretary of State for External Affairs since the inauguration of the Mulroney Government, to the Minister responsible for Constitutional Affairs. The Government is thus consolidating its regime, to be prepared for the next general election expected either in 1992 or 1993.
In the economic area, the fiscal deficit, coupled with inflationary pressures, continues to constrain the Canadian economy. The Government made major cuts in expenditures and implemented a stringent monetary policy. Along with such policy measures, the U.S. economic recession affected the Canadian economy which has gone into recession in the second quarter of 1990. In 1991, with the steadfast cuts in domestic interest rates and the recovery in the U.S. economy, the Canadian economy is heading toward its recovery. Most forecasts predict that the economy will bottom out in the latter half of 1991.
2-2. Foreign Affairs
Emphasis continues to be placed on the maintenance and strengthening of relations with the United States. Prime Minister Mulroney enjoys a close personal relationship with President George Bush, and held four summits with him in 1990. In external economic affairs, efforts were made to smoothly implement the U.S.-Canada Free Trade Agreement, which had gone in its second year. It was also agreed in February 1991 to launch negotiations on the North American Free Trade Agreement among the United States, Mexico and Canada, and the first round of negotiations were held in Toronto in June.
During the Gulf Crisis, Canada went beyond the traditional framework of contributions to the U.N. Peace-keeping function. On August 10, 1990, immediately after the outbreak of the Crisis, the Government decided to dispatch two destroyers, one supply ship and one squadron as well as making other contributions, such as financial assistance to rescue refugees and dispatching medical teams.
3. Relations with Japan
Prime Minister Mulroney has been actively promoting relations with Japan and the other Asia-Pacific countries, as is exemplified by the announcement in 1989 of the "Pacific 2000 Strategy." In May 1991, the Prime Minister made his first visit to Japan since May 1986. The visit, strengthening the personal relationship between the leaders, proved very significant in ensuring further development of the favorable bilateral relationship. During his visit, the new Canadian Embassy building was opened and the establishment of Canadian Consulates in Fukuoka and Nagoya was announced. The two Prime Ministers agreed on the establishment of the "Japan-Canada Forum 2000," which is to make recommendations on desirable long-term partnership between the two countries. The Forum consists of eminent persons in both countries and is to submit a report and recommendations to the two heads of governments by the end of 1992. It is expected that the Forum will be conducive to enhance the cooperative relationship between the two countries toward the 21st century. Canada has been playing unique international roles under its own foreign policy. Closer cooperation with Canada will be meaningful for Japan in assuming more active role in the international community.
The economic relationship between Japan and Canada is one of the most stable and balanced of all the bilateral economic relationships of Japan, and is basically growing very favorably. Moreover, Japanese investment in Canada is steadily increasing, and the outstanding amount of Japan's direct investment in Canada exceeded $5 billion during the first half of 1990.
Note :According to the forecast concerning the cost and the exchange rate at the present point.